Exhibit 10.1
PROMISSORY NOTE
================================================================================
Borrower: Bay National Corporation Lender: ▇▇▇▇▇▇ Bank
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Corporate Address
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
================================================================================
PRINCIPAL AMOUNT: $5,000,000.00 Date of Note: September 28, 2004
PROMISE TO PAY. Bay National Corporation ("Borrower") promises to pay to ▇▇▇▇▇▇
Bank ("Lender"), or order, in lawful money of the United States of America, the
principal amount of Five Million & 00/100 Dollars ($5,000,000.00), together with
interest on the unpaid principal balance from September 28, 2004, until paid in
full.
PAYMENT. Borrower will pay this loan in one principal payment of $5,000,000.00
plus interest on September 28, 2007. This payment due on September 28, 2007,
will be for all principal and all accrued interest not yet paid. In addition,
Borrower will pay regular quarterly payments of all accrued unpaid interest due
as of each payment date, beginning December 28, 2004, with all subsequent
interest payments to be due on the same day of each quarter after that. Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any late charges; and
then to any unpaid collection costs. The annual interest rate for this Note is
computed on a 365/360 basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the ▇▇▇▇▇▇ Bank Prime Rate
(the "Index"). The Index is not necessarily the lowest rate charged by Lender on
its loans and is set by Lender in its sole discretion. If the Index becomes
unavailable during the term of this loan, Lender may designate a substitute
index after notifying Borrower. Lender will tell Borrower the current Index rate
upon Borrower's request. The interest rate change will not occur more often than
each day. Borrower understands that Lender may make loans based on other rates
as well. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate equal to the Index. NOTICE: Under no circumstances will
the interest rate on this Note be more than the maximum rate allowed by
applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: ▇▇▇▇▇▇ Bank, Main Office,
Corporate Address, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 5.000 percentage points over
the Index. The interest rate will not exceed the maximum rate permitted by
applicable law. If judgment is entered in connection with this Note, interest
will continue to accrue on this Note after judgment at the interest rate
applicable to this Note at the time judgment is entered.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PROMISSORY NOTE
Page 2
(Continued)
================================================================================
Payment Default. Borrower fails to make any payment when due under this
Note.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in
any of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations
under this Note or any of the related documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note
or the related documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false
or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note. In the event of a death, Lender, at its option,
may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
Cure Provisions. If any default, other than a default in payment is
curable and if Borrower has not been given a notice of a breach of the
same provision of this Note within the preceding twelve (12) months, it
may be cured if Borrower, after receiving written notice from Lender
demanding cure of such default: (1) cures the default within fifteen
(15) days; or (2) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
PROMISSORY NOTE
Page 3
(Continued)
================================================================================
LENDER'S RIGHTS. Upon default, Lender may, after giving such notices as required
by applicable law, declare the entire unpaid principal balance on this Note and
all accrued unpaid interest immediately due, and then Borrower will pay that
amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the Commonwealth of Pennsylvania.
This Note has been accepted by Lender in the Commonwealth of Pennsylvania.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
COLLATERAL. This loan is unsecured.
CROSS DEFAULT. Any event of default under any loan due and owing to Lender by
Borrower, at any time, shall constitute an event of default under all loans due
and owing to Lender by Borrower.
ADDENDUM. See attached Addendum to Promissory Note.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several. If any portion of this Note is for any
reason determined to be unenforceable, it will not affect the enforceability of
any other provisions of this Note.
CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY
ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF
PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR BORROWER AFTER A DEFAULT
UNDER THIS NOTE AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT
AGAINST BORROWER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE AND ALL ACCRUED
INTEREST, LATE CHARGES AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER
RELATING TO ANY COLLATERAL SECURING THIS NOTE, TOGETHER WITH COSTS OF SUIT, AND
AN ATTORNEY'S COMMISSION OF TEN PERCENT (10%) OF THE UNPAID PRINCIPAL BALANCE
AND ACCRUED INTEREST FOR COLLECTION,
PROMISSORY NOTE
Page 4
(Continued)
================================================================================
BUT IN ANY EVENT NOT LESS THAN FIVE HUNDRED DOLLARS ($500) ON WHICH JUDGMENT OR
JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE IMMEDIATELY; AND FOR SO DOING, THIS
NOTE OR A COPY OF THIS NOTE VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT.
