Document:

exhibit10_1.htm

EXHIBIT 10.1

 

SMALL BUSINESS LENDING FUND  –  SECURITIES PURCHASE AGREEMENT

 

	
First Northern Community Bancorp

	  	
SBLF0695

	
Name of Company

	  	
SBLF No.

	
195 North First Street

	  	
Corporation

	
Street Address for Notices

	  	
Organizational Form (e.g., corporation, national bank)

	
Dixon

	
California

	
95620

	  	
California

	
City

	
State

	
Zip Code

	  	
Jurisdiction of Organization

	
Corporate Secretary

	  	
Board of Governors of the Federal Reserve System

	
Name of Contact Person to Receive Notices

	  	
Appropriate Federal Banking Agency

	
(707) 678-9734

	  	
(707) 678-3041

	  	
September 15, 2011

	
Fax Number for Notices

	  	
Phone Number for Notices

	  	
Effective Date

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of the Effective Date set forth above (the “Signing Date”) between the Secretary of the Treasury (“Treasury”) and the Company named above (the “Company”), an entity existing under the laws of the Jurisdiction of Organization stated above in the Organizational Form stated above.  The Company has elected to participate in Treasury’s Small Business Lending Fund program (“SBLF”).  This Agreement contains the terms and conditions on which the Company intends to issue preferred stock to Treasury, which Treasury will purchase using funds appropriated under SBLF.

 

This Agreement consists of the following attached parts, all of which together constitute the entire agreement of Treasury and the Company (the “Parties”) with respect to the subject matter hereof, superseding all prior written and oral agreements and understandings between the Parties with respect to such subject matter:

 

	
Annex A:                 Information Specific to

         the Company and the Investment

Annex B:                 Definitions

Annex C:                 General Terms and Conditions

Annex D:                 Disclosure Schedule

Annex E:                 Registration Rights

Annex F:                 Form of Certificate of Designation

	
Annex G:                 Form of Officer’s Certificate

Annex H:                 Form of Supplemental Reports

Annex I:                 Form of Annual Certification

Annex J:                 Form of Opinion

Annex K:                 Form of Repayment Document

 

This Agreement may be executed in any number of counterparts, each being deemed to be an original instrument, and all of which will together constitute the same agreement.  Executed signature pages to this Agreement may be delivered by facsimile or electronic mail attachment.

 

[Signatures follow]

  

  

  

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized representatives of the parties hereto as of the Effective Date.

	
THE SECRETARY OF THE TREASURY

 

	  	
FIRST NORTHERN COMMUNITY BANCORP

	
By:

	
/s/ Don Graves

	  	
By:

	
/s/ Jeremiah Z. Smith

	
Name:

	
Don Graves

	  	
Name:

	
Jeremiah Z. Smith

	
Title:

	
Deputy Assistant Secretary

	  	
Title:

	
EVP and Chief Financial Officer

  

  

  

ANNEX A

INFORMATION SPECIFIC TO THE COMPANY AND THE INVESTMENT

Purchase Information

	
Terms of the Purchase:

	  
	
Series of Preferred Stock Purchased:

	
Non-Cumulative Perpetual Preferred Stock, Series A

 

	
Per Share Liquidation Preference of Preferred Stock:

	
$1,000 per share

	
Number of Shares of Preferred Stock Purchased:

	
22,847

	
Dividend Payment Dates on the Preferred Stock:

	
Payable quarterly in arrears on January 1, April 1, July 1 and  October 1 of each year.

 

	
Purchase Price:

	
$22,847,000

	
 

Closing:

	  
	
Location of Closing:

	
Fox, Hefter, Swibel, Levin & Carroll, LLP

200 W. Madison Street

Chicago, Illinois 60606

	
Time of Closing:

	
10:00 a.m.

	
Date of Closing:

	
September 15, 2011

Redemption Information

(Only complete if the Company was a CPP or CDCI participant; leave blank otherwise.)

	
Prior Program:

	
 x CPP

 o CDCI

 

	
Series of Previously Acquired Preferred Stock:

	
Fixed Rate Cumulative Perpetual Preferred Stock, Series A

 

	
Number of Shares of Previously Acquired Preferred Stock:

	
17,390

	
Repayment Amount:

	
$17,462,458.33

	
Residual Amount:

	
$0

  

  

  

Matching Private Investment Information

	
Treasury investment is contingent on the Company raising Matching Private Investment (check one):

 

If Yes, complete the following (leave blank otherwise):

	
o Yes

x No

 

	
Aggregate Dollar Amount of Matching Private Investment Required:

	  
	
Aggregate Dollar Amount of Matching Private Investment Received:

	  
	
Class of securities representing Matching Private Investment:

	  
	
Date of issuance of Matching Private Investment:

	  

  

  

  

ANNEX B

DEFINITIONS

 

 

 

1.           Definitions.

 

  Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Agreement.

 

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

 

“Application Date” means the date of the Company’s completed application to participate in SBLF.

 

“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company or such Company Subsidiaries, as applicable, as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)).  The Appropriate Federal Banking Agency is identified on the cover page of this Agreement.

 

“Appropriate State Banking Agency” means, if the Company is a State-chartered bank, the Company’s State bank supervisor (as defined in Section 3(r) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(q).

 

“Bank Holding Company” means a company registered as such with the Federal Reserve pursuant to 12 U.S.C. §1842 and the regulations of the Federal Reserve promulgated thereunder.

 

“Call Report” has the meaning assigned thereto in Section 4102(4) of the SBJA.  If the Company is a Bank Holding Company or a Savings and Loan Holding Company, unless the context clearly indicates otherwise:  (a) the term “Call Report” shall mean the Call Report(s) (as defined in Section 4102(4) of the SBJA) of the IDI Subsidiary(ies); and (b) if there are multiple IDI Subsidiaries, all references herein or in any document executed or delivered in connection herewith (including the Certificate of Designation, the Initial Supplemental Report and all Quarterly Supplemental Reports) to any data reported in a Call Report shall refer to the aggregate of such data across the Call Reports for all such IDI Subsidiaries.

 

“CDCI” means the Community Development Capital Initiative, as authorized under the Emergency Economic Stabilization Act of 2008.

 

 “Company Material Adverse Effect” means a material adverse effect on (i) the business, results of operation or condition (financial or otherwise) of the Company and its consolidated subsidiaries taken as a whole; provided, however, that Company Material Adverse Effect shall not be deemed to include the effects of (A) changes after the Signing Date in general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries in which the Company and its subsidiaries operate, (B) changes or proposed changes after the Signing Date in GAAP, or authoritative interpretations thereof, or (C) changes or proposed changes after the Signing Date in securities, banking and other laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries taken as a whole relative to comparable U.S. banking or financial services organizations); or (ii) the ability of the Company to consummate the Purchase and other transactions contemplated by this Agreement and perform its obligations hereunder and under the Certificate of Designation on a timely basis and declare and pay dividends on the Dividend Payment Dates set forth in the Certificate of Designations.

 

  

  

  

“CPP” means the Capital Purchase Program, as authorized under the Emergency Economic Stabilization Act of 2008.

 

“Disclosure Schedule” means that certain schedule to this Agreement delivered to Treasury on or prior to the Signing Date, setting forth, among other things, items the disclosure of which is necessary or appropriate in response to an express disclosure requirement contained in a provision hereof.  The Disclosure Schedule is contained in Annex D of this Agreement.

 

“Executive Officers” means the Company's “executive officers” as defined in 12 C.F.R. § 215.2(e)(1) (regardless of whether or not such regulation is applicable to the Company).

 

“Federal Reserve” means the Board of Governors of the Federal Reserve System.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“General Terms and Conditions” and “General T&C” each mean Annex C of this Agreement.

 

“IDI Subsidiary” means any Company Subsidiary that is an insured depository institution.

 

“Junior Stock” means Common Stock and any other class or series of stock of the Company the terms of which expressly provide that it ranks junior to the Preferred Shares as to dividend and redemption rights and/or as to rights on liquidation, dissolution or winding up of the Company.

 

“knowledge of the Company” or “Company’s knowledge” means the actual knowledge after reasonable and due inquiry of the “officers” (as such term is defined in Rule 3b-2 under the Exchange Act) of the Company.

 

  

  

  

“Matching Private Investment-Supported,” when used to describe the Company (if applicable), means the Company’s eligibility for participation in the SBLF program is conditioned upon the Company or an Affiliate of the Company acceptable to Treasury receiving Matching Private Investment, as contemplated by Section 4103(d)(3)(B) of the SBJA.

 

“Original Letter Agreement” means, if applicable, the Letter Agreement (and all terms incorporated therein) pursuant to which Treasury purchased from the Company, and the Company issued to Treasury, the Previously Acquired Preferred Shares (or warrants exercised to acquire the Previously Acquired Preferred Shares or the securities exchanged for the Previously Acquired Preferred Stock).

 

“Oversight Officials” means, interchangeably and collectively as context requires, the Special Deputy Inspector General for SBLF Program Oversight, the Inspector General of the Department of the Treasury, and the Comptroller General of the United States.

 

“Parity Stock” means any class or series of stock of the Company the terms of which do not expressly provide that such class or series will rank senior or junior to the Preferred Shares as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

 

“Preferred Shares” means the number of shares of Preferred Stock identified in the “Purchase Information” section of Annex A opposite “Number of Shares of Preferred Stock Purchased.”

 

“Preferred Stock” means the series of the Company’s preferred stock identified in the “Purchase Information” section of Annex A opposite “Series of Preferred Stock Purchased.”

 

“Previously Acquired Preferred Shares” means, if the Company participated in CPP or CDCI, the number of shares of Previously Acquired Preferred Stock identified in the “Redemption Information” section of Annex A opposite “Number of Shares of Previously Acquired Preferred Stock.”

 

“Previously Acquired Preferred Stock” means, if the Company participated in CPP or CDCI, the series of the Company’s preferred stock identified in the “Redemption Information” section of Annex A opposite “Series of Previously Acquired Preferred Stock.”

 

“Previously Disclosed” means information set forth on the Disclosure Schedule or the Disclosure Update, as applicable; provided, however, that disclosure in any section of such Disclosure Schedule or Disclosure Update, as applicable, shall apply only to the indicated section of this Agreement; provided, further, that the existence of Previously Disclosed information, pursuant to a Disclosure Update, shall neither obligate Treasury to consummate the Purchase nor limit or affect any rights of or remedies available to Treasury.

 

“Prior Program” means (a) CPP, if the Company is a participant in CPP immediately prior to the Closing, or (b) CDCI, if the Company is a participant in CDCI immediately prior to the Closing.

 

  

  

  

“Publicly-traded” means a company that (i) has a class of securities that is traded on a national securities exchange and (ii) is required to file periodic reports with either the Securities and Exchange Commission or its primary federal bank regulator.

 

“Purchase” means the purchase of the Preferred Shares by Treasury from the Company pursuant to this Agreement.

 

“Repayment” means the repurchase set forth in the Repayment Document.

 

“Repayment Amount” means, if the Company participated in CPP or CDCI, the aggregate amount payable by the Company as of the Closing Date to redeem the Previously Acquired Preferred Stock in accordance with its terms, which amount is set forth in the “Redemption Information” section of Annex A.

 

“Savings and Loan Holding Company” means a company registered as such with the Office of Thrift Supervision or any successor thereto pursuant to 12 U.S.C. §1467(a) and the regulations of the Office of Thrift Supervision promulgated thereunder.

 

“SBJA” means the Small Business Jobs Act of 2010, as it may be amended from time to time.

 

“Subsidiary” means any corporation, partnership, joint venture, limited liability company or other entity (A) of which such person or a subsidiary of such person is a general partner or (B) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect to such entity, is directly or indirectly owned by such person and/or one or more subsidiaries thereof.

 

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty or addition imposed by any Governmental Entity.

 

“Total Assets” means, with respect to an insured depository institution, the total assets of such insured depository institution.

 

 “Total Risk-Weighted Assets” means, with respect to an insured depository institution, the risk-weighted assets of such insured depository institution.

 

“Warrant” has the meaning set forth in the Repayment Document.

  

  

  

2.           Index of Definitions.  The following table, which is provided solely for convenience of reference and shall not affect the interpretation of this Agreement, identifies the location where capitalized terms are defined in this Agreement:

 

 

Location of

 

Term                                                                                   Definition

	
Affiliate

	
Annex B, §1

	
Agreement

	
Cover Page

	
Appropriate Federal Banking Agency

	
Annex B, §1

	
Appropriate State Banking Agency

	
Annex B, §1

	
Bank Holding Company

	
Annex B, §1

	
Bankruptcy Exceptions

	
General T&C, §2.5(a)

	
Board of Directors

	
General T&C, §2.6

	
Business Combination

	
General T&C, §5.8

	
business day

	
General T&C, §5.12

	
Call Report

	
Annex B, §1

	
Capitalization Date

	
General T&C, §2.2

	
CDCI

	
Annex B, §1

	
Certificate of Designation

	
General T&C, §1.3(d)

	
Charter

	
General T&C, §1.3(d)

	
Closing

	
General T&C, §1.2(a)

	
Closing Date

	
General T&C, §1.2(a)

	
Closing Deadline

	
General T&C, §5.1(a)(i)

	
Code

	
General T&C, §2.14

	
Common Stock

	
General T&C, §2.2

	
Company

	
Cover Page

	
Company Financial Statements

	
General T&C, §1.3(i)

	
Company Material Adverse Effect

	
Annex B, §1

	
Company Reports

	
General T&C, §2.9

	
Company Subsidiary; Company Subsidiaries

	
General T&C, §2.5(b)

	
control; controlled by; under common control with

	
Annex B, §1

	
CPP

	
Annex B, §1

	
Disclosure Schedule

	
Annex B, §1

	
Disclosure Update

	
General T&C, §1.3(h)

	
ERISA

	
General T&C, §2.14

	
Exchange Act

	
General T&C, §4.3

	
Executive Officers

	
Annex B, §1

	
Federal Reserve

	
Annex B, §1

	
GAAP

	
Annex B, §1

	
Governmental Entities

	
General T&C, §1.3(a)

	
Holders

	
General T&C, §4.4(a)

	
IDI Subsidiary

	
Annex B, §1

	
Indemnitee

	
General T&C, §4.4(b)

	
Information

	
General T&C, §3.1(c)(iii)

	
Initial Supplemental Report

	
General T&C, §1.3(j)

	
Junior Stock

	
Annex B, §1

	
knowledge of the Company; Company’s knowledge

	
Annex B, §1

	
Matching Private Investment

	
General T&C, §1.3(l)

	
Matching Private Investment-Supported

	
Annex B, § 1

	
Matching Private Investors

	
General T&C, §1.3(l)

  

  

  

	
officers

	
Annex B, §1

	
Oversight Officials

	
Annex B, §1

	
Parity Stock

	
Annex B, §1

	
Parties

	
Cover Page

	
Plan

	
General T&C, §2.14

	
Preferred Shares

	
Annex B, §1

	
Preferred Stock

	
Annex B, §1

	
Previously Acquired Preferred Shares

	
Annex B, §1

	
Previously Acquired Preferred Stock

	
Annex B, §1

	
Previously Disclosed

	
Annex B, §1

	
Prior Program

	
General T&C, §1.2(c)

	
Proprietary Rights

	
General T&C, §2.21

	
Publicly-traded

	
Annex B, §1

	
Purchase

	
Annex B, §1

	
Purchase Price

	
General T&C, §1.1(a)

	
Regulatory Agreement

	
General T&C, §2.19

	
Related Party

	
General T&C, §2.25

	
Repayment Document

	
General T&C, §1.2(b)(ii)(E)

	
Residual Amount

	
General T&C, §1.2(b)(ii)(B)

	
Savings and Loan Holding Company

	
Annex B, §1

	
SBJA

	
Annex B, §1

	
SBLF

	
Cover Page

	
SEC

	
General T&C, §2.11

	
Securities Act

	
General T&C, §2.1

	
Signing Date

	
Cover Page

	
Subsidiary

	
Annex B, §1

	
Quarterly Supplemental Report

	
General T&C, §3.1(d)(i)

	
Tax; Taxes

	
Annex B, §1

	
Transfer

	
General T&C, §4.3

	
Treasury

	
Cover Page

3.           Defined Terms in Annex K.  Except for defined terms in Annex K that are expressly cross-referenced in another part of this Agreement, terms defined in Annex K are defined therein solely for purposes of Annex K and are not applicable to other parts of this Agreement.

  

  

  

ANNEX C

GENERAL TERMS AND CONDITIONS

CONTENTS OF GENERAL TERMS AND CONDITIONS

 

Page

 

ARTICLE I                      PURCHASE; CLOSING 3

 

	
  

	
1.1

	
Purchase                                                                                  

	
3

	
  

	
1.2

	
Closing                                                                             

	
3

	
  

	
1.3

	
Closing Conditions                                                           

	
4

 

ARTICLE II                      REPRESENTATIONS AND WARRANTIES 6

 

	
  

	
2.1

	
Organization, Authority and Significant Subsidiaries

	
6

	
  

	
2.2

	
Capitalization                                                              

	
6

	
  

	
2.3

	
Preferred Shares                                                          

	
7

	
  

	
2.4

	
Compliance With Identity Verification Requirem   

	
7

	
  

	
2.5

	
Authorization; Enforceability                                   

	
7

	
  

	
2.6

	
Anti-takeover Provisions and Rights Plan             

	
8

	
  

	
2.7

	
No Company Material Adverse Effect                       

	
8

	
  

	
2.8

	
Company Financial Statements                             

	
9

	
  

	
2.9

	
Reports                                                                 

	
9

	
  

	
2.10

	
No Undisclosed Liabilities                               

	
9

	
  

	
2.11

	
Offering of Securities                                                                                              

	
10

	
  

	
2.12

	
Litigation and Other Proceedings                                                                     

	
10

	
  

	
2.13

	
Compliance with Laws                                                                                      

	
10

	
  

	
2.14

	
Employee Benefit Matters                                                                               

	
11

	
  

	
2.15

	
Taxes                                                                                                                    

	
11

	
  

	
2.16

	
Properties and Leases                                                                                      

	
11

	
  

	
2.17

	
Environmental Liability                                                                                       

	
12

	
  

	
2.18

	
Risk Management Instruments                                                                     

	
12

	
  

	
2.19

	
Agreements with Regulatory Agencies                                                     

	
12

	
  

	
2.20

	
Insurance                                                                                                           

	
13

	
  

	
2.21

	
Intellectual Property                                                                                      

	
13

	
  

	
2.22

	
Brokers and Finders                                                                                         

	
13

	
  

	
2.23

	
Disclosure Schedule                                                                                     

	
13

	
  

	
2.24

	
Previously Acquired Preferred Shares                                                   

	
14

	
  

	
2.25

	
Related Party Transactions                                                                        

	
14

	
  

	
2.26

	
Ability to Pay Dividends                                                                         

	
14

 

 

 

 

 

ARTICLE III                                                                                                                                          COVENANTS 14

 

	
  

	
3.1

	
Affirmative Covenants                                                                  

	
14

	
  

	
3.2

	
Negative Covenants                                                                      

	
20

 

ARTICLE IV                                                                                                                                          ADDITIONAL AGREEMENTS 21

 

	
  

	
4.1

	
Purchase for Investment                                                                    

	
21

	
  

	
4.2

	
Legends                                                                                              

	
21

	
  

	
4.3

	
Transfer of Preferred Shares                                                         

	
22

	
  

	
4.4

	
Rule 144; Rule 144A; 4(11⁄2) Transactions                                  

	
22

	
  

	
4.5

	
Depositary Shares                                                                        

	
24

	
  

	
4.6

	
Expenses and Further Assurances                                         

	
24

 

ARTICLE V                      MISCELLANEOUS 24

 

	
  

	
5.1

	
Termination                                                                                

	
24

	
  

	
5.2

	
Survival                                                                                     

	
25

	
  

	
5.3

	
Amendment                                                                               

	
25

	
  

	
5.4

	
Waiver of Conditions                                                              

	
26

	
  

	
5.5

	
Governing Law; Submission to Jurisdiction; etc.                 

	
26

	
  

	
5.6

	
No Relationship to TARP                                                        

	
26

	
  

	
5.7

	
Notices                                                                                      

	
26

	
  

	
5.8

	
Assignment                                                                               

	
27

	
  

	
5.9

	
Severability                                                                            

	
27

	
  

	
5.10

	
No Third Party Beneficiaries                                              

	
27

	
  

	
5.11

	
Specific Performance                                                         

	
27

	
  

	
5.12

	
Interpretation                                                                     

	
27

  

  

  

ARTICLE I

PURCHASE; CLOSING

 

1.1           Purchase.  On the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell to Treasury, and Treasury agrees to purchase from the Company, at the Closing, the Preferred Shares for the aggregate price set forth on Annex A (the “Purchase Price”).

 

1.2           Closing.  (a)  On the terms and subject to the conditions set forth in this Agreement, the closing of the Purchase (the “Closing”) will take place at the location specified in Annex A, at the time and on the date set forth in Annex A or as soon as practicable thereafter, or at such other place, time and date as shall be agreed between the Company and Treasury.  The time and date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.

 

(b)           Subject to the fulfillment or waiver of the conditions to the Closing in Section 1.3, at the Closing:

 

(i)           if Treasury holds Previously Acquired Preferred Shares:

 

(A)           the Purchase Price shall first be applied to pay the Repayment Amount;

 

(B)           if the Purchase Price is less than the Repayment Amount, the Company shall pay the positive difference (if any) between the Repayment Amount and the Purchase Price (a “Residual Amount”) to Treasury’s Office of Financial Stability by wire transfer of immediately available United States funds to an account designated in writing by Treasury; and

 

(C)           upon receipt of the full Repayment Amount (by application of the Purchase Price and, if applicable, the Company’s payment of the Residual Amount), Treasury and the Company will consummate the Repayment;

 

(D)           the Company will deliver to Treasury a statement of adjustment as contemplated by Section 13(J) of the Warrant, if applicable; and

 

(E)           the Company and Treasury will execute and deliver a properly completed repurchase document in the form attached hereto as Annex K, (the “Repayment Document”).

 

(ii)           the Company will deliver the Preferred Shares as evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as hereinafter provided for, in exchange for payment in full of the Purchase Price by application of the Purchase Price to the Repayment and by wire transfer of immediately available United States funds to a bank account designated by the Company in the Initial Supplemental Report.

 

  

  

  

1.3           Closing Conditions. The obligation of Treasury to consummate the Purchase is subject to the fulfillment (or waiver by Treasury) at or prior to the Closing of each of the following conditions:

 

(a)           (i) any approvals or authorizations of all United States federal, state, local, foreign and other governmental, regulatory or judicial authorities (collectively, “Governmental Entities”) required for the consummation of the Purchase shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired and (ii) no provision of any applicable United States or other law and no judgment, injunction, order or decree of any Governmental Entity shall prohibit the purchase and sale of the Preferred Shares as contemplated by this Agreement;

 

(b)           (i) the representations and warranties of the Company set forth in (A) Sections 2.7 and 2.26 shall be true and correct in all respects as though made on and as of the Closing Date; (B) Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.19, 2.22, 2.23, 2.24 and 2.25 shall be true and correct in all material respects as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all material respects as of such other date); and (C) Sections 2.8 through 2.18 and Sections 2.20 through 2.21 (disregarding all qualifications or limitations set forth in such representations and warranties as to “materiality”, “Company Material Adverse Effect” and words of similar import) shall be true and correct as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct as of such other date), except to the extent that the failure of such representations and warranties referred to in this Section 1.3(b)(i)(C) to be so true and correct, individually or in the aggregate, does not have and would not reasonably be expected to have a Company Material Adverse Effect; and (ii) the Company shall have performed in all respects all obligations required to be performed by it under this Agreement at or prior to the Closing;

 

(c)           the Company shall have delivered to Treasury a certificate signed on behalf of the Company by an Executive Officer certifying to the effect that the conditions set forth in Section 1.3(b) have been satisfied, in substantially the form of Annex G;

 

(d)           the Company shall have duly adopted and filed with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity an amendment to its certificate or articles of incorporation, articles of association, or similar organizational document (“Charter”) in substantially the form of Annex F (the “Certificate of Designation”) and the Company shall have delivered to Treasury a copy of the filed Certificate of Designation with appropriate evidence from the Secretary of State or other applicable Governmental Entity that the filing has been accepted, or if a filed copy is unavailable, a certificate signed on behalf of the Company by an Executive Officer certifying to the effect that the filing of the Certificate of Designation has been accepted, in substantially the form attached hereto as Annex F;

 

(e)           the Company shall have delivered to Treasury true, complete and correct certified copies of the Charter and bylaws of the Company;

 

  

  

  

(f)           the Company shall have delivered to Treasury a written opinion from counsel to the Company (which may be internal counsel), addressed to Treasury and dated as of the Closing Date, in substantially the form of Annex J;

 

(g)           the Company shall have delivered certificates in proper form or, with the prior consent of Treasury, evidence of shares in book-entry form, evidencing the Preferred Shares to Treasury or its designee(s);

 

(h)           the Company shall have delivered to Treasury a copy of the Disclosure Schedule on or prior to the Signing Date and, to the extent that any information set forth on the Disclosure Schedule needs to be updated or supplemented to make it true, complete and correct as of the Closing Date, (i) the Company shall have delivered to Treasury an update to the Disclosure Schedule (the “Disclosure Update”), setting forth any information necessary to make the Disclosure Schedule true, correct and complete as of the Closing Date and (ii) Treasury, in its sole discretion, shall have approved the Disclosure Update, provided, however, that the delivery and acceptance of the Disclosure Update shall not limit or affect any rights of or remedies available to Treasury;

 

(i)           the Company shall have delivered to Treasury on or prior to the Signing Date each of the consolidated financial statements of the Company and its consolidated subsidiaries for each of the last three completed fiscal years of the Company (which shall be audited to the extent audited financial statements are available prior to the Signing Date) (together with the Call Reports filed by the Company or the IDI Subsidiary(ies) for each completed quarterly period since the last completed fiscal year, the “Company Financial Statements”);

 

(j)           the Company shall have delivered to Treasury, not later than five (5) business days prior to the Closing Date, a certificate (the “Initial Supplemental Report”) in substantially the form attached hereto as Annex H setting forth a complete and accurate statement of loans held by the Company (or if the Company is a Bank Holding Company or a Savings and Loan Holding Company, by the IDI Subsidiary(ies)) in each of the categories described therein, for the time periods specified therein, (A) including a signed certification of the Chief Executive Officer, the Chief Financial Officer and all directors or trustees of the Company or the IDI Subsidiary(ies) who attested to the Call Reports for the quarters covered by such certificate, that such certificate (x) has been prepared in conformance with the instructions issued by Treasury and (y) is true and correct to the best of their knowledge and belief; and (B) completed for the last full calendar quarter prior to the Closing Date and the four (4) quarters ended September 30, 2009, December 31, 2009, March 31, 2010 and June 30, 2010;

 

(k)           prior to the Signing Date, the Company shall have delivered to Treasury, the Appropriate Federal Banking Agency and, if the Company is a State-chartered bank, the Appropriate State Banking Agency, a small business lending plan describing how the Company’s business strategy and operating goals will allow it to address the needs of small businesses in the area it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate; and

 

  

  

  

(l)           if the Company is Matching Private Investment-Supported, on or after September 27, 2010 the Company or an Affiliate of the Company acceptable to Treasury shall (i) have received equity capital (“Matching Private Investment”) from one or more non-governmental investors (“Matching Private Investors”) (A) in an amount equal to or greater than the Aggregate Dollar Amount of Matching Private Investment Required set forth on Annex A (net of all dividends paid with respect to, and all repurchases and redemptions of, the Company’s equity securities), (B) that is subordinate in right of payment of dividends, liquidation preference and redemption rights to the Preferred Shares and (C) that is acceptable in form and substance to Treasury, in its sole discretion and (ii) have satisfied the following requirements reasonably in advance of the Closing Date: (A) delivery of copies of the definitive documentation for the Matching Private Investment to Treasury, (B) delivery of the organizational charts of such non-governmental investors to Treasury, each certified by the applicable non-governmental investor and demonstrating that such non-governmental investor is not an Affiliate of the Company, (C) delivery of any other documents or information as Treasury may reasonably request, in its sole discretion and (D) any other terms and conditions imposed by Treasury or the Appropriate Federal Banking Agency, in their sole discretion.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

The Company represents and warrants to Treasury that as of the Signing Date and as of the Closing Date (or such other date specified herein):

 

2.1           Organization, Authority and Significant Subsidiaries.  The Company has been duly incorporated and is validly existing and in good standing under the laws of its jurisdiction of organization, with the necessary power and authority to own, operate and lease its properties and conduct its business as it is being currently conducted, and except as has not, individually or in the aggregate, had and would not reasonably be expected to have a Company Material Adverse Effect, has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification; each subsidiary of the Company that would be considered a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act of 1933 (the “Securities Act”), has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization.  The Charter and bylaws of the Company, copies of which have been provided to Treasury prior to the Signing Date, are true, complete and correct copies of such documents as in full force and effect as of the Signing Date and as of the Closing Date.

