Document:

ex10.htm

Exhibit 10.1

 

 

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

 

	  	  	  
	
Written Agreement by and among

	  	
Docket Nos.      10-179-WA/RB-HC

	  	  	
10-179-WA/RB-SM

	
HIGHLANDS BANKSHARES, INC.

Abingdon, Virginia

	  	  
	  	  	  
	
HIGHLANDS UNION BANK

Abingdon, Virginia

	  	  
	  	  	  
	
and

	  	  
	  	  	  
	
FEDERAL RESERVE BANK OF RICHMOND

Richmond, Virginia

	  	  
	  	  	  

 

WHEREAS, in recognition of their common goal to maintain the financial soundness of Highlands Bankshares, Inc., Abingdon, Virginia ("Bankshares"), a registered bank holding company, and its subsidiary bank, Highlands Union Bank, Abingdon, Virginia (the "Bank"), a state-chartered bank that is a member of the Federal Reserve System, Bankshares, the Bank, and the Federal Reserve Bank of Richmond (the "Reserve Bank") have mutually agreed to enter into this Written Agreement (the "Agreement"); and

WHEREAS, on, October 13, 2010, the boards of directors of Bankshares and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing James D. Moorefield to enter into this Agreement on behalf of Bankshares and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by Bankshares and the Bank, and their institution-affiliated parties, as defined in sections 3(u) and

  

 

  

 

8(b)(3) of the Federal Deposit Insurance Act, as amended (the "FDI Act") (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

 

NOW, THEREFORE, Bankshares, Bank, and the Reserve Bank agree as follows: 

 

Source of Strength

    1.          The board of directors of Bankshares shall take appropriate steps to fully utilize Bankshares's financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the "Board of Governors") (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with this Agreement, and any other supervisory action taken by the Bank's federal or state regulator.

 

Board Oversight

    2.          Within 60 days of this Agreement, the board of directors of the Bank shall submit to the Reserve Bank a written plan to strengthen board oversight of the management and operations of the Bank. The plan shall, at a minimum, address, consider, and include:

(a)          The actions that the board of directors will take to improve the Bank's condition and maintain effective control over, and supervision of, the Bank's major operations and activities, including but not limited to, credit risk management, asset quality, capital, earnings, liquidity, and information technology;

(b)          a description of the information and reports that will be regularly reviewed by the board of directors in its oversight of the operations and management of the Bank, including information on the Bank's adversely classified assets, allowance for loan and lease losses ("ALLL"), capital, liquidity, and earnings;

  

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(c)          the maintenance of adequate and complete minutes of all board and committee meetings, approval of such minutes, and their retention for supervisory review;

(d)          policies to ensure prompt resolution of regulatory concerns; and

(e)          the establishment of a written management succession plan for key senior officers.

 

Credit Risk Management

 

3.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan to strengthen credit risk management practices. The plan shall, at a minimum, address, consider, and include:

(a)          strategies to minimize credit losses and reduce the level of problem assets; and

(b)          stress testing of loan and portfolio segments.

 

Credit Administration

 

 4.   Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written credit administration program that shall, at a minimum, address, consider, and include:

(a)          An analysis of a borrower's and any guarantor's repayment sources, global financial condition, income, liquidity, cash flow and contingent liabilities;

(b)          the preparation of appropriate and complete documentation to support the granting of, renewal or modification of loans;

(c)          the cessation of the practice of capitalizing interest on problem loans;

(d)          policies and procedures for the timely performance of appraisals; and

(e)          the development and implementation of a workout process, including, but not limited to, appropriate workout plans for problem loans.