THE AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT AGAINST BORROWER SHALL
NOT BE EXHAUSTED BY ANY EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME
TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS
NOTE. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE TO NOTICE OR TO A
HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT AND STATES THAT
EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF
JUDGMENT PROVISION TO BORROWER'S ATTENTION OR BORROWER HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
BORROWER:
BAY NATIONAL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL) By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
----------------------- ------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President/
Bay National Corporation CFO of Bay National Corporation
ATTEST:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [CORPORATE SEAL]
--------------------------------
Secretary or Assistant Secretary
================================================================================
x
------------------------
Witness
ADDENDUM TO PROMISSORY NOTE
---------------------------
THIS ADDENDUM is attached to, and made a part of that certain
Promissory Note dated September 28, 2004, in the maximum principal amount of
$5,000,000.00 (the "Note") executed and delivered by Bay National Corporation
("Borrower") to ▇▇▇▇▇▇ Bank ("Lender"). This Addendum sets forth certain
modified or supplemental provisions of the Note. All terms which are defined in
the Note and not otherwise defined in this Addendum shall have the meanings
ascribed to them in the Note.
1. Payments of Interest. Notwithstanding anything to the contrary set
forth in the Note, Borrower may elect to defer one or more quarterly payments of
interest due under this Note. The amount of any deferred interest payment or
payment shall be due not later than the earliest of: Borrower's early payment of
any amounts due under the Note; Lender's declaration, as permitted under this
Note, that the entire unpaid principal balance on this Note and all accrued
unpaid interest is immediately due; or September 28, 2007. The amount of any
deferred interest payment or payments shall, for purposes of calculating the
interest accrued hereunder, be added to the balance of principal outstanding,
and interest shall be accrued at the interest rate specified herein on the
aggregate total principal outstanding, plus the amount of any deferred interest
payment or payments.
2. Continuing Effect. Except as modified or supplemented by this
Addendum, the Note shall continue in full force and effect.
Witness: Borrower:
Bay National Corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------- ---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President of Bay
National Corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------- ---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President/CFO
of Bay National Corporation
Lender:
▇▇▇▇▇▇ Bank
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Title: SVP
BUSINESS LOAN AGREEMENT
================================================================================
Borrower: Bay National Corporation Lender: ▇▇▇▇▇▇ Bank
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Corporate Address
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
================================================================================
THIS BUSINESS LOAN AGREEMENT dated September 28, 2004, is made and executed
between Bay National Corporation ("Borrower") and ▇▇▇▇▇▇ Bank ("Lender") on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement ("Loan"). Borrower understands and agrees
that: (A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements as set forth in this
Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all
times shall be subject to Lender's sole judgment and discretion; and (C) all
such Loans shall be and remain subject to the terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of September 28, 2004, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following
documents for the Loan: (1) the Note; (2) together with all such
Related Documents as Lender may require for the Loan; all in form and
substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender
or its counsel, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this
Agreement or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Maryland. Borrower is
duly authorized to transact business in all other states in which
Borrower is doing business, having obtained all necessary filings,
governmental licenses and approvals for each state in which Borrower is
doing business. Specifically, Borrower is, and at all times shall be,
duly qualified as a foreign corporation in all states in which the
failure to so qualify would have a material adverse effect on its
business or financial condition. Borrower has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Borrower
maintains an office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Unless
Borrower has designated otherwise in writing, the
BUSINESS LOAN AGREEMENT
(Continued)
Page 2
================================================================================
principal office is the office at which Borrower keeps its books and
records including its records concerning the Collateral. Borrower will
notify Lender prior to any change in the location of Borrower's state
of organization or any change in Borrower's name. Borrower shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Borrower and Borrower's business activities.