 

2.2           Capitalization.  The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive or similar rights (and were not issued in violation of any preemptive rights). As of the Signing Date, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire its common stock (“Common Stock”) or other capital stock that is not reserved for issuance as specified in Part 2.2 of the Disclosure Schedule, and the Company has not made any other commitment to authorize, issue or sell any Common Stock or other capital stock.  Since the last day of the fiscal period covered by the last Call Report filed by the Company or the IDI Subsidiary(ies) prior to the Application Date (the “Capitalization Date”), the Company has not (a) declared, and has no present intention of declaring, any dividends on its Common Stock in a per-share amount greater than the per-share amount of declared dividends that are reflected in such Call Report; (b) declared, and has no present intention of declaring (except as contemplated by the Certificate of Designation) any dividends on any of its preferred stock in a per-share amount greater than the per-share amount of declared dividends that are reflected in such Call Report; or (c) issued any shares of Common Stock or other capital stock, other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed in Part 2.2 of the Disclosure Schedule, (ii) shares disclosed in Part 2.2 of the Disclosure Schedule, and (iii) if the Company is Matching Private Investment-Supported, shares or other capital stock representing Matching Private Investment disclosed in the “Matching Private Investment” section of Annex A.  Except as disclosed in Part 2.2 of the Disclosure Schedule, the Company has no agreements providing for the accelerated exercise, settlement or exchange of any capital stock of the Company for Common Stock.  Each holder of 5% or more of any class of capital stock of the Company and such holder’s primary address are set forth in Part 2.2 of the Disclosure Schedule.  The Company has received a representation from each Matching Private Investor that such Matching Private Investor has not received or applied for any investment from the SBLF, and the Company has no reason to believe that any such representation is inaccurate.  If the Company is a Bank Holding Company or a Savings and Loan Holding Company, (x) the percentage of each IDI Subsidiary’s issued and outstanding capital stock that is owned by the Company is set forth on Part 2.2 of the Disclosure Schedule; and (y) all shares of issued and outstanding capital stock of the IDI Subsidiary(ies) owned by the Company are free and clear of all liens, security interests, charges or encumbrances.  Since the Application Date, there has been no change in the organizational hierarchy information regarding the Company that was available on the Application Date from the National Information Center of the Federal Reserve System.

 

  

  

  

2.3           Preferred Shares.  The Preferred Shares have been duly and validly authorized, and, when issued and delivered pursuant to this Agreement, such Preferred Shares will be duly and validly issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights, and will rank pari passu with or senior to all other series or classes of preferred stock, whether or not designated, issued or outstanding, with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Company.

 

2.4           Compliance With Identity Verification Requirements. The Company and the Company Subsidiaries (to the extent such regulations are applicable to the Company Subsidiaries) are in compliance with the requirements of Section 1020.220 of title 31, Code of Federal Regulations.

 

2.5           Authorization, Enforceability.

 

(a)           The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder (which includes the issuance of the Preferred Shares).  The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company.  This Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to any limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity (“Bankruptcy Exceptions”).

 

  

  

  

(b)           The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby and compliance by the Company with the provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any subsidiary of the Company (each subsidiary, a “Company Subsidiary” and, collectively, the “Company Subsidiaries”) under any of the terms, conditions or provisions of (A) its organizational documents or (B) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which it or any Company Subsidiary may be bound, or to which the Company or any Company Subsidiary or any of the properties or assets of the Company or any Company Subsidiary may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree applicable to the Company or any Company Subsidiary or any of their respective properties or assets except, in the case of clauses (i)(B) and (ii), for those occurrences that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

 

(c)           Other than the filing of the Certificate of Designation with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such as have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Purchase except for any such notices, filings, exemptions, reviews, authorizations, consents and approvals the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

2.6           Anti-takeover Provisions and Rights Plan.  The Board of Directors of the Company (the “Board of Directors”) has taken all necessary action to ensure that the transactions contemplated by this Agreement and the consummation of the transactions contemplated hereby will be exempt from any anti-takeover or similar provisions of the Company’s Charter and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.

 

2.7           No Company Material Adverse Effect.  Since the last day of the fiscal period covered by the last Call Report filed by the Company or the IDI Subsidiary(ies) prior to the Application Date, no fact, circumstance, event, change, occurrence, condition or development has occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

 

  

  

  

2.8           Company Financial Statements.  The Company Financial Statements present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated therein and the consolidated results of their operations for the periods specified therein; and except as stated therein, such financial statements (a) were prepared in conformity with GAAP applied on a consistent basis (except as may be noted therein) and (b) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries.

 

2.9           Reports.

 

(a)           Since December 31, 2007, the Company and each Company Subsidiary has filed all reports, registrations, documents, filings, statements and submissions, together with any amendments thereto, that it was required to file with any Governmental Entity (the foregoing, collectively, the “Company Reports”) and has paid all fees and assessments due and payable in connection therewith, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  As of their respective dates of filing, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Entities.

 

(b)           The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or their accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 2.9(b).  The Company (i) has implemented and maintains adequate disclosure controls and procedures to ensure that material information relating to the Company, including the consolidated Company Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation prior to the Signing Date, to the Company’s outside auditors and the audit committee of the Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal controls that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

2.10           No Undisclosed Liabilities.  Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected in the Company Financial Statements to the extent required to be so reflected and, if applicable, reserved against in accordance with GAAP applied on a consistent basis, except for (a) liabilities that have arisen since the last fiscal year end in the ordinary and usual course of business and consistent with past practice and (b) liabilities that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

 

  

  

  

2.11           Offering of Securities.  Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Preferred Shares under the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the “SEC”) promulgated thereunder), which might subject the offering, issuance or sale of any of the Preferred Shares to Treasury pursuant to this Agreement to the registration requirements of the Securities Act.

 

2.12           Litigation and Other Proceedings.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no (a) pending or, to the knowledge of the Company, threatened, claim, action, suit, investigation or proceeding, against the Company or any Company Subsidiary or to which any of their assets are subject nor is the Company or any Company Subsidiary subject to any order, judgment or decree or (b) unresolved violation, criticism or exception by any Governmental Entity with respect to any report or relating to any examinations or inspections of the Company or any Company Subsidiaries.  There is no claim, action, suit, investigation or proceeding pending or, to the Company’s knowledge, threatened against any institution-affiliated party (as defined in 12 U.S.C. §1813(u)) of the Company or any of the IDI Subsidiaries that, if determined or resolved in a manner adverse to such institution-affiliated party, could result in such institution-affiliated party being prohibited from participation in the conduct of the affairs of any financial institution or holding company of any financial institution and, to the Company’s knowledge, there are no facts or circumstances could reasonably be expected to provide a basis for any such claim, action, suit, investigation or proceeding.

 

2.13           Compliance with Laws.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company or such Company Subsidiary.  Except as set forth in Part 2.13 of the Disclosure Schedule, the Company and the Company Subsidiaries have complied in all respects and are not in default or violation of, and none of them is, to the knowledge of the Company, under investigation with respect to or, to the knowledge of the Company, have been threatened to be charged with or given notice of any violation of, any applicable domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity, other than such noncompliance, defaults or violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  Except for statutory or regulatory restrictions of general application, no Governmental Entity has placed any restriction on the business or properties of the Company or any Company Subsidiary that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

  

  

  

2.14           Employee Benefit Matters.  Except as would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect: (a) each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) providing benefits to any current or former employee, officer or director of the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) that is sponsored, maintained or contributed to by the Company or any member of its Controlled Group and for which the Company or any member of its Controlled Group would have any liability, whether actual or contingent (each, a “Plan”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations, including ERISA and the Code; (b) with respect to each Plan subject to Title IV of ERISA (including, for purposes of this clause (b), any plan subject to Title IV of ERISA that the Company or any member of its Controlled Group previously maintained or contributed to in the six years prior to the Signing Date), (1) no “reportable event” (within the meaning of Section 4043(c) of ERISA), other than a reportable event for which the notice period referred to in Section 4043(c) of ERISA has been waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (2) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (3) the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on the assumptions used to fund such Plan) and (4) neither the Company nor any member of its Controlled Group has incurred in the six years prior to the Signing Date, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including any Plan that is a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and (c) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service with respect to its qualified status that has not been revoked, or such a determination letter has been timely applied for but not received by the Signing Date, and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss, revocation or denial of such qualified status or favorable determination letter.

 

2.15           Taxes.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (a) the Company and the Company Subsidiaries have filed all federal, state, local and foreign income and franchise Tax returns (together with any schedules and attached thereto) required to be filed through the Signing Date, subject to permitted extensions, and have paid all Taxes due thereon, (b) all such Tax returns (together with any schedules and attached thereto) are true, complete and correct in all material respects and were prepared in compliance with all applicable laws and (c) no Tax deficiency has been determined adversely to the Company or any of the Company Subsidiaries, nor does the Company have any knowledge of any Tax deficiencies.

 

2.16           Properties and Leases.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens (including, without limitation, liens for Taxes), encumbrances, claims and defects that would affect the value thereof or interfere with the use made or to be made thereof by them.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries hold all leased real or personal property under valid and enforceable leases with no exceptions that would interfere with the use made or to be made thereof by them.

 

  

  

  

2.17           Environmental Liability.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

 

(a)           there is no legal, administrative, or other proceeding, claim or action of any nature seeking to impose, or that would reasonably be expected to result in the imposition of, on the Company or any Company Subsidiary, any liability relating to the release of hazardous substances as defined under any local, state or federal environmental statute, regulation or ordinance, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, pending or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary;

 

(b)           to the Company’s knowledge, there is no reasonable basis for any such proceeding, claim or action; and

 

(c)           neither the Company nor any Company Subsidiary is subject to any agreement, order, judgment or decree by or with any court, Governmental Entity or third party imposing any such environmental liability.

 

2.18           Risk Management Instruments.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company’s own account, or for the account of one or more of the Company Subsidiaries or its or their customers, were entered into (i) only in the ordinary course of business, (ii) in accordance with prudent practices and in all material respects with all applicable laws, rules, regulations and regulatory policies and (iii) with counterparties believed to be financially responsible at the time; and each of such instruments constitutes the valid and legally binding obligation of the Company or one of the Company Subsidiaries, enforceable in accordance with its terms, except as may be limited by the Bankruptcy Exceptions.  Neither the Company or the Company Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement other than such breaches that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

2.19           Agreements with Regulatory Agencies.  Except as set forth in Part 2.19 of the Disclosure Schedule, neither the Company nor any Company Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2007, has adopted any board resolutions at the request of, any Governmental Entity that currently restricts the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies or procedures, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Company or any Company Subsidiary been advised since December 31, 2007, by any such Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement.  The Company and each Company Subsidiary is in compliance with each Regulatory Agreement to which it is party or subject, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Entity indicating that either the Company or any Company Subsidiary is not in compliance with any such Regulatory Agreement.

 

  

  

  

2.20           Insurance.  The Company and the Company Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent and consistent with industry practice.  The Company and the Company Subsidiaries are in material compliance with their insurance policies and are not in default under any of the material terms thereof, each such policy is outstanding and in full force and effect, all premiums and other payments due under any material policy have been paid, and all claims thereunder have been filed in due and timely fashion, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

2.21           Intellectual Property.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and each Company Subsidiary owns or otherwise has the right to use, all intellectual property rights, including all trademarks, trade dress, trade names, service marks, domain names, patents, inventions, trade secrets, know-how, works of authorship and copyrights therein, that are used in the conduct of their existing businesses and all rights relating to the plans, design and specifications of any of its branch facilities (“Proprietary Rights”) free and clear of all liens and any claims of ownership by current or former employees, contractors, designers or others and (ii) neither the Company nor any of the Company Subsidiaries is materially infringing, diluting, misappropriating or violating, nor has the Company or any of the Company Subsidiaries received any written (or, to the knowledge of the Company, oral) communications alleging that any of them has materially infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by any other person.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, to the Company’s knowledge, no other person is infringing, diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries sent any written communications since December 31, 2007, alleging that any person has infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by the Company and the Company Subsidiaries.

 

2.22           Brokers and Finders.  Treasury has no liability for any amounts that any broker, finder or investment banker is entitled to for any financial advisory, brokerage, finder’s or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary.

 

2.23           Disclosure Schedule.  The Company has delivered the Disclosure Schedule and, if applicable, the Disclosure Update to Treasury and the information contained in the Disclosure Schedule, as modified by the information contained in the Disclosure Update, if applicable, is true, complete and correct.

 

  

  

  

2.24           Previously Acquired Preferred Shares.  If Treasury holds Previously Acquired Preferred Shares:

 

(a)           The Company has not breached any representation, warranty or covenant set forth in the Original Letter Agreement or any of the other documents governing the Previously Acquired Preferred Stock.

 

(b)           The Company has paid to Treasury: (i) if the Previously Acquired Preferred Stock is cumulative, all accrued and unpaid dividends and/or interest then due on the Previously Acquired Preferred Stock; or (ii) if the Previously Acquired Preferred Stock is non-cumulative, all unpaid dividends and/or interest due on the Previously Acquired Preferred Shares for the fiscal quarter prior to the Closing Date plus the accrued and unpaid dividends and/or interest due on the Previously Acquired Preferred Shares as of the Closing Date for the fiscal quarter in which the Closing shall occur.

 

2.25           Related Party Transactions.  Neither the Company nor any Company Subsidiary has made any extension of credit to any director or Executive Officer of the Company or any Company Subsidiary, any holder of 5% or more of the Company’s issued and outstanding capital stock, or any of their respective spouses or children or to any Affiliate of any of the foregoing (each, a “Related Party”), other than in compliance with 12 C.F.R Part 215 (Regulation O).  Except as set forth in Part 2.25 of the Disclosure Schedule, to the Company’s knowledge, no Related Party has any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any vendor or material customer of the Company or any Company Subsidiary that is not on arms-length terms, or (ii) direct or indirect ownership interest in any person or entity with which the Company or any Company Subsidiary has a material business relationship that is not on arms-length terms (not including Publicly-traded entities in which such person owns less than two percent (2%) of the outstanding capital stock).

 

2.26           Ability to Pay Dividends.  The Company has all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, Governmental Entities and third parties that are required in order to permit the Company to declare and pay dividends on the Preferred Shares on the Dividend Payment Dates set forth in the Certificate of Designation.

ARTICLE III

COVENANTS

 

3.1           Affirmative Covenants.  The Company hereby covenants and agrees with Treasury that:

 

(a)           Commercially Reasonable Efforts.  Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Purchase as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall use commercially reasonable efforts to cooperate with the other party to that end.

 

  

  

  

(b)           Certain Notifications Until Closing.  From the Signing Date until the Closing, the Company shall promptly notify Treasury of (i) any fact, event or circumstance of which it is aware and which would reasonably be expected to cause any representation or warranty of the Company contained in this Agreement to be untrue or inaccurate in any material respect or to cause any covenant or agreement of the Company contained in this Agreement not to be complied with or satisfied in any material respect and (ii) except as Previously Disclosed, any fact, circumstance, event, change, occurrence, condition or development of which the Company is aware and which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; provided, however, that delivery of any notice pursuant to this Section 3.1(b) shall not limit or affect any rights of or remedies available to Treasury.

 

(c)           Access, Information and Confidentiality.

 

(i)           From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company will permit, and shall cause each of the Company’s Subsidiaries to permit, Treasury, the Oversight Officials and their respective agents, consultants, contractors and advisors to (x) examine any books, papers, records, Tax returns (including all schedules attached thereto), data and other information; (y) make copies thereof; and (z) discuss the affairs, finances and accounts of the Company and the Company Subsidiaries with the personnel of the Company and the Company Subsidiaries, all upon reasonable notice; provided, that:

 

	
  

	
(A)

	
any examinations and discussions pursuant to this Section 3.1(c)(i) shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company;

 

	
  

	
(B)

	
neither the Company nor any Company Subsidiary shall be required by this Section 3.1(c)(i) to disclose any information to the extent (x) prohibited by applicable law or regulation, or (y) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company or any Company Subsidiary is a party or would cause a risk of a loss of privilege to the Company or any Company Subsidiary (provided that the Company shall use commercially reasonable efforts to make appropriate substitute disclosure arrangements under circumstances where the restrictions in this clause (B) apply);

 

	
  

	
(C)

	
the obligations of the Company and the Company Subsidiaries to disclose information pursuant to this Section 3.1(c)(i) to any Oversight Official or any agent, consultant, contractor and advisor thereof, such Oversight Official shall have agreed, with respect to documents obtained under this Section 3.1(c)(i), to follow applicable law and regulation (and the applicable customary policies and procedures) regarding the dissemination of confidential materials, including redacting confidential information from the public version of its reports and soliciting input from the Company as to information that should be afforded confidentiality, as appropriate; and

 

 

  

  

  

 

	
  

	
(D)

	
for avoidance of doubt, such examinations and discussions may, at Treasury’s option, be conducted on site at any office of the Company or any Company Subsidiary.

 

(ii)           From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company will deliver, or will cause to be delivered, to Treasury:

 

	
  

	
(A)

	
as soon as available after the end of each fiscal year of the Company, and in any event within 90 days thereafter, a consolidated balance sheet of the Company as of the end of such fiscal year, and consolidated statements of income, retained earnings and cash flows of the Company for such year, in each case prepared in accordance with GAAP applied on a consistent basis and setting forth in each case in comparative form the figures for the previous fiscal year of the Company and which shall be audited to the extent audited financial statements are available;1

 

	
  

	
(B)

	
as soon as available after the end of the first, second and third quarterly periods in each fiscal year of the Company, a copy of any quarterly reports provided to other stockholders of the Company or Company management by the Company;

 

	
  

	
(C)

	
as soon as available after the Company receives any assessment of the Company’s internal controls, a copy of such assessment (other than assessments provided by the Appropriate Federal Banking Agency or the Appropriate State Banking Agency that the Company is prohibited by applicable law or regulation from disclosing to Treasury);

 

	
  

	
(D)

	
annually on a date specified by Treasury, a completed survey, in a form specified by Treasury, providing, among other things, a description of how the Company has utilized the funds the Company received hereunder in connection with the sale of the Preferred Shares and the effects of such funds on the operations and status of the Company;

 

1 To the extent that the Company informed the Treasury on the Signing Date that it does not prepare financial statements in accordance with GAAP in the ordinary course, the Treasury may consider other annual financial reporting packages acceptable to it in its sole discretion.

  

  

  

 

	
  

	
(E)

	
as soon as such items become effective, any amendments to the Charter, bylaws or other organizational documents of the Company; and

 

	
  

	
(F)

	
at the same time as such items are sent to any stockholders of the Company, copies of any information or documents sent by the Company to its stockholders.

 

(iii)           Treasury will use reasonable best efforts to hold, and will use reasonable best efforts to cause its agents, consultants, contractors and advisors and United States executive branch officials and employees, to hold, in confidence all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the Company furnished or made available to it by the Company or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (A) previously known by such party on a non-confidential basis, (B) in the public domain through no fault of such party or (C) later lawfully acquired from other sources by the party to which it was furnished (and without violation of any other confidentiality obligation)); provided that nothing herein shall prevent Treasury from disclosing any Information to the extent required by applicable laws or regulations or by any subpoena or similar legal process.  Treasury understands that the Information may contain commercially sensitive confidential information entitled to an exception from a Freedom of Information Act request.

 

(iv)           Treasury’s information rights pursuant to Section 3.1(c)(ii)(A), (B), (C), (E) and (F) and Treasury’s right to receive certifications from the Company pursuant to Section 3.1(d)(i) may be assigned by Treasury to a transferee or assignee of the Preferred Shares with a liquidation preference of no less than an amount equal to 2% of the initial aggregate liquidation preference of the Preferred Shares.

 

(v)           Nothing in this Section shall be construed to limit the authority that any Oversight Official or any other applicable regulatory authority has under law.

 

(vi)           The Company shall provide to Treasury all such information as Treasury may request from time to time for the purpose of carrying out the study required by Section 4112 of the SBJA.

 

 (d)           Quarterly Supplemental Reports and Annual Certifications.

 

(i)           Concurrently with the submission of Call Reports by the Company or the IDI Subsidiary(ies) (as the case may be) for each quarter ending after the Closing Date, the Company shall deliver to Treasury a certificate in substantially the form attached hereto as Annex H setting forth a complete and accurate statement of loans held by the Company in each of the categories described therein, for the time periods specified therein, (A) including a signed certification of the Chief Executive Officer, the Chief Financial Officer and all directors or trustees of the Company or the IDI Subsidiary(ies) who attested to the Call Report for the quarter covered by such certificate, that such certificate (x) has been prepared in conformance with the instructions issued by Treasury and (y) is true and correct to the best of their knowledge and belief; (B) completed for such quarter (each, a “Quarterly Supplemental Report”).

 

  

  

  

(ii)           Within ninety (90) days after the end of each fiscal year of the Company during which the Initial Supplemental Report is submitted pursuant to Section 1.3(j) or the first ten (10) Quarterly Supplemental Reports are submitted pursuant to Section 3.1(d)(i), the Company shall deliver to Treasury a certification from the Company’s independent auditors that the Initial Supplemental Report and/or Quarterly Supplemental Reports during such fiscal year are complete and accurate with respect to accounting matters, including policies and procedures and controls over such.

 

(iii)           Until the date on which the Preferred Shares are redeemed pursuant to Section 5 of the Certificate of Designation, within ninety (90) days after the end of each fiscal year of the Company, the Company shall deliver to Treasury a certificate in substantially the form attached hereto as Annex I, signed on behalf of the Company by an Executive Officer.

 

(iv)           If any Initial Supplemental Report or Quarterly Supplemental Report is inaccurate, Treasury shall be entitled to recover from the Company, upon demand, the amount of any difference between (x) the amount of the dividend payment(s) actually made to Treasury based on such inaccurate report and (y) the correct amount of the dividend payment(s) that should have been made, but for such inaccuracy.  The Company shall provide Treasury with a written description of any such inaccuracy within three (3) business days after the Company’s discovery thereof.

 

(v)           Treasury shall have the right from time to time to modify Annex H,  by posting an amended and restated version of Annex H on Treasury’s web site, to conform Annex H to (A) reflect changes in GAAP, (B) reflect changes in the form or content of, or definitions used in, Call Reports, or (C) to make clarifications and/or technical corrections as Treasury determines to be reasonably necessary.  Notwithstanding anything herein to the contrary, upon posting by Treasury on its web site, Annex H shall be deemed to be amended and restated as so posted, without the need for any further act on the part of any person or entity.  If any such modification includes a change to the caption or number of any line item of Annex H, any reference herein to such line item shall thereafter be a reference to such re-captioned or re-numbered line item.

 

(e)           Bank and Thrift Holding Company Status.  If the Company is a Bank Holding Company or a Savings and Loan Holding Company on the Signing Date, then the Company shall maintain status as a Bank Holding Company or Savings and Loan Holding Company for as long as Treasury owns any Preferred Shares.  The Company shall redeem all Preferred Shares held by Treasury prior to terminating its status as a Bank Holding Company or Savings and Loan Holding Company.

 

(f)           Predominantly Financial.  For as long as Treasury owns any Preferred Shares, the Company, to the extent it is not itself an insured depository institution, agrees to remain predominantly engaged in financial activities.  A company is predominantly engaged in financial activities if the annual gross revenues derived by the company and all subsidiaries of the company (excluding revenues derived from subsidiary depository institutions), on a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under subsection (k) of Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) represent at least 85 percent of the consolidated annual gross revenues of the company.

 

  

  

  

(g)           Capital Covenant.  From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company and the Company Subsidiaries shall maintain such capital as may be necessary to meet the minimum capital requirements of the Appropriate Federal Banking Agency, as in effect from time to time.

 

(h)           Reporting Requirements.  Prior to the date on which all of the Preferred Shares have been redeemed in whole, the Company covenants and agrees that, at all times on or after the Closing Date, (i) to the extent it is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E or (ii) as soon as practicable after the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E.

 

(i)           Transfer of Proceeds to Depository Institutions.  If the Company is a Bank Holding Company or a Savings and Loan Holding Company, the Company shall immediately transfer to the IDI Subsidiaries, as equity capital contributions (in a manner that will cause such equity capital contributions to qualify for inclusion in the Tier 1 capital of the IDI Subsidiaries), not less than ninety percent (90%) of the proceeds it receives in connection with the sale of Preferred Shares; provided, however, that:

 

(A)           no IDI Subsidiary shall receive any amount pursuant to this Section 3.1(i) in excess of (A) three percent (3%) of the insured depository institution’s Total Risk-Weighted Assets as reported in its Call Report filed immediately prior to the Application Date, if the insured depository institution has Total Assets of more than $1,000,000,000 and less than $10,000,000,000 as of December 31, 2009or (B) five percent (5%) of the IDI Subsidiary’s Total Risk-Weighted Assets as reported in its Call Report filed immediately prior to the Application Date, if the IDI Subsidiary has Total Assets of $1,000,000,000 or less as of December 31, 2009; and

 

(B)           if Treasury held any Previously Acquired Preferred Shares immediately prior to the Closing Date, the amount required to be transferred pursuant this Section 3.1(i) shall be ninety percent (90%) of the difference obtained by subtracting the Repayment Amount from the Purchase Price (unless the Purchase Price is less than the Repayment Amount, in which case no amount shall be required to be transferred pursuant to this Section 3.1(i)).

 

(j)           Outreach to Minorities, Women and Veterans.  The Company shall comply with Section 4103(d)(8) of the SBJA.

 

  

  

  

(k)           Certification Related to Sex Offender Registration and Notification Act.  The Company shall obtain from any business to which it makes a loan that is funded in whole or in part using funds from the Purchase Price a written certification that no principal of such business has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act, 42 U.S.C. §16911).  The Company shall retain all such certifications in accordance with standard recordkeeping practices established by the Appropriate Federal Banking Agency.

 

3.2           Negative Covenants.  The Company hereby covenants and agrees with Treasury that:

 

(a)           Certain Transactions.

 

(i)           The Company shall not merge or consolidate with, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party (or its ultimate parent entity), as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant, agreement and condition of this Agreement to be performed and observed by the Company.

 

(ii)           Without the prior written consent of Treasury, until such time as Treasury shall cease to own any Preferred Shares, the Company shall not permit any of its “significant subsidiaries” (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) to (A) engage in any merger, consolidation, statutory share exchange or similar transaction following the consummation of which such significant subsidiary is not wholly-owned by the Company, (B) dissolve or sell all or substantially all of its assets or property other than in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company or (C) issue or sell any shares of its capital stock or any securities convertible or exercisable for any such shares, other than issuances or sales in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company.

 

(b)           Restriction on Dividends and Repurchases.  The Company covenants and agrees that it shall not violate any of the restrictions on dividends, distributions, redemptions, repurchases, acquisitions and related actions set forth in the Certificate of Designation, which are incorporated by reference herein as if set forth in full.

 

(c)           Related Party Transactions.  Until such time as Treasury ceases to own any debt or equity securities of the Company, including the Preferred Shares, the Company and the Company Subsidiaries shall not enter into transactions with Affiliates or related persons (within the meaning of Item 404 under the SEC’s Regulation S-K) unless (A) such transactions are on terms no less favorable to the Company and the Company Subsidiaries than could be obtained from an unaffiliated third party, and (B) have been approved by the audit committee of the Board of Directors or comparable body of independent directors of the Company, or if there are no independent directors, the Board of Directors, provided that the Board of Directors shall maintain written documentation which supports its determination that the transaction meets the requirements of clause (A) of this Section 3.2(c).

  

  

  

ARTICLE IV

ADDITIONAL AGREEMENTS

 

4.1           Purchase for Investment.  Treasury acknowledges that the Preferred Shares have not been registered under the Securities Act or under any state securities laws. Treasury (a) is acquiring the Preferred Shares pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute them to any person in violation of the Securities Act or any applicable U.S. state securities laws, (b) will not sell or otherwise dispose of any of the Preferred Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any applicable U.S. state securities laws, and (c) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of the Purchase and of making an informed investment decision.

 

4.2           Legends.  (a)  Treasury agrees that all certificates or other instruments representing the Preferred Shares will bear a legend substantially to the following effect:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

 

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER (THE “144A EXEMPTION”).  IF ANY TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS ADVISED BY THE TRANSFEROR THAT SUCH TRANSFEROR IS RELYING ON THE 144A EXEMPTION, SUCH TRANSFEREE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

 

  

  

  

THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF THESE SECURITIES AND TREASURY, A COPY OF WHICH IS ON FILE WITH THE ISSUER.  THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT.  ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID.”

 

(b)           In the event that any Preferred Shares (i) become registered under the Securities Act or (ii) are eligible to be transferred without restriction in accordance with Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A), the Company shall issue new certificates or other instruments representing such Preferred Shares, which shall not contain the applicable legends in Section 4.2(a); provided that Treasury surrenders to the Company the previously issued certificates or other instruments.

 

4.3           Transfer of Preferred Shares.  Subject to compliance with applicable securities laws, Treasury shall be permitted to transfer, sell, assign or otherwise dispose of (“Transfer”) all or a portion of the Preferred Shares at any time, and the Company shall take all steps as may be reasonably requested by Treasury to facilitate the Transfer of the Preferred Shares, including without limitation, as set forth in Section 4.4, provided that Treasury shall not Transfer any Preferred Shares if such transfer would require the Company to be subject to the periodic reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Company was not already subject to such requirements.  In furtherance of the foregoing, the Company shall provide reasonable cooperation to facilitate any Transfers of the Preferred Shares, including, as is reasonable under the circumstances, by furnishing such information concerning the Company and its business as a proposed transferee may reasonably request and making management of the Company reasonably available to respond to questions of a proposed transferee in accordance with customary practice, subject in all cases to the proposed transferee agreeing to a customary confidentiality agreement.

