Document:

gwrs-ex101_6.htm

Exhibit 10.1

FIRST AMENDMENT TO 

SERVICE AGREEMENT

 

This FIRST AMENDMENT TO SERVICE AGREEMENT (the “First Amendment”) is made and entered into this  17  day of November, 2016, by and among Global Water Management, LLC (“FATHOM”) and GLOBAL WATER, LLC, a Delaware limited liability company (“GW, LLC”); CP WATER COMPANY, LLC, an Arizona limited liability company; GLOBAL WATER – SANTA CRUZ WATER COMPANY, LLC, an Arizona limited liability company; GLOBAL WATER – PALO VERDE UTILITIES COMPANY, LLC, an Arizona limited liability company; WATER UTILITY OF NORTHERN SCOTTSDALE, LLC, an Arizona limited liability company; WATER UTILITY OF GREATER TONOPAH, LLC, an Arizona limited liability company; VALENCIA WATER COMPANY, LLC, an Arizona limited liability company; and WILLOW VALLEY WATER CO., LLC, an Arizona limited liability company (collectively the “Customer”), collectively the “parties.” 

 

WITNESSETH:

 

WHEREAS, FATHOM and the Customer entered into that certain SERVICE AGREEMENT, dated June 5, 2013 (the “Agreement”); 

 

WHEREAS, FATHOM and Customer wish to amend certain provisions of the Agreement.

  

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows:

 

Section 1.The first clause of Section 2.2 of the Agreement is hereby amended to read as follows: “The Access granted by this Agreement is for the period beginning on the Effective Date and ending on December 31, 2026 (the “Initial Period”) . . .”

Section 2.Exhibit A of the Agreement is hereby deleted and replaced with Exhibit A attached hereto.

Section 3.Exhibit B of the Agreement is hereby deleted and replaced with Exhibit B attached hereto.

Section 4.Exhibit C of the Agreement is hereby deleted and replaced with Exhibit C attached hereto.

Section 5.Exhibit D of the Agreement is hereby deleted and replaced with Exhibit D attached hereto.

 

Section 6.Exhibit E of the Agreement is hereby deleted and replaced with Exhibit E attached hereto.

Section 7.A new Exhibit F is hereby added to the Agreement in the form of Exhibit F attached hereto.

Section 8.FATHOM agrees that Customer has satisfied all of its obligations pursuant to Section 15.3 of the Agreement with respect to all sales of private regulated utilities prior to the date hereof.

Section 9.The parties agree that Section 15.3 shall not apply to sales of private regulated utilities occurring after June 5, 2023 and no increase in fees negotiated pursuant to Section 15.3 shall take into account time periods after June 5, 2023.

Section 10.FATHOM agrees to perform all of the obligations of GWRI contained in the TSA and the Contract for the Collection of Accounts between the Valencia Water Company and the Town of Buckeye dated January 17, 1989.

Section 11.In the event that on or prior to December 31, 2020, any private regulated utility company with customers becomes a new direct or indirect subsidiary of GW, LLC and thereby a party to this Agreement, FATHOM agrees that it will not charge any implementation or other similar fee in connection with the addition of the new customers other than the then applicable monthly fee.   

Section 12.FATHOM acknowledges that this First Amendment will be filed as an exhibit to GWRI’s reports with the Securities and Exchange Commission.  In addition, notwithstanding any other provision of the Agreement or any other agreement by or between the parties, GWRI and the Customer may disclose this First Amendment, the Agreement and any future amendments to the Agreement to the extent such disclosure is required by applicable law. 

Section 13.Except as otherwise amended by this First Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. Any reference in the Agreement or this First Amendment to the Agreement shall mean the Agreement, as amended by this First Amendment. 

 

 

 

 

[SIGNATURE PAGES TO FOLLOW]

 

 

 

 

 

 

2

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed as of the date first set forth above. 

		
	
Global Water, LLC

a Delaware limited liability company

By: /s/ Ron Fleming 

 

Name: Ron Fleming

 

Its: Manager

 

Date: November 15, 2016

 
	
Global Water Management, LLC 

a Delaware limited liability company

 

By: /s/ Normund Vitols

 

Name: Normund Vitols

 

Its: Chief Financial Officer

 

Date: November 17, 2016

	
CP Water Company, LLC

an Arizona limited liability company

 

By:   /s/ Ron Fleming                            

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

 
	
Global Water – Santa Cruz Water Company, LLC 

an Arizona limited liability company

 

By:    /s/ Ron Fleming         

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

 

	
Global Water – Palo Verde Utilities Company, LLC

an Arizona limited liability company

 

By: /s/ Ron Fleming

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

 
	
Water Utility of Northern Scottsdale, LLC

an Arizona limited liability company

 

By: /s/ Ron Fleming

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

3

 

		
	
Water Utility of Greater Tonopah, LLC

an Arizona limited liability company

 

By: /s/ Ron Fleming

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

 
	
Valencia Water Company, LLC

an Arizona limited liability company

 

By: /s/ Ron Fleming

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

	
Willow Valley Water Co., LLC

an Arizona limited liability company

 

By: /s/ Ron Fleming

 

Name: Ron Fleming

 

Its: Member

 

Date: November 15, 2016

 
	
 

 

4

 

Exhibit A

Schedule of Selected Services and Fees

 

This schedule defines the fees to be paid by Customer to FATHOM under this Agreement.

 

1.Capital Improvement Project Fee.

The Capital Improvement Project Fee is a one-time fee based on providing the required equipment and non-recurring deliverables described in Exhibit A. The total Capital Improvement Project Fee shall be $10,867,100 and will be paid as detailed below, dependent upon the fee type.  Taxes are not included in the Capital Improvement Project Fee; any applicable taxes will be paid by the Customer.

 

		
	
Fee Type
	
Fee Basis

	
FATHOM Services
	
Milestone Based – Fees are billable based on completed milestones of the contract as follows:

Contract Signing – (upfront payment) $2,100,000

Delivery of Propagation Study- $250,000

Delivery of Project Work Plan- $250,000

Percentage Complete – The remainder of the FATHOM Services Fees are billable on a percent complete basis for Equipment Installations, as described below. 

	
Third Party Expenditures 

(Fees charged for equipment and services received from third party vendors as part of implementation.)
	
As Incurred – Fees are billable upon issuance of purchase orders from FATHOM to Third Party suppliers for goods and services

 Title to the equipment transfers to Customer upon delivery. 

	
Equipment Installation
	
Percentage Complete – Fees calculated by dividing the installed water meters for the period by the total number of water meters to be installed, invoiced monthly.

 A $1,400,000 retention will be withheld from the FATHOM Equipment Installation Services Fees until completion and acceptance of the AMI Capital Project, which shall occur at the completion of the 30-day performance testing.  No retention is withheld from Milestone Based fees.  The retention shall be paid net 45 from date of invoice.]

 

The Contract Signing payment of $2,100,000 is due immediately upon receipt of invoice.  All other payments are due within thirty (30) days from the invoice date.    

 

 

Exhibit A

Schedule of Selected Services and Fees

 

2.Recurring Services Fees.

The Recurring Services Fees will be billed monthly based on the number of Managed Accounts as follows, beginning on January 1. 2017.  Customer shall pay a recurring fee of $7.79 per managed account for November and December of 2016.

“Managed Account” means an account that either (i) is actively being billed by FATHOM under this Agreement or (ii) has been previously billed by FATHOM under this Agreement and either has a move out date or has been provided a final invoice within the previous 12 months.

 

			
	
Fee Type
	
Monthly Fee
	
Adjustments

	
Software as a Service:

FATHOM Prime

FATHOM U2You

AMS

CIS

Managed Services – Revenue Management and Customer Care 

GIS
	
$6.24 per Managed Account per month

 
	
Inflation Adjuster: The monthly fee of $6.24 per Managed Account per month shall be subject to an increase each year that is equivalent to the CPI factor for the region. No annual CPI increase shall be greater than 5%, unless FATHOM validates the uncontrollable direct or indirect costs have increased greater than 5%. Once validated, such costs can be adjusted to reflect the true cost.

 

 

Recurring Services Fees payments are due within fifteen (15) days from invoice date.  

All Recurring Services Fees shall be adjusted annually on January 1st based on the 12-Month change in the Consumer Price Index – United States City Average – for All Urban Consumers and all Items published by the United States Department of Labor, Bureau of Labor Statistics (the “Index”) per the Index for the month of July immediately prior to the annual adjustment date for the then-current adjustment period.  Written notification of the adjustment will be provided to the Client by October 1st immediately prior to the annual adjustment date for the then-current adjustment period.  The adjustment will be negotiated each year based on the documentation provided by FATHOM. No annual Index increase shall be greater than 5%, unless FATHOM validates the uncontrollable direct or indirect costs have increased greater than 5%. Once validated, such Recurring Service Fees can be adjusted to reflect the true cost. 

 

 

Exhibit A

Schedule of Selected Services and Fees

 

The first adjustment will occur on January 1, 2018. 

If the Index is discontinued or revised during the Term, such other government index or computation with which it is replaced shall be utilized, and modified as necessary, to obtain substantially the same result as would have been obtained if the Index had not been discontinued or revised. Annual adjustments will be calculated based on the prior year’s Recurring Services Fees, plus the inflation adjuster as described above. At no point will any change result in a reduction of fees.

 

 

 

 

Exhibit B

Support Services

 

1. COVERAGE

 

FATHOM shall provide Support Services for the use of the Access, including all modifications created by FATHOM whether or not they are exclusive to Customer, until any such Support Services are terminated or discontinued by FATHOM. The Support Services to be provided by FATHOM shall not include (a) support of software operation on equipment not identified by FATHOM as a supported device, (b) support of software not supplied by FATHOM, (c) support of software not properly used or used in an operating environment not supported by FATHOM, or (d) support of business processes not identified during the implementation of the project.  FATHOM will provide periodically updated lists of supported devices and operating environments.  Customer shall designate those employees of Customer who shall be authorized to contact FATHOM for provision of Support Services, and shall maintain and provide FATHOM with an updated listing of employees, including their telephone, fax and e-mail addresses. Only those employees so designated by Customer shall contact FATHOM for the provision of Support Services. In addition, FATHOM shall designate those employees of FATHOM who Customer may contact for provision of Support Services, and shall maintain and provide Customer with an updated listing of employees, including their telephone, fax, and e-mail addresses.

 

 

 

 

 

Exhibit C

Contacts

 

CUSTOMER PROJECT MANAGER

Jon Corwin

General Manager 

21410 N. 19th Avenue, Suite 220

Phoenix, AZ 85027

Phone: 480-360-7775

Fax [Insert Fax]

Email jon.corwin@gwresources.com

 

CUSTOMER IT PROJECT MANAGER

Cosme Borunda

21410 N. 19th Avenue, Suite 220

Phoenix, AZ 85027

Phone:480-360-7775

Fax:[Insert Fax]

Email:cosme.borunda@gwresources.com

 

FATHOM PROJECT MANAGER

John Vlaicevic

FATHOM 

21410 N. 19th Avenue, Suite 201

Phoenix, AZ 85027

Phone:602-710-0502

Fax:[Insert Fax]

Email:john.vlaicevic@gwfathom.com

 

FATHOM IT PROJECT MANAGER

Thomas Martin

FATHOM 

21410 N. 19th Avenue, Suite 201

Phoenix, AZ 85027

Phone:816-804-6260

Fax:[Insert Fax]

Email:thomas.martin@gwfathom.com

 

25003541

 

 

 
 
 

 

 

Exhibit D

Scope of Services

Scope of Services -

FATHOM services will be provided in accordance with our then current FATHOM Operations Scope of Service (SOS) document―summarized below as key deliverables and responsibilities. Customer shall never have a lower level of service with less deliverables and/or responsibilities than what is specified herein, unless Customer gives its express written authorization, which shall not be unreasonably withheld.   Additionally, any changes to the SOS document must not prevent Customer from meeting its legal obligations as set forth in federal, state or local laws, rules or ordinances or as set forth in a regulatory order applicable to Customer. In the event of any conflict between this document and the SOS document, the SOS will control, unless it is a specific contractual term.  The SOS may be updated during the life of the contract to incorporate additional industry best practices as they become available.  If requested by Customer, any modifications and/or additional services requested may be subject to additional fees.  Some line items below refer to specific sections of the SOS.  The SOS will be made available upon request, and Customer will be notified of all material modifications in advance of their implementation to the extent reasonably possible.

 

 

Advanced Metering Infrastructure

 

FATHOM will supply and install an Advanced Metering Infrastructure solution for the Customer, prior to April 30, 2017. The following outlines the key deliverables and responsibilities for the project. Any modifications and/or additional services requested may be subject to additional fees.

 

FATHOM will enable the optimal operation of an Advanced Metering Infrastructure solution for all regulated utility subsidiaries of Customer though the use of FATHOM’s meter data management solution, FATHOM Prime as described in the FATHOM Prime User Guide. 