  

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Loan Grading and Loan Review

 

5.     Within 30 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for the effective grading of the Bank's loan portfolio. The program shall provide for policies, procedures, and processes for the timely and ongoing grading of loans. The program shall, at a minimum, address, consider, and include:

(a)         Standards and criteria for assessing the credit quality of loans, including a discussion of the factors used to assign appropriate risk grades to loans;

(b)          procedures for the early identification of problem loans;

(c)          procedures to re-evaluate the grading of loans in the event of material changes, in the borrower's performance or the value of the collateral;

(d)          procedures to evaluate the grading of all loans assigned less than a pass grade at least quarterly;

(e)          designation of the person(s) responsible for the grading of loans;

(f)           controls to ensure staffs consistent application and adherence to the loan grading system; and

(g)          a mechanism for reporting to senior management and the board of directors, at least monthly, that at a minimum: summarizes the Bank's loan grades; describes trends in asset quality; identifies the loans that are nonperforming, adversely graded, or identified as needing special attention, describes the status of those loans, and describes the actions taken, or to be taken, by management for strengthening of the quality of any such loans.

6.          Within 30 days of this Agreement, the Bank shall conduct a review of the adequacy of the staffing of the loan review function, and shall prepare a written report that summarizes the findings. Within the same time period, the report shall be submitted to the

  

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Reserve Bank.

 

Asset Improvement

       7.     The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the combined report of inspection and examination conducted by the Reserve Bank that commenced on March 22, 2010 (the "Report of Examination"), or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof. The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying that: (i) the Bank's risk management policies and practices for loan workout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank's interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis indicating that the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes that the extension of credit will not impair the Bank's interest in obtaining repayment of the already outstanding credit and that the extension of credit or renewal will be repaid according to its terms. The written certification shall be made a part of the minutes of the meetings of the board of directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information that was used in the determination, shall be retained by the Bank in the borrower's credit file for subsequent

  

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supervisory review. For purposes of this Agreement, the term "related interest" is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors (12 C.F.R. § 215.2(n)).

8.      (a)   Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan designed to improve the Bank's position through repayment, amortization, liquidation, additional collateral, or other means on each loan, relationship, or other asset in excess of $500,000, including other real estate owned ("OREO"), that are past due as to principal or interest more than 90 days as of the date of this Agreement, are on the Bank's problem loan list, or were adversely classified in the Report of Examination.

(b)          Within 30 days of the date that any additional loan, relationship, or other asset in excess of $500,000, including OREO, becomes past due as to principal or interest for more than 90 days, is on the Bank's problem loan list, or is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank an acceptable written plan to improve the Bank's position on such loan, relationship, or asset.

(c)          Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank to update each asset improvement plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank's current problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.

Allowance for Loan and Lease Losses

     9.   (a)    Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified "loss" in the Report of Examination that have not been previously collected in full or charged off. The Bank shall,

  

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within 30 days from the receipt of any federal or state report of examination, charge off all assets classified "loss" unless otherwise approved in writing by the Reserve Bank.

   (b)           Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank. The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank's loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank's loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectability.

(c)          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for the maintenance of an adequate ALLL. The program shall include policies and procedures to ensure adherence to the Bank's revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate. The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions. The board of directors shall maintain written documentation of its review, including the factors considered and conclusions reached by the Bank in determining the adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve

  

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Bank, within 30 days after the end of each calendar quarter, a written report regarding the board of directors' quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of the ALLL for that quarter.

 

Capital Plan

 

    10.    Within 60 days of this Agreement, Bankshares and the Bank shall submit to the Reserve Bank an acceptable joint written plan to maintain sufficient capital at Bankshares on a consolidated basis, and at the Bank as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address, consider, and include:

(a)           Bankshares's current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

(b)          the Bank's current and future capital requirements, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

(c)          the adequacy of the Bank's capital, taking into account the volume of classified assets, concentrations of credit, the adequacy of the ALLL, current and projected asset growth, projected earnings, and the results of the consolidated organization's stress testing;

(d)          the source and timing of additional funds to fulfill Bankshares's and the Bank's future capital requirements; and

(e)          the requirements of section 225.4(a) of Regulation Y of the Board of Governors that Bankshares serve as a source of strength to the Bank.