Assumed Business Names. Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does business:
None.
Authorization. Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by
all necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of (a)
Borrower's articles of incorporation or organization, or bylaws, or (b)
any agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower
or to Borrower's properties.
Financial Information. Each of Borrower's financial statements supplied
to Lender truly and completely disclosed Borrower's financial condition
as of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of
Borrower enforceable against Borrower in accordance with their
respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used or filed a financing
statement under any other name for at least the last five (5) years.
Hazardous Substances. Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that: (1) During the
period of Borrower's ownership of Borrower's Collateral, there has been
no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any Hazardous Substance by any person on,
under, about or from any of the Collateral. (2) Borrower has no
knowledge of, or reason to believe that there has been (a) any breach
or violation of any Environmental Laws; (b) any use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral;
or (c) any actual or threatened litigation or claims of any kind by any
person relating to such matters. (3) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Collateral
shall use, generate, manufacture, store, treat, dispose of or release
any Hazardous Substance on, under, about or from any of the Collateral;
and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws. Borrower
authorizes Lender and its agents to enter upon the Collateral to make
such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the Collateral for
hazardous waste and Hazardous Substances. Borrower hereby (1) releases
and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of
the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release of a hazardous waste
or substance on the Collateral. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the
payment of the
BUSINESS LOAN AGREEMENT
(Continued)
Page 3
================================================================================
Indebtedness and the termination, expiration or satisfaction of this
Agreement and shall not be affected by Lender's acquisition of any
interest in any of the Collateral, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax
returns and reports that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for which
adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof,
as well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of
(1) all material adverse changes in Borrower's financial condition, and
(2) all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
GAAP, applied on a consistent basis, and permit Lender to examine and
audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Annual Statements. As soon as available, but in no event later
than one-hundred-twenty (120) days after the end of each
fiscal year, Borrower's balance sheet and income statement for
the year ended, compiled by a certified public accountant
satisfactory to Lender.
Tax Returns. As soon as available, but in no event later than
one-hundred-twenty (120) days after the applicable filing date
for the tax reporting period ended, Federal and other
governmental tax returns, prepared by a certified public
accountant satisfactory to Lender.
All financial reports required to be provided under this Agreement
shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, as Lender may request from time to time.
BUSINESS LOAN AGREEMENT
(Continued)
Page 4
================================================================================
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least thirty (30) days prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loans, Borrower will provide
Lender with such lender's loss payable or other endorsements as Lender
may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (1)
the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the properties insured; (5) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (6) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits.
Performance. Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower
and Lender. Borrower shall notify Lender immediately in writing of any
default in connection with any agreement.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower's
expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to
any substance, or any waste or by-product of any substance defined as
toxic or a hazardous substance under applicable federal, state, or
local law, rule, regulation, order or directive, at or affecting any
property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower's
properties, businesses and operations, and to the use or occupancy of
the Collateral, including without limitation, the Americans With
Disabilities Act. Borrower may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lender's sole opinion,
Lender's interests in the Collateral are not jeopardized. Lender may
require Borrower to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender's interest.
BUSINESS LOAN AGREEMENT
(Continued)
Page 5
================================================================================
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.