 

The AMI solution will have a warranty equal or greater than the warranty provisions in the manufacturer’s warranty, and Customer will be listed as the owner and beneficiary of such warranty.  The enhanced warranty provisions will be provided in the project plan.

 

Equipment Deliverables:

FATHOM will provide and install the AMI Network with drive-by and AMI capabilities from a manufacturer approved by Customer, including the following equipment as part of the AMI system (actual quantities will be validated during the development and approval of the project plan and appropriate adjustments to quantities and the total Capital Improvement Project Fee will be made):

	
E1)
	
2,072 – 5/8” x 3/4” Positive Displacement Water Meter Assemblies with Encoder Register and Endpoint

	
E2)
	
14,620 – 3/4” Positive Displacement Water Meter Assemblies with Encoder Register and Endpoint

D-1

 

Exhibit D

Scope of Services

	
E3)
	
156 – 1” Positive Displacement Water Meter Assemblies with Encoder Register and Endpoint

	
E4)
	
2,017 – Encoder Registers and Endpoints for Retrofit

	
E5)
	
170 Endpoints only for Retrofit

	
E6)
	
12 – Solar Powered Data Collectors with Cell Phone Based Backhaul, inclusive of new cabling and antennas, and cellular gateways if required

	
E7)
	
AMI Manufacturer Software

 

Project Management Deliverables:

	
PM1)
	
A Project Work Plan and Schedule will be developed and presented to Customer for approval prior to starting work. Project schedule and any material changes will be updated monthly during implementation. Delays in the approval of the Project Work Plan and or Schedule may result in delays in the project completion date.

	
PM2)
	
Weekly calls with Customer-assigned project manager during implementation

	
PM3)
	
Monthly Onsite Project Management Meetings at Customer site as needed during implementation, with written agendas and meeting notes 

 

Project Deliverables:

	
P1)
	
Customer’s customer Education and Outreach Plan 

	
 
	
1)
	
Includes one mass mailing, to be approved by Customer

	
 
	
2)
	
Frequently asked questions handout and/or website postings, to be approved by Customer

	
P2)
	
Customer Management Project Package

	
 
	
1)
	
Customer most frequently asked questions package

	
P3)
	
AMI Network propagation study.  In the event that the criteria defined in paragraphs P8 and P9 of this AMI section cannot be met with the 12 collector configuration, additional collectors will be added to the network as needed to meet the P8 and P9 criteria.  Customer will be responsible for the cost of procuring and installing the collectors.  

	
P4)
	
Meter exchange process documentation and sign-off document 

	
P5)
	
Extranet site for Support Desk Access via ticket system

	
P6)
	
System Training

	
 
	
1)
	
AMI Module Repair and Replacement Training

	
 
	
2)
	
AMI/AMR Software Training

	
 
	
3)
	
Customer Portal and Reporting System Training

	
 
	
4)
	
Electronic Work Order Training

D-2

 

Exhibit D

Scope of Services

	
P7)
	
Data Collector Installation Plan and Inspection

	
P8)
	
Verification report showing that 99% of AMI modules have successfully reported at least one billable read within the 25 day time period.  The verification report shall exclude any outstanding work orders or installations that have been photo verified to meet manufacturers installation recommendations.  

	
P9)
	
Verification reports showing that 99% of AMI modules have successfully reported at least one billable read within the 25 day time period shall be reviewed with Customer in the first, third and tenth month after completed installation. 

	
 

RECURRING DELIVERABLES FOR LIFE OF CONTRACT 

	
 
	
R1) 
	
Monthly Customer Portal (FATHOM Prime) Analytics 

	
 
	
R2) 
	
User log-in and security configuration, provided as needed

	
 
	
1)
	
User log-in configuration changes are requested by Customer by creating a System Access Request (SAR) in the Customer help desk portal.

	
 
	
2)
	
[SOS #22] Log-in security is provided as described in the SOS chapter 22.

	
 
	
R3) 
	
Meter Data Management  
	
 

	
 
	

	
Meter Data Management (MDM) capability will be provided through FATHOM Prime in accordance with the FATHOM Prime User Guide.  The FATHOM Prime User Guide includes the description of functionality that is not included in this Scope of Services or Agreement.  Those functions not included are:

	
 
	
1)
	
Water Balancing & Reporting

	
 
	
2)
	
Meter Verification & Data Collection Tool

	
 
	
3)
	
Revenue Assurance Analytics

	
R4) 
	
Meter Accuracy and Warranty Management will be provided in accordance with the Meter Accuracy and Warranty Management section of the FATHOM Prime User Guide. Meter install date, meter size, meter manufacturer, meter serial number, meter type, and MTU install date will all be included. Additionally, a separate field to track register replacements will be provided so that it is distinguishable from meter replacements. FATHOM will maintain this data for every meter, register, and MTU following completion of the AMI project. 
	
 

 

	
R5) 
	
Software maintenance for FATHOM Prime

The maintenance / renewal protocol for software is divided into Scheduled Routine, Scheduled Non-Routine and Emergency standards.

 

Scheduled Routine

 

All Scheduled Routine maintenance will be performed by FATHOM IT personnel on the second Saturday of each calendar month.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 72 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of 

D-3

 

Exhibit D

Scope of Services

the maintenance.

 

Scheduled Non-Routine

 

All Scheduled Non-Routine maintenance will be performed by FATHOM IT personnel outside of normal working hours.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 24 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Emergency maintenance

 

Any outage is classified as an emergency.  If the utility recognizes a problem deemed to be an emergency, FATHOM Operational Support should be contacted immediately.  An Operational Support representative will respond as soon as possible. Emergency maintenance will be performed by FATHOM IT personnel as soon as reasonably possible.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Software maintenance for FATHOM Prime

Scheduled Routine, Scheduled Non-Routine and Emergency maintenance will be performed by FATHOM from time to time, at FATHOM's discretion, to subscribers of Support Services for:

	
 
	
1)
	
Fixes to errors & bugs;

	
 
	
2)
	
Updates;

	
 
	
3)
	
New features and/or enhancements contained within new releases 

	
 
	
4)
	
New releases; and

	
 
	
5)
	
New versions of the software and/or Platform

 

During the Term, FATHOM will make reasonable efforts to provide prior notice to Customer of any modifications FATHOM intends to make to the FATHOM Platform that would have a material adverse effect upon, or otherwise materially degrade, the FATHOM Platform. If Customer objects to any such modifications, then the parties will negotiate in good faith an appropriate resolution to such objection.

 

Maintenance releases contain proprietary and confidential information and are provided to Customer for Customer's internal use only, subject to the same restrictions and limitations as provided in the Agreement with respect to confidential information.

	
R6) 
	
Daily work order generation based on MDM queries

Work orders are created for Customer in AMS for issues discovered by FATHOM through the use of FATHOM Prime’s MDM capabilities.  FATHOM will generate work orders for the Customer to investigate, repair or replace non-collector equipment as necessary based on the analysis of Prime MDM data.  

D-4

 

Exhibit D

Scope of Services

	
R7) 
	
Monthly reads loaded into the billing system for billing. 

	
R8) 
	
Quarterly review of AMI system performance 

During each Quarterly Business Review, the Client Success Manager assigned to Global Water Resources, Inc. will conduct quarterly business reviews of AMI system traffic and performance metrics.  This will include all verification reports on FATHOM performance guarantees 

 

	
R9) 
	
AMI System Monitoring & Return Management Process 

FATHOM will act diligently to monitor, troubleshoot, and provide expert oversight and consultation as described below for the Customer AMI network provided by FATHOM through this Agreement.  For avoidance of doubt, FATHOM is not responsible for and does not agree to provide these services for any AMI system infrastructure procured or installed outside of a utility contemplated in this Agreement.  

	
 
	
1)
	
Monitor and identify equipment issues through FATHOM Prime MDM reporting or analytics. 

	
 
	
i)
	
FATHOM is responsible for initiating a field investigation for the Customer to repair or replace registers/endpoints as necessary based on the monitoring services provided.  FATHOM shall then facilitate the warranty transaction between Manufacturer and Customer based on the outcome of the Customer’s findings in the field investigation.

	
 
	
a)
	
Register/Endpoint repair and/or replacement to ensure operation in accordance with equipment warranties.

	
 
	
ii)
	
FATHOM is responsible for initiating a field investigation to repair or replace collectors as necessary based on the monitoring services provided.  FATHOM shall then facilitate the warranty transaction between Manufacturer and Customer based on the outcome of the FATHOM’s findings in the field investigation.

 

	
 
	
a)
	
Data Collector repair and/or replacement to ensure network operation in accordance with equipment warranties.

 

	
 
	
iii)
	
All costs related to the necessary repair or replacement of the AMI system equipment, not covered by OEM equipment warranties, will remain the responsibility of the Customer. In addition, 

	
 
	
a)
	
Shipping costs related to warranty repairs or replacements shipped to the Manufacturer will remain the responsibility of the Customer. 

	
 
	
b)
	
Shipping costs related to warranty repairs or replacements returned to the Customer will remain the responsibility of the Manufacturer. 

  

	
 
	
2)
	
FATHOM facilitates the warranty management process for the Customer – we track warranty quantities, we maintain the necessary relationships and have key contacts we leverage on Customer’s behalf and we own the communication process, providing updates to stakeholders. In general, the following process will be used for warranty management 

D-5

 

Exhibit D

Scope of Services

	
 
		
(subject to change based on FATHOM best practices):

	
 
	
i)
	
Customer will contact FATHOM to notify us of their intention to send back applicable units under warranty (data collectors will be handled by FATHOM).

	
 
	
ii)
	
Return Material Authorization (RMA) form is completed by Customer and FATHOM submits to the manufacturer.

	
 
	
iii)
	
FATHOM takes point and handles all communications and other questions regarding warranty from both the Customer and the manufacturer.

	
 
	
iv)
	
Manufacturer approves the RMA form and returns form to FATHOM.

	
 
	
v)
	
FATHOM submits form back to Customer for inclusion with other warranty information for ID match and verification and shipping purposes.

	
 
	
vi)
	
The Customer ships items directly to the manufacturer.

	
 
	
vii)
	
Manufacturer will send back applicable warranty items to the Customer.

	
R10)
	
Should a head-end system be available from the AMI system OEM, FATHOM will allow Customer direct access to that system.  FATHOM may or may not use the OEM’s head-end system in the performance of this contract at FATHOM’s sole discretion.  

In the event of a discrepancy between FATHOM Prime and the OEM head-end system, FATHOM Prime is the system of record used in the performance of the Agreement.  FATHOM makes no guaranties or warranties on the accuracy of the data, system performance, or any other aspect of the OEM head-end system software.

	
R11)
	
AMI Service Level Objective
These AMI SLOs will initiate upon the completion if the AMI project. The FATHOM system is an “eventually consistent” distributed computing system. As such this precludes a 100% data match guarantee at any given moment for reporting and auditing since multiple systems are making multiple updates at any given moment. The “eventually consistent” computing model guarantees anti-entropy and reconciliation if no new updates to systems are made.

Once every week, FATHOM will provide for a comparison reporting spot checking a minimum of 25% of the weekly raw read population and ensure the data matches between the headend system and FATHOM data store.  Should this spot check fail to match greater than or equal to 95% of the raw reads between the headend and the FATHOM data store then FATHOM shall review 100% of all reads for the week, within 72 hours. In the event FATHOM fails to achieve this SLO, the AMI SLA shall be considered breached, and Customer shall receive a service credit of 5% of the FATHOM Prime fee for that month per occurrence.  In no circumstance shall the service credits exceed 15% of the total FATHOM Prime fee for that month.

Once every week, FATHOM will provide for a comparison reporting spot checking of consumption data on a minimum of 25% accounts between FATHOM Prime and FATHOM U2You.  This comparison will exclude read data that FATHOM knows or believes to be incorrect or corrupted.  Should this spot check fail to match 98% of the consumption then FATHOM shall undergo a review of 100% of all accounts in FATHOM U2You and FATHOM Prime for the week, within 72 hours. In the event FATHOM fails to achieve this SLO, the AMI SLA shall be considered breached, and Customer shall receive a service credit of 5% of the FATHOM Prime fee for that month per occurrence.  In no circumstance shall the service credits exceed 15% of the total FATHOM Prime fee for that month.

D-6

 

Exhibit D

Scope of Services

 

The service credit may be applied towards additional services (not recurring fees) procured from FATHOM by Customer.

D-7

 

Exhibit D

Scope of Services

Scope of Services –

Utility Billing

FATHOM will guarantee the execution of the customer care and utility billing operation for all regulated utility subsidiaries of Customer. The following outlines the key deliverables for the life of the contract:

PROJECT DELIVERABLES:

	
P1) 
	
Customer is granted access to directly use the customer information system solution in accordance with Section 2.0 Access of the Agreement.  Customer’s access and use of the CIS is not supported by FATHOM.  Customer may request support for an additional fee.  Customer’s access is being provided to support counter service and reporting functions including but is not limited to:

 

	
 
	
1)
	
The ability to create service work orders, 

	
 
	
2)
	
Use and maintain the back flow protection database (for clarity, back flow protection is not a service or function provided by FATHOM in this Scope of Services).