  

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11.          Bankshares and the Bank shall notify the Reserve Bank, in writing, no more than 30 days after the end of any calendar quarter in which any of Bankshares's consolidated capital ratios or the Bank's capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan's minimum ratios. Together with the notification, the Bankshares and the Bank shall submit an acceptable written plan that details the steps Bankshares or the Bank, as appropriate, will take to increase Bankshares's or the Bank's capital ratios to or above the approved capital plan's minimums.

 

Liquidity and Funds Management

 

12.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable revised written contingency funding plan that, at a minimum, includes adverse scenario planning and identifies and quantifies available sources of liquidity for each scenario. 

 

Investment Portfolio Management

 

13.          Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable revised written investment policy that shall, at a minimum, address, consider, and include:

(a)          A description of acceptable and unacceptable types of investments within the categories of permissible investments;

(b)          a well-documented pre-purchase analysis of the characteristics and risks of a proposed investment;

(c)          periodic review of the credit quality and liquidity of the investment portfolio;

(d)          enhancements to the pricing methodology and documentation requirements for all investments, including those less liquid and those which have no readily

  

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quoted market prices;

(e)          procedures to mitigate risk and control loss exposure;

(f)           reporting, review, and approval procedures to and by the board of directors;

(g)          procedures to assess for impairments and to ensure that the Bank's valuation processes and impairment analyses, including recognition of Other Than Temporary Impairment ("OTTI"), are in accordance with generally accepted accounting principles, including FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other Than Temporary Impairments, and regulatory reporting instructions;

(h)          an independent validation of OTTI; and

(i)          the annual review of the investment policy by the board of directors. 

 

Earnings Plan and Budget

 

14.           (a)         Within 90 days of this Agreement, the Bank shall submit to the Reserve Bank a written business plan for 2011 to improve the Bank's earnings and overall condition. The plan, at a minimum, shall provide for or describe:

(i)           a realistic and comprehensive budget for 2011, including income statement and balance sheet projections; and

(ii)           a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

(b)           During the term of this Agreement, a business plan and budget for each calendar year subsequent to 2011 shall be submitted to the Reserve Bank at least 30 days prior to the beginning of that calendar year.

  

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Information Technology

 

15.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written program for information technology ("IT"). The program shall, at a minimum, address, consider, and include:

(a)           An enterprise-wide information security risk assessment, as required by Appendix D-2 to Regulation H of the Board of Governors (12 C.F.R. Part 208, App. D-2) and Appendix F to Regulation Y of the Board of Governors (12 U.S.C. Part 225, App.F), to enable the Bank to meet all applicable requirements for protecting nonpublic customer information and to assist the Bank in making future appropriate adjustments to its information security safeguards;

(b)          revised current policies, procedures, and controls to address logical information security;

(c)          procedures and controls to strengthen the effectiveness and integrity of the Bank's information security program; and

(d)          the information technology security deficiencies noted in the Report of Examination.

     16.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written disaster recovery and business continuity program for the Bank that describes the specific actions that will be taken to ensure the prompt resumption of business activity in the event of an emergency that affects information technology systems and operations. The program shall, at a minimum, address, consider, and include:

(a)          A risk assessment;

(b)          the designation of a qualified business continuity officer;

  

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(c)           back-up systems necessary to recover and restore facilities, hardware, software, communications, data files, customer files and services, and other pertinent operations;

(d)           written contracts with service providers and vendors;

(e)           periodic testing;

                (f)        annual board of directors' review of the program; and

(g)           the deficiencies noted in the Report of Examination related to business continuity and disaster recovery.

 

Dividends and Distributions

 

17.     (a)          Bankshares and the Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the "Director").

  (b)          Bankshares and its nonbank subsidiary shall not directly or indirectly take any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

  (c)          Bankshares and its nonbank subsidiary shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

  (d)          All requests for prior written approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information, as appropriate, on Bankshares's capital, earnings, and cash flow; the Bank's capital, asset quality, earnings, and ALLL needs; and identification of the sources of funds for the proposed payment or distribution. For requests to

  

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declare or pay dividends, Bankshares and the Bank, as appropriate, must also demonstrate that the requested declaration or payment of dividends is consistent with the Board of Governors' Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

 

Debt and Stock Redemption

 

    18.        (a)          Bankshares and its nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

        (b)           Bankshares shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.