 

4.4           Rule 144; Rule 144A; 4(11⁄2) Transactions. (a)  At all times after the Signing Date, the Company covenants that (1) it will, upon the request of Treasury or any subsequent holders of the Preferred Shares (“Holders”), use its reasonable best efforts to (x), to the extent any Holder is relying on Rule 144 under the Securities Act to sell any of the Preferred Shares, make “current public information” available, as provided in Section (c)(1) of Rule 144 (if the Company is a “Reporting Issuer” within the meaning of Rule 144) or in Section (c)(2) of Rule 144 (if the Company is a “Non-Reporting Issuer” within the meaning of Rule 144), in either case for such time period as necessary to permit sales pursuant to Rule 144, (y), to the extent any Holder is relying on the so-called “Section 4(11⁄2)” exemption to sell any of its Preferred Shares, prepare and provide to such Holder such information, including the preparation of private offering memoranda or circulars or financial information, as the Holder may reasonably request to enable the sale of the Preferred Shares pursuant to such exemption, or (z) to the extent any Holder is relying on Rule 144A under the Securities Act to sell any of its Preferred Shares, prepare and provide to such Holder the information required pursuant to Rule 144A(d)(4), and (2) it will take such further action as any Holder may reasonably request from time to time to enable such Holder to sell Preferred Shares without registration under the Securities Act within the limitations of the exemptions provided by (i) the provisions of the Securities Act or any interpretations thereof or related thereto by the SEC, including transactions based on the so-called “Section 4(11⁄2)” and other similar transactions, (ii) Rule 144 or 144A under the Securities Act, as such rules may be amended from time to time, or (iii) any similar rule or regulation hereafter adopted by the SEC; provided that the Company shall not be required to take any action described in this Section 4.4(a) that would cause the Company to become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act if the Company was not subject to such requirements prior to taking such action.  Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

 

  

  

  

(b)           The Company agrees to indemnify Treasury, Treasury’s officials, officers, employees, agents, representatives and Affiliates, and each person, if any, that controls Treasury within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any document or report provided by the Company pursuant to this Section 4.4 or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(c)           If the indemnification provided for in Section 4.4(b) is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and Treasury agree that it would not be just and equitable if contribution pursuant to this Section 4.4(c) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 4.4(b).  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

4.5           Depositary Shares.  Upon request by Treasury at any time following the Closing Date, the Company shall promptly enter into a depositary arrangement, pursuant to customary agreements reasonably satisfactory to Treasury and with a depositary reasonably acceptable to Treasury, pursuant to which the Preferred Shares may be deposited and depositary shares, each representing a fraction of a Preferred Share, as specified by Treasury, may be issued. From and after the execution of any such depositary arrangement, and the deposit of any Preferred Shares, as applicable, pursuant thereto, the depositary shares issued pursuant thereto shall be deemed “Preferred Shares” and, as applicable, “Registrable Securities” for purposes of this Agreement.

 

4.6           Expenses and Further Assurances.  (a)  Unless otherwise provided in this Agreement, each of the parties hereto will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated under this Agreement, including fees and expenses of its own financial or other consultants, investment bankers, accountants and counsel.

 

(b)           The Company shall, at the Company’s sole cost and expense, (i) furnish to Treasury all instruments, documents and other agreements required to be furnished by the Company pursuant to the terms of this Agreement, including, without limitation, any documents required to be delivered pursuant to Section 4.4 above, or which are reasonably requested by Treasury in connection therewith; (ii) execute and deliver to Treasury such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the Preferred Shares purchased by Treasury, as Treasury may reasonably require; and (iii) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement, as Treasury shall reasonably require from time to time.

ARTICLE V

MISCELLANEOUS

 

5.1           Termination.  This Agreement shall terminate upon the earliest to occur of:

 

(a)           termination at any time prior to the Closing:

 

(i)           by either Treasury or the Company if the Closing shall not have occurred on or before the 30th calendar day following the date on which Treasury issued its preliminary approval of the Company’s application to participate in SBLF (the “Closing Deadline”); provided, however, that in the event the Closing has not occurred by the Closing Deadline, the parties will consult in good faith to determine whether to extend the term of this Agreement, it being understood that the parties shall be required to consult only until the fifth calendar day after the Closing Deadline and not be under any obligation to extend the term of this Agreement thereafter; provided, further, that the right to terminate this Agreement under this Section 5.1(a)(i) shall not be available to any party whose breach of any representation or warranty or failure to perform any obligation under this Agreement shall have caused or resulted in the failure of the Closing to occur on or prior to such date; or

 

  

  

  

(ii)           by either Treasury or the Company in the event that any Governmental Entity shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable; or

 

(iii)           by the mutual written consent of Treasury and the Company; or

 

(b)           the date on which all of the Preferred Shares have been redeemed in whole; or

 

(c)           the date on which Treasury has transferred all of the Preferred Shares to third parties which are not Affiliates of Treasury.

 

In the event of termination of this Agreement as provided in this Section 5.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except that nothing herein shall relieve either party from liability for any breach of this Agreement.

 

5.2           Survival.

 

(a)           This Agreement and all representations, warranties, covenants and agreements made herein shall survive the Closing without limitation.

 

(b)           The covenants set forth in Article III and Annex E and the agreements set forth in Article IV shall, to the extent such covenants do not explicitly terminate at such time as Treasury no longer owns any Preferred Shares, survive the termination of this Agreement pursuant to Section 5.1(c) without limitation until the date on which all of the Preferred Shares have been redeemed in whole.

 

(c)           The rights and remedies of Treasury with respect to the representations, warranties, covenants and obligations of the Company herein shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time by Treasury or any of its personnel or agents with respect to the accuracy or inaccuracy of, or compliance with, any such representation, warranty, covenant or obligation.

 

5.3           Amendment.  No amendment of any provision of this Agreement will be effective unless made in writing and signed by an officer or a duly authorized representative of each party, except as set forth in Section 3.1(d)(v).  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative of any rights or remedies provided by law.

 

  

  

  

5.4           Waiver of Conditions.  The conditions to each party’s obligation to consummate the Purchase are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. No waiver will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.

 

5.5           Governing Law; Submission to Jurisdiction, etc.  This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Each of the parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the Purchase contemplated hereby and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 5.7 and (ii) Treasury at the address and in the manner set forth for notices to the Company in Section 5.7, but otherwise in accordance with federal law. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE PURCHASE CONTEMPLATED HEREBY.

 

5.6           No Relationship to TARP .  The parties acknowledge and agree that (i) the SBLF program is separate and distinct from the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008; and (ii) the Company shall not, by virtue of the investment contemplated hereby, be considered a recipient under the Troubled Asset Relief Program.

 

5.7           Notices.  Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second business day following the date of dispatch if delivered by a recognized next day courier service.  All notices to the Company shall be delivered as set forth on the cover page of this Agreement, or pursuant to such other instruction as may be designated in writing by the Company to Treasury.  All notices to Treasury shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by Treasury to the Company.

 

	
  

	
If to Treasury:

 

	
  

	
The Secretary of the Treasury

	
  

	
1500 Pennsylvania Avenue, NW

	
  

	
Washington, D.C. 20220

Attention:  Small Business Lending Fund, Office of Domestic Finance

E-mail: SBLFComplSubmissions@treasury.gov

  

  

  

 

5.8           Assignment.  Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an assignment, in the case of a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Company’s stockholders (a “Business Combination”) where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such Business Combination or the purchaser in such sale, (b) an assignment of certain rights as provided in Sections 3.1(c) or Annex E or (c) an assignment by Treasury of this Agreement to an Affiliate of Treasury; provided that if Treasury assigns this Agreement to an Affiliate, Treasury shall be relieved of its obligations under this Agreement but (i) all rights, remedies and obligations of Treasury hereunder shall continue and be enforceable by such Affiliate, (ii) the Company’s obligations and liabilities hereunder shall continue to be outstanding and (iii) all references to Treasury herein shall be deemed to be references to such Affiliate.

 

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

 

5.10           No Third Party Beneficiaries.  Other than as expressly provided herein, nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and Treasury (and any Indemnitee) any benefit, right or remedies.

 

5.11           Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled (without the necessity of posting a bond) to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

 

5.12           Interpretation.  When a reference is made in this Agreement to “Articles” or “Sections” such reference shall be to an Article or Section of the Annex of this Agreement in which such reference is contained, unless otherwise indicated.  When a reference is made in this Agreement to an “Annex”, such reference shall be to an Annex to this Agreement, unless otherwise indicated.  The terms defined in the singular have a comparable meaning when used in the plural, and vice versa.  References to “herein”, “hereof”, “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. 

  

  

  

Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is entered into between sophisticated parties advised by counsel.  All references to “$” or “dollars” mean the lawful currency of the United States of America.  Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section.  References to a “business day” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York or the District of Columbia generally are authorized or required by law or other governmental actions to close.

  

  

  

 

ANNEX D

DISCLOSURE SCHEDULE

Part 2.2                      Capitalization

	
 

Capital stock reserved for issuance in connection with securities or obligations giving the holder thereof the right to acquire such capital:

	
770,521 shares of common stock

	
 

Shares issued since the Capitalization Date upon exercise of options or pursuant to equity-based awards, warrants, or convertible securities:

	
-0-

	
 

All other shares issued since the Capitalization Date:

	
-0-

	
 

Holders of 5% or more of any class of capital stock

	
 

Primary Address

	
None.

	  
	
 

If the Company is a Bank Holding Company or Savings and Loan Holding Company, complete the following (leave blank otherwise):

	
Name of IDI Subsidiary

	
Percentage of IDI Subsidiary’s capital stock owned by the Company

	
First Northern Bank of Dixon

	
100%

  

  

  

Part 2.7                      Material Adverse Effect

List any exceptions to the representation and warranty in Section 2.7 of the General Terms and Conditions.  If none, please so indicate by checking the box: x.

  

  

  

Part 2.13                      Compliance With Laws

 

List any exceptions to the representation and warranty in the second sentence of Section 2.13 of the General Terms and Conditions.  If none, please so indicate by checking the box:  x.

 

 

 

  

  

  

Part 2.19                      Regulatory Agreements

 

List any exceptions to the representation and warranty in Section 2.19 of the General Terms and Conditions.  If none, please so indicate by checking the box: x.

 

  

  

  

Part 2.25                      Related Party Transactions

 

List any exceptions to the representation and warranty in Section 2.25 of the General Terms and Conditions.  If none, please so indicate by checking the box:  x.

 

 

  

  

  

ANNEX E

REGISTRATION RIGHTS

 

1.         Definitions.  Terms not defined in this Annex shall have the meaning ascribed to such terms in the Agreement. As used in this Annex E, the following terms shall have the following respective meanings:

 

(a)         “Holder” means Treasury and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 9 of this Annex E.

 

(b)         “Holders’ Counsel” means one counsel for the selling Holders chosen by Holders holding a majority interest in the Registrable Securities being registered.

 

(c)         “Pending Underwritten Offering” means, with respect to any Holder forfeiting its rights pursuant to Section 11 of this Annex E, any underwritten offering of Registrable Securities in which such Holder has advised the Company of its intent to register its Registrable Securities either pursuant to Section 2(b) or 2(d) of this Annex E prior to the date of such Holder’s forfeiture.

 

(d)         “Register”, “registered”, and “registration” shall refer to a registration effected by preparing and (A) filing a registration statement or amendment thereto in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement or amendment thereto or (B) filing a prospectus and/or prospectus supplement in respect of an appropriate effective registration statement on Form S-3.

 

(e)         “Registrable Securities” means (A) all Preferred Shares and (B) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in the foregoing clause (A) by way of conversion, exercise or exchange thereof, or share dividend or share split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (1) they are sold pursuant to an effective registration statement under the Securities Act, (2) they shall have ceased to be outstanding or (3) they have been sold in any transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities.  No Registrable Securities may be registered under more than one registration statement at any one time.

 

(f)         “Registration Expenses” mean all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Annex E, including all registration, filing and listing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred in connection with any “road show”, the reasonable fees and disbursements of Holders’ Counsel, and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include Selling Expenses.

 

  

  

  

(g)         “Rule 144”, “Rule 144A”, “Rule 159A”, “Rule 405” and “Rule 415” mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

 

(h)         “Selling Expenses” mean all discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of Holders’ Counsel included in Registration Expenses).

 

(i)         “Special Registration” means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or Company Subsidiaries or in connection with dividend reinvestment plans.

 

2.         Registration.

 

(a)         The Company covenants and agrees that as promptly as practicable after the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (and in any event no later than 30 days thereafter), the Company shall prepare and file with the SEC a Shelf Registration Statement covering all Registrable Securities (or otherwise designate an existing shelf registration on an appropriate form under Rule 415 under the Securities Act (a “Shelf Registration Statement”) filed with the SEC to cover the Registrable Securities), and, to the extent the Shelf Registration Statement has not theretofore been declared effective or is not automatically effective upon such filing, the Company shall use reasonable best efforts to cause such Shelf Registration Statement to be declared or become effective and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by refiling such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires).  Notwithstanding the foregoing, if the Company is not eligible to file a registration statement on Form S-3, then the Company shall not be obligated to file a Shelf Registration Statement unless and until requested to do so in writing by Treasury.

 

(b)         Any registration pursuant to Section 2(a) of this Annex E shall be effected by means of a Shelf Registration Statement on an appropriate form under Rule 415 under the Securities Act (a “Shelf Registration Statement”).  If any Holder intends to distribute any Registrable Securities by means of an underwritten offering it shall promptly so advise the Company and the Company shall take all reasonable steps to facilitate such distribution, including the actions required pursuant to Section 2(d) of this Annex E; provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless (i) the expected gross proceeds from such offering exceed $200,000 or (ii) such underwritten offering includes all of the outstanding Registrable Securities held by such Holder.   The lead underwriters in any such distribution shall be selected by the Holders of a majority of the Registrable Securities to be distributed.

 

  

  

  

(c)         The Company shall not be required to effect a registration (including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to Section 2 of this Annex E:  (A) with respect to securities that are not Registrable Securities; or (B) if the Company has notified all Holders that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company or its security holders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration for a period of not more than 45 days after receipt of the request of any Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (1) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against holders of similar securities that have registration rights and (2) not more than three times in any 12-month period and not more than 90 days in the aggregate in any 12-month period.

 

(d)         If during any period when an effective Shelf Registration Statement is not available, the Company proposes to register any of its equity securities, other than a registration pursuant to Section 2(a) of this Annex E or a Special Registration, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to all Holders of its intention to effect such a registration (but in no event less than ten days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten business days after the date of the Company’s notice (a “Piggyback Registration”).  Any such person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth business day prior to the planned effective date of such Piggyback Registration.  The Company may terminate or withdraw any registration under this Section 2(d) of this Annex E prior to the effectiveness of such registration, whether or not any Holders have elected to include Registrable Securities in such registration.

 

(e)         If the registration referred to in Section 2(d) of this Annex E is proposed to be underwritten, the Company will so advise all Holders as a part of the written notice given pursuant to Section 2(d) of this Annex E.  In such event, the right of all Holders to registration pursuant to Section 2 of this Annex E will be conditioned upon such persons’ participation in such underwriting and the inclusion of such person’s Registrable Securities in the underwriting if such securities are of the same class of securities as the securities to be offered in the underwritten offering, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company; provided that Treasury (as opposed to other Holders) shall not be required to indemnify any person in connection with any registration. If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriters and Treasury (if Treasury is participating in the underwriting).

 

  

  

  

(f)         If either (x) the Company grants “piggyback” registration rights to one or more third parties to include their securities in an underwritten offering under the Shelf Registration Statement pursuant to Section 2(b) of this Annex E or (y) a Piggyback Registration under Section 2(d) of this Annex E relates to an underwritten offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such managing underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in the case of a Piggyback Registration under Section 2(d) of this Annex E, the securities the Company proposes to sell, (B) then the Registrable Securities of all Holders who have requested inclusion of Registrable Securities pursuant to Section 2(b) or Section 2(d) of this Annex E, as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such Holder and (C) lastly, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement; provided, however, that if the Company has, prior to the Signing Date, entered into an agreement with respect to its securities that is inconsistent with the order of priority contemplated hereby then it shall apply the order of priority in such conflicting agreement to the extent that it would otherwise result in a breach under such agreement.

 

3.         Expenses of Registration.  All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company.  All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the holders of the securities so registered pro rata on the basis of the aggregate offering or sale price of the securities so registered.

 

4.         Obligations of the Company.  Whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

 

(a)         Prepare and file with the SEC a prospectus supplement or post-effective amendment with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to Section 4 of this Annex E, keep such registration statement effective and keep such prospectus supplement current until the securities described therein are no longer Registrable Securities.

 

(b)         Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

 

(c)         Furnish to the Holders and any underwriters such number of copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned or to be distributed by them.

 

  

  

  

(d)         Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders or any managing underwriter(s), to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

 

(e)         Notify each Holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the applicable prospectus, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

 

(f)         Give written notice to the Holders:

 

(i)           when any registration statement or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

 

(ii)           of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

 

(iii)           of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

 

(iv)           of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the applicable Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

 

(v)           of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the registration statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made); and

 

(vi)           if at any time the representations and warranties of the Company contained in any underwriting agreement contemplated by Section 4(j) of this Annex E cease to be true and correct.

 

  

  

  

(g)         Use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 4(f)(iii) of this Annex E at the earliest practicable time.

 

(h)         Upon the occurrence of any event contemplated by Section 4(e) or 4(f)(v) of this Annex E, promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with Section 4(f)(v) to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Holders and any underwriters shall suspend use of such prospectus and use their reasonable best efforts to return to the Company all copies of such prospectus (at the Company’s expense) other than permanent file copies then in such Holders’ or underwriters’ possession.  The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.

 

(i)         Use reasonable best efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s).

 

(j)         If an underwritten offering is requested pursuant to Section 2(b) of this Annex E, enter into an underwriting agreement in customary form, scope and substance and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith or by the managing underwriter(s), if any, to expedite or facilitate the underwritten disposition of such Registrable Securities, and in connection therewith in any underwritten offering (including making members of management and executives of the Company available to participate in “road shows”, similar sales events and other marketing activities), (A) make such representations and warranties to the Holders that are selling stockholders and the managing underwriter(s), if any, with respect to the business of the Company and its subsidiaries, and the Shelf Registration Statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in customary form, substance and scope, and, if true, confirm the same if and when requested, (B) use its reasonable best efforts to furnish the underwriters with opinions of counsel to the Company, addressed to the managing underwriter(s), if any, covering the matters customarily covered in such opinions requested in underwritten offerings, (C) use its reasonable best efforts to obtain “cold comfort” letters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any business acquired by the Company for which financial statements and financial data are included in the Shelf Registration Statement) who have certified the financial statements included in such Shelf Registration Statement, addressed to each of the managing underwriter(s), if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters, (D) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures customary in underwritten offerings (provided that Treasury shall not be obligated to provide any indemnity), and (E) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith, their counsel and the managing underwriter(s), if any, to evidence the continued validity of the representations and warranties made pursuant to clause (A) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.

 

  

  

  

(k)         Make available for inspection by a representative of Holders that are selling stockholders, the managing underwriter(s), if any, and any attorneys or accountants retained by such Holders or managing underwriter(s), at the offices where normally kept, during reasonable business hours, financial and other records, pertinent corporate documents and properties of the Company, and cause the officers, directors and employees of the Company to supply all information in each case reasonably requested (and of the type customarily provided in connection with due diligence conducted in connection with a registered public offering of securities) by any such representative, managing underwriter(s), attorney or accountant in connection with such Shelf Registration Statement.

 

(l)         Use reasonable best efforts to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed or, if no similar securities issued by the Company are then listed on any national securities exchange, use its reasonable best efforts to cause all such Registrable Securities to be listed on such securities exchange as Treasury may designate.

 

(m)         If requested by Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith, or the managing underwriter(s), if any, promptly include in a prospectus supplement or amendment such information as the Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith or managing underwriter(s), if any, may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or such amendment as soon as practicable after the Company has received such request.

 

(n)         Timely provide to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

  

  

  

5.         Suspension of Sales.  Upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make inadvisable use of such registration statement, prospectus or prospectus supplement, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until such Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.  The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.

 

6.         Termination of Registration Rights.  A Holder’s registration rights as to any securities held by such Holder (and its Affiliates, partners, members and former members) shall not be available unless such securities are Registrable Securities.

 

7.         Furnishing Information.

 

(a)         No Holder shall use any free writing prospectus (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

 

(b)         It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 4 of this Annex E that the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

 

8.         Indemnification.

 

(a)         The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and in the case of Treasury, Treasury’s officials, and each person, if any, that controls a Holder within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that the Company shall not be liable to such Indemnitee in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon (A) an untrue statement or omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B)  offers or sales effected by or on behalf of such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.

 

  

  

  

(b)         If the indemnification provided for in Section 8(a) of this Annex E is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission;  the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(b) of this Annex E were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(a) of this Annex E.  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

9.         Assignment of Registration Rights.  The rights of Treasury to registration of Registrable Securities pursuant to Section 2 of this Annex E may be assigned by Treasury to a transferee or assignee of Registrable Securities; provided, however, the transferor shall, within ten days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being assigned.

 

10.         Clear Market.  With respect to any underwritten offering of Registrable Securities by Holders pursuant to this Annex E, the Company agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Shelf Registration Statement (other than such registration or a Special Registration) covering any preferred stock of the Company or any securities convertible into or exchangeable or exercisable for preferred stock of the Company, during the period not to exceed ten days prior and 60 days following the effective date of such offering or such longer period up to 90 days as may be requested by the managing underwriter for such underwritten offering.  The Company also agrees to cause such of its directors and senior executive officers to execute and deliver customary lock-up agreements in such form and for such time period up to 90 days as may be requested by the managing underwriter.

 

  

  

  

11.         Forfeiture of Rights.  At any time, any holder of Registrable Securities (including any Holder) may elect to forfeit its rights set forth in this Annex E from that date forward; provided, that a Holder forfeiting such rights shall nonetheless be entitled to participate under Section 2(d) – (f) of this Annex E in any Pending Underwritten Offering to the same extent that such Holder would have been entitled to if the Holder had not withdrawn; and provided, further, that no such forfeiture shall terminate a Holder’s rights or obligations under Section 7 of this Annex E with respect to any prior registration or Pending Underwritten Offering.

 

12.         Specific Performance.  The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations under this Annex E and that Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that such Holders, in addition to any other remedy to which they may be entitled at law or in equity, to the fullest extent permitted and enforceable under applicable law shall be entitled to compel specific performance of the obligations of the Company under this Annex E in accordance with the terms and conditions of this Annex E.

 

13.         No Inconsistent Agreements.  The Company shall not, on or after the Signing Date, enter into any agreement with respect to its securities that may impair the rights granted to Holders under this Annex E or that otherwise conflicts with the provisions hereof in any manner that may impair the rights granted to Holders under this Annex E.  In the event the Company has, prior to the Signing Date, entered into any agreement with respect to its securities that is inconsistent with the rights granted to Holders under this Annex E (including agreements that are inconsistent with the order of priority contemplated by Section 2(f) of Annex E) or that may otherwise conflict with the provisions hereof, the Company shall use its reasonable best efforts to amend such agreements to ensure they are consistent with the provisions of this Annex E.

 

14.         Certain Offerings by Treasury.  An “underwritten” offering or other disposition shall include any distribution of such securities on behalf of Treasury by one or more broker-dealers, an “underwriting agreement” shall include any purchase agreement entered into by such broker-dealers, and any “registration statement” or “prospectus” shall include any offering document approved by the Company and used in connection with such distribution.

 

  

  

  

ANNEX F

FORM OF CERTIFICATE OF DESIGNATION

 

 

[SEE ATTACHED]

  

  

  

ANNEX G

FORM OF OFFICER’S CERTIFICATE

 

OFFICER’S CERTIFICATE

 

 

OF

 

 

FIRST NORTHERN COMMUNITY BANCORP

 

 In connection with that certain Securities Purchase Agreement, dated September 15, 2011 (the “Agreement”) by and between First Northern Community Bancorp (the “Company”) and the Secretary of the Treasury, the undersigned does hereby certify as follows:

 

1. I am a duly elected/appointed EVP, Chief Financial Officer and Secretary of the Company.

 

2. The representations and warranties of the Company set forth in Article II of Annex C of the Agreement are true and correct in all respects as though as of the date hereof (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date) and the Company has performed in all material respects all obligations required to be performed by it under the Agreement.

 

3. The Certificate of Determination, a true, complete and correct copy of which is attached as Exhibit A hereto, has been filed with, and accepted by, the Secretary of State of the State of California.

 

The foregoing certifications are made and delivered as of September 15, 2011 pursuant to Section 1.3 of Annex C of the Agreement.

 

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

 

[SIGNATURE PAGE FOLLOWS]

  

  

  

 

 IN WITNESS WHEREOF, this Officer’s Certificate has been duly executed and delivered as of the 15th day of September, 2011.

 

	
  

	
FIRST NORTHERN COMMUNITY BANCORP

 

	
  

	
                                                                                                 By:

	/s/ Jeremiah Z. Smith

	
  

	
Name: Jeremiah Z. Smith

	
  

	
Title: EVP, Chief Financial Officer and

	
  

	
          Secretary

  

  

  

 

EXHIBIT A

  

  

  

ANNEX H

FORM OF SUPPLEMENTAL REPORTS

 

 

 

[SEE ATTACHED FORM OF INITIAL SUPPLEMENTAL REPORT]

 

 

  

  

  

[SEE ATTACHED FORM OF QUARTERLY SUPPLEMENTAL REPORT]

  

  

  

ANNEX I

FORM OF ANNUAL CERTIFICATION

 

 ANNUAL CERTIFICATION

 

 

OF

 

 

FIRST NORTHERN COMMUNITY BANCORP

 

 In connection with that certain Securities Purchase Agreement, dated September 15, 2011 (the “Agreement”) by and between First Northern Community Bancorp (the “Company”) and the Secretary of the Treasury (“Treasury”), the undersigned does hereby certify as follows:

 

1.           I am a duly elected/appointed [____________] of the Company.

 

2.           For each loan originated by the Company or any of its Affiliates that was funded in whole or in part using funds from the Purchase Price, the Company has obtained from the business to which it made such loan a written certification that no principal of such business has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act, 42 U.S.C. §16911).  The Company shall retain all such certifications in accordance with standard recordkeeping practices established by the Appropriate Federal Banking Agency.

 

3.           The Company is in compliance with the requirements of Section 1020.220 of title 31, Code of Federal Regulations.

 

The foregoing certifications are made and delivered as of [_________] pursuant to Section 3.1(d)(iii) of Annex C of the Agreement.

 

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

 

[SIGNATURE PAGE FOLLOWS]

  

  

  

 

IN WITNESS WHEREOF, this Certificate has been duly executed and delivered as of the [__] day of [__________], 20[__].

 

	
  

	
[COMPANY]

 

	
  

	
                                                                                                 By:

	 

 

	
  

	
Name:

 

	
  

	
Title:

  

  

  

ANNEX J

FORM OF OPINION

 

 (a)           The Company has been duly formed and is validly existing as a [TYPE OF ORGANIZATION] and is in good standing under the laws of the jurisdiction of its organization.  The Company has all necessary power and authority to own, operate and lease its properties and to carry on its business as it is being conducted.

 

(b)           The Company has been duly qualified as a foreign entity for the transaction of business and is in good standing under the laws of [_____________], [_____________] and [_____________].

 

(c)           The Preferred Shares have been duly and validly authorized, and, when issued and delivered pursuant to the Agreement, the Preferred Shares will be duly and validly issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights, and will rank pari passu with or senior to all other series or classes of Preferred Stock issued on the Closing Date with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Company.

 

(d)           The Company has the corporate power and authority to execute and deliver the Agreement and to carry out its obligations thereunder (which includes the issuance of the Preferred Shares).

 

(e)           The execution, delivery and performance by the Company of the Agreement and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company, including, without limitation, by any rule or requirement of any national stock exchange.

 

(f)           The Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

 

(g)           The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations thereunder (i) do not require any approval by any Governmental Entity to be obtained on the part of the Company, except those that have been obtained, (ii) do not violate or conflict with any provision of the Charter, (iii) do not violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any Company Subsidiary under any of the terms, conditions or provisions of its organizational documents or under any agreement, contract, indenture, lease, mortgage, power of attorney, evidence of indebtedness, letter of credit, license, instrument, obligation, purchase or sales order, or other commitment, whether oral or written, to which it is a party or by which it or any of its properties is bound or (iv) do not conflict with, breach or result in a violation of, or default under any judgment, decree or order known to us that is applicable to the Company and, pursuant to any applicable laws, is issued by any Governmental Entity having jurisdiction over the Company.

 

  

  

  

(h)           Other than the filing of the Certificate of Designation with the [Secretary of State] of its jurisdiction of organization or other applicable Governmental Entity, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such consents and approvals that have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Purchase.

 

(i)           The Company is not nor, after giving effect to the issuance of the Preferred Shares pursuant to the Agreement, would be on the date hereof an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

  

  

  

ANNEX K

FORM OF REPAYMENT DOCUMENT

UNITED STATES DEPARTMENT OF THE TREASURY

1500 PENNSYLVANIA AVENUE, NW

WASHINGTON, D.C. 20220

 

Dear Ladies and Gentlemen:

Reference is made to that certain Letter Agreement incorporating the Securities Purchase Agreement – Standard Terms (the “Securities Purchase Agreement”), dated as of the date set forth on Schedule A hereto, between the United States Department of the Treasury (the “Investor”) and the company set forth on Schedule A hereto (the “Company”).  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement.  Pursuant to the Securities Purchase Agreement, at the Closing, the Company issued to the Investor the number of shares of the series of its preferred stock set forth on Schedule A hereto (the “Preferred Shares”) and a warrant (the “Warrant”) to purchase the number of shares of [To be included for private issuers: the series of its preferred stock set forth on Schedule A hereto (such shares, the “Warrant Shares”), which was exercised by the Investor at Closing.] [To be included for public issuers: its common stock set forth on Schedule A hereto.]

In connection with the consummation of the repurchase (the “Repurchase”) by the Company from the Investor, on the date hereof, of the number of Preferred Shares listed on Schedule A hereto (the “Repurchased Preferred Shares”) [To be included for private issuers who are repurchasing some or all of the Warrant Shares: and the number of Warrant Shares listed on Schedule A hereto (the “Repurchased Warrant Shares”)], as permitted by the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009:

(a)           The Company hereby acknowledges receipt from the Investor of the share certificate(s) set forth on Schedule A hereto representing the Preferred Shares; [and]

(b)           The Investor hereby acknowledges receipt from the Company of a wire transfer for the account of the Investor in immediately available funds of the aggregate purchase price set forth on Schedule A hereto, representing payment in full for the Repurchased Preferred Shares at a price per share equal to the Liquidation Amount per share, together with any accrued and unpaid dividends to, but excluding, the date hereof;

 [Paragraphs (c) and (d) to be included for private issuers who are repurchasing some or all of the Warrant Shares: (c) The Company hereby acknowledges receipt from the Investor of the share certificate(s) set forth on Schedule A hereto representing the Warrant Shares; [and]

(d)           The Investor hereby acknowledges receipt from the Company of a wire transfer for the account of the Investor in immediately available funds of the aggregate purchase price set forth on Schedule A hereto, representing payment in full for the Repurchased Warrant Shares at a price per share equal to the Liquidation Amount per share, together with any accrued and unpaid dividends to, but excluding, the date hereof [; and]]

  

  

  

[Paragraph (e) to be included for private issuers who are repurchasing less than all of the Warrant Shares: (e) The Investor hereby acknowledges receipt from the Company of a share certificate for the number of Warrant Shares set forth on Schedule A hereto, equal to the difference between the Warrant Shares represented by the certificate referenced in clause (c) above and the Repurchased Warrant Shares.]