Additionally, FATHOM will continue to provide the monthly backups by 9 am on the 3rd business day of each month.

	
P2 
	
[SOS #24] FATHOM customer portal (U2You) for Customer's customers with access to the following:

	
 
	
1)
	
Account Information

	
 
	
i)
	
Account Details

	
 
	
ii)
	
Account Balance 

	
 
	
iii)
	
Billing History 

	
 
	
iv)
	
Payment History  

	
 
	
v)
	
Usage History

	
 
	
vi)
	
Customer Service

	
 
	
vii)
	
Report a Problem

	
 
	
2)
	
Bill Payment

	
 
	
i)
	
Credit or debit card 

	
 
	
ii)
	
Checking account

	
 
	
iii)
	
Sign up for automatic payments

	
 
	
3)
	
Notifications (to be sent via text/SMS, email or FATHOM App)

	
 
	
i)
	
Bill Ready

	
 
	
ii)
	
Bill Past Due

	
 
	
iii)
	
Customer-set Consumption Threshold

	
 
	
iv)
	
Customer-set Bill Amount Threshold (future deliverable)

	
 
	
4)
	
Customer Messaging 

	
P3)
	
[SOS #25] FATHOM Mobile 
	
 

	

	
Customer’s customers can view their historic bills, pay a bill, review account balances and metered usages using the FATHOM Mobile application. 
	
 

D-8

 

Exhibit D

Scope of Services

	
P4)
	
FATHOM utility administration portal for Customer with access to the following:

	
 
	
1)
	
Customer Care Information

	
 
	
i)
	
Customer and account details including but not limited to usage, billing and payment history in the U2You administration portal

	
 

	
 P5)
	
[SOS #18 with qualification] Reporting 

A specific list of custom reports, developed by FATHOM and noted below, will be provided to the utility on a monthly basis.  In addition, other custom monthly and one-time ad hoc reports can be developed and delivered for an additional charge.  The standard reports specified in SOS #18 will not be delivered.

	
 
	
1)
	
Customized Monthly Reporting Package to be delivered by 9 am on the 3rd business day of each month and in no circumstance later than the end of the 5th day of the month, except as noted below. 

	
 
	
i)
	
Customer Total Accounts Detail (detail listing of customer/accounts and services)

	
 
	
ii)
	
Customer Total Accounts Schedule (summarization of the Customer Total Accounts Detail report)

	
 
	
iii)
	
Account Totals for Compliance (detailed list of all active connections Customer uses for compliance reporting)

	
 
	
iv)
	
Connection Totals by System (count of connections attached to each water system)

	
 
	
v)
	
Customer Billed Consumption (WUDS) (Detail list of all charges with consumption amounts without Raw Water or Recycled Water) 

	
 
	
vi)
	
Customer Billed Consumption (WUDS) (Detail list of all charges with consumption amounts) – to be delivered by the 8th business day of the month

	
 
	
vii)
	
WUDS Billed Consumption Detail (Detail list of water charges with consumption amounts) – to be delivered by the 8th business day of the month

	
 
	
viii)
	
Santa Cruz 13 Month Consumption (Breaks down the last 13 months of consumption by type) – to be delivered by the 8th business day of the month

	
 
	
ix)
	
Customer Zero Reads (A list of all accounts that had zero consumption for the month)

	
 
	
x)
	
Detail by Transaction 

	
 
	
xi)
	
Meter Bill Codes

	
 
	
xii)
	
Deposit Interest 

	
 
	
xiii)
	
Deposit Water

	
 
	
xiv)
	
A/R Aging

	
 
	
xv)
	
Block Summary report

	
 
	
xvi)
	
Read file with actual meter read data

	
 
	
xvii)
	
Bill date and due date report

	
 
	
2)
	
Annual Reports
The following reports will be provided to Customer on an annual basis:

	
 
	
i)
	
Customer Meters 

	
 
	
ii)
	
Water company plant description and quantities by type for each public water supply system.

D-9

 

Exhibit D

Scope of Services

	
 
	
iii)
	
Wastewater company plant description and quantities by type for each wastewater system.

Within 30 days of Customer’s addition on a new Public Water and/or Wastewater System or new utility acquisition, FATHOM and Customer will develop a change order for a mutually agreed upon scope and delivery schedule for the report(s) set up. FATHOM will charge a mutually agreed, one time set up fee for the reports.  If Customer adds a public water supply or waste water system(s) through the acquisition of new utilities, the scope, schedule, and report set up fee will be included in the implementation fees for that new utility.

 

	
 
	
3)
	
Year End Audit support

FATHOM will provide commercially reasonable support for annual audit requests related to revenue verification, which will only include copies of customer checks received or other audit required documents that cannot be retrieved by Customer directly.  The SLA on each request will be 48 business hours unless otherwise mutually agreed.  If the required support exceeds what is agreed to be commercially reasonable, Customer will be charged FATHOM’s then current hourly rate for the exceeding hours.

 

	
 
	
4)
	
Ad hoc (one-time) reports

Ad hoc reports can be developed based upon a written request stipulating requirements in the form of a template or spreadsheet.   Based upon the complexity of the reports, additional development time may be required.  A one-time fee will be assessed for an ad hoc report. 

	
 
	
5)
	
Custom reports

Additional custom monthly reports can be developed, run and delivered based upon business objectives.  Based upon the complexity of the reports, additional development time may be required.  FATHOM offers a package of four (4) additional monthly custom reports for a separate monthly fee. 

	
 
	
P6)
	
[SOS #12] Electronic “help-desk” ticketing system.   

Customer’s operational staff members enter tickets here for feedback and/or action on questions, concerns and requests that are operational in nature. (including customer service, billing, field activities, accounting, IT issues, and new user requests).

	
P7)
	
[SOS #19] Access to electronic file-sharing site (FTP, drop box, or similar) for read files and reporting 

	
 
	
1)
	
Monthly reporting packages are currently uploaded by FATHOM to SharePoint, where Customers can view and export if needed. 

	
 
	
2)
	
Customer will upload completed meter read files to be retrieved by FATHOM’s Revenue Management department for use in cycle billing. 

	
P8)
	
FATHOM will perform in accordance with the Information Technology Service Level Agreement provided in Exhibit F.

	
P9) 
	
Disaster Recovery Documentation

D-10

 

Exhibit D

Scope of Services

FATHOM will provide protection against disasters involving complete system failures and/or the destruction of main computing environment. Complete documentation will be provided at least annually in support Customer’s own audit requirements, and is available upon request.  

RECURRING DELIVERABLES FOR LIFE OF CONTRACT:

	
R1) 
	
Monthly Customer Portal (U2You) Analytics

	
R2) 
	
User log-in and security configuration

	
 
	
1)
	
User log-in configuration changes are requested by Customer by creating a System Access Request (SAR) in the Customer help desk portal.

	
 
	
2)
	
[SOS #22] Log-in security is provided as described in the SOS chapter 22.

	
R3)
	
[SOS #23] Software maintenance 

Software maintenance is performed to correct errors, enhance capabilities, delete obsolete capabilities and optimize the FATHOM system. During the Term, FATHOM will make reasonable efforts to provide prior notice to Customer of any modifications FATHOM intends to make to the FATHOM Platform that would have a material adverse effect upon, or otherwise materially degrade, the FATHOM Platform. If Customer objects to any such modifications, then the parties will negotiate in good faith an appropriate resolution to such objection.

 

The maintenance / renewal protocol for software is divided into Scheduled Routine, Scheduled Non-Routine and Emergency standards.

 

Scheduled Routine

 

All Scheduled Routine maintenance will be performed by FATHOM IT personnel on the second Saturday of each calendar month.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 72 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Scheduled Non-Routine

 

All Scheduled Non-Routine maintenance will be performed by FATHOM IT personnel outside of normal working hours.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 24 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Emergency maintenance

 

Any outage is classified as an emergency.  If the utility recognizes a problem deemed to be an emergency, FATHOM Operational Support should be contacted immediately.  An Operational Support representative will respond as soon as possible. Emergency maintenance will be 

D-11

 

Exhibit D

Scope of Services

performed by FATHOM IT personnel as soon as reasonably possible.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Software maintenance for Utility Billing

Scheduled Routine, Scheduled Non-Routine and Emergency maintenance will be performed by FATHOM from time to time, at FATHOM's discretion, to subscribers of Support Services for:

 

	
 
	
1)
	
Fixes to errors & bugs;

	
 
	
2)
	
Updates;

	
 
	
3)
	
New features and/or enhancements contained within new releases 

	
 
	
4)
	
New releases; and

	
 
	
5)
	
New versions of the software and/or Platform

 

	
R4)
	
[SOS #2] Provide monthly billing services for water and wastewater accounts to include;

	
 
	
1)
	
Monthly reads loaded into the billing system for billing

	
 
	
2)
	
Review and processing of billing in accordance with SOS #2.

	
 
	
3)
	
Green collections management campaign, limited to mailed disconnect notices, disconnect service orders, and daily outbound IVR communications
	
 

	
 
	
4)
	
Customer notification messages on the bills, up to twelve unique messages per year (SOS #4)

	
 
	
5)
	
Provide up to 12 unique billing inserts per year (Customer to provide inserts as 8.5 x 11 inch or 1/3 page inserts).  Additionally, the Consumer Confidence Reports are included and do not count towards the twelve per year limit. 

	
 
	
6)
	
Deposit management, which includes the proper application of deposits to customer accounts in accordance with Title 14, Article 4 of the Arizona Administrative Code R14-2-403 and R14-2-603 Establishment of Service B. Deposits as amended, and the ongoing reimbursement of such deposits in accordance with such standards.

	
R5)
	
[SOS #19] Provide Customer a portal for uploading and downloading any data collection activities 

	
R6)
	
[SOS #20] Support and management of payment interfaces & processes

	
 
	
1)
	
Paperless Billing

	
 
	
2)
	
Pay by phone

	
 
	
3)
	
Pay by mail

	
 
	
4)
	
Pay by credit or debit card

	
 
	
5)
	
Pay locally

	
 
	
6)
	
Pay by electronic check

	
 
	
7)
	
Pay by ACH

	
R7) 
	
Manage the following processes in accordance with Title 14, Article 4 of the Arizona Administrative Code as amended:
	
 

	
 
	
1)
	
[SOS #9] Late fees 
	
 

D-12

 

Exhibit D

Scope of Services

	
 
	
2)
	
[SOS # 17] Other fees

	
 
	
3)
	
[SOS #17] After hours customer callbacks 

	
 
	
4)
	
[SOS #16] Bankruptcies 

	
 
	
5)
	
[SOS #16] Payment arrangements 

	
 
	
6)
	
[SOS #20] Unapplied Payments

	
R8)
	
[SOS #24 and #25] Support and management of customer internet site for account access to:

Presentment of Customer’s customer consumption data will be provided through FATHOM U2You, including:

	
 
	
1)
	
Online customer access via web or smartphone

	
 
	
2)
	
Simplified login and account creation

	
 
	
3)
	
Customer self-service - account and usage management

	
 
	
i)
	
Account information

	
 
	
ii)
	
Payments

	
 
	
iii)
	
Bill history

	
 
	
4)
	
Presentment of hourly, daily, weekly and monthly consumption given data availability  

	
 
	
5)
	
Usage history

	
 
	
6)
	
User-configurable consumption and leak alerts

	
 
	
7)
	
Report an issue

Custom announcements to customers on the internet site. FATHOM will create up to six unique messages per year. Additionally, the utility will be provided access to a text box wherein they can control specific utility messaging on the main page.

	
R9) 
	
[SOS #5] Support and management of the electronic work order system (excluding field equipment) and the following work orders to support customer care and field customer service.  Work Order capability will be provided as described in the user documentation for the version of AMS solution in use by FATHOM at the time.  

	
 
	
1)
	
AMR Repair

	
 
	
2)
	
Billing Field Investigation

	
 
	
3)
	
Compliance

	
 
	
4)
	
Disconnect for Non-Compliance

	
 
	
5)
	
Disconnect

	
 
	
6)
	
Meter Equipment Exchange (sub category selectable)

	
 
	
7)
	
Register Exchange (sub category selectable)

	
 
	
8)
	
AMI Equipment Exchange (sub category selectable)

	
 
	
9)
	
Field Investigation

	
 
	
10)
	
Final Bill Service Order

	
 
	
11)
	
Meter Install

	
 
	
12)
	
Meter Relocation

	
 
	
13)
	
Meter Test

	
 
	
14)
	
Reconnect

	
 
	
15)
	
Meter Repair

	
 
	
16)
	
Re-Read Meter upon Customer Request

	
 
	
17)
	
Scheduled Field Investigation

	
 
	
18)
	
Scheduled Reconnect

D-13

 

Exhibit D

Scope of Services

	
 
	
19)
	
Scheduled Vacant Account Reactivation

	
 
	
20)
	
Vacant Account Reactivation

	
 
	
21)
	
Vacant Account Usage

	
R10)
	
Advanced call center support

 

	
 
	
1)
	
[SOS #17] Call Center Service Level Objective (SLO)
70% of customer contacts will be addressed within 120 seconds (average of the daily at the end of the month excluding Mondays and Tuesdays after holiday weekends).  If the Call Center SLO is not achieved, a service credit will be applied according to the schedule below.
	