 

Compliance with Laws and Regulations

 

    19.    (a)          In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

            (b)           The Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation's regulations (12 C.F.R. Part 359).

  

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Compliance with the Agreement

 

    20.     (a)          Within 10 days of this Agreement, Bankshares's and the Bank's boards of directors shall appoint a joint committee (the "Compliance Committee") to monitor and coordinate Bankshares's and the Bank's compliance with the provisions of this Agreement. The Compliance Committee shall consist of a majority of outside directors who are not executive officers of Bankshares or the Bank as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)). The Compliance Committee shall meet at least monthly, keep detailed minutes of each meeting, and report its findings to Bankshares's and the Bank's boards of directors.

         (b)            Within 30 days after the end of each calendar quarter following the date of this Agreement, Bankshares and the Bank shall submit to the Reserve Bank joint written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

 

Approval and Implementation of Plans, Program and Policy

 

21.       (a)          The Bank and, as applicable, Bankshares, shall submit written plans, programs, and a policy that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 3, 4, 5, 8(a), 8(b), 9(c), 10, 11, 12, 13, 15 and 16 of this Agreement.

    (b)          Within 10 days of approval by the Reserve Bank, the Bank and, as applicable, Bankshares, shall adopt the approved plans, programs, and policy. Upon adoption, the Bank and, as applicable, Bankshares, shall promptly implement the approved plans, programs, and policy, and thereafter fully comply with them.

    (c)          During the term of this Agreement, the approved plans, programs, and

  

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policy shall not be amended or rescinded without the prior written approval of the Reserve Bank. 

 

Communications

 

22.            All communications regarding this Agreement shall be sent to:

 

	
  

	
(a)

	
Mr. A. Linwood Gill, III

	
 

	
Vice President

	
 

	
Federal Reserve Bank of Richmond

	
 

	
P.O. Box 27622

	
 

	
Richmond, Virginia 23261-7622

 

	
  

	
(b)

	
Mr. Samuel L. Neese 

	
 

	
Chief Executive Officer

	
 

	
Highlands Bankshares, Inc.

	
 

	
Highlands Union Bank

	
 

	
340 W. Main Street

	
 

	
Abingdon, Virginia 24210

 

Miscellaneous

 

23.          Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to Bankshares and the Bank to comply with any provision of this Agreement.

24           The provisions of this Agreement shall be binding upon Bankshares and the Bank and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

25.          Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

26.          The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting Bankshares and the Bank or any of their current or former institution- affiliated parties and their successors and assigns.

  

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     27.           Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831 aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 13th of October, 2010.

 

	
HIGHLANDS BANKSHARES, INC.

	  	
FEDERAL RESERVE BANK

	
HIGHLANDS UNION BANK

	  	
OF RICHMOND

	  	  	  	  	  	  
	  	  	  	  	  	  
	
By:

	
/s/ James D. Moorefield

	  	
By:

	
/s/ A. Linwood Gill, III

	  
	  	
James D. Moorefield

	  	  	
A. Linwood Gill, III

	  	
Chairman

	  	  	
Vice President

 

 

  

16ex101.htm

Exhibit 10.1

AMP Holding Inc.

4540 Alpine Avenue

Blue Ash, Ohio 45242

 

October 11, 2010

 

James E. Taylor

 

Letter of Appointment – Board of Directors

 

Dear Mr. Taylor:

 

We are pleased to offer you the role of Director on the Board of Directors (the “Board”) of AMP Holding Inc. (the “Company”).  This letter contains the terms of your appointment as Director of the Company and will be effective from the date of the signing of this letter.

 

	
1.  