[To be included for public issuers: The Investor and the Company hereby agree that, notwithstanding Section 4.4 of the Securities Purchase Agreement, immediately following consummation of the Repurchase, but subject to compliance with applicable securities laws, the Investor shall be permitted to Transfer all or a portion of the Warrant with respect to, and/or exercise the Warrant for, all or a portion of the number of shares of Common Stock issuable thereunder, at any time and without limitation, and Section 4.4 of the Securities Purchase Agreement shall be deemed to be amended in order to permit the foregoing.  The Company shall take all steps as may be reasonably requested by the Investor to facilitate any such Transfer.

In addition, the Company agrees that in the event it elects to repurchase the Warrant, it shall deliver to the Investor within 15 calendar days of the date hereof a notice of intent to repurchase the Warrant, which notice shall be in accordance with Section 4.9(b) of the Securities Purchase Agreement (the “Warrant Repurchase Notice”).  In the event the Company does not deliver the Warrant Repurchase Notice to the Investor within 15 calendar days of the date hereof, the Investor hereby provides notice, pursuant to Section 4.5(p) of the Securities Purchase Agreement, of its intention to sell the Warrant, such notice to be effective as of the first day following the end of such 15-day period.

In the event that the Company delivers a Warrant Repurchase Notice and the Company and the Investor fail to agree on the Fair Market Value of the Warrant pursuant to the procedures (including the Appraisal Procedure), and in accordance with the time periods, set forth in Section 4.9(c) of the Securities Purchase Agreement or the Company revokes the delivery of such Warrant Repurchase Notice, then the Investor hereby provides notice of its intention to sell the Warrant.]

This letter agreement will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

This letter agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this letter agreement may be delivered by facsimile and such facsimiles will be deemed sufficient as if actual signature pages had been delivered

[Remainder of this page intentionally left blank]

  

  

  

 

In witness whereof, the parties have duly executed this letter agreement as of the date first written above.

 

	
  

	
UNITED STATES DEPARTMENT OF THE TREASURY

 

	
  

	
                                                                                                  By:

	 

 

	
  

	
Name:

 

	
  

	
Title:

 

	
  

	
COMPANY: _________________________

 

	
  

	
                                                                                                  By:

	 

 

	
  

	
Name:

 

	
  

	
Title:

  

  

  

 

SCHEDULE A

 

[Version to be used by public issuers]

 

General Information:

 

Date of Letter Agreement incorporating the Securities Purchase Agreement:

 

Name of the Company:

 

Corporate or other organizational form of the Company:

 

Jurisdiction of organization of the Company:

 

Number and series of preferred stock issued to the Investor at the Closing:

 

Number of Initial Warrant Shares:

 

 

Terms of the Repurchase:

 

Number of Preferred Shares repurchased by the Company:

 

Share certificate number (representing the Preferred Shares previously issued to the Investor at the Closing):

 

Per share Liquidation Amount of Preferred Shares:

 

Accrued and unpaid dividends on Preferred Shares:

 

Aggregate purchase price for Repurchased Preferred Shares:

 

Investor wire information for payment of purchase price:                          ABA Number:  

Bank:  

Account Name:  

Account Number:

  

  

  

 

SCHEDULE A

 

[Version to be used by private issuers]

 

General Information:

 

Date of Letter Agreement incorporating the Securities Purchase Agreement:

 

Name of the Company:

 

Corporate or other organizational form of the Company:

 

Jurisdiction of organization of the Company:

 

Number and series of preferred stock issued to the Investor at the Closing (Preferred Shares):

 

Number and series of preferred stock underlying the Warrant issued to the Investor at the Closing (Warrant Shares):

 

 

Terms of the Repurchase of Preferred Shares:

 

Number of Preferred Shares purchased by the Company:

 

Share certificate number (representing the Preferred Shares previously issued to the Investor at the Closing):

 

Per share Liquidation Amount of Preferred Shares:

 

Accrued and unpaid dividends on Preferred Shares:

 

Aggregate purchase price for Repurchased Preferred Shares:

 

 

[To be included for private issuers who are repurchasing some or all of the Warrant Shares: Terms of the Repurchase of the Warrant Shares:

 

Number of Warrant Shares purchased by the Company:

 

  

  

  

Share certificate (representing the Warrant Shares previously issued to the Investor at the Closing):

 

Per share Liquidation Amount of Warrant Shares:

 

Accrued and unpaid dividends on Warrant Shares;

 

Aggregate purchase price for Repurchased Warrant Shares:

 

[To be included for issuers who are repurchasing less than all of the Warrant Shares: Difference between the Warrant Shares and the Repurchased Warrant Shares:] ]

 

Investor wire information for payment of purchase price:                          ABA Number:  

Bank:  

Account Name:  

Account Number:

Beneficiary:ex10_1.htm

EXHIBIT 10.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated as of September 15, 2011 (this “Agreement”), is between INSPERITY, INC., a Delaware corporation (“Borrower”), and each of the financial institutions which is or may from time to time become a party hereto (collectively, “Lenders”, and each a “Lender”), and AMEGY BANK NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders.

 

R E C I T A L S:

 

Borrower has requested that Lenders extend credit to Borrower in the form of a revolving line of credit in the amount of $100,000,000.00 (which may be increased upon the terms and conditions hereinafter set forth to $150,000,000.00 and which includes a swing line in the amount of $10,000,000.00).  Lenders are willing to make such extensions of credit to Borrower upon the terms and conditions hereinafter set forth.

 

Bank of America, N.A. has been appointed Syndication Agent for the credit facilities described in this Agreement.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE I.

Definitions

 

Section 1.1        Definitions.  As used in this Agreement, the following terms have the following meanings:

 

“Acquisition” means the acquisition of substantially all the assets of another Person or a line of business or division of another Person or substantially all the ownership interests of another Person by Borrower or any Subsidiary.

 

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly, Controls or is Controlled by or is under common Control with such Person.

 

“Agent” means Amegy Bank National Association, a national banking association, in its capacity as agent for the Lenders, and any successor in such capacity pursuant to Article XI.

 

“Alternate Base Rate” means, for any day, a rate of interest which is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus one-half percent (0.50%), and (c) the sum of (i) the Floating Thirty Day LIBOR Rate as of such day plus (ii) two percent (2.0%).

 

“Alternate Base Rate Loans” means Loans that bear interest at rates based upon the Alternate Base Rate.

 

  

1

  

 

“Alternate Base Rate Margin” means, for any day, the rate per annum identified as the Alternate Base Rate Margin in the table contained in the definition of the term “Applicable Margin” corresponding to the applicable Level on such day.

 

“Amegy” means Amegy Bank National Association, a national banking association, and its successors and assigns.

 

“Applicable Margin” means, for the Levels described below, the applicable rate per annum set forth below.

 

	  	
Level I

	
Level II

	
Level III

	
Level IV

	
LIBOR Margin

	
2.00%

	
2.25%

	
2.50%

	
2.75%

	
Alternate Base Rate Margin

	
0.00%

	
0.25%

	
0.50%

	
0.75%

 

Level I applies when the Leverage Ratio is less than or equal to 1.00 to 1.00.

 

Level II applies when the Leverage Ratio is greater than 1.00 to 1.00 but less than or equal to 1.50 to 1.00.

 

Level III applies when the Leverage Ratio is greater than 1.50 to 1.00 but less than or equal to 2.00 to 1.00.

 

Level IV applies when the Leverage Ratio is greater than 2.00 to 1.00.

 

The applicable Level shall be adjusted, to the extent applicable, forty-five (45) days after the end of each fiscal quarter of Borrower (or, in the case of any change reflected by the audited financial statements delivered pursuant to Section 7.1(a), one hundred twenty (120) days after the end of any fiscal year) based on the Leverage Ratio tested for the period of four (4) consecutive fiscal quarters ending on the last day of such fiscal quarter or such fiscal year, as applicable; provided that if Borrower fails to deliver the financial statements required by Section 7.1(a) or (b), as applicable, or the related No Default Certificate required by Section 7.1(c) by the forty-fifth (45th) day (or, if applicable, the one hundred twentieth (120th) day) after the end of any fiscal quarter or any fiscal year, as applicable, Level IV or the Default Rate, if applicable, shall apply until such financial statements are delivered; provided, however, that notwithstanding any provision hereof to the contrary, the applicable Level shall be deemed to be Level I from the Closing Date through the delivery of the financial statements dated September 30, 2011.

 

“Applicable Rate” means (a) during the period that a Loan is an Alternate Base Rate Loan, the sum of (i) the Alternate Base Rate from time to time in effect, plus (ii) the applicable Alternate Base Rate Margin, and (b) during the period that a Loan is a LIBOR Loan, the sum of (i) the LIBOR Rate from time to time in effect, plus (ii) the applicable LIBOR Margin; provided, however, that if an Event of Default has occurred and is continuing, the Applicable Rate shall be determined pursuant to clause (a) only and clause (b) shall not be applicable.

 

  

2

  

 

“Assignment and Acceptance” means a document in substantially the form of Exhibit “E”.

 

“Authorized Representative” means the chief executive officer, the chief financial officer, the president or any other officer or employee of Borrower who has been designated in writing by Borrower to Agent to be an Authorized Representative.

 

“Bermuda Subsidiary” means Insperity Captive Insurance Companies Limited, a Bermuda corporation.

 

“Borrower” has the meaning given to such term in the introductory paragraph hereof.

 

“Business Day” means (a) any day on which commercial banks are not authorized or required by law to close in Houston, Texas, and (b) with respect to all borrowings, payments, Conversions, Continuations, Interest Periods, and notices in connection with LIBOR Loans, any day which is a Business Day described in clause (a) above and which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.

 

“Capital Expenditures” means for Borrower and its Subsidiaries, all expenditures for assets which, in accordance with GAAP, are required to be capitalized and so shown on the consolidated balance sheet of Borrower and its Subsidiaries and which are incurred for property, plant and equipment in the ordinary course of business.

 

“Capitalized Lease Obligations” means, for Borrower and its Subsidiaries, on a consolidated basis, the obligations of Borrower and its Subsidiaries to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations, in accordance with GAAP, are required to be classified and accounted for as a capital lease on a balance sheet of any such Person.

 

“Cash Distribution” means any distribution, dividend or any other payment paid in cash or cash equivalents by a Person on account of its capital stock.  For the avoidance of doubt, repurchases of any capital stock of a Person by such Person shall not constitute a “Cash Distribution”.

 

“Cash Interest Expense” means for Borrower and its Subsidiaries, on a consolidated basis, for any period, the sum of all cash interest expense paid or required by its terms to be paid during such period, as determined in accordance with GAAP.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority charged with the interpretation, administration or application thereof, after the date of this Agreement or (c) compliance by a Lender (or its parent company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided, however, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines, directives, rules or regulations thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives concerning capital adequacy (A) promulgated by the Bank for International Settlements or the Basel Committee on Banking Supervision (or any successor or similar authority) and made or issued by any Governmental Authority or (B) made or issued by the United States financial regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued, and shall be deemed to have gone into effect and adopted after the date of this Agreement.

 

  

3

  

 

“Change of Control” means with respect to Borrower the acquisition of ownership, directly or indirectly, beneficially or of record by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect of the date hereof) other than Related Persons, of shares representing more than fifty percent (50%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Borrower.

 

“Claims” has the meaning set forth in Section 12.2.

 

“Closing Date” means the date on which this Agreement has been executed and delivered by the parties hereto and the conditions set forth in Section 5.1 have been satisfied (or waived by Agent).

 

“Combined Commitments” means, at any time, the sum of the Commitments of all Lenders at such time.  The Combined Commitments shall be $100,000,000.00 as of the Closing Date.

 

“Combined Commitments Increase” shall have the meaning given to such term in Section 2.8.

 

“Commitment Percentage” means, at any time, for each Lender, the percentage derived by dividing such Lender’s Commitment at such time by the Combined Commitments at such time.

 

“Commitment” means, as to any Lender, its obligation to make Revolving Advances and to acquire participations in Letters of Credit and Swing Loans hereunder in an aggregate amount set forth opposite the name of such Lender on Annex “I” hereto under the heading “Commitments”, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable, as the same may be (a) reduced as provided herein, (b) modified as provided in an amendment to this Agreement, (c) modified as the result of an assignment of all or part of such Lender’s Revolving Note pursuant to Section 12.16 or (d) increased pursuant to Section 2.8.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract to otherwise.  “Controlled” has the meaning correlative thereto.

 

“Continue”, “Continuation” and “Continued” shall refer to the continuation pursuant to Section 3.7 of a LIBOR Loan from one Interest Period to the next Interest Period.

 

“Convert”, “Conversion”, and “Converted” shall refer to a conversion pursuant to Section 3.7 or 3.8 of one Type of Loan into another Type of Loan.

 

  

4

  

 

“Credit Exposure” means, with respect to any Lender at any time, the sum of (a) the outstanding principal amount of such Lender’s Revolving Advances at such time plus (b) such Lender’s LC Exposure at such time plus (c) such Lender’s Swing Exposure at such time.

 

“Current Assets” means, at any particular time, all amounts which, in conformity with GAAP, would be included as current assets on a consolidated balance sheet of Borrower and its Subsidiaries.

 

“Current Liabilities” means, at any particular time, all amounts which, in conformity with GAAP, would be included as current liabilities on a consolidated balance sheet of Borrower and its Subsidiaries.

 

“Debt” means, for any Person, (a) all indebtedness of such Person, whether or not represented by bonds, debentures, notes, securities or other evidences of indebtedness, for the repayment of money borrowed, including, with respect to Borrower, the indebtedness evidenced by the Notes and all other indebtedness for the repayment of money borrowed by Borrower and owed to any Lender, (b) indebtedness and obligations of such Person arising in connection with Rate Management Transactions, (c) all indebtedness of such Person representing deferred payment of the purchase price of property or assets (other than accounts payable incurred in the ordinary course of business which are either (i) current or (ii) being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP), (d) Capitalized Lease Obligations, (e) all indebtedness of such Person under guaranties, endorsements, assumptions or other contingent obligations in respect of, or to purchase or otherwise acquire, Debt (as defined in the other clauses of this definition) of others, (f) all Debt (as defined in the other clauses of this definition) of others secured by a Lien existing on property owned by such Person, whether or not the indebtedness secured thereby shall have been assumed by the owner thereof, and (g) any obligation of such Person to redeem or repurchase any of such Person’s capital stock, partnership or membership interests or other ownership interests, as applicable, on or prior to the date that is ninety-one (91) days after the Termination Date.

 

“Default Rate” means the lesser of (a) with respect to any Note, the sum of the stated rate to be borne by such Note plus two percent (2.0%) or (b) the Maximum Rate.

 

“Defaulting Lender” means any Lender that has (a) failed to fund any portion of its Loans or participations in Letters of Credit or Swing Loans within three (3) Business Days of the date required to be funded by it hereunder, (b) notified Borrower, Agent, the Issuing Bank, the Swing Lender or any Lender in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement or under other agreements in which it commits to extend credit, (c) failed, within three (3) Business Days after request by Agent or Borrower, to confirm in writing that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit and Swing Loans, (d) otherwise failed to pay over to Agent, the Issuing Bank or any Lender any other amount required to be paid by it hereunder within three (3) Business Days of the date when due, unless (i) the amount due is the subject of a good faith dispute, or (ii) Agent consents (which consent may be withheld at the sole discretion of Agent) to such Lender’s cure of such failure, or (e) as determined by Agent, (i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian, appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.

 

  

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“Distribution” means any distribution, dividend or any other payment or distribution (in cash, property or obligations) made by a Person on account of its capital stock.

 

“Dollar,” “Dollars” and “$” means currency of the United States of America which is at the time of payment legal tender for the payment of public and private debts in the United States of America.

 

“Domestic Subsidiary” means any Subsidiary of Borrower, whether presently or hereafter created or existing, that is organized and existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia; provided that if such Subsidiary does not exist on the date of this Agreement, Borrower or such Subsidiary shall satisfy the provisions of Section 8.4(a)(i) with respect to such Subsidiary.  The Domestic Subsidiaries are listed on Schedule 6.14.  Schedule 6.14 may be amended or supplemented from time to time with the written consent of Agent and Borrower.

 

“EBITDA” means for Borrower and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Operating Income for such period, plus (b) depreciation and amortization for such period, plus (c) non-cash stock based compensation expense for such period, plus (d) Interest Income for such period, plus (e) non-recurring charges consisting of fees and expenses incurred in connection with the change of Borrower’s name, if applicable, during such period; provided, however, that the amounts of each of the items set forth in clauses (a), (b), (c) and (d) above shall include, for the first twelve (12) months after any Acquisition, the actual historical amounts of such items for any Person which is acquired by Borrower or any Subsidiary in such Acquisition.

 

“Eligible Assignee” means any of (a) a Lender or any Affiliate of a Lender (except, in each case, a Defaulting Lender) (b) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000.00, (c) a commercial bank organized under the laws of a country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000.00, provided that such bank is acting through a branch or agency located in the United States, and (d) subject to the provisions of Section 12.16, any other Person approved by Agent and, if no Event of Default or Unmatured Event of Default exists, by Borrower.

 

  

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“Environmental Laws” means any and all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of Hazardous Substance or to health and safety matters.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof.

 

“Event of Default” has the meaning specified in Section 10.1.

 

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day immediately succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the immediately preceding Business Day as so published on the immediately succeeding Business Day and (b) if no such rate is so published on such immediately succeeding Business Day, the Federal Funds Rate for any day shall be the average rate (rounded upwards, if necessary, to the next 1/100 of 1%) charged to Agent on such day on such transactions as determined by Agent.

 

“Financial Officer” means the chief executive officer, the chief financial officer, the principal accounting officer or the treasurer of Borrower or any other officer of Borrower acceptable to Agent.

 

“Floating Thirty Day LIBOR Rate” means, as of any day, the rate per annum offered for Dollar deposits in an amount comparable to the principal amount of the outstanding Alternate Base Rate Loans for a period of thirty (30) days as of 11:00 a.m. City of London, England time two (2) Business Days prior to such day as shown on the display designated as “British Bankers Association Interest Settlement Rates” on the Bloomberg System (“Bloomberg”); provided, however, that if such rate is not available on Bloomberg then such offered rate shall be otherwise independently determined by Agent from an alternate, substantially similar independent source available to Agent and recognized in the banking industry.

 

“Foreign Subsidiary” means any Subsidiary of Borrower that is not a Domestic Subsidiary, whether presently or hereafter created or existing; provided that if such Subsidiary does not exist on the date of this Agreement, Borrower and such Subsidiary shall satisfy the provisions of Section 8.4(a)(ii) with respect to such Subsidiary.  The Foreign Subsidiaries are listed on Schedule 6.14.  Schedule 6.14 may be amended or supplemented from time to time with the written consent of Agent and Borrower.

 

“Funded Debt” means, at any time, for Borrower and its Subsidiaries, on a consolidated basis, the sum of (a) all indebtedness for borrowed money, whether or not evidenced by notes, bonds, debentures or similar instruments, of Borrower and its Subsidiaries, including the Notes, (b) all Capitalized Lease Obligations, (c) all obligations of Borrower and its Subsidiaries to pay the deferred purchase price of property or services (but excluding trade accounts payable or trade notes in the ordinary course of business that are not past due by more than ninety (90) days) arising, and accrued expenses incurred, in the ordinary course of business, (d) all indebtedness of others secured by a Lien on the property of such Persons, and (e) the Letter of Credit Liabilities and liabilities related to other unfunded letters of credit, bankers acceptances and similar instruments.

 

  

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“GAAP” means generally accepted accounting principles in the United States of America.

 

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

“Guarantors” means those Domestic Subsidiaries existing on the Closing Date and all future Domestic Subsidiaries (other than those expressly released from their obligations by Agent pursuant to Section 8.4(b)).

 

"Guarantor Release Date" shall have the meaning given to such term in Section 8.4(b)(i).

 

“Guaranty Agreement” means a Guaranty Agreement executed by a Domestic Subsidiary in favor of Agent in substantially the form of Exhibit “F”, as the same may be amended, supplemented or modified from time to time.

 

“Hazardous Substance” means any substance, product, waste, pollutant, material, chemical, contaminant, constituent, or other material which is or becomes listed, regulated or addressed under any Environmental Law.

 

“Indemnitee” has the meaning set forth in Section 12.2.

 

“Interest Coverage Ratio” means for Borrower and its Subsidiaries, on a consolidated basis, as of any date (a) EBITDA for the period of four consecutive fiscal quarters ended on such date, divided by (b) the sum of (i) Cash Interest Expense for the period of four consecutive fiscal quarters ended on such date, plus (ii) Cash Distributions paid, or to be paid, for the period of four consecutive fiscal quarters ended on such date.

 

“Interest Income” means for Borrower and its Subsidiaries, on a consolidated basis, for any period, the sum of all interest income for such period, as determined in accordance with GAAP.

 

“Interest Period” means, with respect to any LIBOR Loan, the period commencing on the date such Loan is made or Converted from Loans of another Type or, in the case of each subsequent, successive Interest Period applicable to a LIBOR Loan, each period commencing on the last day of the immediately preceding Interest Period with respect to such LIBOR Loan, and in each case ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as Borrower may select as provided in Sections 2.5 or 3.7;  provided, however, that (a) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day, unless such extension would cause the last day of such Interest Period to occur in the next following calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month, (c) no Interest Period for any LIBOR Loan may extend beyond the Termination Date (and any proposed LIBOR Loan with an Interest Period which would extend beyond the Termination Date shall be an Alternate Base Rate Loan), (d) for all LIBOR Loans no more than eight (8) Interest Periods shall be in effect at the same time and (e) no Interest Period shall have a duration of less than thirty (30) days and, if the Interest Period for any LIBOR Loan would otherwise be a shorter period, such Loan shall be an Alternate Base Rate Loan.

 

  

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"IRC" means the Internal Revenue Code of 1986, as amended from time to time.

 

“Issuing Bank” means Amegy Bank National Association in its capacity as the issuer of Letters of Credit.

 

“LC Exposure” means, with respect to any Lender at any time, such Lender’s Pro Rata Share of the Letter of Credit Liabilities at such time.

 

“Lender” and “Lenders” have the meanings given to such terms in the introductory paragraph hereof.

 

“Letter of Credit” means any letter of credit issued by Issuing Bank for the account of Borrower pursuant to Article II.

 

“Letter of Credit Application” means Issuing Bank’s standard form of letter of credit application and agreement, as the same may be amended or supplemented.

 

“Letter of Credit Liabilities” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all drawings made under Letters of Credit that have not been reimbursed by one or more Revolving Advances at such time.

 

“Leverage Ratio” means, as of any date, (a) Funded Debt as of such date divided by (b) EBITDA for the period of four consecutive fiscal quarters ended on such date.

 

“LIBOR Loans” means Loans the interest rates on which are determined on the basis of the rates referred to in the definition of “LIBOR Rate”.

 

“LIBOR Margin” means, for any day, the rate per annum identified as the LIBOR Margin in the table contained in the definition of the term “Applicable Margin” corresponding to the applicable Level on such day.

 

  

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“LIBOR Rate” means, for any LIBOR Loan, for any Interest Period therefor, (a) the rate per annum offered for Dollar deposits in an amount comparable to the outstanding principal amount of such LIBOR Loan for a period of time equal to such Interest Period as of 11:00 a.m. City of London, England time two (2) London Business Days prior to the first date of such Interest Period as shown on the display designated as “British Bankers Association Interest Settlement Rates” on the Bloomberg System (“Bloomberg”), provided, however, that if such rate is not available on Bloomberg, then such rate shall be otherwise independently determined by Agent from an alternate, substantially similar independent source available to Agent and recognized in the banking industry; divided by (b) one (1) minus the Reserve Requirement.

 

“Lien” means any lien, mortgage, security interest, pledge, charge, hypothecation or other encumbrance of any kind or nature whatsoever (including, without limitation, the interest of a vendor under any conditional sale or title retention agreement), whether arising by contract, operation of law, or otherwise.

 

“Loan Documents” means this Agreement and all promissory notes, security agreements, deeds of trust, assignments, letters of credit, guaranties, and other instruments, documents, and agreements executed and delivered pursuant to or in connection with this Agreement, as such instruments, documents, and agreements may be amended, modified, renewed, extended or supplemented.

 

“Loans” means Revolving Advances and Swing Loans.

 

“London Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by laws or executive order to close in the City of London, England.

 

“Majority Lenders” means, at any time, Lenders holding more than 50% or more of the Combined Commitments; provided, however, that if there are only two (2) Lenders, “Majority Lenders” means both Lenders; provided, further, that the Commitment of any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole, (b) the ability of Borrower to pay the Obligations or the ability of Borrower and the Guarantors, considered as a whole, to perform their respective obligations under this Agreement and the other Loan Documents, or (c) the validity or enforceability of this Agreement, any Guaranty Agreement or any of the other Loan Documents, or the rights or remedies of Agent or any Lender under this Agreement, any Guaranty Agreement or any of the Notes.

 

“Maximum Rate” means the maximum rate of nonusurious interest permitted from day to day by applicable law, including Chapter 303 of the Texas Finance Code (the “Code”) (and as the same may be incorporated by reference in other Texas statutes).  To the extent that Chapter 303 of the Code is relevant to Lenders for the purposes of determining the Maximum Rate, Lenders may elect to determine such applicable legal rate pursuant to the “weekly ceiling,” from time to time in effect, as referred to and defined in Chapter 303 of the Code; subject, however, to the limitations on such applicable ceiling referred to and defined in the Code, and further subject to any right any Lender may have subsequently, under applicable law, to change the method of determining the Maximum Rate.

 

  

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“Merger” shall have the meaning given to such term in Section 8.3.

 

“Net Working Capital” means for Borrower and its Subsidiaries, on a consolidated basis, as of any date, (a) Current Assets as of such date minus (b) Current Liabilities as of such date; provided that, for purposes of calculating Current Assets, Borrower may include an amount equal to the maximum amount of the Revolving Line of Credit Availability as of such date which, assuming such amount had been fully borrowed as of such date, would not cause the Leverage Ratio as of such date to exceed 3.00 to 1.00.

 

“No Default Certificate” means a certificate in the form of Exhibit “D” hereto, fully completed and executed by Borrower.

 

“Notes” means the Revolving Notes and the Swing Note.

 

“Obligations” means (a) all obligations, indebtedness and liabilities of Borrower to Agent, Issuing Bank and Lenders, or any of them, arising pursuant to this Agreement or any of the other Loan Documents, now existing or hereafter arising, including, without limitation, all of Borrower’s contingent reimbursement obligations in respect of Letters of Credit, (b) all interest accruing thereon and all attorneys’ fees and other expenses incurred in the enforcement or collection thereof and (c) all Rate Management Transaction Obligations.

 

“Operating Income” means, for Borrower and its Subsidiaries for any period, the consolidated operating income (or loss) of Borrower and its Subsidiaries for such period, as determined in accordance with GAAP.

 

“Organizational Documents” means, for any Person, (a) if such Person is a corporation, the articles of incorporation or certificate of incorporation and bylaws of such Person, (b) if such Person is a limited liability company, the articles of organization or certificate of formation and regulations or limited liability company agreement of such Person, (c) if such Person is a limited partnership, the certificate of limited partnership or certificate of formation and the limited partnership agreement of such Person and (d) if such person is not a corporation, limited liability company or limited partnership, the documents under which such Person was created and is governed.

 

“Permitted Dividend” means the regular quarterly dividend established by the board of directors of Borrower.

 

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

 

“Pledged Foreign Subsidiary” means each Foreign Subsidiary (other than the Bermuda Subsidiary) with respect to which sixty-five percent (65%) of the ownership interests thereof have been pledged to Agent pursuant to Section 8.4(a)(ii)(C).

 

  

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“Prime Rate” means, at any time, the rate of interest per annum then most recently published in The Wall Street Journal (or any successor publication if The Wall Street Journal is no longer published) in the “Money Rates” section (or such successor section) as the “Prime Rate.”  If a range of prime interest rates per annum is so published, “Prime Rate” shall mean the highest rate per annum in such published range.  If the definition of “Prime Rate” is no longer published in The Wall Street Journal (or any successor publication), “Prime Rate” shall mean, at any time, the rate of interest per annum then most recently established by Agent as its prime rate.

 

“Pro Rata” or “Pro Rata Share” means for each Lender, with respect to Revolving Advances and Letters of Credit and fees, as applicable, attributable thereto, such Lender’s Commitment Percentage.

 

“Proprietary Accounts” shall mean all the depository accounts of Borrower and its Subsidiaries which are not used to hold client-related payroll and payroll tax funds.  The Proprietary Accounts are listed on Schedule 1.1.  Schedule 1.1 may be amended or supplemented from time to time with the written consent of Agent and Borrower.

 

“Rate Management Transaction” means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by Borrower or any Subsidiary which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

 

“Rate Management Transaction Obligations” means any and all obligations and indebtedness, contingent or otherwise, whether now existing or hereafter arising, of Borrower or any Subsidiary to any Lender arising under or in connection with any Rate Management Transaction.

 

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented.