 

		
	
Call Center Service Level Tier
	
Service Credit

 

	
69.999% - 65%
	
5% of that month’s Call Center Fee

 

	
64.999% - 60%
	
10% of that month’s Call Center Fee

 

	
<60%
	
15% of that month’s Call Center Fee

 

The service credit may be applied towards additional services (not recurring fees) procured from FATHOM by Customer.  In no circumstances shall the service credit exceed 15% of that month’s total Call Center fee.

	
 
	
2)
	
Revenue Management Service Level Objective (SLO)
FATHOM Revenue Management shall maintain an on-time billing SLO of 99% or greater.  If that SLO is not achieved, the following service credit schedule shall apply.
	
 

		
	
Call Center Service Level Tier
	
Service Credit

 

	
98.999% - 95%
	
5% of that month’s Revenue Management Fee

 

	
94.999% - 90%
	
10% of that month’s Revenue Management Fee

 

	
<90%
	
15% of that month’s Revenue Management Fee

 

The service credit may be applied towards additional services (not recurring fees) procured from FATHOM by Customer.  In no circumstances shall the service credit exceed 15% of that month’s total Revenue Management fee.

	
 
	
3)
	
Call Abandonment Rate Service Level Objective
FATHOM shall maintain a call abandonment rate of not higher than 7% averaged for the month.  This shall be reported to Customer monthly.  If FATHOM fails to achieve the SLO, FATHOM will make a reasonable attempt to diagnose the cause and implement appropriate actions to attempt to restore performance back to the 

D-14

 

Exhibit D

Scope of Services

	
 
		
SLO.  As the rate is not fully in FATHOM’s control, there is no service level penalty.

	
 
	
4)
	
Billing accuracy shall be measured based on the ratio of the number of canceled/rebilled bill pairs to the total number of bills.  Canceled/rebilled pairs are defined as those that are reasonably known to have been due to FATHOM data inputs or actions, not those related to customer or client data inputs or actions. FATHOM Revenue Management shall maintain a billing accuracy SLO of 99% or greater.  If that SLO is not achieved, the following service credit schedule shall apply.
	
 

		
	
Call Center Service Level Tier
	
Service Credit

	
99% - 95%
	
5% of that month’s Revenue Management Fee

	
<95% - 90%
	
10% of that month’s Revenue Management Fee

	
<90%
	
15% of that month’s Revenue Management Fee

For clarity, a cancelled bill without an associated rebill does not contribute to as an inaccurate bill to the bill accuracy ratio unless there was no re-bill due to it falling outside the 90 day time limit for re-billing.

The service credit may be applied towards additional services (not recurring fees) procured from FATHOM by Customer.  In no circumstances shall the service credit exceed 15% of that month’s total Revenue Management fee.

	
 
	
5)
	
Provide call recording and call storage of all calls for two years.  Call recordings will be provided upon request within two business days.

	
 
	
6)
	
[SOS #17] After Hours Call Back
Customer calls made by the customer after hours are answered by a third-party operator. The operator will follow a procedure developed in coordination with the Customer to determine emergency calls which need an immediate response or calls that can be handled at a later time.  For calls determined to be non-emergencies, Customer Care will place a phone call to those customers who reported an emergency after hours.

	
R11)
	
[SOS #26] 24/7 automated interactive voice response (IVR) phone support with functionality to:

	
 
	
1)
	
Report an emergency

	
 
	
2)
	
Access general information

	
 
	
3)
	
Access account information

	
 
	
4)
	
Make payments

	
 
	
5)
	
Provide balances & payment history

D-15

 

Exhibit D

Scope of Services

	
R12)
	
[SOS #25] Manage and support the FATHOM mobile applications for the Customer's customers 

	
R13)
	
As needed support for custom report development and delivery (at additional cost).

D-16

 

Exhibit D

Scope of Services

Scope of Services -

Asset Management Services

 

FATHOM will guarantee the availability of the asset management system for all regulated utility subsidiaries of Customer. The following outlines the key deliverables and responsibilities for the life of the contract:

RECURRING DELIVERABLES FOR LIFE OF CONTRACT:

	
 
	
R1)
	
Monthly Asset Management System (AMS) Analytics

	
 
	
R2) 
	
User log-in and security configuration provided as needed.

	
 
	
1)
	
User log-in configuration changes are requested by Customer by creating a System Access Request (SAR) in the Customer help desk portal.

	
 
	
2)
	
[SOS #22] Log-in security is provided as described in the SOS chapter 22.

 

	
 
	
R3) 
	
[SOS #23] Software maintenance 
	
 

Software maintenance is performed to correct errors, enhance capabilities, delete obsolete capabilities and optimize the FATHOM system. 

 

During the Term, FATHOM will make reasonable efforts to provide prior notice to Customer of any modifications FATHOM intends to make to the FATHOM Platform that would have a material adverse effect upon, or otherwise materially degrade, the FATHOM Platform. If Customer objects to any such modifications, then the parties will negotiate in good faith an appropriate resolution to such objection.

 

The maintenance / renewal protocol for software is divided into Scheduled Routine, Scheduled Non-Routine and Emergency standards.

 

Scheduled Routine

 

All Scheduled Routine maintenance will be performed by FATHOM IT personnel on the second Saturday of each calendar month.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 72 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Scheduled Non-Routine

 

All Scheduled Non-Routine maintenance will be performed by FATHOM IT personnel outside of normal working hours.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative at least 24 hours in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be 

D-17

 

Exhibit D

Scope of Services

advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Emergency maintenance

 

Any outage is classified as an emergency.  If the utility recognizes a problem deemed to be an emergency, FATHOM Operational Support should be contacted immediately.  An Operational Support representative will respond as soon as possible. Emergency maintenance will be performed by FATHOM IT personnel as soon as reasonably possible.  Notice of the impending maintenance will be provided by FATHOM IT personnel through email to a Utility representative in advance of the scheduled event.  In addition, a message will be displayed on the U2YOU Home Page. Please be advised that U2You systems may experience intermittent downtime for the duration of the maintenance.

 

Software maintenance for AMS

Scheduled Routine, Scheduled Non-Routine and Emergency maintenance will be performed by FATHOM from time to time, at FATHOM's discretion, to subscribers of Support Services for:

	
 
	
1)
	
Fixes to errors & bugs;

	
 
	
2)
	
Updates;

	
 
	
3)
	
New features and/or enhancements contained within new releases 

	
 
	
4)
	
New releases; and

	
 
	
5)
	
New versions of the software and/or Platform

 

	
R4) 
	
Evergreen updates to software – including an update to the AMS server’s recent version.  Delivery of this specific upgrade to be documented in the AMI project plan.  The parties agree to notify each other of planned, future software upgrades.

 

	
R5) 
	
Uploading and maintenance of new and replacement infrastructure in the GIS database

Fathom shall provide and maintain a web-based interactive GIS viewer with the following functionality

	
 
	
1)
	
Ability to select various base maps, including basic mapping, aerial photography, and topographic

	
 
	
2)
	
Access to source documents (as-built drawings, agreements, easements, deed, etc.) via an integrated link

	
 
	
3)
	
Ability to select attribute layers

	
 
	
4)
	
Ability to print selected layers and mapping

	
 
	
5)
	
Ability to export data from attribute tables

	
 
	
6)
	
Ability to query

 

Fathom shall provide custom maps of Customer’s existing utilities at Customer’s request.  Fathom and Customer shall mutually agree to a reasonable timeframe for producing custom maps.  

D-18

 

Exhibit D

Scope of Services

Fathom shall maintain and update all data contained within the main layers listed below.  Updates shall be performed at Customer’s request with in the timeframes listed below or within the a mutually agreed upon timeframe.

 

		
	
Main Layers:
	
Update Timeframe:

	
•         Service Address
	
30 days upon request from Utility

	
•         Potable Water
	
15 days upon request from Utility

	
•         Wastewater
	
15 days upon request from Utility

	
•         Recycled Water
	
15 days upon request from Utility

	
•         Arizona
	
Annually- first quarter of every new year

	
•         Counties (3rd party data)
	
Annually- first quarter of every new year

	
•         County Parcels  (3rd party data)
	
Annually- first quarter of every new year

	
•         County Centerlines  (3rd party data)
	
Annually- first quarter of every new year

	
•         CC&N
	
30 days upon request from Utility

	
•         As-Builts
	
15 days upon request from Utility

	
•         Deed
	
15 days upon request from Utility

	
•         Easement
	
15 days upon request from Utility

	
•         ICFA
	
15 days upon request from Utility

	
•         LXA
	
15 days upon request from Utility

	
•         CAPEX Project
	
15 days upon request from Utility

	
•         Franchise Area
	
30 days upon request from Utility

	
•         Subdivision/Development
	
30 days upon request from Utility

	
•         Water Quality Plan Management Plan Area
	
30 days upon request from Utility

	
•         Public Land Survey System
	
Annually- first quarter of every new year

 

D-19

 

Exhibit D

Scope of Services

Customer will electronically submit a request with supporting documentation to update or add data to the GIS database.  This can be done through the AMS software using the Redline tool for updates to existing data or through a ticketing system for new additions.  Since the amount of effort can vary greatly based upon the request FATHOM will review each request as it is submitted and provide an estimate of how long it will take to finish the job. 

	
R6) 
	
Uploading and maintenance of asset documentation, O&M Manuals, Standard Operating Procedures. 

	

	
Customer will have the ability to upload and maintain documents in the AMS software if Customer chooses to do so, but may rely upon FATHOM to upload documents at a mutually agreed upon scope and delivery pace based on current work load.  In the event that tools in the AMS software are not available to upload and maintain documents then Customer will submit requests in a ticketing system to FATHOM with the document and Asset ID that the document needs to be associated with.  FATHOM will process the request within 7 business days, after which the document will be available for use in the software.

	
R7) 
	
Standard Asset Management Reporting

Asset Management reports will be available to Customer as described in the user documentation for the version of AMS solution in use by FATHOM at the time.  The predefined reports currently available and accessible by Customer include:

	
 
	
1)
	
Work Order Listing

	
 
	
2)
	
Work Order Summary

	
 
	
3)
	
Work Order Duration

	
 
	
4)
	
Service Request Listing

	
 
	
5)
	
Service Request Summary

	
 
	
6)
	
Inspection Listing 

	
 
	
7)
	
Inspection Summary

	
 
	
8)
	
Capitalized Labor Report (without salary information)

	
 
	
9)
	
Utilization Report

	
 
	
10)
	
Asset Analytics

	
 
	
11)
	
Asset Condition Score

	
 
	
12)
	
Work Order Latency (dashboard only)

	
 
	
13)
	
Overdue Work Orders (dashboard only)

	
 
	
14)
	
Planned versus Unplanned Work Orders (dashboard only)

	
 
	
15)
	
Work Order by site or asset class (dashboard only)

Customer may create additional reports using tools provided within the AMS.  Customer may request additional reports from FATHOM for an additional fee.

	
R8)
	
Standard Water, Wastewater and Recycled Water Work Orders. Customer will have access to the AMS to create and manage Standard Water, Wastewater and Recycled Water Work Orders for any asset type that has been created in the GIS and integrated into the AMS solution.  Work Order capability will be provided as described in the user documentation for the version of AMS solution in use by FATHOM at the time.

	
R9)
	
Customer will be provided access to the FATHOM Development Services web site and the AMS software to pull information from the GIS such as maps and data using the web site’s print data export tool.  FATHOM Development Services will be available to either assist Customer or 

D-20

 

Exhibit D

Scope of Services

		
perform the task at a mutually agreed additional fee.

	
R10)
	
Quarterly review of Asset Management System

During each Quarterly Business Review, the Client Success Manager assigned to Global Water Resources, Inc. account to conduct quarterly review of AMS system traffic and performance metrics.  This will include all verification reports on FATHOM performance guarantees.

 

	
R11) 
	
One one-day training session per quarter, with an individual who is adequately trained in both the AMS software, and on AMS principles and strategy as they pertain to water and wastewater utility operations.

 

Scope of Services -

Enhanced Partnership

 

When reasonably requested by FATHOM and FATHOM is performing in accordance with Agreement and Scope of Services, Customer agrees to support FATHOM with select market and innovation development tasks including but not limited to:

	
R1)
	
Testimonials and quotes for articles, brochures, and/or videos.

	
R2)
	
Speaking and/or panel discussions at industry conferences.

	
R3)
	
Prospective customer references and site visits to Customer’s facilities.

	
R4)
	
Participation and input from Customer subject matter experts for the development of business and technological innovation to further advance FATHOM’s solutions and industry thought leadership.

	
R5)
	
To provide a test-bed for new innovations from FATHOM and/or FATHOM partners, including those using the FATHOM Store. However, as these innovations often require considerable dedication of resources, both time and money, Customer is under no obligation to provide this test-bed if agreeable terms, in Customer’s sole and absolute discretion, are not established in advance. 