	
Your Duties:

 

	
a)  

	
You will be expected to attend all meetings (either in person or by teleconference) of the Board of the Company, of which we expect to hold approximately four per annum as well as sign all written consents if you deem appropriate.  In addition, you will be expected to perform such other duties as are reasonably contemplated by your holding office as Director of the Company or which may reasonably be assigned to you by the Board from time to time.

 

	
b)  

	
As Director you will:

 

	
i)  

	
Perform to the best of your abilities and knowledge the duties reasonably assigned to you by the Board from time to time, whether during or outside business hours and at such places as the Board reasonably requires;

 

	
ii)  

	
Use all reasonable efforts to promote the interests of the Company;

 

	
iii)  

	
Attend directors’ meetings;

 

	
iv)  

	
Act in the best interests of the Company; and

 

	
v)  

	
Work closely with the Chairman of the Board of Directors and the Chief Executive Officer.

 

	
c)  

	
As you will appreciate, however, your time commitment will ultimately be a product of the matters confronting the Company from time to time and matters properly requiring your attention as a director of the Company.

 

	
2.  

	
Remuneration:

 

	
a)  

	
Fees

  

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i)  

	
The Company will pay you an annual fee of US$40,000.

 

	
ii)  

	
The Company shall pay the annual fee in equal monthly instalments in arrears on the last day of each month.  Your first and last instalments of the annual fee will be apportioned if necessary.  The fee will be paid by wire to your nominated bank account.

 

	
iii)  

	
Your fees shall be subject to adjustment periodically as determined by the Board.

 

	
b)  

	
Options:  The Company shall grant you options to purchase 325,000 shares of the Company’s common stock at US$0.68 per share.  The options will expire five years from the vesting period.  Options will vest as follows:  75,000 upon the signing of this agreement and 50,000 every six months thereafter for a total of 325,000 shares.

 

	
3.  

	
Expenses:  Subject to you providing the Company with receipts or other evidence of payment, the Company will pay for or reimburse you for all travelling, hotel and other expenses reasonably incurred by you in connection with attending and returning from Board, Committee, Company, meetings or otherwise in connection with the Company's business.  Reasonable travel and out of pocket expenses used in connection with the business of the Group shall include:

 

	
a)  

	
Cell phone bills;

 

	
b)  

	
Domestic and international travel (economy class under 4 hours and business class over 4 hours); and

 

	
c)  

	
Hotel accommodation.

 

	
4.  

	
Termination of Appointment:

 

	
a)  

	
Your appointment as the Director may be terminated at any time by the vote of the stockholders of the Company in accordance with the certificate of incorporation and bylaws of the Company.

 

	
b)  

	
You acknowledge and agree that if the shareholders of the Company terminate your appointment, you will have no claim of any kind against the Company by reason of the termination.

 

	
c)  

	
You are at liberty to terminate the appointment at any time by notice in writing to the Company.

 

	
5.  

	
What happens after termination of appointment?

 

	
  

	
If your appointment is terminated for any reason or you resign for any reason:

 

	
a)  

	
The Company may set off any amounts you owe the Company against any amounts the Company owes to you as a Director at the date of termination except for amounts the Company is not entitled by law to set off;

 

	
b)  

	
You must return all the Company's property (including property leased by the Company) to the Company on termination including all written or machine readable material, software, computers, credit cards, keys and vehicles; and

 

	
c)  

	
You must not record any confidential information in any form after termination.

  

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6.  

	
Prohibited Activities:

 

	
a)  

	
You undertake to the Company that you will not during the term of your appointment engage in a business or an activity that would place you in a position of conflict in respect of the performance of your duties.