 

“Regulatory Change” means, with respect to any Lender, any change after the date of this Agreement in United States federal, state, or foreign laws or regulations (including Regulation D) or the adoption or making after such date any interpretations, directives, or requests applying to a class of banks (including any Lender) of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

 

“Related Persons” means (a) Borrower and any of its Subsidiaries, (b) any trust for any employee benefit plan of Borrower or any of its Subsidiaries, (c) any other individual who is as of the date of this Agreement an employee or retiree of Borrower or any of its Subsidiaries or any member of such employee’s or retiree’s family, and (d) any trust, corporation, partnership or family foundation created by or for the benefit of any individual who is as of the date of this Agreement an employee or retiree of Borrower or any of its Subsidiaries or any member of such employee’s or retiree’s family.

 

  

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“Reserve Requirement” means the aggregate maximum reserve percentages (including any marginal, special, supplemental or emergency reserves, and expressed as a decimal) established by the Board of Governors of the Federal Reserve System or any other United States banking authority to which Lenders are subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D).  Such reserve percentages shall include, without limitation, those imposed under Regulation D.  LIBOR Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time under Regulation D or any comparable regulation.  The Reserve Requirement shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

"Requesting Guarantor " shall have the meaning given to such term in Section 8.4(b).

 

“Revolving Advance” means an advance of funds pursuant to Article II (other than Swing Loans).

 

“Revolving Advance Request Form” means a certificate, in substantially the form of Exhibit “C”, properly completed and signed by Borrower requesting a Revolving Advance.

 

“Revolving Line of Credit” means the credit facility extended by those Lenders who have a Commitment to Borrower pursuant to Article II.

 

“Revolving Line of Credit Availability” means, as of any date, an amount equal to the Combined Commitments minus the sum of (a) the aggregate principal amount of the outstanding Revolving Advances, plus (b) the Letter of Credit Liabilities, plus (c) the aggregate principal amount of the outstanding Swing Loans.

 

“Revolving Notes” means the promissory notes executed by Borrower payable to the order of each Lender, in substantially the form of Exhibit “A”, properly completed, as the same may be renewed, extended or modified, and all promissory notes executed by Borrower in renewal, extension, modification or substitution thereof.

 

“SEC” means the Securities and Exchange Commission or any successor Governmental Authority.

 

“Stock Repurchase” has the meaning assigned to such term in Section 8.5(b).

 

“Subsidiary” means any Person with respect to which Borrower or one or more of its other Subsidiaries, or Borrower and one or more of its other Subsidiaries, own or control, directly or indirectly, fifty percent (50%) or more of (a) the combined voting power of all classes of capital stock having general voting power under ordinary circumstances to elect a majority of the directors (if it is a corporation), managers or equivalent body of such Person, (b) the capital interest or profits interest of such Person, if it is a partnership, limited liability company, joint venture or similar entity, or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated association or organization.

 

  

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“Swing Exposure” means, with respect to any Lender at any time, such Lender’s Pro Rata Share of the aggregate principal amount of all Swing Loans outstanding at such time.

 

“Swing Lender” means the Lender designated as Swing Lender, initially Amegy Bank National Association.

 

“Swing Loan” has the meaning assigned to such term in Section 2.9.

 

“Swing Loan-Applicable Rate” means the sum of (a) the Alternate Base Rate from time to time in effect, plus (b) the applicable Alternate Base Rate Margin.

 

“Swing Note” means the promissory note executed by Borrower payable to the order of Swing Lender, in substantially the form of Exhibit “B”, as the same may be renewed, extended or modified, and all promissory notes executed by Borrower in renewal, extension, modification or substitution thereof.

 

"Tangible Net Worth" means, for a Person, as of any date, all amounts which, in conformity with GAAP, would be included as partners' capital, stockholders' equity or members' capital, as applicable, on a balance sheet of such Person; provided, however, there shall be excluded therefrom (a) any amount at which partnership interests, shares of capital stock or membership interests, as applicable, of such Person appear as an asset on such Person's balance sheet, (b) goodwill, including any amounts, however designated, that represent the excess of the purchase price paid for assets, stock or other ownership interests over the value assigned thereto, (c) patents, trademarks, trade names and copyrights, (d) deferred expenses, (e) loans and advances to any stockholder, partner, member, owner, director, officer, manager or employee of such Person or any Affiliate of such Person, including any such loans and advances evidenced by promissory notes, and (f) all other assets which are properly classified as intangible assets.

"Tangible Net Worth Test" means, for any Subsidiary, as of any date, the Tangible Net Worth of such Subsidiary as of such date is not greater than one percent (1.0%) of the consolidated Tangible Net Worth of Borrower and its Subsidiaries as of such date (excluding such Subsidiary).

“Termination Date” means 11:00 a.m. on September 15, 2015, or such earlier date on which the Commitments terminate as provided in this Agreement.

 

“Type” refers to whether a Loan is an Alternate Base Rate Loan or a LIBOR Loan.

 

“Unmatured Event of Default” means the occurrence of an event or the existence of a condition which, with the giving of notice or the passage of time, would constitute an Event of Default.

 

Section 1.2        Other Definitional Provisions.  All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined.  The words “hereof”, “herein”, and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified, (a) all references to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement, (b) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, restated or otherwise modified (subject to any restrictions on such amendments, supplements, restatements or modifications set forth in the Loan Documents), and (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to the restrictions contained in the Loan Documents).  In the event that, at any time, Borrower has no Subsidiaries, all references to the Subsidiaries of Borrower and the consolidation of certain financial information shall be deemed to be inapplicable until such time as Borrower has a Subsidiary.  All times of day are Houston, Texas, time.

 

  

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Section 1.3       Accounting Terms and Determinations; GAAP.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to Agent or the Lenders hereunder shall be prepared, in accordance with GAAP as in effect from time to time; provided that, if Borrower notifies Agent that it requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof or the operation of such provision (or if Agent notifies Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.  Notwithstanding anything to the contrary in this Agreement or any other Loan Document, for purposes of the definitions of Capitalized Lease Obligations and Funded Debt, GAAP will be deemed to treat leases that would have been classified as operating leases in accordance with generally accepted accounting principles in the United States as in effect on December 31, 2010 in a manner consistent with the treatment of such leases under generally accepted accounting principles in the United States as in effect on December 31, 2010, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.

 

ARTICLE II.

Revolving Line of Credit and Letters of Credit

 

Section 2.1       Revolving Line of Credit.  Subject to the terms and conditions of this Agreement, each Lender agrees severally to make Revolving Advances to Borrower from time to time from the date hereof to and including the Termination Date in an aggregate principal amount at any time outstanding up to but not exceeding such Lender’s Commitment; provided that the aggregate principal amount of all Revolving Advances of such Lender at any time shall not exceed such Lender’s Commitment at such time minus such Lender’s Pro Rata Share of the Letter of Credit Liabilities at such time; and provided, further, that the aggregate principal amount of all Revolving Advances at any time outstanding shall not exceed the Combined Commitments at such time minus the sum of (a) the Letter of Credit Liabilities at such time plus (b) the aggregate principal amount of the outstanding Swing Loans at such time.  Lenders shall have no obligation to make any Revolving Advance (other than a Revolving Advance to reimburse Issuing Bank for any draw on a Letter of Credit issued pursuant to the terms hereof) if an Event of Default or an Unmatured Event of Default has occurred and is continuing unless agreed to by Majority Lenders.  The obligations of the Lenders under the Commitments are several and not joint.  The failure of any Lender to make a Revolving Advance required to be made by it shall not relieve any other Lender of its obligation to make its Revolving Advance, and no Lender shall be responsible for the failure of any other Lender to make the Revolving Advance to be made by such other Lender.  Subject to the foregoing limitations, and the other terms and provisions of this Agreement, Borrower may borrow, repay and reborrow Revolving Advances hereunder.

 

  

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Section 2.2       Revolving Notes.  The obligation of Borrower to repay the Revolving Advances made by each Lender shall be evidenced by a Revolving Note executed by Borrower, payable to the order of such Lender, in the principal amount of such Lender’s Commitment.  From time to time a new Revolving Note may be issued to another Lender hereunder as such Person becomes a party to this Agreement. From time to time Agent may require a Revolving Note to be exchanged for a newly issued Revolving Note to accurately reflect the amount of each Lender’s Commitment hereunder.  Upon the request of Agent, Borrower shall execute and deliver to Agent such new Revolving Notes as requested by Agent; provided, however, that in no event will Borrower be required to (i) issue Revolving Notes in an aggregate amount which exceeds the amount of the Combined Commitments or (ii) issue Revolving Notes to any Lender in an aggregate amount which exceeds the Commitment of such Lender.

 

Section 2.3        Interest.  The unpaid principal amount of the Revolving Advances shall bear interest prior to maturity at a varying rate per annum equal from day to day to the lesser of (a) the Maximum Rate or (b) the Applicable Rate in effect from day to day, and each change in the rate of interest charged on the Revolving Advances shall become effective, without notice to Borrower, on the effective date of each change in the Applicable Rate or the Maximum Rate, as the case may be; provided, however, if at any time the rate of interest specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing the interest on the Revolving Advances to be limited to the Maximum Rate, then any subsequent reduction in the Applicable Rate shall not reduce the rate of interest on the Revolving Advances below the Maximum Rate until the aggregate amount of interest actually accrued on the Revolving Advances equals the amount of interest which would have accrued on the Revolving Advances if the interest rate specified in clause (b) preceding had at all times been in effect.  Notwithstanding the foregoing, if any Event of Default has occurred and is continuing, the outstanding principal of the Revolving Advances shall, upon the determination of the Majority Lenders, bear interest at the Default Rate.

 

Section 2.4        Repayment of Principal and Interest.  (a)  Accrued and unpaid interest on the Revolving Advances shall be payable as follows:

 

(i)       in the case of each Revolving Advance which is an Alternate Base Rate Loan, on the last day of each March, June, September and December, commencing December 31, 2011;

 

(ii)      in the case of each Revolving Advance which is a LIBOR Loan, on the last day of each Interest Period therefor, provided, however, if Borrower selects a six (6) month Interest Period, accrued and unpaid interest shall also be payable on the first (1st) Business Day following that day which is ninety (90) days after the first (1st) day of such six (6) month Interest Period;

 

  

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(iii)     upon the payment or prepayment of any Revolving Advance (but only on the principal amount so paid or prepaid); and

 

(iv)     for all Revolving Advances, on the Termination Date.

 

(b)           The aggregate unpaid principal amount of the Revolving Advances shall be due and payable on the Termination Date.

 

(c)           Notwithstanding the foregoing, interest payable at the Default Rate shall be payable from time to time on demand.

 

Section 2.5        Requests for Revolving Advances.  (a)  Borrower shall request each Revolving Advance by delivering to Agent a Revolving Advance Request Form (i) stating the amount of the Revolving Advance, (ii) stating the date on which Borrower desires that the Revolving Advance be funded (which shall be a Business Day), (iii) stating the Type of the Revolving Advance, and (iv) if such Revolving Advance is a LIBOR Loan, designating the Interest Period thereof.  Each Revolving Advance Request Form shall be delivered to Agent (i) in the case of each Revolving Advance which is to be an Alternate Base Rate Loan, not later than 11:00 a.m. on the date on which Borrower desires that the Revolving Advance be funded, and (ii) in the case of each Revolving Advance which is to be a LIBOR Loan, at least three (3) Business Days before the date on which Borrower desires that the Revolving Advance be funded; provided that (y) no Revolving Advance which is a LIBOR Loan may be in an amount which is less than $250,000.00, and (z) at any time there can be no more than eight (8) Interest Periods in effect for all LIBOR Loans.  Borrower at any time may redesignate the amounts of, and Convert and Continue, the Revolving Advances, subject to the terms and provisions of this Agreement, including Sections 3.7, 3.8 and 3.9 hereof.

 

(b)           Agent shall promptly notify each Lender of each request for a Revolving Advance.  No later than 12:00 p.m. on the proposed date of any Revolving Advance hereunder, each Lender shall make available to Agent at its office specified herein in immediately available funds, its Pro Rata Share of such requested Revolving Advance.  After Agent’s receipt of such funds and subject to the other terms and conditions of this Agreement, Agent shall make each Revolving Advance available to Borrower.

 

Section 2.6        Use of Proceeds.  The proceeds of the Revolving Advances shall be used for working capital and general corporate purposes.

 

Section 2.7        Unused Commitment Fee; Reduction or Termination of Commitment.

 

(a)           Borrower agrees to pay to Agent for the Pro Rata benefit of Lenders who have a Commitment a commitment fee on the average daily unused portion of the Combined Commitments, for the period from and including the Closing Date to and excluding the Termination Date, at the rate of one-quarter percent (0.25%) per annum based on a three hundred sixty (360) day year and the actual number of days elapsed, payable quarterly in arrears and on the Termination Date.  For the purpose of calculating the commitment fee hereunder, the Combined Commitments shall be deemed utilized by the amount of all outstanding Revolving Advances, Swing Loans and Letter of Credit Liabilities.

 

  

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(b)           Borrower shall have the right at any time to terminate in whole, or from time to time to irrevocably reduce in part, the Combined Commitments upon at least three (3) Business Days prior notice to Agent specifying the effective date thereof, whether a termination or reduction is being made, and the amount of any partial reduction; provided, however, that (a) no such reduction shall be in an amount less than the lesser of (i) $250,000.00 and (ii) the Combined Commitments, and (b) the Combined Commitments shall never be reduced below an amount equal to the Letter of Credit Liabilities.  At the time of such reduction, Borrower shall prepay the amount by which the unpaid principal amount of the Revolving Advances plus the Swing Loans plus the Letter of Credit Liabilities exceeds the Combined Commitments (after giving effect to such reduction) plus accrued and unpaid interest on the principal amount so prepaid.  The Combined Commitments may not be reinstated after they have been terminated or reduced.

 

Section 2.8        Increase of the Combined Commitments.  (a)  At any time prior to the Termination Date, Borrower may effectuate increases in the aggregate Combined Commitments (each such increase being a “Combined Commitments Increase”), by designating either one or more of the existing Lenders (each of which, in its sole discretion, may determine whether and to what degree to participate in such Combined Commitments Increase) or one or more other banks or other financial institutions (acceptable to Agent) that at the time agree (y) in the case any existing Lender, to increase its Commitment (an “Increasing Lender”), and (z) in the case of any other bank or financial institution that is not an existing Lender, to provide a Commitment and become a party to this Agreement as a Lender (an “Additional Lender”); provided, however, that (i) each Combined Commitments Increase shall be in an amount at least equal to $5,000,000.00, (ii) the aggregate amount of all Combined Commitments Increases shall not exceed $50,000,000.00, and (iii) all Commitments and Revolving Advances provided pursuant to a Combined Commitments Increase shall be available on the same terms as those applicable to the existing Commitments and Revolving Advances.  Borrower shall provide prompt notice of any proposed Combined Commitments Increase pursuant to clause (a) above to Agent.  This Section 2.8 shall not be construed to create any obligation on Agent or any Lender to advance or to commit to advance any credit to Borrower or to arrange for any other Person to advance or to commit to advance any credit to Borrower.

 

(b)           A Combined Commitments Increase shall become effective upon (i) the receipt by Agent of (A) an agreement in form and substance satisfactory to Agent signed by Borrower, each Increasing Lender and each Additional Lender, as applicable, setting forth the Commitments of each such Lender, and in the case of an Additional Lender, setting forth the agreement of such Additional Lender to become a party to this Agreement and to be bound by all the terms and provisions hereof binding upon each Lender, and (B) such evidence of appropriate authorization on the part of Borrower with respect to such Combined Commitments Increase as Agent may reasonably request, and (ii) receipt by Agent of a certificate of an Authorized Representative of Borrower stating that, both before and after giving effect to such Combined Commitments Increase, no Event of Default or Unmatured Event of Default has occurred and is continuing, and that all representations and warranties made by Borrower in this Agreement are, to Borrower’s knowledge, true and correct as of such date, unless such representation or warranty relates to an earlier date, in which case such representation and warranty shall continue to be, to Borrower’s knowledge, true and correct as of such earlier date.

 

  

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(c)           Upon the occurrence of a Combined Commitments Increase, the outstanding Revolving Advances and participation interests shall be reallocated by Agent and Lenders by causing such assignments (among the Lenders with Commitments) of Revolving Advances, Commitments and participation interests as necessary such that, after giving effect to such Combined Commitments Increase, each Lender with a Commitment will hold Revolving Advances, Commitments and participation interests based upon its Pro Rata Share of the Combined Commitments (after giving effect to such Combined Commitments Increase and such assignments).  Borrower shall be responsible for payment of any costs arising under Section 3.9 as a result of the assignments described in this paragraph (c) as though such assignments were prepayments.  The fees described in paragraph (b) of Section 12.16 shall not be applicable in connection with assignments described in this paragraph (c).

 

Section 2.9       Swing Loans.  (a)  On the terms and conditions set forth in this Agreement, upon Borrower’s request on any Business Day prior to the Termination Date, Swing Lender shall make Alternate Base Rate Loans under the Swing Note (“Swing Loans”) to Borrower in an aggregate principal amount not to exceed $10,000,000.00 outstanding at any time; provided that the aggregate principal amount of the outstanding Revolving Advances, plus the Letter of Credit Liabilities, plus the aggregate principal amount of the outstanding Swing Loans shall never exceed the Combined Commitments; and provided, further, that Swing Lender shall not make Swing Loans if an Event of Default or an Unmatured Event of Default has occurred and is continuing.  Subject to the other provisions of this Agreement, Borrower may from time to time borrow, prepay (in whole or in part and without premium or penalty) and reborrow Swing Loans.  Borrower shall request a Swing Loan by written notice to Swing Lender.

 

(b)           The unpaid principal amount of the Swing Loans shall bear interest prior to maturity at a varying rate per annum equal from day to day to the lesser of (i) the Maximum Rate or (ii) the Swing Loan-Applicable Rate in effect from day to day, and each change in the rate of interest charged on the Swing Loans shall become effective, without notice to Borrower, on the effective date of each change in the Swing Loan-Applicable Rate or the Maximum Rate, as the case may be; provided, however, if at any time the rate of interest specified in clause (b)(ii) preceding shall exceed the Maximum Rate, thereby causing the interest on the Swing Loans to be limited to the Maximum Rate, then any subsequent reduction in the Swing Loan-Applicable Applicable Rate shall not reduce the rate of interest on the Swing Loans below the Maximum Rate until the aggregate amount of interest actually accrued on the Swing Loans equals the amount of interest which would have accrued on the Swing Loans if the interest rate specified in clause (b)(ii) preceding had at all times been in effect.  Notwithstanding the foregoing, if any Event of Default has occurred and is continuing, the outstanding principal of the Swing Loans shall, upon the determination of the Swing Lender, bear interest at the Default Rate.

 

(c)           Borrower shall repay the outstanding principal amount of the Swing Loans on the Termination Date.  Borrower shall pay the accrued interest on the Swing Loans on the last day of each March, June, September and December, commencing December 31, 2011.  Borrower may prepay the Swing Loans, together with accrued interest thereon, at any time.

 

  

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(d)           If (i) any Swing Loan advanced hereunder is not repaid within five (5) Business Days following the date such Swing Loan is advanced or (ii) Swing Lender at any time in its sole and absolute discretion requests on behalf of Borrower (which Borrower hereby authorizes Swing Lender to so request on its behalf), that each Lender make a Revolving Advance that is an Alternate Base Rate Loan in an amount equal to such Lender’s Pro Rata Share of such Swing Loan then outstanding, then, upon the giving of notice to the Lenders in accordance with the following sentence, each Lender shall pay to Swing Lender such Lender’s Pro Rata Share of such Swing Loan.  In connection with any Revolving Advance to be made to refinance any Swing Loan as contemplated by the foregoing sentence, Swing Lender shall give a notice to Agent prior to 12:00 noon on (i) the sixth (6th) Business Day following the date such Swing Loan is advanced or (ii) such other day that Swing Lender makes a request on behalf of Borrower as set forth above, and Agent shall give each Lender a notice by 1:00 p.m. on such date, to make an Alternate Base Rate Loan in the amount of its Pro Rata Share of such Swing Loan.  Each Revolving Advance made pursuant to each request made by Swing Lender pursuant to the foregoing sentence shall be considered to be a Revolving Advance, and Borrower hereby irrevocably instructs Swing Lender to apply the proceeds of such Revolving Advances to the prepayment of such Swing Loan.  Each Lender (including Swing Lender in its capacity as a Lender) shall make its Pro Rata Share of such Revolving Advance available to Agent in immediately available funds by 3:00 p.m. on the date requested, and the obligation to fund such Revolving Advance shall be unconditional, irrespective of the occurrence, existence or continuance of an Event of Default or Unmatured Event of Default.

 

(e)           If, prior to refinancing a Swing Loan with a Revolving Advance as provided above, an Event of Default under Section 10.1(d) or 10.1(e) shall have occurred or if for any other reason a Revolving Advance cannot be made, then each Lender will, on the date on which the Revolving Advance was to have been made or such other date as is designated by Swing Lender, purchase from the Swing Lender an undivided participation interest in all the outstanding Swing Loans in an amount equal to its Pro Rata Share of such Swing Loans.  Upon request from Agent (which shall be given by Agent to Lenders immediately following receipt by Agent of notice from Swing Lender), each Lender will immediately transfer such amount to Swing Lender.

 

Section 2.10     Letters of Credit.  Subject to the terms and conditions of this Agreement, Issuing Bank agrees to issue one or more Letters of Credit for the account of Borrower from time to time from the date hereof to and including the Business Day prior to the Termination Date; provided, however, that the Letter of Credit Liabilities shall not at any time exceed the lesser of (a) $10,000,000.00 and (b) the Combined Commitments at such time minus the sum of (i) the aggregate principal amount of the outstanding Revolving Advances at such time, plus (ii) the aggregate principal amount of the outstanding Swing Loans at such time.  Each Letter of Credit shall (a) have an expiration date (i) which is not later than one year following the date of issuance of such Letter of Credit (or, in the case of any renewal or extension of a Letter of Credit, not later than one year after such renewal or extension) and (ii) which may, at the sole discretion of Issuing Bank, extend beyond the Termination Date, subject to Section 2.18, (b) be payable in Dollars, (c) be issued for general corporate purposes of Borrower or any Subsidiary and (d) otherwise be satisfactory in form and substance to Issuing Bank; provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods.  No Letter of Credit shall require any payment by Issuing Bank to the beneficiary thereunder pursuant to a drawing prior to the third (3rd) Business Day following presentment of a draft and any related documents to Issuing Bank.  Issuing Bank shall have no obligation to issue any Letter of Credit if an Event of Default or an Unmatured Event of Default has occurred and is continuing.

 

  

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Section 2.11     Procedure for Issuing Letters of Credit.  Each Letter of Credit shall be issued upon receipt by Issuing Bank of written notice from an Authorized Representative requesting the issuance of such Letter of Credit, which notice shall be received by Issuing Bank at least three (3) Business Days prior to the requested date of issuance of such Letter of Credit (or such shorter period as Issuing Bank may agree).  Such notice shall be accompanied by a Letter of Credit Application and such other documents as Issuing Bank may require in order to prepare such Letter of Credit.  Such notice and application (both front and back sides) may be sent by fax or other electronic method.  Each request for a Letter of Credit shall constitute a representation by Borrower to Issuing Bank, Agent and the other Lenders as to each of the matters set forth in the Revolving Advance Request Form, including representations that (a) immediately after giving effect to the issuance of such Letter of Credit, the sum of (i) the aggregate principal amount of the outstanding Revolving Advances plus (ii) the Letter of Credit Liabilities plus (iii) the aggregate principal amount of the outstanding Swing Loans does not exceed the Combined Commitments, and (b) at the time of and immediately after giving effect to the issuance of such Letter of Credit, no Event of Default or Unmatured Event of Default exists.  To the extent that the terms and provisions of a Letter of Credit Application may conflict with or be inconsistent with the terms and provisions of this Agreement, the terms and provisions of this Agreement shall govern and control.

 

Section 2.12     Participation by Lenders.  By the issuance of any Letter of Credit and without any further action on the part of Issuing Bank or any Lender in respect thereof, Issuing Bank hereby grants to each Lender, and each Lender hereby agrees to acquire from Issuing Bank, a participation in each such Letter of Credit and the related Letter of Credit Liabilities, effective upon the issuance thereof without recourse or warranty, equal to such Lender’s Pro Rata Share of such Letter of Credit and the Letter of Credit Liabilities related to such Letter of Credit.  Issuing Bank shall provide a copy of each Letter of Credit to each other Lender promptly after issuance thereof.  This agreement to grant and acquire participations is an agreement between Issuing Bank and Lenders, and neither Borrower nor any beneficiary of a Letter of Credit shall be entitled to rely thereon.  Borrower agrees that each Lender purchasing a participation from the Issuing Bank pursuant to this Section 2.12 may exercise all of its rights to payment against Borrower including the right of setoff, with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participations.

 

Section 2.13     Payments Constitute Revolving Advances.  Each payment by Issuing Bank pursuant to a drawing under a Letter of Credit shall constitute and be deemed a Revolving Advance by Issuing Bank to Borrower under the Revolving Notes and this Agreement as of the day and time such payment is made by Issuing Bank and in the amount of such payment.  Each Lender shall make available to Issuing Bank in immediately available funds its Pro Rata Share of such Revolving Advance in the manner provided in Section 2.5 hereof upon notice given by Issuing Bank in the manner provided in Section 2.5 for notices given by Agent.  Notwithstanding the foregoing, if, prior to paying a drawing on a Letter of Credit with a Revolving Advance as provided above, an Event of Default under Section 10.1(d) or Section 10.1(e) shall have occurred or if for any other reason a Revolving Advance cannot be made, then each Lender will, on the date on which the Revolving Advance was to have been made to pay such drawing or such other date as is designated by Issuing Bank, purchase from Issuing Bank an undivided participation interest in such Letter of Credit in an amount equal to its Commitment Percentage times the amount of such drawing.  Upon request from Agent (which shall be given by Agent to Lenders immediately following receipt of notice by Agent from Issuing Bank), each Lender will immediately transfer such amount to Issuing Bank.

 

  

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Section 2.14     Letter of Credit Fees.  Borrower shall pay to Agent for the ratable benefit of the Lenders a letter of credit participation fee, payable quarterly in arrears, in an amount equal to (a) for a commercial Letter of Credit, the greater of (i) one percent (1.0%) per annum of the stated amount of such commercial Letter of Credit for the period during which such commercial Letter of Credit will remain outstanding (based on a three hundred sixty (360) day year and the actual number of days to elapse), and (ii) $250.00, and (b) for a standby Letter of Credit, the greater of (i) two percent (2.0%) per annum of the stated amount of such standby Letter of Credit for the period during which such standby Letter of Credit will remain outstanding (based on a three hundred sixty (360) day year and the actual number of days to elapse), and (ii) $250.00.  At the time of issuance of each Letter of Credit, Borrower shall also pay to the Issuing Bank a letter of credit fee in an amount equal to one-eighth of one percent (1⁄8%) of the stated amount of such Letter of Credit.  In addition, Borrower shall pay to Issuing Bank (a) at the time of issuance of any Letter of Credit, all reasonable out-of-pocket costs incurred by Issuing Bank in connection with the issuance of such Letter of Credit, (b) upon the payment of any Letter of Credit, Issuing Bank’s standard letter of credit payment fees (if any) with respect to such payment, and (c) upon the amendment (including the extension) of any Letter of Credit, Issuing Bank’s standard letter of credit amendment fees (if any) with respect to such amendment.

 

Section 2.15     Obligations Absolute.  The obligations of Borrower to reimburse Issuing Bank and Lenders, as applicable, for payment of drawings under any Letter of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and the other Loan Documents under all circumstances, including (a) any lack of validity or enforceability of any Letter of Credit or any other Loan Document, (b) the existence of any claim, set-off, counterclaim, defense or other rights which any Subsidiary or any other Person may have at any time against any beneficiary of any Letter of Credit, Issuing Bank, Agent, any Lender, or any other Person, whether in connection with this Agreement or any other Loan Document or any unrelated transaction, (c) if any statement, draft or other document presented under any Letter of Credit proves to be forged, fraudulent, invalid or insufficient in any respect or any statement therein is untrue or inaccurate in any respect whatsoever, (d) payment by Issuing Bank under any Letter of Credit against presentation of a draft or other document which does not comply with the terms of such Letter of Credit in a manner which is not material, (e) any amendment or waiver of, or any consent to departure from, any Loan Document or (f) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, Borrower’s obligations hereunder.

 

  

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Section 2.16      Limitation of Liability.  Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit with respect to its use of such Letter of Credit.  None of Issuing Bank, Agent, any Lender or any of their officers, employees or directors shall have any responsibility or liability to Borrower or any other Person for (a) the failure of any draft to bear any reference or adequate reference to any Letter of Credit, or the failure of any documents to accompany any draft at negotiation, or the failure of any Person to surrender any Letter of Credit or to send documents apart from drafts as required by the terms of any Letter of Credit, or the failure of any Person to note the amount of any instrument on any Letter of Credit, (b) errors, omissions, interruptions or delays in transmission or delivery of any messages relating to any Letter of Credit, (c) the validity, sufficiency or genuineness of any draft or other document, or any endorsement thereon, even if any such draft, document or endorsement should in fact prove to be in any and all respects invalid, insufficient, fraudulent or forged or any statement therein is untrue or inaccurate in any respect, (d) payment by Issuing Bank to the beneficiary of any Letter of Credit against presentation of any draft or other document that does not comply with the terms of the Letter of Credit in a respect which is not material or (e) any other circumstance whatsoever in making or failing to make any payment under a Letter of Credit.  Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.  Notwithstanding the foregoing, Issuing Bank shall be liable to Borrower to the extent of any direct, but not consequential, damages suffered by Borrower which Borrower proves in a final nonappealable judgment were caused by (i) Issuing Bank’s willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms thereof or (ii) Issuing Bank’s willful failure to pay under any Letter of Credit after presentation to it of documents strictly complying with the terms and conditions of such Letter of Credit.