 

 

D-21

 

Exhibit E

Active Regulated Utilities

 

Global Water Resources, Inc. 

(Delaware “C” Corp)

 

 
 

Global Water, LLC 

(Delaware LLC)

Holding Co. for Regulated Utilities

 

 

 

 

 

Water Utility of Northern Scottsdale, LLC

(Arizona LLC)

 

 

Global Water – Palo Verde Utilities Company, LLC

(Arizona LLC)

 

 

Global Water – Santa Cruz Water Company, LLC

(Arizona LLC)

 

 

 

 

 

Water Utility of Greater Tonopah, LLC

(Arizona LLC)

 

 
 
 

 

 

 

E-1

 

 

Exhibit F

FATHOM Service Level Agreement (SLA)

	
1.0
	
General

This Exhibit F is appended to the Service Agreement between Global Water Management, LLC (FATHOM), Global Water LLC, et al (collectively the “Customer”) dated June 5, 2013, as amended by the First Amendment to Service Agreement dated November   17   2016, and sets out the maintenance and support that FATHOM will provide to Customer for the FATHOM suite of software-as-a-service products.  

	
2.0
	
Software Service Level Objective

	
 
	
2.1
	
Uptime.  Uptime is defined as the amount of time during a calendar month that FATHOM is not experiencing Downtime.  During the Term, FATHOM will use commercially reasonable efforts to provide a Monthly Uptime Percentage of at least 99.7% (the “Service Level Objective” or “SLO”).  

	
 
	
2.2
	
Downtime.  Downtime is defined as loss of external connectivity and/or access for all running FATHOM modules combined with Customer’s inability to connect to their FATHOM sites. FATHOM sites that are down for a period of five consecutive minutes or more, will immediately be counted towards Downtime. Intermittent downtime for a period of less than five minutes will not be counted towards Downtime.  

	
 
	
2.3
	
Exclusions.  The following events are not included in Downtime:

	
 
	
2.3.1
	
Scheduled FATHOM Maintenance Windows.  Includes upgrades or repairs to shared infrastructure, such as core routing or switching infrastructure that FATHOM scheduled at least 72 hours in advance and that occurs during off peak hours in the time zone where the data center is located.

	
 
	
2.3.2
	
Scheduled Customer Maintenance.  Includes maintenance of Customer’s configuration that Customer requests and that FATHOM schedules with Customer in advance (either on a case by case basis, or based on standing instructions), such as hardware or software upgrades.

	
 
	
2.3.3
	
Emergency Maintenance.  Includes critical unforeseen maintenance needed for the security or performance of your configuration or the FATHOM network.

	
 
	
2.3.4
	
Extraordinary Events.  Includes downtime or outages resulting from denial of service attacks, virus attacks, hacking attempts, or any other circumstances that are not within our control.

	
 
	
2.4
	
Remedy.  If FATHOM does not meet the SLO stated, Customer will be eligible to receive a Service Credit as described below. This SLA states the sole and exclusive remedy for any failure by FATHOM to meet the SLO.

F-1

 

 

	
3.0
	
Software Support and Maintenance

FATHOM shall offer on-going maintenance and support for the provided software-as-a-service for the Term and shall include the following:

	
 
	
3.1
	
Types of Support.  Support for Customer will be provided by the FATHOM Technical Support Help Desk which utilizes a collaboration support model (non-tiered) which provides the agents the ability to resolve any issues in the most efficient way possible.  

	
 
	
3.1.1
	
The Support Desk can be reached through the FATHOM Support website, via email or by phone depending on the requestor’s preference.

	
 
	
3.1.2
	
The Support Desk is staffed by live agents from 7 AM to 9 PM Eastern (4 AM to 6 PM Pacific).

	
 
	
3.1.3
	
Customer will be able to submit tickets 24 hours a day if needed and will be addressed during business hours the following day.

	
 
	
3.2
	
Response Times.  FATHOM will respond to Customer request for support via support ticket, telephone call, or both depending upon the severity of the situation and consistent with any procedures we have established with Customer for the Customer’s account.  FATHOM will respond to your support requests made via ticket or telephone within the following time frames during normal business hours:

			
	
Severity Level
	
Example 
	
Response Time

	
Emergency:

Site, switch, or server down
	
You cannot access your server or site from the public Internet.
	
Within 15 minutes

	
Urgent:

Site or server functioning improperly or at less than optimal performance
	
Your site or server is accessible but in a reduced state (timeouts or slow response)
	
Within 1 hour

	
Standard:

Non-critical; site or server is functioning normally, but you require information or assistance on services, wish to schedule maintenance outages, or any other non-immediate tasks
	
Your site is functioning with acceptable parameters, but you require assistance on the software or have a help desk-type question
	
Within 4 hours

 

Response Time applies to the initial contact from FATHOM regarding the request and is not a guarantee for resolution. 

F-2

 

 

	
 
	
3.3
	
Remedy.  If FATHOM does not meet the Response Time guarantees stated, Customer will be eligible to receive a Service Credit as described below.  This SLA states the sole and exclusive remedy for any failure by FATHOM to meet the Response Time guaranties.

	
4.0
	
Service Credit

	
 
	
4.1
	
Service Credit

	
 
	
4.1.1
	
Software Service Level Objective.  If FATHOM does not meet the SLO, by module for FATHOM Prime, U2You, and/or AMS, Customer will be eligible to receive the Service Credit described below. 

		
	
Monthly Uptime Percentage
	
Eligible Service Credit, Percentage of Equivalent Monthly Recurring Fee for SaaS Services for the offending module

	
99.0% - < 99.7%
	
10% 

	
95.0% - < 99.0%
	
25%

	
< 95.0%
	
50%

 

For avoidance of doubt, at no time are the fees associated with managed services, including but not limited to utility billing and customer care services, eligible for Service Credit as described in this SLA.

	
 
	
4.1.2
	
Support.  If FATHOM does not meet the Response Time guarantees stated above, the Customer will be eligible to receive a Service Credit of 5% of the equivalent monthly recurring fee per event for the affected software module.

For avoidance of doubt, at no time are the fees associated with managed services, including but not limited to utility billing and customer care services, eligible for Service Credit as described in this SLA.

	
 
	
4.2
	
Limitations on Service Credit

	
 
	
4.2.1
	
Cumulative Dollar Amount.  Notwithstanding anything to the contrary, the maximum total credit for any calendar month, including all guaranties, shall not exceed 50% of Customer’s equivalent monthly recurring fee for the affected configuration for any given month.  Credits that would be available but for this limitation will not be carried forward to future months.

F-3

 

 

	
 
	
4.2.2
	
Application of Service Credit.  The service credit may be applied towards additional services (not recurring fees) procured from FATHOM by Customer.  

	
 
	
4.2.3
	
Customer Breach of Agreement.  Customer is not eligible to receive a Service Credit if Customer is in breach of the Agreement (including payment obligations to FATHOM) at the time of the occurrence of the event giving rise to the Service Credit until the breach has been cured.  In addition, Customer is not eligible to receive a Service Credit if the event giving rise to the credit would not have occurred but for Customer’s breach of the Agreement.

 

	
 
	
4.3
	
Service Credit Request

	
 
	
4.3.1
	
Customer must request a Service Credit in writing either via a support ticket or by postal mail no later than seven (7) days following the occurrence of the event giving rise to the Service Credit.  

	
 
	
4.3.2
	
FATHOM will contact Customer within 30 days to approve or reject the claim or to request more information.  

 

 

F-4EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of October 1, 2016, by and between MetaBank, a federally chartered savings bank (the “Bank”), and J. Tyler Haahr (“Officer”);

 

W I T N E S S E T H:

 

WHEREAS, the Bank wishes to continue to employ Officer upon the terms and conditions set forth below; and

 

WHEREAS, Officer desires to continue to be employed by Bank upon the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Parties agree as follows:

 

1.             Definitions.

 

Capitalized terms not otherwise defined herein shall have the meanings set forth in Exhibit A attached hereto.

 

2.             Term.

 

The Bank shall continue to employ Officer pursuant to this Agreement, and Officer hereby accepts such continued employment, for the Term.  The Term begins on October 1, 2016 (the “Effective Date”) and shall end on the third anniversary of the Effective Date (the “Initial Term”), subject to earlier termination as provided herein.  On each anniversary, the term of employment under this Agreement shall be extended for a period of one year (each one year extension following the Initial Term shall be referred to herein as a “Renewal Term”); provided that such term will not be automatically extended unless such extension is approved by the Board of Directors of the Bank (the “Board”) following the Board’s review of a formal performance evaluation of Officer, performed by independent members of the Board, to the extent such approval is required by applicable law, regulation or other applicable guidance.  The Initial Term and each Renewal Term together are collectively referred to herein as the “Term”.

 

3.             Position, Duties, Location, and Likeness.

 

(a)           Officer shall continue to serve as Chairman and Chief Executive Officer; shall have all authority, duties, and responsibilities customarily exercised by an individual serving in such position at an entity of the size and nature of the Bank and shall be assigned duties and/or responsibilities that are, in the aggregate, substantially consistent with Officer’s position (including, without limitation, serving in an officer or director role of affiliates of the Bank (including but not limited to its holding company). The Officer shall receive compensation consistent with Bank compensation practices regarding Board service. Officer shall have such additional duties and responsibilities, consistent with the foregoing, as may be from time to time reasonably assigned to Officer by the Board.

 

(b)           During Officer’s employment with the Bank and Meta Financial Group, Inc. (the Bank and Meta Financial Group, Inc. are collectively referred to herein as the “Company”), Officer shall devote substantial business time to the business and affairs of the Company; provided, however, that so long as the following activities do not either individually or in the aggregate materially interfere with the proper performance of Officer’s duties and responsibilities hereunder, nothing in this Agreement (including Sections 10 and 11) shall preclude Officer from: (i)  engaging in charitable activities and community affairs, (ii) managing Officer’s personal investments and affairs, (iii) engaging in other activities approved by the Board, including Waived Opportunities (as defined below), (iv) making personal investments that are not in competition with the Company or antithetical to the Company’s interests, and (v) engaging in business opportunities that have been presented to the Company pursuant to the usurpation of corporate opportunity doctrine, including 12 CFR Section 163.201, and declined in writing by the Board (which declination will not be unreasonably withheld), including Waived Opportunities.

 

(c)           During Officer’s employment with the Company, the Company shall have the right, but not the obligation, to use Officer’s name and likeness in connection with the Company and its Business, as well as the right to issue publicity (including biographical information) concerning Officer in connection therewith.

 

(d)           Upon termination of service with the Company for any reason or no reason, Officer shall resign (and hereby provides Officer’s written proxy to another officer of the Company to act as Officer’s attorney in fact with respect to Officer’s resignation) from any and all offices and positions of the Company and its Affiliates, unless otherwise expressly agreed to in writing by the Company.

 

4.             Compensation.

 

(a)           Annual Review.  The Compensation Committee of the Board (the “Committee”) will review Officer’s “total compensation” (including Base Salary, equity compensation, and bonus opportunities) at least once every twelve (12) months and, as part of such review, shall compare Officer’s compensation to the compensation of Officer’s counterparts among the Company’s peer group, as determined by the Compensation Committee.  Should it decide to engage a consultant, the Committee will consult with Officer and direct the consultant to interview Officer in connection with establishing an appropriate peer group. Consistent with the Charter of the Committee, the Committee shall retain the sole authority to retain, pay, oversee and terminate any such consultant.  The parties acknowledge and agree that the Bank desires to pay Officer no less than the median compensation for Officer’s appropriate counterpart among the peer group and shall make such adjustments, from time to time, as may be appropriate to reflect such desire; provided that total target compensation shall be no less than $3 million for fiscal years beginning on and after October 1, 2018.

 

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(b)           Base Salary.  Commencing as of the Effective Date, Officer shall continue to receive an annual salary of $775,000.00 (the “Base Salary”), payable in accordance with the regular payroll practices applicable to senior executives of the Bank generally, but no less frequently than monthly, and less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions.  With respect to Base Salary for the period beginning on October 1, 2017, the Base Salary shall be $813,750. For each fiscal year thereafter, the Committee will review Officer’s Base Salary and make such increases (but not decreases) to Base Salary as determined by the Committee and consistent with Section 4(a) of this Agreement.  Base Salary increases will be retroactive to the first day of the applicable fiscal year.

 

(c)           Bonus.

 

(i)          Officer shall be entitled to participate in any bonus programs as authorized and declared by the Board consistent with the terms of such programs as determined by the Board.  As of the Effective Date, the Officer’s annual target bonus opportunity shall be equal to 133% of Base Salary (the “Target Annual Bonus”), based on the achievement of performance goals established by the Committee; provided that, depending on those results, Officer’s actual bonus may be higher or lower than the Target Annual Bonus, as determined by the Committee, and any such actual bonus will be paid consistent with the Bank’s customary practice (i.e., 37.5% in cash and 62.5% in restricted common stock).  Any such bonus shall be payable to Officer at the time bonuses are paid to executive officers in accordance with the Bank’s policies and practices; provided, that, to the extent that the applicable bonus program does not provide for an Internal Revenue Code (“Code”) Section 409A (“Section 409A”) compliant time and form of payment, any such cash bonus shall be paid in the year following the year in which the bonus was earned but no later than March 15th of the calendar year following the year the bonus was earned and any such restricted common stock shall vest in accordance with the terms of any such annual bonus award.