Compliance Certificates. Unless waived in writing by Lender, provide
Lender at least annually, with a certificate executed by Borrower's
chief financial officer, or other officer or person acceptable to
Lender, certifying that the representations and warranties set forth in
this Agreement are true and correct as of the date of the certificate
and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on Borrower's part or on the part of any third party, on
property owned and/or occupied by Borrower, any environmental activity
where damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
assignments, financing statements, instruments, documents and other
agreements as Lender or its attorneys may reasonably request to
evidence and secure the Loans and to perfect all Security Interests.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (1) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (2) sell, transfer, mortgage, assign,
pledge, lease, grant a security interest in, or encumber any of
Borrower's assets (except as allowed as Permitted Liens), or (3) sell
with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (1) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (2) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, or
(3) pay any dividends on Borrower's stock (other than dividends payable
in its stock), provided, however that notwithstanding the foregoing,
but only so long as no Event of Default has occurred and is continuing
or would result from the payment of dividends, if Borrower is a
"Subchapter S Corporation" (as defined in the Internal Revenue Code of
1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under
BUSINESS LOAN AGREEMENT
(Continued)
Page 6
================================================================================
federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership
of shares of Borrower's stock, or purchase or retire any of Borrower's
outstanding shares or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance
money or assets to any other person, enterprise or entity, (2)
purchase, create or acquire any interest in any other enterprise or
entity, or (3) incur any obligation as surety or guarantor other than
in the ordinary course of business.
Agreements. Borrower will not enter into any agreement containing any
provisions which would be violated or breached by the performance of
Borrower's obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good ▇▇▇▇▇ ▇▇▇▇▇ itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Borrower fails to make any payment when due under the
Loan.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any
term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's or any Grantor's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or
becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
BUSINESS LOAN AGREEMENT
(Continued)
Page 7
================================================================================
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. In the event of a
death, Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure any Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Loan is impaired.
Insecurity. Lender in good faith believes itself insecure.
Right to Cure. If any default, other than a default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured if Borrower or Grantor, as the case may be,
after receiving written notice from Lender demanding cure of such
default: (1) cure the default within fifteen (15) days; or (2) if the
cure requires more than fifteen (15) days, immediately initiate steps
which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
CROSS DEFAULT. Any event of default under any loan due and owing to Lender by
Borrower, at any time, shall constitute an event of default under all loans due
and owing to Lender by Borrower.
DEPOSIT ACCOUNTS. The Borrower shall maintain its deposit accounts with Lender.
ADDENDUM. See attached Addendum to Business Loan Agreement.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Agreement. Lender may hire or pay someone
BUSINESS LOAN AGREEMENT
(Continued)
Page 8
================================================================================
else to help enforce this Agreement, and Borrower shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's
attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also shall pay all court costs and such additional
fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the purchasers
of any such participation interests will be considered as the absolute
owners of such interests in the Loan and will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loan irrespective of the failure or
insolvency of any holder of any interest in the Loan. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the
Commonwealth of Pennsylvania. This Agreement has been accepted by
Lender in the Commonwealth of Pennsylvania.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any of Borrower's
or any Grantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
Notices. Unless otherwise provided by applicable law, any notice
required to be given under this Agreement shall be given in writing,
and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near
the beginning of this Agreement. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address. Unless
otherwise provided by applicable law, if there is more than one
Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision
illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this
Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other
provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used in this Agreement shall include all
BUSINESS LOAN AGREEMENT
(Continued)
Page 9
================================================================================
of Borrower's subsidiaries and affiliates. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be
construed to require Lender to make any Loan or other financial
accommodation to any of Borrower's subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements by or on behalf of
Borrower contained in this Agreement or any Related Documents shall
bind Borrower's successors and assigns and shall inure to the benefit
of Lender and its successors and assigns. Borrower shall not, however,
have the right to assign Borrower's rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival of Representations and Warranties. Borrower understands and
agrees that in making the Loan, Lender is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement or the Related Documents.
Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive
the making of the Loan and delivery to Lender of the Related Documents,
shall be continuing in nature, and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in
full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waive Jury. All parties to this Agreement hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by any
party against any other party.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
Advance. The word "Advance" means a disbursement of Loan funds made, or
to be made, to Borrower or on Borrower's behalf on a line of credit or
multiple advance basis under the terms and conditions of this
Agreement.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower. The word "Borrower" means Bay National Corporation and
includes all co-signers and co-makers signing the Note.
Collateral. The word "Collateral" means all property and assets granted
as collateral security for a Loan, whether real or personal property,
whether granted directly or indirectly, whether granted now or in the
future, and whether granted in the form of a security interest,
mortgage, collateral mortgage, deed of trust, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise.