 

Section 2.17      Provisions Regarding Electronic Issuance of Letters of Credit.  Issuing Bank may adopt procedures pursuant to which Borrower may request the issuance of Letters of Credit by electronic means and Issuing Bank may issue Letters of Credit based on such electronic requests.  Such procedures may include the submission by Borrower of Letter of Credit Applications electronically.

 

Section 2.18      Cash Deposit Prior to Termination Date.  If Letters of Credit are to be outstanding after the Termination Date, not later than five (5) Business Days prior to the Termination Date, Borrower will deposit with Issuing Bank cash, or pledge to Issuing Bank (in a manner satisfactory to Issuing Bank) cash equivalent investments or other collateral acceptable to Issuing Bank, or a combination thereof, in an amount equal to the sum of the amounts available to be drawn under the Letters of Credit which will remain outstanding after the Termination Date.

 

Section 2.19      Defaulting Lenders.  Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(a)           any and all fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.7;

 

(b)           the Commitment of such Defaulting Lender shall not be included in determining whether all Lenders or Majority Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 2.1 or Section 12.7), provided that any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender differently than other affected Lenders shall require the consent of such Defaulting Lender;

 

  

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(c)           if any Swing Loans or Letter of Credit Liabilities exist at the time such Lender becomes a Defaulting Lender, then:

 

(i)       all or any part of the Swing Exposure and LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Commitment Percentages (for the purposes of such reallocation, such Defaulting Lender’s Commitment shall be disregarded in determining the non-Defaulting Lenders’ Commitment Percentages), but only to the extent that (x) the sum of each non-Defaulting Lender’s Credit Exposure plus its reallocated share of such Defaulting Lender’s Swing Exposure and LC Exposure does not exceed such non-Defaulting Lender’s Commitment, (y) the sum of all non-Defaulting Lenders’ Credit Exposures plus such Defaulting Lender’s Swing Exposure and LC Exposure does not exceed the Commitments of all non-Defaulting Lenders, and (z) no Event of Default has occurred and is continuing at such time;

 

(ii)      if the reallocation described in clause (i) above cannot, or can only partially, be effected, Borrower shall, within three (3) Business Days following Borrower’s receipt of written notice by Agent, (y) first, prepay such Swing Loans and (z) second, deposit with Agent cash, or pledge to Agent (in a manner satisfactory to Agent) cash equivalent investments or other collateral acceptable to Agent, or a combination thereof, in an amount equal to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 10.3 for so long as such LC Exposure is outstanding;

 

(iii)     if Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.14 with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

 

(iv)     if the LC Exposures of the non-Defaulting Lenders are reallocated pursuant to Section 2.19(c), then the fees payable to the Lenders pursuant to Section 2.7 and Section 2.14 shall be adjusted in accordance with such non-Defaulting Lenders’ Pro Rata Share of the Letter of Credit Liabilities after giving effect to such reallocation; and

 

(v)      if there is neither reallocation nor cash collateralization pursuant to the above subsections of this Section 2.19(c), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all fees due under Section 2.14 with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until such Defaulting Lender’s LC Exposure is cash collateralized and/or reallocated; and

 

  

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(d)           so long as any Lender is a Defaulting Lender, the Swing Lender shall not be required to fund any Swing Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless the Swing Lender or the Issuing Bank, as applicable, is satisfied that the related exposure will be covered one hundred percent (100%) by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by Borrower in accordance with Section 2.19(c)(iii), and participating interests in any such newly made Swing Loan or newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.19(c)(iv) (and Defaulting Lenders shall not participate therein).

 

In the event that Agent, Borrower, the Swing Lender and the Issuing Bank each agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swing Exposures and LC Exposures of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment, and on such date such Lender shall purchase at par such of the Loans of the other Lenders (other than Swing Loans) as Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Commitment Percentage.  The rights and remedies against, and with respect to, a Defaulting Lender under this Section 2.19 are in addition to, and cumulative and not in limitation of, all other rights and remedies that Agent, the Issuing Bank, the Swing Lender, the Lenders, Borrower and Guarantors may at any time have against, or with respect to, such Defaulting Lender.

 

Section 2.20      Failure of Lender to Make Loans or Payments.  If any Lender shall fail to make any Loan or payment required to be made by it, then Agent may, in its discretion and notwithstanding any contrary provision hereof, (a) apply any amounts thereafter received by Agent for the account of such Lender to satisfy such Lender’s obligations to make such Loan and/or payment until all such unsatisfied obligations are fully paid, and/or (b) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender to make such Loan and/or payment; in the case of each of (a) and (b) above, in any order as determined by Agent in its discretion.

 

Section 2.21      Replacement of Lenders.  If (i) any Lender requests compensation under Section 3.5 or (ii) any Lender becomes a Defaulting Lender, then Borrower may, at its sole expense and effort, upon notice to such Lender and Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.16), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (1) Borrower shall have received the prior written consent of the Issuing Bank and, if such assignee is not already a Lender hereunder, Agent, which consent of the Issuing Bank and Agent (if applicable) shall not be unreasonably withheld, conditioned or delayed and (2) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Advances, participations in Letters of Credit and Swing Exposure, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts).

 

  

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ARTICLE III.

Payments; Additional Matters with Respect to

LIBOR Loans; Yield Protection Provisions

 

Section 3.1        Method of Payment.  All payments of principal, interest and other amounts to be made by Borrower under this Agreement, the Notes or any other Loan Document shall be made to Agent at its designated office specified herein in immediately available funds, without setoff, deduction, or counterclaim, not later than 11:00 a.m. on the date that such payment shall become due (and each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).  Each payment received by Agent under this Agreement or any other Loan Document for the account of a Lender shall be paid promptly to such Lender, in immediately available funds, at such Lender’s office designated herein; provided, however, in the event any Lender fails to fund any Revolving Advance required to be funded by it and Agent or another Lender or Lenders shall have funded such Revolving Advance on behalf of such Lender, any payment received by Agent for the account of such non-funding Lender shall not be distributed to such Lender until such Revolving Advance shall have been repaid in full to Agent or the Lender or Lenders who funded such Revolving Advance on behalf of such Lender.  Whenever any payment under this Agreement, any Note or any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next Business Day, and interest shall continue to accrue during such extension.

 

Section 3.2        Sharing of Payments, etc./Non-Receipt of Funds by Agent.

 

(a)           If any Lender shall obtain any payment (whether voluntary, involuntary or otherwise) on account of Revolving Advances (including, without limitation, any set-off), which is in excess of its Pro Rata Share of payments on the Revolving Advances obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in the Revolving Advances of the other Lenders as shall be necessary to cause such purchasing Lender to share the excess payment Pro Rata with each of the other Lenders; provided that (i) if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of recovery and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Advances to any assignee or participant.  Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this paragraph may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation.

 

(b)           Unless Agent shall have been notified by a Lender or Borrower (the “Payor”) prior to the date on which such Lender is to make payment to Agent of the proceeds of a Revolving Advance to be made by it hereunder or Borrower is to make a payment to Agent for the account of one or more of the Lenders, as the case may be (a “Required Payment”), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to Agent, Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to Agent, the recipient of such payment shall, on demand, pay to Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was made available by Agent until the date Agent recovers such amount at the rate applicable to such portion of the applicable Revolving Advance.

 

  

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Section 3.3        Voluntary Prepayment.  Borrower may prepay the Notes in whole at any time or from time to time in part without premium or penalty.  Each prepayment of the Notes shall be accompanied by all accrued and unpaid interest to the date of prepayment on the amount so prepaid, together with any additional amounts required pursuant to Section 3.9.

 

Section 3.4        Computation of Interest.  Interest on the indebtedness evidenced by the Notes shall be computed on the basis of a year of (a) three hundred sixty (360) days and the actual number of days elapsed (including the first day but excluding the last day) for all LIBOR Loans unless such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be, and (b) three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be, for all Alternate Base Rate Loans.

 

Section 3.5        Capital Adequacy.

 

(a)           If, after the date hereof, any Lender shall have determined in good faith that a Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital (or the capital of such Lender’s parent company, if any) as a consequence of its obligations hereunder or the transactions contemplated hereby to a level below that which such Lender (or its parent company) could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s parent company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, subject to paragraphs (b) and (c) of this Section, Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its parent company) for any such reduction actually suffered.

 

(b)           A certificate of such Lender claiming compensation under this Section and setting forth the additional amount or amounts necessary to compensate such Lender or such Lender’s parent company, as the case may be, including in reasonable detail a description of the basis for such claim for compensation and a calculation of such amount or amounts, shall be delivered to Borrower and shall be conclusive absent manifest error, provided that the determination of such amount or amounts is made on a reasonable basis.  In determining such amount or amounts, such Lender may use any reasonable averaging and attribution methods.  Borrower shall pay such Lender the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

 

(c)           Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than one hundred eighty (180) days prior to the date that such Lender notifies Borrower in writing of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the one hundred eighty (180) day period referred to above shall be extended to include the period of retroactive effect thereof.

 

  

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Section 3.6        Additional Costs in Respect of Letters of Credit.

 

(a)           If as a result of any Regulatory Change there shall be imposed, modified or deemed applicable any tax, reserve, special deposit, or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder or Issuing Bank’s commitment to issue Letters of Credit hereunder, and the result shall be to increase the cost to Issuing Bank of issuing or maintaining any Letter of Credit or its commitment to issue Letters of Credit hereunder or reduce any amount receivable by Issuing Bank hereunder in respect of any Letter of Credit (which increase in cost or reduction in amount receivable, shall be the result of Issuing Bank’s reasonable allocation of the aggregate of such increases or reductions resulting from such event), then from time to time, subject to paragraphs (b) and (c) of this Section, Borrower shall pay to Issuing Bank such additional amount or amounts as will compensate Issuing Bank for such increased costs or reductions in amount.

 

(b)           A certificate of Issuing Bank claiming compensation under this Section and setting forth the additional amount or amounts necessary to compensate Issuing Bank, including in reasonable detail a description of the basis for such claim for compensation and a calculation of such amount or amounts, shall be delivered to Borrower and shall be conclusive absent manifest error, provided that the determination of such amount or amounts is made on a reasonable basis.  Borrower shall pay Issuing Bank the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

 

(c)           Failure or delay on the part of Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of Issuing Bank’s right to demand such compensation; provided that Borrower shall not be required to compensate Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than one hundred eighty (180) days prior to the date that Issuing Bank notifies Borrower in writing of the Regulatory Change giving rise to such increased costs or reductions and of Issuing Bank’s intention to claim compensation therefor; provided further that, if the Regulatory Change giving rise to such increased costs or reductions is retroactive, then the one hundred eighty (180) day period referred to above shall be extended to include the period of retroactive effect thereof.

 

Section 3.7        Conversions and Continuations.  Borrower shall have the right from time to time to Convert any Loan from one Type of Loan into another Type of Loan or to Continue any LIBOR Loan as a LIBOR Loan by giving Agent written notice (a) for Conversion into an Alternate Base Rate Loan, not later than 11:00 a.m. on the date on which Borrower desires that the Conversion occur (which shall be a Business Day), in which case such Loan shall be Converted into an Alternate Base Rate Loan on such date, and (b) for Continuation of or Conversion into a LIBOR Loan, not later than 11:00 a.m. three (3) Business Days before the effective date of such Conversion or Continuation, specifying (i) the Conversion or Continuation date (which shall be a Business Day), (ii) in the case of Conversions, the Type of Loan to be Converted into, and (iii) in the case of a Continuation of or Conversion into a LIBOR Loan, the duration of the Interest Period to be applicable thereto after giving effect to such election; provided that (x) no Loan which is a LIBOR Loan may be in an amount which is less than $250,000.00, (y) at any time there can be no more than eight (8) Interest Periods in effect for all LIBOR Loans, and (z) except for Conversions to Alternate Base Rate Loans, no Lender shall have an obligation to make any Conversions while an Event of Default or an Unmatured Event of Default has occurred and is continuing.  All notices under this Section shall be irrevocable once given.  If Borrower shall fail to give Agent the notice specified above for Continuation or Conversion of any LIBOR Loan prior to the end of the Interest Period with respect thereto, such LIBOR Loan shall automatically be Converted into an Alternate Base Rate Loan on the last day of such Interest Period.

 

  

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Section 3.8        Illegality, Impossibility, Regulatory Change; Change in Law and Compensation.  In the event that (a) it becomes unlawful for any Lender to honor its obligation to make LIBOR Loans hereunder or to maintain LIBOR Loans hereunder, (b) Agent determines that (i) quotations of interest rates for the relevant deposits referred to in the definition of “LIBOR Rate” are not being provided in the relative amounts or for the relative maturities for determining the interest rates borne by the LIBOR Loans as provided in this Agreement or (ii) such quotations do not accurately reflect any Lender’s costs of making or maintaining its LIBOR Loans, or (c) a Regulatory Change (including the imposition of a Reserve Requirement) or any change in law occurs which changes any Lender’s basis of taxation with respect to LIBOR Loans or imposes reserve, capital or other requirements with respect thereto, then (x) such Lender shall notify Borrower of any such event, (y) Borrower shall promptly pay to such Lender such amounts as such Lender may determine (which determination shall be conclusive provided such determination is made on a reasonable basis) to be necessary to compensate such Lender for any increased costs incurred by such Lender or decreases in amounts receivable by such Lender which such Lender determines are attributable to any event described in clauses (a), (b) or (c) above, and (z) the obligation of such Lender to make or Continue LIBOR Loans or to Convert Alternate Base Rate Loans to LIBOR Loans shall terminate, and (i) all future Loans shall be Alternate Base Rate Loans and (ii) all outstanding Loans which are LIBOR Loans shall be Converted to Alternate Base Rate Loans on the last day of the current Interest Period therefor.

 

Section 3.9        Compensation for Prepayment or Failure to Borrow.  Borrower shall pay to Agent in accordance with this Section, promptly upon the request of Agent, such amount or amounts as shall be sufficient to compensate any Lender for any reasonable loss, cost or expense (including any reasonable losses and expenses arising from the liquidation or reemployment of deposits acquired to fund or maintain any principal amount prepaid) incurred by such Lender as a result of (a) any payment, prepayment or Conversion of any LIBOR Loan on a day other than the last day of an Interest Period therefor (a “LIBOR Prepayment”) or (b) the failure by Borrower to borrow, Convert or prepay a LIBOR Loan on any date required hereby.  Such reimbursement shall be calculated as though such Lender funded the principal amount paid, prepaid, Converted or not borrowed through the purchase of Dollar deposits in the London, England interbank market having a maturity corresponding to last day of the Interest Period for the amount paid, prepaid, Converted or to be borrowed and bearing an interest rate equal to the LIBOR Rate for such principal amount for such Interest Period, whether in fact that is the case or not.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, including in reasonable detail a description of the basis for such compensation and a calculation of such amount or amounts, shall be delivered to Borrower and Agent and shall be conclusive absent manifest error, provided that the determination thereof is made on a reasonable basis.  Borrower shall pay such Lender the amount shown as due on any such certificate within thirty (30) days after receipt thereof.  On the date of any LIBOR Prepayment, interest shall be due and payable on the principal amount so paid, prepaid or Converted.

 

  

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ARTICLE IV.

 

Setoff and Guaranty Agreements

 

Section 4.1       Setoff.  If an Event of Default has occurred and is continuing, Agent, Issuing Bank and each Lender, or any of the foregoing, shall have the right and are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply against the Obligations in such a manner as such Person may determine, at any time and without notice to Borrower, any and all deposits (general or special, time or demand, provisional or final) held in any Proprietary Account maintained by Agent, Issuing Bank or such Lender, whether or not the Obligations are then due.  The rights and remedies of Agent, Issuing Bank and each Lender hereunder are in addition to other rights and remedies (including, without limitation, to the rights of setoff) which such Person may have.

 

Section 4.2        Guaranty Agreements.  Each Domestic Subsidiary shall unconditionally and irrevocably guarantee payment and performance of the Obligations by execution and delivery of a Guaranty Agreement.

 

ARTICLE V.

 

Conditions Precedent

 

Section 5.1        Initial Extension of Credit.  The obligation of Lenders to fund any amounts hereunder is subject to satisfaction (or waiver) of the condition precedent that prior thereto Agent shall have received all of the documents set forth below in this Section 5.1 in form and substance satisfactory to Agent.

 

(a)           Certificates.

 

(i)        A certificate of the Secretary or Assistant Secretary of Borrower (or another officer of Borrower acceptable to Agent) certifying (A) resolutions of the board of directors of Borrower which authorize the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents to which Borrower is or is to be a party, and (B) the names of the officers of Borrower authorized to sign this Agreement and each of the other Loan Documents to which Borrower is or is to be a party as of the Closing Date, together with specimen signatures of such officers.

 

(ii)       A certificate of the Chief Financial Officer of Borrower certifying (A) that all representations and warranties in this Agreement and the other Loan Documents are true and correct, (B) that no Event of Default or Unmatured Event of Default has occurred and is continuing, (C) that no Material Adverse Effect has occurred since December 31, 2010, and (D) that no event has occurred and no condition exists which could reasonably be expected to have a Material Adverse Effect.

 

  

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(b)           Organizational Documents.  The certificate of incorporation and the bylaws of Borrower, certified by the Secretary or Assistant Secretary of Borrower (or another officer of Borrower acceptable to Agent).

 

(c)           Governmental Certificates.  Certificates issued by the appropriate government officials of the state of incorporation of Borrower as to the existence and good standing of Borrower in such state.

 

(d)           Certificate - Domestic Subsidiaries.  A certificate of the Secretary or Assistant Secretary of each Domestic Subsidiary (or another officer of such Domestic Subsidiary acceptable to Agent) certifying (i) resolutions of the governing body of such Domestic Subsidiary which authorize the execution, delivery and performance by such Domestic Subsidiary of each of the Loan Documents to which such Domestic Subsidiary is or is to be a party as of the Closing Date and (ii) the names of the officers of such Domestic Subsidiary authorized to sign each of the Loan Documents to which such Domestic Subsidiary is or is to be a party, together with specimen signatures of such officers.

 

(e)           Organizational Documents - Domestic Subsidiaries.  The Organizational Documents of each Domestic Subsidiary, certified by the Secretary or Assistant Secretary of such Domestic Subsidiary (or another officer of such Domestic Subsidiary acceptable to Agent).

 

(f)           Governmental Certificates - Domestic Subsidiaries.  Certificates issued by the appropriate government officials of the state of organization of each Domestic Subsidiary as to the existence and good standing of such Domestic Subsidiary in such state.

 

(g)           Notes.  (i) Revolving Notes executed by Borrower payable to the order of the Lenders and (ii) a Swing Note executed by Borrower payable to the order of the Swing Lender.

 

(h)           Pledge of Bermuda Subsidiary.  (i) A pledge agreement executed by the owner of the ownership interests of the Bermuda Subsidiary pledging sixty-five percent (65%) of its ownership interests in the Bermuda Subsidiary to Agent.

 

(ii)           A Uniform Commercial Code search showing all financing statements and other documents or instruments on file against the owner of the ownership interests of the Bermuda Subsidiary in the office of the Secretary of State of Delaware.

(iii)           Uniform Commercial Code financing statements showing the owner of the ownership interests of the Bermuda Subsidiary as debtor.

 

(iv)           An original stock certificate evidencing sixty-five percent (65%) of Bermuda Subsidiary’s ownership interests and an executed stock power related thereto.

 

(i)            Guaranty Agreements.  A Guaranty Agreement executed by each Domestic Subsidiary in existence on the date hereof.

 

  

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(j)           Insurance Policies.  A summary of insurance coverage of Borrower and its Subsidiaries evidencing that they are carrying insurance in compliance with the requirements of Section 7.6.

 

(k)           Opinion of Counsel.  An opinion of Baker Botts L.L.P., legal counsel to Borrower and Guarantors, in substantially the form attached hereto as Exhibit G.

 

(l)           Fees and Expenses.  (i)  Evidence that the costs and expenses (including reasonable attorneys’ fees) referred to in Section 12.1, to the extent invoiced prior to the Closing Date, have been paid in full by Borrower.

 

(ii)           Evidence that all fees referenced in the term sheet have been paid in full by Borrower.

 

(m)           Additional Documentation.  Such additional approvals, opinions or documents as Agent may reasonably request.

 

Section 5.2        Post Closing Obligations.  Borrower shall deliver to Agent within ninety (90) days of the Closing Date (a) evidence that Borrower has taken all actions necessary to perfect the pledge to Agent of sixty-five percent (65%) of the ownership interests in the Bermuda Subsidiary, and (b) an opinion of legal counsel to the Bermuda Subsidiary, in substantially the form attached hereto as Exhibit H.

 

Section 5.3        All Extensions of Credit.  The obligation of Lenders to make any Revolving Advance and Issuing Bank to issue any Letter of Credit (including the initial Revolving Advance and the initial Letter of Credit) is subject to satisfaction (or waiver) of the following conditions:

 

(a)           Agent or Issuing Bank, as applicable, shall have received the items required by Section 2.5 or 2.11, as applicable;

 

(b)           the representations and warranties contained in Article VI hereof and the other Loan Documents shall, to Borrower’s knowledge, be true and correct on and as of the date of such Revolving Advance and/or Letter of Credit issuance, as applicable, with the same force and effect as if such representations and warranties had been made on and as of such date, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date; and

 

(c)           at the time of and immediately after giving effect to such Revolving Advance or such Letter of Credit issuance, no Event of Default or Unmatured Event of Default shall have occurred and be continuing.

 

  

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ARTICLE VI.

 

Representations and Warranties

 

To induce Agent, Issuing Bank and Lenders to enter into this Agreement, Borrower represents and warrants to each such Person that:

 

Section 6.1        Existence.  Each of Borrower and each Subsidiary (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has all requisite power and authority to own its assets and carry on its business as now being or as proposed to be conducted and (c) is qualified to do business in all jurisdictions where such qualification is necessary.  Borrower has the power and authority to execute, deliver and perform its obligations under this Agreement and the other Loan Documents to which it is or may become a party.

 

Section 6.2        Financial Statements.  Borrower has delivered to Agent audited consolidated financial statements of Borrower and its Subsidiaries as at and for the fiscal year ended December 31, 2010, and unaudited consolidated financial statements of Borrower and its Subsidiaries for the fiscal quarter ending June 30, 2011.  Such financial statements have been prepared in accordance with GAAP, and fairly present in all material respects, on a consolidated basis, the financial condition of Borrower and its Subsidiaries as of the respective dates indicated therein and the results of operations for the respective periods indicated therein.  Neither Borrower nor any of its Subsidiaries has any material contingent liabilities, liabilities for taxes, material forward or long-term commitments, or unrealized or anticipated losses from any unfavorable commitments that are not either (x) reflected in such financial statements or (y) otherwise disclosed to Agent prior to the Closing Date.

 

Section 6.3       Requisite Action; No Breach.  The execution, delivery and performance by Borrower of this Agreement and the other Loan Documents to which Borrower is or may become a party (a) have been duly authorized by all requisite action on the part of Borrower, (b) do not and will not violate the Organizational Documents of Borrower, (c) do not and will not violate in any material respect any law, rule or regulation of any Governmental Authority applicable to Borrower or any of its properties, or any order, writ, injunction or decree of any court, Governmental Authority or arbitrator applicable to Borrower or any of its properties and (d) do not and will not result in a breach of, or constitute a default under, or result in the imposition of any Lien (except as permitted by this Agreement) upon any of the revenues or assets of Borrower or any Subsidiary pursuant to the provisions of, any indenture, mortgage, deed of trust, security agreement, franchise, permit, license or other instrument or agreement (x) that is material to Borrower and its Subsidiaries and (y) by which Borrower or any Subsidiary or any of their respective properties is bound.

 

Section 6.4       Operation of Business.  Each of Borrower and its Subsidiaries possess all material licenses, permits, approvals and other governmental authorizations necessary for the ownership of its property and the conduct of its business.

 

Section 6.5        Litigation and Judgments.  Except as set forth on Schedule 6.5, there is no action, suit, investigation, or proceeding before or by any Governmental Authority pending, or to the knowledge of Borrower, threatened against or affecting Borrower or any Subsidiary as to which there is a reasonably possibility of an adverse determination and that, if adversely determined, would reasonably be expected to have a Material Adverse Effect.

 

  

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Section 6.6       Rights in Properties; Liens.  Borrower and each Subsidiary have good title to, or valid leasehold interests in, their respective properties and assets (real and personal) necessary for the conduct of its business, subject, with respect to all real property owned by Borrower or a Subsidiary, to encumbrances consisting of easements, zoning restrictions or other restrictions on the use of real property that do not (individually or in the aggregate) materially affect the value of the assets encumbered thereby or materially impair the ability of Borrower or any Subsidiary to use such assets in its business, and none of which is violated in any material respect by existing or proposed structures or land use, and none of such properties, assets or leasehold interests is subject to any Lien, except as permitted by this Agreement.

 

Section 6.7        Enforceability.  This Agreement constitutes, and the other Loan Documents to which Borrower is a party, when delivered, shall constitute, the legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditor’s rights and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

Section 6.8       Approvals.  No authorization, approval, or consent of, and no filing or registration with, any Governmental Authority or third party is or will be necessary for the execution, delivery or performance by Borrower of this Agreement and the other Loan Documents to which Borrower is or may become a party or the validity or enforceability thereof, except (i) such as have been obtained or made and are in full force and effect and (ii) the filing of any required documents with the SEC after the Closing Date.

 

Section 6.9        Debt.  Borrower and its Subsidiaries have no Debt except Debt permitted pursuant to Section 8.1.

 

Section 6.10     Use of Proceeds; Margin Securities.  Neither Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit under this Agreement will be used for any purpose that violates Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

Section 6.11     ERISA.  Borrower and each Subsidiary have complied with all applicable minimum funding requirements and all other material requirements of ERISA applicable to them, and there are no existing conditions that would give rise to liability thereunder.  No Reportable Event (as defined in Section 4043 of ERISA) has occurred in connection with any employee benefit plan that might constitute grounds for the termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer such plan.

 

  

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Section 6.12      Taxes.  To Borrower's knowledge, Borrower and each Subsidiary have filed all tax returns (federal, state, and local) required to be filed by them, including all income, franchise, employment, property, and sales taxes, and have paid all of their liabilities for taxes that are due and payable pursuant to such returns, except such taxes as are being contested in good faith by appropriate proceedings and for which Borrower or such Subsidiary has set aside on its books adequate reserves in accordance with GAAP.  No Tax lien has been filed and, to the knowledge of Borrower, no claim for the collection or assessment of taxes is being asserted against Borrower or any Subsidiary which is not being contested as permitted in this Agreement.

 

Section 6.13      Disclosure.  Since December 31, 2010, no event has occurred, and no fact or condition exists, which has had a Material Adverse Effect or which is likely to have a Material Adverse Effect.

 

Section 6.14     Subsidiaries.  Borrower has no Subsidiaries other than as set forth on Schedule 6.14.  As of the date hereof, Borrower owns, directly or indirectly, one hundred percent (100%) of the equity interests of each such Subsidiary set forth in Schedule 6.14.

 

Section 6.15     Compliance with Laws.  Neither Borrower nor any Subsidiary is in violation in any material respect of any law, rule, regulation, order or decree of any Governmental Authority or arbitrator applicable to it or its properties.

 

Section 6.16     Compliance with Agreements.  Neither Borrower nor any Subsidiary is in violation in any material respect of any material document, agreement, contract or instrument to which it is a party or by which it or its properties are bound.

 

Section 6.17     Environmental Matters.  To Borrower's knowledge, Borrower and each Subsidiary, and their respective properties, are in compliance with all applicable Environmental Laws and neither Borrower nor any Subsidiary is subject to any liability or obligation for remedial action thereunder.  There is no pending or, to Borrower’s knowledge, threatened investigation or inquiry by any Governmental Authority of Borrower or any Subsidiary, or any of their respective properties pertaining to any Hazardous Substance.  To Borrower's knowledge, Borrower and each Subsidiary have obtained all permits, licenses, and authorizations which are required under and by all Environmental Laws.  Furthermore, except in the ordinary course of business and in compliance with all applicable Environmental Laws or otherwise with respect to any matters that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, (x) to Borrower's knowledge, there are no Hazardous Substances located on or under any of the properties of Borrower or any Subsidiary and (y) to Borrower's knowledge, neither Borrower nor any Subsidiary has caused or permitted any Hazardous Substance to be disposed of on or under or released from any of its properties.

 

Section 6.18      Solvency.  Borrower and its Subsidiaries, on a consolidated basis, are not insolvent, Borrower’s and its Subsidiaries’ assets, on a consolidated basis, exceed their liabilities, and Borrower will not be rendered insolvent by the execution and performance of this Agreement and the other Loan Documents to which it is a party.

 

  

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Section 6.19     Investment Company Act.  Neither Borrower nor any Subsidiary is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 6.20     Proprietary Accounts.  All the Proprietary Accounts of Borrower and its Subsidiaries are listed on Schedule 1.1, and neither Borrower nor any Subsidiary maintains any Proprietary Account which is not listed on Schedule 1.1; provided that no Proprietary Account opened after the date hereof shall be deemed to be included in the representation and warranty set forth in this Section 6.20 until ten (10) Business Days (or such later date as Agent may agree) after the opening of such Proprietary Account.

 

ARTICLE VII.

 

Affirmative Covenants

 

Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made at the time of determination) or any Lender has any commitment to advance funds hereunder or Issuing Bank has any obligation to issue any Letter of Credit hereunder or any Letter of Credit Liabilities exist (unless collateralized in accordance with Section 2.18), Borrower will perform and observe the covenants set forth below.