 

(ii)         Effective October 1, 2017, so long as Officer is employed by the Bank on such date, Officer shall be awarded a special-incentive bonus with a target bonus opportunity that shall be no less than 135% of Base Salary (at the rate in effect on October 1, 2017), with such terms and performance conditions as determined by the Committee in a separate award agreement; provided that such performance conditions shall be consistent with the Bank’s customary performance based compensation practices (the “Special Incentive Bonus”).  Any such actual bonus will be paid consistent with the Bank’s customary practice for the payment of annual bonuses (i.e., 37.5% in cash and 62.5% in restricted common stock).  Any such Special Incentive Bonus shall be payable to Officer at the time bonuses are paid to executive officers in accordance with the Bank’s policies and practices; provided, that, to the extent that the applicable bonus program does not provide for Code Section 409A compliant time and form of payment, any such cash element of the Special Incentive Bonus shall be paid in the year following the year in which the bonus was earned but no later than March 15th of the calendar year following the year the bonus was earned and any such restricted common stock shall vest in accordance with the terms of any such Special Incentive Bonus award.

 

(d)           Performance-Based Restricted Stock Award. On the date that the Officer executes this Agreement, Officer shall receive a grant of 89,156 shares of Restricted Stock, subject to the performance vesting conditions and other terms set forth in the Performance-Based Restricted Stock Agreement attached hereto as Exhibit A and the Meta Financial Group, Inc. 2002 Omnibus Incentive Plan (the “Plan”).  On January 1, 2017, the Officer shall receive a supplemental grant of 10,844 shares of Restricted Stock, subject to the performance vesting conditions and other terms set forth in the Performance-Based Restricted Stock Agreement attached hereto as Exhibit B and the Plan.

 

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5.             Other Benefits.

 

(a)            Executive Benefits.  During the Term, Officer shall be entitled to participate in all benefit plans, programs and arrangements (including paid vacation and sick pay) at a level, and on terms and conditions, that are commensurate with Officer’s position and responsibilities at the Company as in effect under such plans, programs and arrangements as are in effect from time to time, each as may be amended.  Nothing in this Section 5(a) shall be construed to require the Company to establish or maintain any particular employee benefit plan, program or arrangement except as expressly set forth elsewhere in this Agreement.

 

(b)           Reimbursement of Business Expenses.  Officer will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Officer’s duties on behalf of the Company.  To obtain reimbursement, expenses must be submitted promptly (and in any event, not later than 180 days—or such shorter period as required under the Bank’s applicable policy—following the date the expense was incurred) with appropriate supporting documentation and will be reimbursed in accordance with the Bank’s policies, but no later than 30 days after proof of payment is submitted by Officer.  Any reimbursement Officer is entitled to receive shall  (i) not be affected by any other expenses that are eligible for reimbursement in any tax year, and (ii) not be subject to liquidation or exchange for another benefit.

 

6.             Termination of Employment.

 

(a)            Termination Due to Death or Disability.  If Officer becomes unable to perform the essential functions of Officer’s position, with or without reasonable accommodation, due to a mental or physical disability, for a consecutive period of 180 days or for an aggregate of 270 days in any 365-day period (herein defined as “Disability”), either Officer (or Officer’s legal representative) or the Bank may, to the extent permitted by applicable law, terminate this Agreement and Officer’s employment by giving thirty (30) days’ written notice to the other Party.  Officer shall cooperate in good faith with the Bank if a question arises as to whether Officer has incurred a Disability (including, without limitation, submitting to an examination by a medical doctor or other health care provider reasonably selected by the Bank).  Any question as to the existence of Officer’s Disability as to which Officer and the Bank cannot agree shall be determined in writing by a qualified independent physician reasonably selected by the Bank. The determination of Disability by such physician shall be made in writing to Bank and Officer and shall be final and conclusive for all purposes of this Agreement. In the event that Officer’s employment hereunder terminates due to Officer’s death or by the Bank due to Disability, the Term shall expire and Officer (or Officer’s estate or Officer’s beneficiaries, as the case may be) shall be entitled to receive only the amounts described in Section 6(c).

 

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(b)           Termination for Cause.  In the event that Officer’s employment hereunder is terminated for Cause by the Bank, the Term shall expire and Officer shall be entitled to the benefits described in Section 6(f).  All other Bank obligations to Officer pursuant to this Agreement will become automatically terminated and completely extinguished, except as otherwise provided in Section 8.  For the avoidance of doubt, in the event that Officer’s employment hereunder is terminated for Cause, Officer will immediately forfeit any unvested equity or unvested equity-like interest that Officer then holds in the Bank (whether held directly or indirectly), regardless of whether such forfeiture is required by the provisions of the agreements and other documents governing any such equity or equity-like interest.

 

(c)           Termination Without Cause or Resignation for Good Reason.  In the event that Officer resigns for Good Reason or Officer’s employment hereunder is terminated by the Bank other than  for Cause in accordance with Section 6(b), Officer shall be entitled to a “Severance Package” consisting of:

 

(i)          a “Severance Payment” equal to the sum of (a) two-times the Officer’s  annual Base Salary (as in effect on the Termination Date), (b) two-times the Officer’s Target Annual Bonus, and (c) two-times the target Special Incentive Bonus, as applicable for the year in which the Termination Date occurs, which shall be aggregated and paid in a lump sum cash payment within sixty (60) days following the Termination Date, and subject to required deductions for state and federal withholding tax, social security and all other applicable employment taxes and required deductions;

 

(ii)         if such termination under this 6(c) occurs on or after six (6) months following the commencement of the fiscal year to which annual bonuses relate, a “Pro-Rata Bonus Payment” equal to the product of (x) the annual bonus described in Section 4(c)(i) above and the Special Incentive Bonus, if any, that Officer would have earned for the fiscal year in which the Termination Date occurs based on achievement of the applicable performance goals for such year and (y) a fraction, the numerator of which is the number of days that Officer was employed by the Company during the fiscal year of termination and the denominator of which is the total number of days in such fiscal year. The Pro-Rata Bonus Payment shall be paid, notwithstanding any service requirement, following the last day of the applicable bonus period, not later than the date that annual bonuses are paid to similarly situated executives and in no event later than March 15th of the calendar year immediately following the fiscal year in which the Termination Date occurs (the “Pro-Rata Bonus Payment Date”);

 

(iii)        vesting of all unvested stock options and stock appreciation rights granted by the Company to Officer;

 

(iv)        all outstanding equity compensation awards, other than stock options and stock appreciation rights, that were granted by Company to Officer and that are intended to constitute performance-based compensation under Code Section 162(m)(4)(C) and that would otherwise were scheduled to vest in a year subsequent to the year of termination of Officer’s employment, shall remain outstanding and fully vest upon satisfaction of the applicable performance requirements underlying such awards notwithstanding any service requirement;

 

(v)         accelerated vesting of any outstanding equity-based compensation awards, other than stock options and stock appreciation rights, that were granted by Company to Officer and that are not intended to qualify as performance-based compensation under Code Section 162(m)(4)(C); and

 

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(vi)        payment of the premiums required to continue Officer’s group health care coverage (i.e. medical, dental and vision, to the extent applicable) for a period up to eighteen (18) months following Officer’s Termination Date, under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), provided that Officer elects to continue and remains eligible for these benefits under COBRA, and does not become eligible for such health coverage through another employer during this period; provided further, that, if Bank determines, in its sole discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules under Code Section 105(h) or of any statute or regulation of similar effect or other adverse tax or legal consequences to the Bank, then, the parties agree to take such reasonable best efforts to reform this Section 6(c)(vi) in such manner as is necessary as to not violate the nondiscrimination rules under Code Section 105(h) or of any statute or regulation of similar effect or cause such adverse consequences.

 

(vii)       Officer will only receive the Severance Package if Officer: (a) complies with all surviving provisions of this Agreement; and (b) executes a separation and release agreement in a form reasonably acceptable to the Company, releasing all claims, known or unknown, that Officer may have against the Company, its Subsidiaries and Affiliates (the “Company Group”) and such other parties as reasonably included therein and releasing all claims, known or unknown, that the Company Group may have against the Officer, (with customary carveouts, as may be applicable, including carveouts for vested benefits and any D&O insurance and indemnification rights that survive termination pursuant to their terms) arising out of or any way related to Officer’s employment or termination of employment with the Company (the “Release”), and such release has become effective in accordance with its terms prior to the sixtieth (60th) day following the Termination Date (collectively, the “Release Conditions”); provided that the Company shall not release Officer from (i) fraud, (ii) material violation of law, (iii) willful misconduct or acts of bad faith, (iv) any right to clawback compensation under applicable law, regulation, or bilateral agreement or Company policy (including, without claim Section 16(f) of this Agreement), or (v) the right to enforce post-termination restrictive covenants to which Officer is subject.  For purposes of complying with Section 409A, (I) any payment or benefit described in Section 6(c) of this Agreement shall not be due and payable until the date that the Release becomes fully effective and non-revocable (such date, the “Release Effective Date”), (II) to the extent any payments are delayed pursuant to clause (I) of this sentence, such delayed amounts shall be paid in a lump-sum promptly following the Release Effective Date, (III) all payments due after the payment made pursuant to clause (II) of this sentence shall be made at the time prescribed in Sections 6(c) of this Agreement, and (IV) notwithstanding the clauses (II) and (III) of this sentence, to the extent the amounts described in Sections 6(c) of this Agreement constitute “non-qualified deferred compensation” that is subject to Section 409A, (A) to the extent Officer’s termination of employment with the Company occurs on or after November 2 of any calendar year, no amounts shall be paid pursuant to Section 6(c) of this Agreement until the calendar year following the year in which the Termination Date occurs, (B) to the extent any payments are delayed pursuant to clause (IV)(A) of this sentence, such delayed amounts shall be paid in a lump-sum promptly following (and, subject to the remainder of this subsection (vii), in no event later than thirty (30) days following) the later of the Release Effective Date and January 1 of the calendar year following the calendar year in which the Termination Date occurred, and (C) all payments due after the payment made pursuant to clause (IV)(B) of this sentence shall be made at the time prescribed in Sections 6(c) of this Agreement.  All other Bank obligations to Officer pursuant to this Agreement will be automatically terminated and completely extinguished, except as otherwise provided in Section 8 below.  Officer shall have no entitlement to any separation pay or termination benefits in connection with any termination described in this Section 6(c) as may be provided under any other Company plan, program or arrangement.

 

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(d)           Voluntary Termination.  In the event that Officer terminates Officer’s employment hereunder on Officer’s own initiative prior to the then-scheduled expiration of the Term other than by death or for Disability or for Good Reason, Officer agrees to provide the Company with at least thirty (30) days prior written notice (“Notice Period”) of such termination, provided, that, after receipt of such notice, the Bank may, in its sole discretion, accelerate the effective date of Officer’s resignation and the expiration of the Term to any date following the date of delivery of such notice without the payment of consideration therefor.  All other Company obligations to Officer pursuant to this Agreement will become automatically terminated and completely extinguished, except as provided in Sections 6(f) and 8.  For the avoidance of doubt, Officer will not be entitled to receive the payments described in Sections 6(c) or 6(e) in the event of Officer’s voluntary termination under this Section 6(d).