 

	
b)  

	
The terms of your appointment do not restrict you from accepting appointment as a director of any other company outside of the Company’s industry, providing consulting services or any other business or other activity whatsoever.  The Company acknowledges and accepts your current roles as a Chairman.You recognize that the services to be performed by you under the Agreement are special, unique and extraordinary.  The parties confirm that it is reasonably necessary for the protection of the Company's goodwill that you agree, and accordingly, you do hereby agree and covenant, that during your term as director, you will not, directly or indirectly, except for the benefit of the Company:

	
i.  

	
become an officer, director, more than 2% stockholder, partner, associate, employee, owner, proprietor, agent, creditor, independent contractor, co-venturer or otherwise, or be interested in or associated with any other corporation, firm or business engaged in the same or any similar business competitive with that of the Company (including the Company's present and future subsidiaries and affiliates) (the "Business"); or

 

	
ii.  

	
solicit, cause or authorize, directly or indirectly, to be solicited for or on behalf of himself or third parties from parties who were customers of the Company (including its present and future subsidiaries and affiliates) at any time during your term, any business similar to the business transacted by the Company with such customer; or

 

	
iii.  

	
accept or cause or authorize, directly or indirectly, to be accepted for or on behalf of your or third parties, business from any such customers of the Company (including its present and future subsidiaries and affiliates); or

 

	
iv.  

	
solicit, or cause or authorize, directly or indirectly, to be solicited for employment for or on behalf of you or third parties, any persons who were at any time during your term hereunder, employees of the Company (including its present and future subsidiaries and affiliates); or

 

	
v.  

	
employ or cause or authorize, directly or indirectly, to be employed for or on behalf of yourself or third parties, any such employees of the Company (including its present and future subsidiaries and affiliates); or

 

	
vi.  

	
use the tradenames, trademarks, or trade dress of any of the products of the Company (including its present and future subsidiaries and affiliates); or any substantially similar tradename, trademark or trade dress likely to cause, or having the effect of causing, confusion in the minds of manufacturers, customers, suppliers and retail outlets and the public generally.

 

You acknowledge the intention that the Company shall have the broadest possible protection of the value of its business consistent with public policy, and it will not violate the intent of the parties if any court should determine that, consistent with established precedent of the forum state, the public policy of such state requires a more limited restriction in geographical area or duration of the aforesaid covenant not to compete, contained in an appropriate decree.

	
c)  

	
Except as permitted in this Agreement or as approved by the Company, you will not (i) use any Confidential Information (as defined below) or (ii) disseminate or in any way disclose the Confidential Information to any person, firm, business or governmental agency or department. You may use the Confidential Information to perform your Duties for the benefit of Company. You shall treat all Confidential Information with the same degree of care as you accord to your own confidential information, but in no case shall you use less than reasonable care.  You shall

  

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d)  

	
immediately give notice to Company of any unauthorized use or disclosure of the Confidential Information.  You shall assist Company in remedying any the unauthorized use or disclosure of the Confidential Information. You agree not to communicate any information to Company in violation of the proprietary rights of any third party.

“Confidential Information” means (a) any technical and non-technical information related to the Company’s business and current, future and proposed products and services of Company, including for example and without limitation, Company innovations, intellectual property, and information concerning research, development, design details and specifications, financial information, procurement requirements, engineering and manufacturing information, customer lists, business forecasts, sales information, marketing plans and business plans, and provided, in each case, that each is marked as “confidential” or “proprietary” and (b) any information that Company has received from others that may be made known to you and that Company is obligated to treat as confidential or proprietary, and provided, in each case, that each is marked as “confidential” or “proprietary”.

 

	
7.  

	
Notices and Other Communications:

 

	
a)  

	
Service of Notices

 

	
  

	
A notice, demand, consent, approval or communication under this letter (collectively a “Notice”) must be:

 

	
i)  

	
In writing and in English directed to the address advised by the recipient for notices, as varied by any notice; and

 

	
ii)  

	
Hand delivered or sent by prepaid post or facsimile to that address.