 

Section 7.1        Reporting Requirements.  Borrower will deliver to Agent:

 

(a)           Annual Financial Statements.  As soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, beginning with the fiscal year ending December 31, 2011, a copy of the annual audited financial statements of Borrower and its Subsidiaries for such fiscal year containing, on a consolidated basis, Borrower’s balance sheet and related statements of income, stockholders’ equity and cash flows as at the end of such fiscal year and for the 12-month period then ended, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and audited and certified by independent certified public accountants of recognized national standing or otherwise reasonably acceptable to Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) (provided that the requirements of this Section 7.1(a) with respect to the delivery of financial statements for any fiscal year shall be deemed satisfied by publicly filing Borrower’s Form 10-K for such fiscal year with the SEC, and such financial statements shall be deemed to have been delivered to Agent under this Section 7.1(a) on the date such Form 10-K has been posted on the SEC website accessible through http://www.sec.gov/edgar/searchedgar/webusers.htm or such successor webpage of the SEC thereto).

 

(b)           Quarterly Financial Statements.  As soon as available, and in any event within forty-five (45) days after the end of the first three fiscal quarters of each fiscal year of Borrower, a copy of the financial statements of Borrower and its Subsidiaries as at the end of such fiscal quarter and for the portion of the fiscal year then ended, containing, on a consolidated basis, Borrower’s balance sheet and related statements of income, stockholders’ equity and cash flows, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified by a Financial Officer to have been prepared in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes) and to fairly present in all material respects the financial condition and results of operations of Borrower and its Subsidiaries, on a consolidated basis, at the date and for the periods indicated therein (provided that the requirements of this Section 7.1(b) with respect to the delivery of financial statements for any fiscal quarter shall be deemed satisfied by publicly filing Borrower’s Form 10-Q for such fiscal quarter with the SEC, and such financial statements shall be deemed to have been delivered to Agent under this Section 7.1(b) on the date such Form 10-Q has been posted on the SEC website accessible through http://www.sec.gov/edgar/searchedgar/webusers.htm or such successor webpage of the SEC thereto).

 

  

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(c)           No Default Certificate.  (i) Together with the financial statements delivered pursuant to Section 7.1(a), a No Default Certificate as of the last day of the fiscal year covered by such financial statements, and (ii) together with the financial statements delivered pursuant to Section 7.1(b), a No Default Certificate as of the last day of the fiscal quarter covered by such financial statements, in each case executed by a Financial Officer and containing detailed calculations of the covenants contained in Section 8.1 and Article IX.

 

(d)           Notice of Litigation.  Promptly after the commencement thereof, notice of all actions, suits and proceedings before any Governmental Authority against Borrower or any Subsidiary as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, is likely to have a Material Adverse Effect.

 

(e)           Judgments.  Within five (5) Business Days of the rendering thereof, notice of any judgment against Borrower or any Subsidiary in an amount which is more than $5,000,000.00.

 

(f)           Notice of Default.  As soon as possible and in any event within five (5) Business Days after Borrower becomes aware thereof, a written notice setting forth the details of any Event of Default or Unmatured Event of Default and the action which Borrower has taken and proposes to take with respect thereto.

 

(g)           Notice of Material Adverse Effect.  As soon as possible, and in any event within five (5) Business Days after Borrower becomes aware thereof, notice of the occurrence of any event or the existence of any fact or condition which is likely to have a Material Adverse Effect.

 

(h)           General Information.  Promptly, such other information concerning Borrower or any Subsidiary as Agent or any Lender may from time to time reasonably request.

 

Section 7.2       Maintenance of Existence; Conduct of Business.  Borrower will preserve and maintain, and will cause each Subsidiary to preserve and maintain, (a) its legal existence and (b) all of its leases, privileges, licenses, permits, franchises, qualifications and rights that are necessary in the ordinary conduct of its business provided that the foregoing shall not prohibit any merger, consolidation or other transaction permitted under Section 8.3.

 

Section 7.3        Payment of Debt Service.  Borrower will promptly pay the principal of, interest on and any other amount due on the Notes and the other Obligations in the amounts, on the dates and in the manner provided herein, in the Notes and each other document evidencing the Obligations.

 

  

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Section 7.4        Maintenance of Properties.  Borrower will maintain, and will cause each Subsidiary to maintain, all assets and properties material to the conduct of the business of Borrower and its Subsidiaries, in good condition and repair, ordinary wear and tear excepted.

 

Section 7.5        Taxes and Claims.  Borrower will pay or discharge, and will cause each Subsidiary to pay or discharge, at or before maturity or before becoming delinquent (a) all taxes, levies, assessments and charges imposed on it or its income or profits or any of its property by any Governmental Authority, and (b) all lawful claims for labor, material and supplies, which, if unpaid, might become a Lien upon any of its property; provided, however, that neither Borrower nor any Subsidiary shall be required to pay or discharge any such tax, levy, assessment, charge or claim (a “Tax and Claim Charge”) if (i) the validity or amount thereof is being contested in good faith by appropriate proceedings diligently pursued, and (ii) either (A) (I) no Lien has been filed of record with respect to such Tax and Claim Charge, (II) no material assets of Borrower or such Subsidiary would be in any danger of sale, forfeiture or loss by reason of the contest of such Tax and Claim Charge, and (III) Borrower or such Subsidiary has set aside on its books adequate reserves against such Tax and Claim Charge in accordance with GAAP, or (B) the aggregate amount of all Tax and Claim Charges not otherwise permitted under clause (ii)(A) is less than $250,000.00.

 

Section 7.6        Insurance.  Borrower will maintain, and will cause each Subsidiary to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are usually insured against by Persons engaged in similar businesses.

 

Section 7.7        Inspection.  Borrower will permit, and will cause each Subsidiary to permit, representatives of Agent, upon reasonable prior notice, to visit and inspect from time to time the properties or assets of Borrower or such Subsidiary, to examine and make copies of the books and records of Borrower or such Subsidiary, and to discuss the business, operations, and financial condition of Borrower or such Subsidiary with its officers and independent certified public accountants, all at such reasonable times as may be requested and all at the expense of Agent (except that Borrower will bear the expenses of any such visitation or inspection made while an Event of Default has occurred and is continuing); provided that advance notice of any discussion with such independent certified public accountants shall be given to Borrower or the applicable Subsidiary and, so long as no Event of Default shall have occurred and be continuing, Borrower or such Subsidiary shall have the opportunity to be present at any such discussion.

 

Section 7.8        Keeping Books and Records.  Borrower will maintain, and will cause each Subsidiary to maintain, proper books of record and account in which full, true and correct entries, in all material respects, are made of its financial and business transactions to the extent required by GAAP.  For purposes of determining compliance with the financial covenants contained in this Agreement, any election by Borrower to measure an item of Debt using fair value (as permitted by Statement of Financial Accounting Standards No. 159 or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.

 

  

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Section 7.9       Compliance with Laws.  Borrower will comply, and will cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations and orders of any court, Governmental Authority or arbitrator applicable to it or its properties.

 

Section 7.10      Compliance with Agreements.  Borrower will comply, and will cause each Subsidiary to comply, in all material respects with all material agreements, contracts, and instruments binding on it or affecting its properties or business.

 

Section 7.11     Further Assurances.  Borrower will execute and deliver, and will cause each Subsidiary to execute and deliver, such further instruments as may be reasonably requested by Agent to carry out the provisions and purposes of this Agreement and the other Loan Documents.

 

Section 7.12      ERISA.  Borrower will comply, and will cause each Subsidiary to comply, with all material requirements of ERISA so as not to give rise to any material liability thereunder.

 

ARTICLE VIII.

 

Negative Covenants

 

Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made at the time of determination) or any Lender has any commitment to advance funds hereunder or Issuing Bank has any obligation to issue any Letter of Credit hereunder or any Letter of Credit Liabilities exist (unless collateralized in accordance with Section 2.18), Borrower will perform and observe the covenants set forth below.

 

Section 8.1        Debt.  Borrower will not incur, create, assume or permit to exist, and will not permit any Subsidiary to incur, create, assume, or permit to exist, any Debt, except (a) Debt to Lenders pursuant to this Agreement and the other Loan Documents, (b) purchase money Debt and Capitalized Lease Obligations in an aggregate amount which does not exceed $10,000,000.00 outstanding at any time, (c) accounts payable in the ordinary course of business so long as no account payable has been outstanding more than ninety (90) days, (d) Rate Management Transaction Obligations incurred solely in connection with hedging transactions, (e) Debt arising from the endorsement of instruments for collection in the ordinary course of business and (f) other unsecured Debt in an aggregate principal amount not to exceed $5,000,000.00 at any time outstanding.

 

Section 8.2        Limitation on Liens.  Borrower will not incur, create, assume or permit to exist, and will not permit any Subsidiary to incur, create, assume or permit to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except (a) Liens in favor of Agent as agent for Lenders, (b) Liens described on Schedule 8.2, (c) purchase money Liens and Liens related to Capitalized Lease Obligations securing Debt permitted by Section 8.1(b), which Liens cover only the assets financed or leased, as applicable, with the Debt permitted by Section 8.1(b), (d) encumbrances consisting of easements, zoning restrictions or other restrictions on the use of real property that do not (individually or in the aggregate) materially affect the value of the assets encumbered thereby or materially impair the ability of Borrower or any Subsidiary to use such assets in its business, and none of which is violated in any material respect by existing or proposed structures or land use, (e) Liens for taxes, assessments or other governmental charges (a “Tax and Government Charge”) which (i) are not delinquent, or (ii) for which (A) no Lien has been filed of record with respect to such Tax and Government Charge, (B) no material assets of Borrower or such Subsidiary would be in any danger of sale, forfeiture or loss by reason of the contest for such Tax and Government Charge, and (C) Borrower or such Subsidiary has set aside on its books adequate reserves against such Tax and Government Charge, (f) Liens of mechanics, materialmen, warehousemen, carriers or other similar statutory Liens securing obligations that are not yet due (or are being contested in good faith, for which adequate reserves have been established) and are incurred in the ordinary course of business, and (g) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations.

 

  

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Section 8.3        Mergers, Acquisitions, Dissolutions and Disposition of Assets.  Borrower will not, and will not permit any Subsidiary to:

 

(a)           become a party to a merger, consolidation or other business combination (a “Merger”) or an Acquisition, except that:

 

(i)       any Subsidiary may merge into Borrower if Borrower is the surviving entity,

 

(ii)      any Subsidiary may merge into any Guarantor or any Foreign Subsidiary for which Agent has a pledge of ownership interests as required by Section 8.4(a)(ii),

 

(iii)     any Subsidiary may merge with any other Person with such other Person being the surviving entity, so long as such Person becomes a Subsidiary as a result of such merger, and

 

(iv)     Borrower or any Subsidiary may enter into an Acquisition if, at the time of such Acquisition,

 

(A)           Borrower has an Interest Coverage Ratio of not less than 3.00 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available, calculated on a pro forma basis assuming that such Acquisition and all other Acquisitions made since the last day of the fiscal quarter most recently ended for which financial statements are available had been made on the first day of the four consecutive fiscal quarter period then ended (but without any adjustment for projected cost savings or other synergies (except with the consent of Agent)),

 

(B)           Borrower has a Leverage Ratio of not greater than 2.75 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available, calculated on a pro forma basis assuming that such Acquisition and all other Acquisitions made since the last day of the fiscal quarter most recently ended for which financial statements are available had been made on the first day of the four consecutive fiscal quarter period then ended (but without any adjustment for projected cost savings or other synergies (except with the consent of Agent)),

 

  

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(C)           Borrower’s Net Working Capital as of the last day of the fiscal quarter most recently ended for which financial statements are available is equal to an amount not less than $25,000,000.00, calculated on a pro forma basis assuming that such Acquisition and all other Acquisitions made since the last day of the fiscal quarter most recently ended for which financial statements are available had been made on the first day of the four consecutive fiscal quarter period then ended, and

 

(D)           no Event of Default exists at the time of such Acquisition or would occur as a result thereof;

 

provided that, if the total consideration paid (including cash, Debt (incurred or assumed) and equity issued) for such Acquisition equals or exceeds $25,000,000.00, Borrower shall deliver to Agent a written notice regarding such Acquisition, which written notice shall certify as to the foregoing conditions; provided, further, however, that Borrower and its Subsidiaries may enter into Acquisitions without having to satisfy the requirements of clauses (A) through (D) above if (I) the total consideration paid (including cash, Debt (incurred or assumed) and equity issued) for all such Acquisitions consummated during the then-current fiscal year of Borrower does not exceed $3,500,000.00 and (II) no Event of Default exists at the time of such Acquisition or would occur as a result thereof;

 

(b)           dissolve, liquidate or dispose of substantially all of its assets, except that (i) any Subsidiary may liquidate or dissolve if as of the date of such liquidation or dissolution (A) no Event of Default or Unmatured Event of Default exists, and (B) such Subsidiary satisfies the Tangible Net Worth Test, and (ii) any Subsidiary may dispose of all or substantially all of its assets to Borrower or to another Subsidiary;

 

(c)           amend its Organizational Documents in a manner that is materially adverse to the Lenders;

 

(d)           sell or otherwise dispose of the ownership interests (corporate, partnership, membership or otherwise) in any Subsidiary to any Person other than to Borrower or any Subsidiary, except Borrower or a Subsidiary may dispose of all its ownership interests in a Subsidiary if as of the date of such disposition (A) no Event of Default or Unmatured Event of Default exists, and (B) such Subsidiary satisfies the Tangible Net Worth Test; or

 

(e)           enter into any agreement to enter into a transaction that would (upon the effectiveness of such transaction) be prohibited by any of clauses (a) through (d) of this Section without giving Agent prior notice thereof.

 

Section 8.4        Subsidiaries.  (a) Borrower will not, and will not permit any Subsidiary to, create or acquire any Subsidiary (including in connection with any Acquisition pursuant to Section 8.3(a)), unless:

 

  

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(i)            if such Subsidiary is a Domestic Subsidiary, within ten (10) Business Days after the creation or Acquisition of such Subsidiary (unless such ten (10) Business Day time period is extended by Agent in its sole discretion):

 

(A)           Borrower or such Subsidiary has notified Agent of the creation or the Acquisition of such Subsidiary (and, in the case of an Acquisition, has complied with Section 8.3(a)); and

 

(B)           such Subsidiary has (I) executed and delivered to Agent a Guaranty Agreement, and (II) delivered to Agent its Organizational Documents and evidence of its authority to enter into such Guaranty Agreement (each Guaranty Agreement executed by a Domestic Subsidiary pursuant to the preceding clause shall constitute a Loan Document); or

(ii)           if such Subsidiary is a Foreign Subsidiary, within ten (10) Business Days after the creation or Acquisition of such Subsidiary (unless such ten (10) Business Day time period is extended by Agent in its sole discretion):

 

(A)           Borrower or such Subsidiary has notified Agent of the creation or the Acquisition of such Subsidiary (and, in the case of an Acquisition, has complied with Section 8.3(a));

(B)           such Subsidiary shall be owned directly by Borrower or a Domestic Subsidiary; and

 

(C)           Borrower or the direct Domestic Subsidiary-owner of such Subsidiary has (I) executed and delivered to Agent a pledge agreement granting Agent a Lien on sixty-five percent (65%) of the ownership interests of such Foreign Subsidiary, (II) delivered to Agent (aa) such Foreign  Subsidiary's Organizational Documents and (bb) evidence of such pledging party's authority to enter into such pledge agreement, and (III) delivered to Agent an opinion of legal counsel to such Foreign Subsidiary opinions covering such matters as may be reasonably requested by Agent.

(iii)           such Subsidiary shall not be deemed to be included in the representations, warranties and covenants contained in this Agreement until the date of compliance with the terms and provisions of Section 8.4(a)(i) or (ii), as applicable.

 

(b)           Upon Borrower's written request, Agent shall release a Guarantor hereunder (a "Requesting Guarantor") from its obligations and liabilities arising in connection with such Guarantor's Guaranty Agreement if:

 

(i)             no Event of Default or Unmatured Event of Default exists on the date of the release of such Requesting Guarantor from its Guaranty Agreement (the "Guarantor Release Date"); and

 

  

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(ii)           on the Guarantor Release Date, such Requesting Guarantor is either (A) dissolved in a transaction permitted pursuant to Section 8.3(b), or (B) all of its assets or all of its equity interests are acquired by a Person who is an unrelated third party to Borrower and its Subsidiaries in a transaction permitted pursuant to Section 8.3(d).

 

Section 8.5        Restricted Payments.

 

(a)           Borrower will not declare or pay any Distribution (other than a Permitted Dividend) if (i) an Event of Default exists at the time of declaring or paying such Distribution or (ii) an Event of Default would occur immediately after giving effect to the declaration or payment of such Distribution.

 

(b)           Borrower will not redeem, purchase, retire or otherwise acquire any of its capital stock (each, a “Stock Repurchase”) if (i) an Event of Default exists at the time of declaring or making such Stock Repurchase or (ii) an Event of Default would occur immediately after giving effect to the declaration or making of such Stock Repurchase; provided that the aggregate amount of all Restricted Stock Repurchases effected by Borrower during each calendar year shall not exceed $25,000,000.00.  A Stock Repurchase shall be deemed to be a “Restricted Stock Repurchase” for purposes of this Section 8.5(b) if the Leverage Ratio is greater than or equal to 2.25 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available, calculated on a pro forma basis assuming that such Stock Repurchase and all other Stock Repurchases made since the last day of the fiscal quarter most recently ended for which financial statements are available had been made on such day.

 

Section 8.6        Loans and Advances.  Borrower will not make, and will not permit any Subsidiary to make, any advance, loan or extension of credit to any Person, except (a) advances, loans and extensions of credit in an aggregate outstanding principal amount which does not exceed $10,000,000.00 at any time, (b) advances, loans and extensions of credit among Borrower, Guarantors and the Bermuda Subsidiary, and (c) advances, loans and extensions of credit from Borrower or any Guarantor to any Pledged Foreign Subsidiary, provided that the aggregate outstanding amount of all advances, loans and extensions of credit made pursuant to this clause (c), together with the aggregate amount of all investments made by Borrower and the Guarantors pursuant to Section 8.7(j) since the date of this Agreement, shall not exceed $20,000,000.00 at any time.

 

Section 8.7        Investments.  Except for investments permitted pursuant to Section 8.3, Borrower will not make, and will not permit any Subsidiary to make, any capital contribution to or investment in, or purchase, or permit any Subsidiary to purchase, any stock, bonds, notes, debentures, or other securities of any Person, except:

 

(a)           direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America or Canada (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America or Canada), in each case maturing within one year from the date of acquisition. thereof;

 

  

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(b)           investments in commercial paper maturing within two hundred seventy (270) days from the date of acquisition thereof and having, at such date of acquisition, a rating of A2 or better by Standard and Poor's Corporation ("S&P"), P2 or better by Moody's Investors Service ("Moody's"), or R1 "mid" or better by The Dominion Bond Rating Service;

 

(c)           investments in certificates of deposit, banker's acceptances and time deposits (including eurodollar deposits) maturing within one hundred eighty (180) days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any Lender or any domestic office of any commercial bank organized under the laws of the United States of America or Canada or any State or Province thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000.00;

 

(d)           fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

 

(e)           money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P or Aaa by Moody's and (iii) have portfolio assets of at least $1,000,000,000.00;

 

(f)           investments in corporate debt securities (including loan participations) that (a) mature within sixty (60) days from the date of acquisition, and (b) are rated BBB or better by S&P or Baa2 or better by Moody's at the date of acquisition;

 

(g)           investments in municipal securities or auction rate securities that are rated AA or better by S&P or Aa or better by Moody's, provided that Borrower has the right to put such securities back to the issuer or seller thereof at least once every sixty (60) days;

 

(h)           other investments in an amount not to exceed $10,000,000.00 in the aggregate at any one time by Foreign Subsidiaries in certificates of deposit, banker's acceptances and time deposits (or other substantially similar investments) maturing within one hundred eighty (180) days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts (or other substantially similar deposit accounts) issued or offered by, any foreign commercial bank not organized under the laws of the United States of America or Canada or any state or province thereof;

 

(i)            investments in Guarantors and the Bermuda Subsidiary;

 

(j)            investments made by Borrower or any Guarantor in any Pledged Foreign Subsidiary, provided that the aggregate amount of all investments made by Borrower and the Guarantors pursuant to this Section 8.7(j) since the date of this Agreement, together with the aggregate outstanding amount of all advances, loans and extensions of credit made by Borrower and the Guarantors pursuant to Section 8.6(c), shall not exceed $20,000,000.00 at any time;

 

(k)           investments in any Person (other than a Guarantor, the Bermuda Subsidiary or a Pledged Foreign Subsidiary), provided such investments are only permitted under this subsection (k) if:

 

  

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(i)        Borrower and its Subsidiaries do not hold, collectively, a controlling interest in such Person,

 

(ii)       the aggregate amount of all investments made under this subsection (k) does not exceed $10,000,000.00 during any fiscal year of Borrower,

 

(iii)      Borrower has an Interest Coverage Ratio of not less than 3.00 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available,

 

(iv)      Borrower has a Leverage Ratio of not greater than 2.75 to 1.00 as of the last day of the fiscal quarter most recently ended for which financial statements are available,

 

(v)       Borrower’s Net Working Capital as of the last day of the fiscal quarter most recently ended for which financial statements are available is equal to an amount not less than $25,000,000.00, and

 

(vi)      no Event of Default exists at the time of such investment or would occur as a result thereof; and

 

(l)            other investments in an aggregate amount which does not exceed $1,000,000.00.

 

Section 8.8       Compliance with Environmental Laws.  Borrower will not, and will not permit any Subsidiary to, (a) use (or permit any tenant to use) any of their respective properties or assets for the handling, processing, storage, transportation, or disposal of any Hazardous Substance, except in the ordinary course of business and in compliance with all Environmental Laws, (b) generate any Hazardous Substance in violation of any Environmental Law, (c) conduct any activity which is likely to cause a release or threatened release of any Hazardous Substance in violation of any Environmental Law, or (d) otherwise conduct any activity or use any of their respective properties or assets in any manner which is likely to violate any Environmental Law.

 

Section 8.9        Accounting.  Borrower will not make, and will not permit any Subsidiary to make, any change in accounting treatment or reporting practices, except as required by GAAP.  For purposes of determining compliance with the financial covenants contained in this Agreement, any election by Borrower to measure an item of Debt using fair value (as permitted by Statement of Financial Accounting Standards No. 159 or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.  Further, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Debt of Borrower and its Subsidiaries shall be deemed to be carried at one hundred percent (100%) of the outstanding principal amount thereof, and the effects of Statement of Financial Accounting Standards ASC 825 and Statement of Financial Accounting Standards ASC 470-20 on financial liabilities shall be disregarded.

 

Section 8.10      Change of Business.  Borrower will not enter into, or permit any Subsidiary to enter into, any type of business which is materially different from the business of providing services or products in the area of human resources and business solutions which are designed to improve business performance, and activities reasonably ancillary thereto.

 

  

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Section 8.11      Transactions With Affiliates.  Borrower will not enter into, or permit to exist, and will not permit any Subsidiary to enter into or permit to exist, any transaction, arrangement or contract (including any lease or other rental agreement) with any of its Affiliates, unless such transaction, arrangement or contract is upon terms substantially as favorable to it as are obtainable from any Person who is not an Affiliate of Borrower or such Subsidiary (or, if in the good faith judgment of Borrower’s Board of Directors, no comparable transaction, arrangement or contract is available with which to compare any such transaction, arrangement or contract, such transaction arrangement or contract is otherwise fair to Borrower or the relevant Subsidiary from a financial point of view); provided that the foregoing shall not apply to:

 

(a)           transactions between or among Borrower and Subsidiaries;

 

(b)           transactions described on Schedule 8.11;

 

(c)           the payment of reasonable and customary directors’ fees and other benefits to Persons who are not otherwise Affiliates of Borrower or any Subsidiary;

 

(d)           any employment or severance or other employee compensation, arrangement or plan or any amendment thereto, entered into by Borrower or any of the Subsidiaries in the ordinary course of business, and payments, awards, grants or issuances of equity interests pursuant thereto; and

 

(e)           provision of officers’ and directors’ indemnification and insurance in the ordinary course of business to the extent permitted by law.

 

Section 8.12      Rate Management Transactions.  Borrower will not, and will not permit any Subsidiary to, enter into any Rate Management Transactions, except for Rate Management Transactions which are entered into solely for hedging purposes.

 

Section 8.13      Compliance with Government Regulations.  Borrower will not, and will not permit any Subsidiary to, (a) be or become subject at any time to any law, regulation or list of any governmental agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits any Lender from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (b) fail to provide documentary and other evidence of Borrower’s identity as may be requested by Agent or any Lender at any time to enable Agent or such Lender to verify Borrower’s identity or to comply with any applicable law or regulation, including, without limitation Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

Section 8.14      Capital Expenditures.  Borrower will not, and will not permit any Subsidiary to, incur any Capital Expenditure, other than Capital Expenditures needed to maintain the normal business operations of Borrower and its Subsidiaries, if (a) an Event of Default exists at the time of incurring such Capital Expenditure or (b) an Event of Default would occur immediately after giving effect to such Capital Expenditure.

 

Section 8.15      ERISA.  Borrower will not maintain, and will not permit its Subsidiaries to maintain, any ERISA benefit plan which is subject to the  minimum funding standards as set forth under IRC Section 412 or ERISA Section 302.

 

  

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ARTICLE IX.

 

Financial Covenants

 

Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding (other than indemnities and other contingent obligations not then due and payable and as to which no claim has been made at the time of determination) or any Lender has any commitment to advance funds hereunder or Issuing Bank has any obligation to issue any Letter of Credit hereunder or any Letter of Credit Liabilities exist (unless collateralized in accordance with Section 2.18), Borrower will observe and perform the financial covenants set forth below.

 

Section 9.1        Interest Coverage Ratio.  Borrower will at all times maintain an Interest Coverage Ratio of not less than 3.00 to 1.00.  The Interest Coverage Ratio will be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower, commencing with the fiscal quarter ending September 30, 2011, for the period of four consecutive fiscal quarters ended as of such date (a “rolling or trailing four quarter” basis).

 

Section 9.2        Leverage Ratio.  Borrower will at all times maintain a Leverage Ratio of not greater than 3.00 to 1.00.  The Leverage Ratio shall be calculated and tested quarterly as of the last day of each quarter of each fiscal year of Borrower, commencing with the quarter ending September 30, 2011, and, for purposes of calculating the Leverage Ratio, EBITDA shall be calculated for the period of four consecutive fiscal quarters ended as of such date (a “rolling or trailing four quarter” basis).

 

ARTICLE X.

 

Default

 

Section 10.1      Events of Default.  Each of the following shall be deemed an “Event of Default”:

 

(a)           Borrower shall fail to pay when due (i) any principal of the Obligations, or (ii) any interest on the Obligations or any other amount due under this Agreement or any Loan Document and, with respect to this clause (ii), such failure shall continue for a period of five (5) Business Days.

 

(b)           Any representation or warranty made or deemed made by Borrower or any Subsidiary (or any of their respective officers) in any Loan Document or in any certificate, report, notice or financial statement furnished at any time in connection with this Agreement shall be false, misleading or erroneous in any material respect when made or deemed to have been made.

 

(c)           Borrower or any Subsidiary shall fail to perform, observe or comply with (i) any covenant, agreement or term contained in Section 7.6 or Section 8.3 of this Agreement; (ii) any covenant, agreement or term contained in Section 7.1 or Article IX of this Agreement and, with respect to this clause (ii), such failure shall continue for a period of fifteen (15) days; or (iii) any covenant, agreement or term contained in any other Section of this Agreement or any other Loan Document and, with respect to this clause (iii), such failure shall have continued for a period of thirty (30) days following the earlier to occur of (A) the date on which Agent gave Borrower notice of such failure or (B) the date on which Borrower first obtained knowledge of such failure.

 

  

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(d)           Borrower or any Subsidiary shall commence a voluntary proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or a substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any corporate action to authorize any of the foregoing.

 

(e)           An involuntary proceeding shall be commenced against Borrower or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or a substantial part of its property, and such involuntary proceeding shall remain undismissed and unstayed for a period of sixty (60) days.

 

(f)           Borrower or any Subsidiary shall fail to discharge, within a period of thirty (30) days after the commencement thereof, any attachment, sequestration, or similar proceeding or proceedings involving an aggregate amount in excess of $5,000,000.00 against any of its assets or properties.

 

(g)           One or more judgments for the payment of money in an aggregate amount in excess of $5,000,000.00 (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage) shall be rendered against any Borrower or any Subsidiary and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Borrower or any Guarantor to enforce any such judgment.

 

(h)           Borrower or any Subsidiary shall fail to pay when due (after giving effect to any applicable grace periods) any principal of or interest on any Debt (other than the Obligations) with a principal amount in excess of $5,000,000.00, or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the stated maturity thereof, or any event shall have occurred that permits (or, with the giving of notice or lapse of time or both, would permit) any holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment.

 

(i)           Borrower or any Subsidiary shall fail to pay when due (after giving effect to any applicable grace periods) any Debt (excluding the Obligations) with a principal amount in excess of $500,000.00 owed to any Lender or any Affiliate of any Lender.

 

  

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(j)           This Agreement, any Guaranty Agreement or any Note shall cease to be in full force and effect or shall be declared null and void or the validity or enforceability thereof shall be contested or challenged by Borrower or any Subsidiary, or Borrower or any Subsidiary shall deny that it has any further liability or obligation under any of the Loan Documents.

 

(k)           Any Change of Control of Borrower shall occur.

 

(l)            Borrower shall fail to comply with the provisions of Section 2.18 of this Agreement.

 

Section 10.2      Remedies Upon Default.  If any Event of Default shall occur and be continuing, Agent may, and, upon the direction of the Majority Lenders, shall, do any one or more of the following: (a) declare the outstanding principal of and accrued and unpaid interest on the Notes and the Obligations or any part thereof to be immediately due and payable, and the same shall thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower, (b) terminate the Combined Commitments without notice to Borrower, (c) foreclose or otherwise enforce any Lien granted to Agent to secure payment and performance of the Obligations, and (d) exercise any and all rights and remedies afforded by the laws of the State of Texas or any other jurisdiction by any of the Loan Documents, by equity or otherwise; provided, however, that upon the occurrence of an Event of Default under Section 10.1(d) or Section 10.1(e), the Combined Commitments shall automatically terminate, and the outstanding principal of and accrued and unpaid interest on the Notes and the other Obligations shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower.