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("▇▇▇▇"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words "Event of Default" mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.
BUSINESS LOAN AGREEMENT
(Continued)
Page 10
================================================================================
GAAP. The word "GAAP" means generally accepted accounting principles.
Grantor. The word "Grantor" means each and all of the persons or
entities granting a Security Interest in any Collateral for the Loan,
including without limitation all Borrowers granting such a Security
Interest.
Guarantor. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Loan.
Guaranty. The word "Guaranty" means the guaranty from Guarantor to
Lender, including without limitation a guaranty of all or part of the
Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. The words "Hazardous Substances" are used in their
very broadest sense and include without limitation any and all
hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances"
also includes, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Borrower is responsible under this Agreement or under any of the
Related Documents.
Lender. The word "Lender" means ▇▇▇▇▇▇ Bank, its successors and
assigns.
Loan. The word "Loan" means any and all loans and financial
accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those
loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.
Note. The word "Note" means the Note executed by Bay National
Corporation in the principal amount of $5,000,000.00 dated September
28, 2004, together with all renewals of, extensions of, modifications
of, refinancings of, consolidations of, and substitutions for the note
or credit agreement.
Permitted Liens. The words "Permitted Liens" mean (1) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(2) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith; (3) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (4) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (5) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (6) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Loan.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean, without
limitation, any and all types of collateral security, present and
future, whether in the form of a lien, charge, encumbrance, mortgage,
deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien or title
retention
BUSINESS LOAN AGREEMENT
(Continued)
Page 11
================================================================================
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever whether created by law,
contract, or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED SEPTEMBER 28, 2004.
THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
BORROWER:
BAY NATIONAL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL) By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
-------------------- --------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President/CFO
of Bay National Corporation of Bay National Corporation
ATTEST:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ [Corporate Seal]
--------------------------------
Secretary or Assistant Secretary
LENDER:
▇▇▇▇▇▇ BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (SEAL)
---------------------
Authorized Signer
================================================================================
x________________________
Witness
ADDENDUM TO BUSINESS LOAN AGREEMENT
-----------------------------------
THIS ADDENDUM is attached to, and made a part of that certain Business
Loan Agreement dated September 28, 2004 (the "Agreement") by and between Bay
National Corporation ("Borrower") and ▇▇▇▇▇▇ Bank ("Lender"). This Addendum sets
forth certain modified or supplemental provisions of the Agreement. All
capitalized terms which are defined in the Agreement and not otherwise defined
in this Addendum shall have the meanings ascribed to them in the Agreement.
1. Additional Covenants. The Borrower agrees that the Borrower shall,
so long as this Agreement remains in effect, maintain, and cause Borrower's
subsidiary, Bay National Bank, to maintain, as of the date of each Consolidated
Report of Condition, or similar successor federal regulatory financial report
("Call Report") submitted by Bay National Bank:
a. A minimum Total Risk-Based Capital Ratio (as reported on
the Call Report filed with respect to Bay National Bank, and calculated in the
same manner with respect to Borrower) of not less than 10.00%;
b. A minimum Tier 1 Risk-Based Capital Ratio (as reported on
the Call Report filed with respect to Bay National Bank, and calculated in the
same manner with respect to Borrower) of not less than 6.00%; and
c. A Loan Loss Reserve at a level required by federal
regulatory agencies, provided that such Loan Loss Reserve also equal not less
than three hundred percent (300.00%) of the sum of the balances of the
following: loans on non-accrual, loans more than 90 days past due, and
renegotiated loans.
2. Continuing Effect. Except as modified or supplemented by this
Addendum, the Agreement shall continue in full force and effect.
Witness: Borrower:
Bay National Corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------- ----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President of Bay
National Corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------ -----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President/CFO
of Bay National Corporation
LENDER:
▇▇▇▇▇▇ Bank
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title: SVP