 

	
b)  

	
Effective on Receipt:  A Notice given in accordance with section 7a takes effect when received (or at a later time specified in the Notice), and is taken to be received:

 

	
i)  

	
If hand delivered, on delivery;

 

	
ii)  

	
If sent by prepaid post, two Business Days after the date of posting (or seven Business Days after the date of posting if posted to or from outside The United States of America);

 

	
iii)  

	
If sent by facsimile, when the sender's facsimile system generates a message confirming successful transmission of the entire Notice unless, within eight Business Hours after the transmission, the recipient informs the sender that it has not received the entire Notice;

 

	
  

	
but if the delivery, receipt or transmission is not on a Business Day or is after 5.00pm on a Business Day, the Notice is taken to be received at 9.00am on the Business Day after that delivery, receipt or transmission.

 

	
8.  

	
Miscellaneous

 

	
a)  

	
Alterations:  This letter may be altered only in writing signed by each party.

 

	
b)  

	
Approvals and consents:  Except where this letter expressly states otherwise, a party may, in its discretion, give conditionally or unconditionally or withhold any approval or consent under this letter.

 

	
c)  

	
Assignment:  This letter may NOT be assigned by either party.

 

	
d)  

	
Costs:  Each party must pay its own costs of negotiating, preparing and executing this letter.

 

 

  

4

  

 

	
e)  

	
Survival:  Any indemnity in this letter is independent and survives termination of this letter.  Any other provision by its nature intended to survive termination of this letter survives termination of this letter.

 

	
f)  

	
Counterparts:  This letter may be executed in counterparts.  All executed counterparts constitute one document.

 

	
g)  

	
No Merger:  The rights and obligations of the parties under this letter do not merge on completion of any transaction contemplated by this letter.

 

	
h)  

	
Entire Agreement:  This letter constitutes the entire agreement between the parties in connection with its subject matter and supersedes all previous agreements or understandings between the parties in connection with its subject matter.

 

	
i)  

	
Further Action:  Each party must do, at its own expense, everything reasonably necessary (including executing documents) to give full effect to this letter and the transactions contemplated by it.

 

	
j)  

	
Waiver:  A party does not waive a right, power or remedy if it fails to exercise or delays in exercising the right, power or remedy.  A single or partial exercise of a right, power or remedy does not prevent another or further exercise of that or another right, power or remedy.  A waiver of a right, power or remedy must be in writing and signed by the party giving the waiver.

 

	
k)  

	
Relationship:  Except where this letter expressly states otherwise, it does not create a relationship of employment, agency or partnership between the parties.

 

	
l)  

	
Confidentiality:  A party may only use the confidential information of another party for the purposes of this letter, and must keep the existence of this letter and the terms of it and the confidential information of another party confidential information except where:

 

	
i)  

	
The information is public knowledge (but not because of a breach of this letter) or the party has independently created the information;or

 

	
ii)  

	
Disclosure is required by law or a regulatory body (including a relevant stock exchange).

 

	
m)  

	
Announcements:  A public announcement in connection with this letter or a transaction contemplated by it must be agreed by the parties before it is made, except if required by law or a regulatory body (including a relevant stock exchange).

 

	
9.  

	
Insurance:  The Company has directors' and officers' liability insurance under which you are covered in the US and elsewhere for all usual risks during the term of your appointment as the Director. The Company will maintain that cover for the full term of your appointment.

 

	
10.  

	
Contract for Services:  This is a contract for services and is not a contract of employment.

 

	
11.  

	
Governing Law:  This Agreement shall be governed by the laws of the Commonwealth of Ohio (without giving effect to choice of law principles or rules thereof that would cause the application of the laws of any jurisdiction other than the Commonwealth of Ohio) and the invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

  

5

  

 

Please sign the attached copy of this letter to indicate that you have read, understood and accept the terms of your appointment.

 

	Yours Sincerely, 
 

AMP Holding Inc.

 

 

	 	 	 	 
	By:	
/s/ Stephen S. Burns

	 	 	 	 
	Name: 	
Stephen S. Burns

	 	 	 	 
	Title:	
CEO and Director

	 	 	 	 

 

	Agreed to and accepted by: 
 

 

	 	 	 	 
	By:	
/s/ James E. Taylor

	 	 	 	 
	 	
James E. Taylor

	 	 	 	 
	 	 	 	 	 	 

 

6

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