 

(e)            Termination in Connection With a Change of Control.  If Officer’s employment is terminated by the Company without Cause or due to death or Disability, Officer resigns for Good Reason, or by expiration of the Term, in any such case within ninety (90) days prior to the consummation of a Change of Control or within twenty-four (24) months following the consummation of a Change of Control, Officer shall be entitled to receive the following subject to the Release Conditions and the terms of Section 6(c)(vii): (i) (A) a lump sum payment equal to the Severance Payment, payable within sixty (60) days following such termination, and (B) the Pro-Rata Bonus Payment, payable on the Pro-Rata Bonus Payment Date; (ii) payment of COBRA premiums pursuant to Section 6(c)(vi); and (iii) any and all then unvested equity awards granted to Officer by Company shall be immediately vested and exercisable on the Termination Date.  Officer shall have no entitlement to any separation pay or termination benefits in connection with any termination described in this Section 6(e) as may be provided under any other Company plan, program or arrangement (including, without limitation, Section 6(c)).  Notwithstanding anything herein to the contrary, if any payments or benefits received or to be received by Officer under this Section 6(e), this Agreement or any other plan, arrangement or agreement (all such payments referred to herein as “Parachute Payments”) constitute “parachute payments” within the meaning of Code Section 280G and would, but for this Section, be subject to the excise tax imposed under Code Section 4999 (the “Excise Tax”), then prior to making the Parachute Payments, a calculation shall be made comparing (x) the Net Benefit (defined below) to Officer of the Parachute Payments after payment of the Excise Tax to (y) the Net Benefit to Officer if the Parachute Payments are limited to the extent necessary to avoid being subject to the Excise Tax.  Only if the amount calculated under (x) above is less than the amount under (y) above will the Parachute Payments be reduced to the minimum extent necessary to ensure that no portion of the Parachute Payments is subject to the Excise Tax.  “Net Benefit” shall mean the present value of the Parachute Payments net of all federal, state, local, foreign income, employment, and excise taxes.  Any reduction made pursuant to this Section 6(e) shall be made in a manner determined solely by the Bank that is consistent with the requirements under Section 409A.  All calculations and determinations under this Section shall be made by an independent accounting firm or independent tax counsel appointed by Bank (“Tax Counsel”) whose determinations shall be conclusive and binding on Company and Officer for these purposes.  For purposes of making the calculations and determinations required by this Section 6(e), Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Code Sections 280G and 4999.  Bank and Officer shall furnish to Tax Counsel with such information and documents as Tax Counsel may reasonably request in order to make its determinations under this Section.  Bank shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

 

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(f)            Accrued Amounts.  Upon the termination of Officer’s employment hereunder for any reason, Officer shall be entitled to Officer’s Base Salary through the Termination Date, any expenses due and payable pursuant to Section 5(b) above, any amount required to be paid by applicable law or pursuant to a Company Arrangement (except for any Company severance or termination benefit program, plan, practice or arrangement), and, any accrued but unpaid bonus amount due to Officer for any completed fiscal year pursuant to the applicable bonus arrangement as then in effect.

 

(g)           Regulatory Suspension. If Officer is suspended from office and/or temporarily prohibited from participating in the conduct of the Company’s affairs by a notice served under Section 8(e) or (g) of the Federal Deposit Insurance Act (“FDIA”), 12 USC 1818(e), (g) (or any successor thereto), the Company’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Company may in its discretion (i) pay Officer all or part of the compensation withheld while its obligations under this Agreement were suspended, and (ii) reinstate in whole or in part any of the obligations which were suspended.

 

(h)           Regulatory Removal or Prohibition.  If Officer is removed from office and/or permanently prohibited from participating in the conduct of the Company’s affairs by an order issued under Section 8(e) or (g) of the FDIA, 12 USC 1818(e), (g) (or any successor thereto), all obligations of the Company under this Agreement shall terminate as of the effective date of the order, but vested rights of the Parties shall not be affected.

 

(i)            Company Declared in Default.  If the Bank becomes in default (as defined in Section 3(x)(1) of the FDIA, 12 USC 1813(x)(1) (or any successor thereto)), all obligations under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the Parties.

 

(j)            Office of the Comptroller of the Currency.  All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Company: (i) by the Comptroller of the Office of the Currency (“OCC”) or his or her designee at the time the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Company under the authority contained in Section 13(c) of the FDIA, 12 USC 1823(c) (or any successor thereto); or (ii) by the Comptroller of the OCC or his or her designee at the time the Comptroller of the OCC or his or her designee approves a supervisory merger to resolve problems related to the operation of the Company or when the Company is determined by the Comptroller of the OCC to be in unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.

 

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(k)            Mitigation.  In no event shall Officer be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Officer under any of the provisions of this Agreement and except as provided in Section 6(c)(vi), any amounts payable pursuant to this Section 6 shall not be reduced by compensation Officer earns on account of employment with another employer.

 

7.            Application of Section 409A.

 

Notwithstanding anything set forth in this Agreement to the contrary, no amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A (the “Section 409A Regulations”) shall be paid in connection with Officer’s termination of employment (or terms of similar effect under Section 409A) with the Company unless and until Officer has incurred a “separation from service” (within the meaning of the Section 409A Regulations) with the Company.  Furthermore, to the extent that Officer is a “specified employee” within the meaning of the Section 409A Regulations as of the date of Officer’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Officer’s separation from service shall be paid to Officer before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Officer’s separation from service or, if earlier, the date of Officer’s death following such separation from service.  All such amounts that would, but for this section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.  For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments under this Agreement that may be excluded from Section 409A either as “separation pay due to an involuntary separation from service” or as a “short-term deferral” (each as described in Section 409A) shall be excluded from Section 409A to the greatest extent possible.  The Bank intends that, to the greatest extent possible, income provided to Officer pursuant to this Agreement will not be subject to taxation under Section 409A.  The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A. However, the Company does not guarantee any particular tax effect for income provided to Officer pursuant to this Agreement.  In any event, except for the Bank’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Officer, the Company Group shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Officer pursuant to this Agreement.

 

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8.            Indemnification.

 

(a)           If Officer is made a party, is threatened to be made a party, or reasonably anticipates being made a party, to any Proceeding by reason of the fact that Officer is or was a director, officer, member, employee, agent, manager, trustee, consultant or representative of the Company Group or is or was serving at the request of the Company Group, or in connection with Officer’s service hereunder, as a director, officer, member, employee, agent, guarantor, manager, trustee, consultant or representative of another Person, or if any Claim is made, is threatened to be made, or is reasonably anticipated to be made, that arises out of or relates to Officer’s service in any of the foregoing capacities, then Officer shall promptly be indemnified and held harmless, to the fullest extent permitted or authorized by applicable law and consistent with Company bylaws and other governing documents (except for any claim relating to or arising from Officer’s fraud, gross negligence, bad faith or willful misconduct), against any and all costs, expenses, liabilities and losses (including attorneys’ and other professional fees and charges, judgments, interest, expenses of investigation, penalties, fines, excise taxes or penalties and amounts paid or to be paid in settlement) incurred or suffered by Officer in connection therewith or in connection with seeking to enforce Officer’s rights under this Section 8(a), and such indemnification shall continue as to Officer even if Officer has ceased to be a director, officer, member, employee, agent, manager, trustee, consultant or representative of the Company or other Person and shall inure to the benefit of Officer’s heirs, executors and administrators.  Officer shall be entitled to prompt advancement of any and all costs and expenses (including attorneys’ and other professional fees and charges) incurred by Officer in connection with any such Proceeding or Claim, or in connection with seeking to enforce Officer’s rights under this Section 8(a), any such advancement to be made within 15 days after Officer gives written notice, supported by reasonable documentation, requesting such advancement.  Such notice shall include an agreement by Officer to repay the amount advanced if Officer is ultimately determined not to be entitled to indemnification against such costs and expenses.  Nothing in this Agreement shall operate to limit or extinguish any right to indemnification, advancement of expenses, or contribution that Officer would otherwise have (including by agreement or under applicable law).  This section shall survive termination of this Agreement. Neither the failure of the Company (including the Board, independent legal counsel or equity holders) to have made a determination prior to the commencement of any Proceeding concerning payment of amounts claimed by Officer under Section 8(a) that indemnification of Officer is proper because Officer has met the applicable standard of conduct, nor a determination by the Company (including the Board, independent legal counsel or equity holders) that Officer has not met such applicable standard of conduct, shall create a presumption that Officer has not met the applicable standard of conduct.

 

(b)           Notwithstanding any other provision in this Section 8 or otherwise in the Agreement, any and all indemnification payments made to Officer are subject to and limited by the provisions set forth in 12 USC 1828(k) and its implementing regulations (or any successor thereto).

 

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9.            Confidentiality.

 

(a)           Obligation to Maintain Confidentiality.  (i) Officer acknowledges that the success of the Company Group depends upon the use and protection of a large body of confidential and proprietary information.  All of such confidential and proprietary information now existing or to be developed in the future will be referred to in this Agreement as “Confidential Information”.  Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is developed or used by the Company Group relating to their business, operations, employees, customers, program managers, suppliers or distributors, including: confidential or proprietary names and records, purchase orders, financial data, pricing information and price lists; business plans and market strategies and arrangements; books, records, manuals, mailing lists, purchasing materials, purchasing records, personnel records and quality control records; methods; trademarks, copyrights and patents, and applications therefor; trade secrets; inventions, processes, procedures, research records, market surveys and marketing know-how; and software, computer programs, data bases and documentation thereof.  Officer agrees that Officer shall not disclose to any unauthorized person or use for Officer’s own account any of such Confidential Information, unless and to the extent that any Confidential Information (x) becomes generally known to and available for use by the public other than as a result of Officer’s acts or omissions to act or (y) is required to be disclosed pursuant to any applicable law or court order.  Officer agrees to deliver to the Bank at the end of the Term, or at any other time the Bank may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of the Company Group (including, without limitation, all Confidential Information) that Officer may then possess or have under Officer’s control.  (ii) Nothing in this Agreement prohibits Officer from reporting possible violations of federal law or regulation to any governmental agency or entity, or making other disclosures, that are protected under the whistleblower or similar protective provisions of federal law or regulation (or similar state laws).  Officer will not need the prior authorization of the Bank to make any such reports or disclosures and Officer will not be required to notify the Bank that Officer has made such reports or disclosures, provided, that nothing shall waive any attorney client or similar privilege of the Company Group. Nothing in this Agreement in any way prohibits or is intended to restrict or impede Officer from exercising protected rights to the extent that such rights cannot be waived by agreement. Nothing herein will prevent receipt by Officer of any rewards (or similar awards or entitlements) in respect of the provision of information under any such whistleblower or similar protective provision of federal law or regulation (or similar state laws).  Officer will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (x) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law, or (y) in a complaint or other document that is filed under seal in a lawsuit or other proceeding.  If Officer files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Officer may disclose trade secrets to Officer’s attorney and use the trade secret information in the court proceeding if Officer (I) files any document containing the trade secret under seal and (II) does not disclose the trade secret, except pursuant to court order.

 

(b)           Ownership of Intellectual Property.  Officer agrees to make prompt and full disclosure to the Bank of all ideas, discoveries, trade secrets, inventions, innovations, improvements, developments, methods of doing business, processes, programs, designs, analyses, drawings, reports, data, software, firmware, logos and all similar or related information (whether or not patentable and whether or not reduced to practice) that relate to the Company Group’s actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, acquired, contributed to, made, or reduced to practice by Officer (either solely or jointly with others) while employed by the Company or during the ninety (90) days thereafter (collectively, “Work Product”).  Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” under the copyright laws of the United States, and ownership of all rights therein shall vest in the Company Group.  To the extent that any Work Product is not deemed to be a “work made for hire”, Officer hereby assigns and agrees to assign to the Company Group all right, title and interest, including without limitation, the intellectual property rights that Officer may have in and to such Work Product.  Officer shall promptly perform all actions reasonably requested by the Bank (whether during or after the Term) to establish and confirm the Company Group’s ownership (including, without limitation, providing testimony and executing assignments, consents, powers of attorney, and other instruments).  Officer understands, however, that there is no obligation being imposed on Officer to assign to the Company Group any invention falling within the definition of Work Product for which no Company Group equipment, supplies, facility, or trade secret information was used and that was developed entirely on Officer’s own time, unless: (i) such Work Product relates to the Business or to their actual or demonstrably anticipated research or development, or (ii) the Work Product results from any work performed by Officer for them under this Agreement.  Officer has identified and listed in Exhibit C attached hereto all Work Product that is or was owned by Officer or was written, discovered, made, conceived or first reduced to practice by Officer alone or jointly with another person prior to Officer’s employment under this Agreement.  If no such Work Product is listed, Officer represents to the Bank that Officer does not now nor has Officer ever owned, nor has Officer made, any such Work Product.

 

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(c)           Third Party Information.  Officer understands that the Company Group will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company Group to maintain the confidentiality of such information and to use it only for certain limited purposes.  During the Term and thereafter, and without in any way limiting the provisions of Section 9(a), Officer will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company Group who need to know such information in connection with their work for the Company Group) or use, except in connection with Officer’s work for the Company, Third Party Information unless expressly authorized in writing by the Bank.

 

(d)           Use of Information of Prior Employers.  During Officer’s employment with the Company, Officer shall not use or disclose to the Company Group any confidential information or trade secrets, if any, of any former employers or any other person to whom Officer has an obligation of confidentiality, and shall not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom Officer has an obligation of confidentiality unless consented to in writing by the former employer or person.  Officer shall use in the performance of Officer’s duties only information that is (i) generally known and used by persons with training and experience comparable to Officer’s and that is (x) common knowledge in the industry or (y) is otherwise legally in the public domain, (ii) otherwise provided or developed by the Company or (iii) in the case of materials, property or information belonging to any former employer or other person to whom Officer has an obligation of confidentiality, approved for such use in writing by such former employer or person.

 

10.          Non-Solicitation; Non-Competition; Non-Disparagement.

 

(a)           Officer agrees that during the Term and for a period of twenty-four (24) months following the Termination Date (the “Restricted Period”), Officer will not, either directly or indirectly, separately or in association with others, (i) interfere with, impair, disrupt or damage the Company Group’s business or business relations, including by soliciting, encouraging or recruiting any of the Company Group’s employees, customers, program managers, or business relations or causing others to solicit or encourage any of the Company Group’s employees, customers, program managers, or business relations to discontinue their employment or service with, or discontinue or reduce their dealings with the Company Group, (ii) hire or engage (or attempt to hire or engage) any Company Group employee or service provider, or (iii) usurp any business opportunity presented to the Company Group or Officer during the Term.