 

Section 10.3      Cash Collateral.  If any Event of Default shall occur, Borrower shall, if requested by Agent, immediately deposit with and pledge to Agent, cash or cash equivalent investments in an amount equal to the Letter of Credit Liabilities as security for the Obligations.

 

Section 10.4      Performance by Agent.  If Borrower shall fail to perform any covenant, duty, or agreement contained in any of the Loan Documents, Agent may perform or attempt to perform such covenant, duty, or agreement on behalf of Borrower.  In such event, Borrower shall, at the request of Agent, promptly pay any amount expended by Agent in such performance or attempted performance to Agent, together with interest thereon at the Default Rate from the date of such expenditure until paid.  Notwithstanding the foregoing, it is expressly agreed that neither Agent nor any Lender shall have any liability or responsibility for the performance of any obligation of Borrower under this Agreement or any other Loan Document.

 

Section 10.5      Application of Liquidation Proceeds.  All monies received by Agent from the exercise of remedies under this Agreement or the Loan Documents securing or relating to the Notes or the Rate Management Transaction Obligations shall, unless otherwise required by applicable law, be applied as follows:

 

  

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(a)           First, to the payment of all expenses incurred by Agent in connection with the exercise of such rights and remedies, including, without limitation, all reasonable costs and expenses of collection, attorneys’ fees, court costs and foreclosure expenses.

 

(b)           Second, to the payment of interest then accrued on the Notes.

 

(c)           Third, to the payment pro rata of the principal balance then owing on the Notes, the cash collateralization of outstanding Letters of Credit and all payments under Rate Management Transaction Obligations.

 

(d)           Fourth, to the payment of any other Obligations.

 

(e)           Finally, any remaining surplus, to Borrower or to whomsoever shall be lawfully entitled thereto.

 

The provisions of this Section 10.5 shall govern and control over any conflicting provisions in this Agreement or any Loan Document.

 

ARTICLE XI.

 

The Agent

 

Section 11.1      Appointment and Authorization.  v)  Each Lender and the Issuing Bank hereby irrevocably (subject to Section 11.9) appoints Amegy Bank National Association to act as Agent hereunder, and under the Loan Documents and authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  The person serving as Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall include the Person serving as Agent hereunder in its individual capacity.

 

(b)           Issuing Bank shall act on behalf of Lenders with respect to any Letters of Credit issued by it and the documents associated therewith.  The Issuing Bank shall have all of the benefits and immunities (i) provided to Agent in this Article XI with respect to any acts taken or omissions suffered by Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Agent”, as used in this Article XI, included Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to Issuing Bank.

 

Section 11.2      Delegation of Duties.  Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

 

  

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Section 11.3      Liability of Agent.  vi)  Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender (regardless of whether an Event of Default or an Unmatured Event of Default exists), and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Documents or otherwise exist against Agent.  Without limiting the foregoing, the Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretional rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable law.

 

(b)           None of Agent nor any of its directors, officers, employees or agents shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Documents or the transactions contemplated hereby (except for their own gross negligence or willful misconduct), or (ii) have any duty to inquire into or be responsible in any manner to any Lender for any recital, statement, representation or warranty made by Borrower or any Subsidiary or Affiliate of Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder.  Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any of Borrower’s Subsidiaries or Affiliates.

 

Section 11.4      Reliance by Agent.  Agent shall be entitled to rely, and shall not incur any liability for relying, upon (a) any writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, email or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, (b) any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and (c) advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by Agent.  Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate and, if it so requests, confirmation from Lenders of their obligation to indemnify Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Documents in accordance with a request or consent of the Majority Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Bank, the Agent may presume that such condition is satisfactory to such Lender or the Issuing Bank unless the Agent shall have received notice to the contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit.

 

  

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Section 11.5      Notice of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a “notice of default”.  The Agent will notify Lenders of its receipt of any such notice.  Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Majority Lenders in accordance with Article X; provided that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of Lenders.

 

Section 11.6      Credit Decision.  Each Lender acknowledges that Agent has not made any representation or warranty to it, and that no act by Agent hereafter taken, including any review of the affairs of Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by Agent to any Lender.  Each Lender represents to Agent that it has, independently and without reliance upon Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder.  Each Lender also represents that it will, independently and without reliance upon Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries.  Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of Borrower or its Subsidiaries which may come into the possession of the Agent.

 

Section 11.7      Indemnification.  Whether or not the transactions contemplated hereby are consummated, each Lender shall indemnify upon demand Agent and its directors, officers, employees and agents (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so) from and against any and all Claims in an amount based on such Lender’s Pro Rata Share of such Claims; provided that no Lender shall be liable for any payment to any such Person of any portion of the Claims to the extent such Claims arise from such Person’s gross negligence or willful misconduct.  Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for its Pro Rata Share of any costs or out-of-pocket expenses (including reasonable attorneys’ fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower or any Guarantor.  The undertaking in this Section shall survive repayment of the Revolving Advances, cancellation of each Note, expiration or termination of the Letters of Credit, any foreclosure under, or modification, release or discharge of, any or all of the Loan Documents, termination of this Agreement and the resignation or replacement of Agent.

 

  

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Section 11.8      Agent in Individual Capacity.  Amegy Bank National Association and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrower and its Subsidiaries and Affiliates as though Amegy Bank National Association were not Agent or Issuing Bank hereunder and without notice to or consent of Lenders.  Lenders acknowledge that, pursuant to such activities, Amegy Bank National Association or its Affiliates may receive information regarding Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of Borrower or such Affiliate) and acknowledge that Agent shall be under no obligation to provide such information to them.

 

Section 11.9      Successor Agent.  Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Borrower.  If Agent resigns under this Agreement, Majority Lenders shall, with (so long as no Event of Default exists) the consent of Borrower (which shall not be unreasonably withheld or delayed), appoint from among Lenders a successor agent for Lenders.  If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Borrower, a successor agent from among Lenders.  Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as Agent shall be terminated.  After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article XI and Sections 12.1, 12.2 and 12.3 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.  If no successor agent has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above.

 

ARTICLE XII.

 

Miscellaneous

 

Section 12.1      Expenses.  Borrower hereby agrees to pay Agent and Lenders, as applicable, on demand (a) all reasonable out-of-pocket costs and expenses incurred by Agent in connection with the preparation, negotiation, and execution of this Agreement and the other Loan Documents and any and all amendments, modifications, renewals, extensions, and supplements thereof and thereto, including, without limitation, the reasonable fees and expenses of Agent’s legal counsel, (b) all reasonable out-of-pocket costs and expenses incurred by Agent and each Lender in connection with the enforcement of this Agreement or any other Loan Document, including, without limitation, the fees and expenses of each such Person’s legal counsel, and (c) all other reasonable out-of-pocket costs and expenses incurred by Agent in connection with this Agreement or any other Loan Document, including, without limitation, all costs, expenses, taxes, assessments, filing fees, and other charges levied by any Governmental Authority or otherwise payable in respect of this Agreement or any other Loan Document.

 

  

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Section 12.2      INDEMNIFICATION.  BORROWER HEREBY INDEMNIFIES AGENT, ISSUING BANK AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES) (COLLECTIVELY, “CLAIMS”) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (a) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (b) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (c) ANY BREACH BY BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (d) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS SUBSTANCE LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY, (e) ANY ACT OR OMISSION OF AGENT OR ANY LENDER BASED UPON ANY FAX OR ELECTRONIC TRANSMISSION, OR (f) ANY MATTER RELATED TO ANY LETTER OF CREDIT, INCLUDING, WITH RESPECT TO ALL OF THE ABOVE, ANY CLAIM WHICH ARISES AS A RESULT OF THE NEGLIGENCE OF AGENT OR ANY LENDER; PROVIDED, HOWEVER, THAT BORROWER’S INDEMNIFICATION OBLIGATIONS UNDER THIS SECTION 12.2 SHALL NOT APPLY TO THE EXTENT THAT ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES OR EXPENSES WERE INCURRED BY REASON OF THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR UNLAWFUL CONDUCT OF SUCH INDEMNITEE.

 

Section 12.3     Limitation of Liability.  Neither Agent, Issuing Bank, any Lender nor any affiliate, officer, director, employee, attorney, or agent of such Person shall have any liability with respect to, and Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by Borrower in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.  Borrower hereby waives, releases, and agrees not to sue Agent, Issuing Bank, any Lender or any of such Person’s Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.

 

  

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Section 12.4     No Waiver; Cumulative Remedies.  No failure on the part of Agent, Issuing Bank, or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.  The rights and remedies provided for in this Agreement and the other Loan Documents are cumulative and not exclusive of any rights and remedies provided by law.

 

Section 12.5      Successors and Assigns.  This Agreement is binding upon and shall inure to the benefit of Agent, Issuing Bank, each Lender and Borrower and their respective successors and assigns, except that (a) Borrower may not assign or transfer any of its rights or obligations under this Agreement without prior written consent of Agent and Lenders and (b) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with Section 12.16 or as required under Section 2.21.

 

Section 12.6     Survival.  All representations and warranties made in this Agreement or any other Loan Document or in any document, statement, or certificate furnished in connection with this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and no investigation by Agent, Issuing Bank or any Lender or any closing shall affect the representations and warranties or the right of Agent, Issuing Bank or any Lender to rely upon them.  Without prejudice to the survival of any other obligation of Borrower hereunder, the obligations of Borrower under Sections 12.1 and 12.2 shall survive repayment of the Notes and termination of the Combined Commitments and the Letters of Credit.

 

Section 12.7     Amendments.  No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any Note shall in any event be effective unless the same shall be in writing and signed and delivered by the Majority Lenders and Borrower, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  No amendment, modification, waiver or consent shall change the Commitment of any Lender without the consent of such Lender.  No amendment, modification, waiver or consent shall (i) increase the Combined Commitments (other than pursuant to Section 2.8), (ii) extend the date for payment of any principal of or interest on the Revolving Advances or any fees payable hereunder, (iii) extend any Lender’s Commitment, (iv) reduce the principal amount of any Revolving Advance, (v) release any guaranty (except as permitted in Section 8.4(b)), or (vi) reduce the aggregate percentage of holders of the Combined Commitments required to effect an amendment, modification, waiver or consent without, in each case, the consent of all Lenders.  If any amendment, modification, waiver or consent relates only to the Revolving Advances, the applicable percentage for consent shall be calculated only from the holders of the Combined Commitments, provided that if either the Combined Commitments are fully funded or the Termination Date has occurred, then such applicable percentage for consent shall be calculated from the holders of the outstanding Revolving Advances and the Letter of Credit Liabilities.  No amendment, modification, waiver or consent shall reduce any principal of or interest on the Revolving Advances or any fees payable hereunder without the consent of each Lender affected thereby.  No provision of Article XI or any other provision of this Agreement affecting Agent in its capacity as such shall be amended, modified or waived without the consent of Agent.  No provision of this Agreement relating to the rights or duties of the Issuing Bank in its capacity as such shall be amended, modified or waived without the consent of the Issuing Bank.  No provision of this Agreement relating to the rights or duties of the Swing Lender in its capacity as such shall be amended, modified or waived without the consent of the Swing Lender.

 

  

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Section 12.8      Maximum Interest Rate.  No provision of this Agreement or of any other Loan Documents shall require the payment or the collection of interest (including all fees, charges and other amounts which are treated as interest) in excess of the Maximum Rate.  If any excess of interest in such respect is hereby provided for, or shall be adjudicated to be so provided, in any other Loan Documents or otherwise in connection with this loan transaction, the provisions of this Section shall govern and prevail and neither Borrower nor the sureties, guarantors, successors, or assigns of Borrower shall be obligated to pay the excess amount of such interest or any other excess sum paid for the use, forbearance, or detention of sums loaned pursuant hereto.  In the event Agent, Issuing Bank or any Lender ever receives, collects, or applies as interest any such sum, such amount which would be in excess of the maximum amount permitted by applicable law shall be applied as a payment and reduction of the principal of the indebtedness evidenced by the Notes; and, if the principal of the Notes have been paid in full, any remaining excess shall forthwith be paid to Borrower.  In determining whether or not the interest paid or payable exceeds the Maximum Rate, Borrower and Agent, Issuing Bank and Lenders shall, to the extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the indebtedness evidenced by the Notes so that interest for the entire term does not exceed the Maximum Rate.

 

Section 12.9      Notices.  All notices and other communications provided for in this Agreement and the other Loan Documents shall be in writing and may be emailed, telecopied (faxed), mailed by certified mail return receipt requested, or delivered by hand or overnight courier service to the intended recipient at the addresses specified on the signature pages hereof or at such other address as shall be designated by any such party in a notice to the other parties given in accordance with this Section; provided, however, that (a) all electronic mail transmissions may be only in the form of electronically scanned documents, showing all signatures, and (b) electronic mail may be used only to distribute Advance Request Forms, interest election requests, notices of prepayment and other routine communications, such as financial statements, and not for any other purpose.  Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given (a) when received if transmitted by electronic mail, (b) when transmitted by telecopy (fax), subject to confirmation of receipt, (c) when personally delivered if by hand or overnight courier service or, (d) in the case of a mailed notice, when duly deposited in the mails, in each case given or addressed as aforesaid; provided, however, that notices to Agent pursuant to Article II shall not be effective until received by Agent.

 

Section 12.10    Applicable Law; Venue; Service of Process.  This Agreement and the other Loan Documents shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America.  This Agreement has been entered into in Harris County, Texas and it shall be performable for all purposes in Harris County, Texas.  Any action or proceeding against Borrower under or in connection with any of the Loan Documents may be brought in any state or federal court in Harris County, Texas, and each party hereto hereby irrevocably submits to the nonexclusive jurisdiction of such courts and waives any objection it may now or hereafter have as to the venue of any such action or proceeding brought in any such court or that any such court is an inconvenient forum.  Each party hereto agrees that service of process upon it may be made by certified or registered mail, return receipt requested, at its office specified in this Agreement.  Nothing herein or in any of the other Loan Documents shall affect the right of Agent to serve process in any other manner permitted by law or shall limit the right of Agent to bring any action or proceeding against Borrower or with respect to any of its property in courts in other jurisdictions.  Any action or proceeding by Borrower against Agent, Issuing Bank or any Lender shall be brought only in a court located in Harris County, Texas.

 

  

56

  

 

Section 12.11    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery of an executed signature page of this Agreement by facsimile transmission or other electronic means shall be effective as delivery of a manually executed counterpart hereof.

 

Section 12.12   Severability.  Any provision of this Agreement or any other Loan Document held by a court of competent jurisdiction to be invalid, illegal or unenforceable shall not impair or invalidate the remaining provisions hereof or thereof and the effect of such invalidity, illegality or unenforceability shall be confined to the provision held to be invalid, illegal or unenforceable.

 

Section 12.13    Headings.  The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

Section 12.14    Non-Application of Chapter 346 of Texas Finance Code.  The provisions of Chapter 346 of the Texas Finance Code are specifically declared by the parties hereto not to be applicable to this Agreement or any of the other Loan Documents or to the transactions contemplated hereby.

 

Section 12.15    Consent to Participations.  Any Lender shall have the right at any time and from time to time to sell or transfer one or more participation interests in the Notes and the indebtedness evidenced thereby to one or more purchasers (“Purchasers”), whether related or unrelated to such Lender, but such Person shall not be a “Lender” hereunder.  Subject to Section 12.20, any Lender may provide to any one or more Purchasers or potential Purchasers any information, financial statements, data or knowledge such Lender may have about Borrower or about any other matter relating to the Obligations.  Borrower further waives any and all notices of sale of participation interests and notices of repurchases of participation interests.  Borrower agrees that the owners of any participation interests will be considered as the absolute owners of their interests in the Obligations and will have all the rights granted under the participation agreements or other agreements governing the sale of their participation interests, but such Purchasers shall not have any direct rights under this Agreement or the Loan Documents.  Borrower waives all rights of offset or counterclaim that it may now or later have against Agent or against any Purchaser.

 

  

57

  

 

Section 12.16    Assignments.  Any Lender may, with the prior written consent of Agent and (so long as no Event of Default or Unmatured Event of Default exists) Borrower, which consents shall not be unreasonably delayed or withheld (it being understood that Borrower may withhold its consent to any such assignment if such assignment would result in a "Termination Event" or an "Event of Default" or a similar event under any agreement relating to any Rate Management Transaction to which the assignor or any Affiliate of the assignor is a party and such "Termination Event," "Event of Default" or similar event would result in an Event of Default under Section 10.1(h) or 10.1(i) of this Agreement) and, in any event, shall not be required for an assignment by any Lender to one of its Affiliates, at any time assign and delegate to an Eligible Assignee all or any fraction of such Lender’s Revolving Advances and Commitment, in a minimum aggregate amount not less than the lesser of (a) the amount of the assigning Lender’s Commitments, and (b) $2,000,000.00; provided that Borrower and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Eligible Assignee until the date when all of the following conditions shall have been met:

 

(a)           the assigning Lender and the Eligible Assignee shall have executed and delivered to Borrower and Agent an Assignment and Acceptance, together with any documents required to be delivered thereunder, which Assignment and Acceptance shall have been accepted by Agent, and

 

(b)           except in the case of an assignment by a Lender to one of its Affiliates, the assigning Lender or the Eligible Assignee shall have paid Agent a processing fee of $3,500.00.

 

From and after the date on which the conditions described above have been met, (x) such Eligible Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Eligible Assignee pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender hereunder and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment and Acceptance, shall be released from its obligations hereunder.  Within five (5) Business Days after effectiveness of any assignment and delegation and upon request by Agent, Borrower shall execute and deliver to Agent (for delivery to the Eligible Assignee and the assigning Lender, as applicable) a new Note, as applicable, in the principal amount of the Eligible Assignee’s Pro Rata Share of the Combined Commitments, and, if the assigning Lender has retained a Commitment, a replacement Note in the principal amount of the Pro Rata Share of the Combined Commitments, retained by the assigning Lender (each such Note to be in exchange for, but not in payment of, the portion of the predecessor Note not being assigned).  At such time the assigning Lender shall deliver to Borrower the Note assigned by such Lender.  Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement.  Subject to Section 2.21, any attempted assignment and delegation not made in accordance with this Section 12.16 shall be null and void.

 

Notwithstanding the foregoing provisions of this Section 12.16 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Commitment and its Notes to a Federal Reserve Bank (but no such assignment shall release any Lender from any of its obligations hereunder).

 

  

58

  

 

Section 12.17    USA Patriot Act.  Each Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender to identify Borrower in accordance with the Act.

 

Section 12.18   Foreign Lender Reporting Requirements.  If any Lender which is not a Person organized and existing under the laws of the United States of America or a state thereof (a “Non-US Person”) becomes a party to this Agreement, such Lender will deliver to Borrower and Agent such documents and forms related to such status as a Non-US Person as Borrower or Agent may require.

 

Section 12.19    Document Imaging.  Borrower understands and agrees that (a) Agent’s document retention policy involves the imaging of executed loan documents and the destruction of the paper originals, and (b) Borrower waives any right that it may have to claim that the imaged copies of the Loan Documents are not originals.

 

Section 12.20.   Confidentiality.  Agent, Issuing Bank and each Lender agree (on behalf of itself and each of its Affiliates, directors, officers and employees) to maintain the confidentiality of all non-public information supplied to it by or on behalf of Borrower or any Subsidiaries pursuant to this Agreement or any other Loan Document (“Confidential Information”), provided that nothing herein shall limit the disclosure of any Confidential Information (a) to the extent required by statute, rule, regulation or judicial process, (b) to counsel or any other third party professional consultants or advisors for any Lender, Issuing Bank or Agent, provided that such consultant or advisor has agreed to hold such Confidential Information confidential, (c) to regulatory bodies (including the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about Agent's, Issuing Bank's or any Lender's investment portfolio), auditors or accountants of Agent, Issuing Bank or any Lender, (d) to Agent, Issuing Bank or any other Lender or any Affiliate thereof, (e) in connection with any litigation relating to the transactions contemplated by this Agreement or any other Loan Document to which any one or more of Agent, Issuing Bank or any Lender is a party, or (f) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) agrees in writing to be bound by the provisions of this Section 12.20.  Confidential Information does not include information that (i) was publicly known prior to the time of disclosure by Borrower or any Subsidiary, (ii) after disclosure by Borrower or any Subsidiary to any Lender, Issuing Bank or Agent, becomes publicly known through no act or omission by any Lender, Issuing Bank or Agent or by any Person acting on behalf of any Lender, Issuing Bank or Agent or (iii) otherwise becomes known to any Lender, Issuing Bank or Agent other than through disclosure by Borrower, any Subsidiary or any other party known by such Lender, Issuing Bank or Agent to be subject to a confidentiality agreement.

 

Section 12.21.   Dispute Resolution.  This Section contains a jury waiver, arbitration clause and a class action waiver.  This Section should be carefully read.

 

(a)           JURY TRIAL WAIVER.  AS PERMITTED BY APPLICABLE LAW, EACH PARTY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BEFORE A JURY IN CONNECTION WITH ANY DISPUTE (HEREINAFTER DEFINED), AND DISPUTES SHALL BE RESOLVED BY A JUDGE SITTING WITHOUT A JURY.  IF A COURT DETERMINES THAT THIS PROVISION IS NOT ENFORCEABLE FOR ANY REASON, THEN AT ANY TIME PRIOR TO TRIAL OF THE DISPUTE, BUT NOT LATER THAN THIRTY (30) DAYS AFTER ENTRY OF THE ORDER DETERMINING THIS PROVISION IS UNENFORCEABLE, ANY PARTY SHALL BE ENTITLED TO MOVE THE COURT FOR AN ORDER COMPELLING ARBITRATION AND STAYING OR DISMISSING SUCH LITIGATION PENDING ARBITRATION (“ARBITRATION ORDER”).

 

  

59

  

 

(b)           ARBITRATION.  If a claim, dispute, or controversy arises between any of the parties hereto with respect to this Agreement (a "Dispute"), and only if a jury trial waiver with respect to such Dispute is not permitted by applicable law or ruling by a court, any party may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party.  By agreeing to arbitrate a Dispute, each party gives up any right such party may have to a jury trial, as well as other rights such party would have in court that are not available or are more limited in arbitration, such as the rights to discovery and to appeal.

 

Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, JAMS or National Arbitration Forum (“Administrator”) as selected by the initiating party.  If the parties agree, arbitration may be commenced by appointment of a licensed attorney who is selected by the parties and who agrees to conduct the arbitration without an Administrator.  Disputes include matters (i) relating to a deposit account, application for or denial of credit, enforcement of any of the obligations any party has to any other party, compliance with applicable laws and/or regulations, performance or services provided under any agreement by any party, (ii) based on or arising from an alleged tort, or (iii) involving any party's employees, agents, affiliates, or assigns.  However, Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court.  If a third party is a party to a Dispute, each party will consent to including the third party in the arbitration proceeding for resolving the Dispute with the third party.  Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement, in the city and state where lender or bank is headquartered.

After entry of an Arbitration Order, the non-moving party shall commence arbitration.  The moving party shall, at its discretion, also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be adversely prejudiced by electing not to commence arbitration.  The arbitrator: (i) will hear and rule on appropriate dispositive motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment; (ii) will render a decision and any award applying applicable law; (iii) will give effect to any limitations period in determining any Dispute or defense; (iv) shall enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable; (v) with regard to motions and the arbitration hearing, shall apply rules of evidence governing civil cases; and (vi) will apply the law of the state specified in the agreement giving rise to the Dispute.  Filing of a petition for arbitration shall not prevent any party from (i) seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin, garnishment, and/or the appointment of a receiver, (ii) pursuing non-judicial foreclosure, or (iii) availing itself of any self-help remedies such as setoff and repossession.  The exercise of such rights shall not constitute a waiver of the right to submit any Dispute to arbitration.

  

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Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds $5,000,000.00, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators.  To allow for such appeal, if the award (including Administrator, arbitrator, and attorney’s fees and costs) exceeds $5,000,000.00, the arbitrator will issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute.  A request for de novo appeal must be filed with the arbitrator within thirty (30) days following the date of the arbitration award; if such a request is not made within that time period, the arbitration decision shall become final and binding.  On appeal, the arbitrators shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than deferring in any manner to the original arbitrator.  Appeal of an arbitration award shall be pursuant to the rules of the Administrator or, if the Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.

Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.  This arbitration provision shall survive any termination, amendment, or expiration of this Agreement.  If the terms of this provision vary from the Administrator’s rules, this arbitration provision shall control.

(c)           CLASS ACTION WAIVER.  EACH PARTY WAIVES THE RIGHT TO LITIGATE IN COURT OR ARBITRATE ANY CLAIM OR DISPUTE AS A CLASS ACTION, EITHER AS A MEMBER OF A CLASS OR AS A REPRESENTATIVE, OR TO ACT AS A PRIVATE ATTORNEY GENERAL.

 

(d)           RELIANCE.  Each party (i) certifies that no one has represented to such party that the other parties would not seek to enforce jury and class action waivers in the event of suit, and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers, agreements, and certifications in this Section.

 

Section 12.22.   ENTIRE AGREEMENT.  THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

[[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]]

 

  

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

	 	

BORROWER:

	 	 
	 	

INSPERITY, INC.

	 	 	 
	
 

	
By: 

	/s/ Douglas S. Sharp
	 	 	Douglas S. Sharp
	 	 	Sr. Vice President of Finance, Chief
	 	 	Financial Officer and Treasurer
	 	 	 
	 	Address for Notices:
	 	Legal Notices:
	 	Insperity, Inc.
	 	19001 Crescent Springs Drive
	 	Kingwood, Texas 77339-3802
	 	Attention: General Counsel
	 	Fax: (281) 348-2859
	 	 
	 	Other Notices:
	 	Insperity, Inc.
	 	19001 Crescent Springs Drive
	 	Kingwood, Texas 77339-3802
	 	Email: douglas.sharp@insperity.com
	 	Fax: (281) 348-3977

 

SIGNATURE PAGE FOR CREDIT AGREEMENT

 

  

  

  

 

	 	AGENT:
	 	 
	 	AMEGY BANK NATIONAL ASSOCIATION
	 	 	 
	
 

	
By: 

	/s/ Laif Afseth                                                 
	 	 	Laif Afseth
	 	 	Senior Vice President
	 	 	 
	 	Address for Notices:
	 	Five Post Oak Park
	 	4400 Post Oak Parkway
	 	Houston, Texas 77027
	 	Attention:  Laif Afseth
	 	Email:  Laif.Afseth@amegybank.com

SIGNATURE PAGE FOR CREDIT AGREEMENT

 

  

  

  

 

	 	LENDERS:
	 	 
	 	AMEGY BANK NATIONAL ASSOCIATION
	 	 	 
	
 

	
By: 

	 /s/ Ryan Hightower
	 	 	Ryan Hightower
	 	 	Vice President
	 	 	 
	 	Address for Notices:
	 	Five Post Oak Park
	 	4400 Post Oak Parkway
	 	Houston, Texas 77027
	 	Attention:  Ryan Hightower
	 	Email:  Ryan.Hightower@amegybank.com

 

SIGNATURE PAGE FOR CREDIT AGREEMENT

 

  

  

  

 

	 	BANK OF AMERICA, N.A.
	 	 	 
	 	 	 
	
 

	
By: 

	/s/ Gary L. Mingle 
	 	 	Gary L. Mingle
	 	 	Senior Vice-President
	 	 	 
	 	Address for Notices:
	 	700 Louisiana - TX4-213-08-02
	 	Houston, Texas 77002
	 	Email: gary.mingle@baml.com

 

SIGNATURE PAGE FOR CREDIT AGREEMENT

 

  

  

  

 

	 	

WOODFOREST NATIONAL BANK

	 	 	 
	 	 	 
	
 

	
By: 

	/s/ Dan Hauser   
	 	 	Dan Hauser
	 	 	Regional President
	 	 	 
	 	Address for Notices:
	 	1330 Lake Robbins Drive, Ste 100
	 	The Woodlands, Texas 77380
	 	Email: dhauser@woodforest.com

 

SIGNATURE PAGE FOR CREDIT AGREEMENT

 

  

  

  

 

Annex I

 

COMMITMENTS

 

September 15, 2011

 

 

	 	Name of Lender	
Percentage Share as of August 

September 15, 2011

	
Commitment Amounts as of 

September 15, 2011

	 	 	 	 
	 1. 	Amegy Bank National Association 	40%	 $40,000,000.00
	 	 	 	 
	2.	Bank of America, N.A. 	40% 	 $40,000,000.00
	 	 	 	 
	3.	Woodforest National Bank 	20%	 $20,000,000.00
	 	 	 	 
	 	    Total	     100%   	    $100,000,000.00

 

  

  

  

 

LIST OF EXHIBITS

 

	
Exhibit

	  	
Document

	  	  	  
	
A

	  	
Form of Revolving Note

	  	  	  
	
B

	  	
Form of Swing Note

	  	  	  
	
C

	  	
Form of Revolving AdvanceRequest Form

	  	  	  
	
D

	  	
Form of No DefaultCertificate

	  	  	  
	
E

	  	
Form of Assignment andAcceptance

	  	  	  
	
F

	  	
Form of Guaranty Agreement

	  	  	  
	
G

	  	
Form of Opinion of BakerBotts L.L.P.

	  	  	  
	
H

	  	
Form of Opinion of BermudaCounsel

 

  

  

  

 

LIST OF SCHEDULES

 

	
Schedule

	  	
Document

	  	  	  
	
1.1

	  	
Proprietary Accounts

	  	  	  
	
6.5

	  	
Litigation

	  	  	  
	
6.14

	  	
List of Subsidiaries

	  	  	  
	
8.2

	  	
Permitted Liens

	  	  	  
	
8.11

	  	
Transactions with Affiliates

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