 

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(b)           In consideration of the Bank’s obligations under this Agreement, for the Restricted Period, or such lesser period as may be designated by the Bank in writing at any time, Officer will not engage in, or prepare to engage in, any “Competitive Activity,” defined as:

 

(i)          (A) holding the position of partner or principal (or similar role) in a Competitive Enterprise, (B) founding or independently conducting a Competitive Enterprise, (C) acquiring a greater than one percent (1%) equity, voting, revenue, income, profit, loss or other economic interest in a Competitive Enterprise the equity of which is publicly traded on a recognized securities exchange, or (D) acquiring any equity, voting, revenue, income, profit, loss or other economic interest in a Competitive Enterprise the equity of which is not publicly traded on a recognized securities exchange; and/or

 

(ii)         rendering services to a Competitive Enterprise (whether as an employee, consultant, independent contractor or otherwise).

 

For purposes of this Agreement, “Competitive Enterprise” means an enterprise in North America (or such other location where the Company Group does or has active plans to do business) engaged in business related to (I) banking, but only with respect to any financial institution that has an office or retail branch within fifty (50) miles of an office or retail branch of the Company Group as of date of the Termination Date, (II) prepaid debit cards, (III) payments, (IV) insurance premium finance, (V) any industry similar to or otherwise related to any of the businesses described in the foregoing clauses (I) through (IV), (VI) any other business in which the Company Group may be engaged during the Term, or (VII) any business in which the Company Group was actively contemplating engagement at any time during the six (6) month period prior to the Termination Date.

 

(c)           Officer agrees and covenants that because of Officer’s experience with and relationship to the Company Group, Officer will have access to and learn about all of the Company Group’s Customer Information.  “Customer information” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, and other identifying facts and circumstances specific to the customer or program manager and relevant to the services provided to customer or program manager.  Officer understands and acknowledges that loss of this customer or program manager relationship and/or goodwill will cause significant and irreparable harm.  Officer agrees and covenants, during the Restricted Period, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact, or meet with the Company Group’s current or prospective customers or program managers that were previously identified by the Company Group and any former customers or program managers who were customers or program managers within the twenty-four (24) months preceding the date of termination of Officer’s employment for purposes of offering or accepting services similar to or competitive with those offered by the Company Group.

 

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(d)           Officer agrees and covenants that, other than in the good faith performance of Officer’s duties to the Company, Officer will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company Group or its businesses, or any of its employees, officers, and existing and prospective customers, program managers, investors and other associated third parties.  This Section 10(d) does not, in any way, restrict or impede Officer from exercising protected rights, to the extent that such rights cannot be waived by agreement, including such rights referenced in Section 9(a)(ii), or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. Except as provided under Section 9(a)(ii), Officer shall promptly provide written notice of any such order to pursuant to Section 15 of this Agreement.

 

The Bank agrees and covenants that it shall cause its executive officers and its Board members, to refrain from publishing or communicating to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning Officer other than in the good faith performance of their obligations to the Company Group. Promptly following the time the Board is notified in writing or otherwise becomes aware of the publishing or communicating by non-executive officer employees of defamatory or disparaging remarks, comments or statements concerning Officer to any person or entity or in any public forum, the Bank shall take commercially reasonable efforts to direct such employees to cease  publishing or communicating any such remarks, comments or statements.

 

Officer acknowledges that (A) the provisions of this Section 10 are essential to the Company Group; (B) that the Bank would not enter into this Agreement if it did not include this Section 10; and (C) that damages sustained by the Company Group as a result of a breach of this Section 10 cannot be adequately remedied by monetary damages.  Furthermore, Officer agrees that the Bank, notwithstanding any other provision of this Agreement, and in addition to any other remedy it may have under this Agreement, or at law, will be entitled to injunctive and other equitable relief to prevent or curtail any breach of this Section 10.  Officer further acknowledges and agrees that the restrictions contained herein are reasonable and do not hinder Officer’s ability to earn a living in the future.

 

11.          No Conflict of Interest.

 

During Officer’s employment with the Company, Officer must not engage in any work, paid or unpaid, that creates the appearance of or an actual conflict of interest.  Such work shall include, but is not limited to, directly or indirectly competing with the Company Group in any way, or acting as an officer, director, employee, consultant, stockholder, volunteer, lender, or agent of any business enterprise or business opportunity of the same nature as, or which is in direct competition with, the business in which the Company Group is now engaged or in which the Company Group becomes engaged during Officer’s employment with the Company, as may be determined by the Board in its sole discretion. Officer will not be restricted from engaging in an activity, business or business opportunity that might be otherwise prohibited hereunder if Officer, prior to engaging in such activity, business or business opportunity, discloses such activity in writing to the Board, offers such opportunity to the Company, the Board formally rejects such opportunity in writing, and the Board consents in writing to Officer engaging in such activity, business or business opportunity (“Waived Opportunity”).  If the Company believes such a conflict exists during Officer’s employment, the Company may ask Officer to choose to discontinue the other work or resign employment with the Company.

 

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12.          Assignability; Binding Nature.

 

(a)            This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Officer) and permitted assigns.

 

(b)            No rights or obligations of the Bank under this Agreement may be assigned or transferred by the Bank, except that such rights and obligations may be assigned or transferred pursuant to a merger, consolidation or other combination in which the Company is not the continuing entity, or a sale or liquidation of all or substantially all of the business and assets of the Company; provided that the assignee or transferee is the successor to all or substantially all of the business and assets of the Company and such assignee or transferee expressly assumes the liabilities, obligations and duties of the Company as set forth in this Agreement.  In the event of any merger, consolidation, other combination, sale of business and assets, or liquidation as described in the immediately preceding sentence, the Bank shall use its best reasonable efforts to cause such assignee or transferee to promptly and expressly assume the liabilities, obligations and duties of the Company hereunder.

 

(c)            No rights or obligations of Officer under this Agreement may be assigned or transferred by Officer other than Officer’s rights to compensation and benefits, which may be transferred to Officer’s beneficiaries by will or trust.

 

13.          Representations.

 

(a)            The Bank represents and warrants that:  (i) it is fully authorized to enter into this Agreement and to perform its obligations hereunder; (ii) the execution, delivery and performance of this Agreement by it does not violate any applicable law, regulation, order, judgment or decree or any agreement, arrangement, plan or corporate governance document (x) to which it is a party or (y) by which it is bound; and (iii) upon the execution and delivery of this Agreement by the Parties, this Agreement shall be its valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

 

(b)            Officer represents and warrants that:  (i) delivery and performance of this Agreement by Officer does not violate any law or regulation applicable to Officer; (ii) delivery and performance of this Agreement by Officer does not violate any applicable order, judgment or decree or any agreement to which Officer is a party or by which Officer is bound; and (iii) upon the execution and delivery of this Agreement by the Parties, this Agreement shall be a valid and binding obligation of Officer, enforceable against Officer in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

 

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14.          Arbitration.  In the event of any dispute or claim relating to or arising out of the employment relationship between Officer and the Bank or the termination of that relationship (including, but not limited to, any claims of breach of contract, wrongful termination or age, sex, race, disability or other discrimination), Officer and the Bank agree that all such disputes shall be resolved by confidential, binding arbitration conducted before a single neutral arbitrator in Sioux Falls, SD, pursuant to the rules for arbitration of employment disputes by the American Arbitration Association (available at www.adr.org).  The arbitrator shall permit adequate discovery.  In addition, the arbitrator is empowered to award all remedies otherwise available in a court of competent jurisdiction; however Officer and the Bank each retain the right to seek provisional remedies as permitted by law.  Any judgment rendered by the arbitrator may be entered by any court of competent jurisdiction.  The arbitrator shall issue an award in writing and state the essential findings and conclusions on which the award is based.  By executing this Agreement, Officer and the Bank are both waiving the right to a jury trial with respect to any such disputes.  This arbitration agreement does not include claims that, by law, may not be subject to mandatory arbitration.  Each Party shall bear its own expenses in any arbitration convened pursuant to this Section 14 and shall split evenly the costs of the arbitration; provided, however, that the Bank will pay the costs of such arbitration to the extent necessary as a condition precedent to enforce this arbitration obligation.

 

15.          Notices.  Any notice, consent, demand, request, or other communication given to a Person in connection with this Agreement shall be in writing and shall be deemed to have been given to such Person (x) when delivered personally to such Person or (y) provided that a written acknowledgment of receipt is obtained, five days after being sent by prepaid certified or registered mail, or two days after being sent by a nationally recognized overnight courier, to the address (if any) specified below for such Person (or to such other address as such Person shall have specified by ten days’ advance notice given in accordance with this Section 15) or (z) in the case of the Bank only, on the first business day after it is sent by facsimile to the facsimile number set forth below (or to such other facsimile number as shall have specified by ten days’ advance notice given in accordance with this Section 15), with a confirmatory copy sent by certified or registered mail or by overnight courier in accordance with this Section 15.

 

	
If to the Company:

	
5501 S. Broadband Lane

	 	
Sioux Falls, SD  57108

	 	
Attn: Chairman of the Board of Directors

	 	
 

	 	
With a copy to (which shall not constitute notice hereunder):

	 	
Austin S. Lilling

	 	
Katten Muchin Rosenman LLP

	 	
575 Madison Avenue

	 	
New York, NY 10022

	 	 
	
If to Officer:

	
The address of Officer’s principal residence as it appears in the Company records, with a copy to Officer (during the Term) at Officer’s principal office at the Company.

	 	 
	
If to a beneficiary

	 
	
of Officer:

	
The address most recently specified by Officer or beneficiary of Officer.

16.          Miscellaneous.

 

(a)            Entire Agreement.  This Agreement (together with Exhibits A and B) contains the entire understanding and agreement between the Parties concerning the specific subject matter hereof and supersedes in its entirety, as of the Effective Date, any prior employment agreement between Officer and the Bank.

 

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(b)           Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is set forth in a writing that expressly refers to the provision of this Agreement that is being amended and that is signed by Officer and by an authorized individual on behalf of the Bank.  No waiver by any Person of any breach of any condition or provision contained in this Agreement shall be deemed a waiver of any similar or dissimilar condition or provision at the same or any prior or subsequent time.  To be effective, any waiver must be set forth in a writing signed by the waiving Person and must specifically refer to the condition(s) or provision(s) of this Agreement being waived.

 

(c)           Inconsistencies.  In the event of any inconsistency between any provision of this Agreement and any provision of any other Company Arrangement, the provisions of this Agreement shall control, to the extent it would not violate Section 409A.

 

(d)           Interpretation.  The headings of the sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.  References to masculine pronouns herein shall be deemed to include references to feminine pronouns where applicable.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.”

 

(e)           Beneficiaries/References.  Officer shall be entitled, to the extent permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit due or payable hereunder following Officer’s death by giving written notice thereof.  In the event of Officer’s death or a judicial determination of Officer’s incompetence, references in this Agreement to Officer shall be deemed, where appropriate, to refer to Officer’s beneficiary, estate or other legal representative.

 

(f)            Clawback. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Officer pursuant to this Agreement or any other agreement or arrangement with Company Group which is subject to recovery under any law, government regulation. or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by Company pursuant to any such law, government regulation or stock exchange listing requirement)

 

(g)           Survival. Sections 6 (“Termination of Employment”), 8 (“Indemnification”), 9 (“Confidentiality”), 10 (“Non-Solicitation; Non-Competition; Non‐Disparagement”), 12 (“Assignability; Binding Nature”), 13 (“Representations”), 14 (“Arbitration”), 15 (“Notices”), and 16 (“Miscellaneous”) of this Agreement shall survive Officer’s termination of employment with the Company for so long as is necessary to give effect to the terms thereof.

 

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(h)           Severability.  In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law.  If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.

 

(i)            Withholdings.  The Bank may withhold from any amount or benefit payable under this Agreement taxes and other amounts that it is required to withhold pursuant to any applicable law or regulation.

 

(j)            Governing Law.  This Agreement shall be governed, construed, performed and enforced in accordance with its express terms, and otherwise in accordance with the laws of the state of South Dakota, without reference to principles of conflict of laws.  Each Party consents to the jurisdiction and venue of the state or federal courts located in Sioux Falls, SD, at the time any action, suit, or Proceeding arising out of or relating to this Agreement is brought.

 

(k)            Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument.  Signatures delivered by facsimile shall be effective for all purposes.

 

(l)             Exhibits.  All Exhibits hereto are hereby incorporated into this Agreement and are hereby made a party hereof as if set out in full herein.

 

(m)          Other Regulatory Restrictions.  Notwithstanding any other provision in this Agreement, any payments made to Officer pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC 1828(k) and Federal Deposit Insurance Corporation regulation 12 CFR Part 359, Golden Parachute and Indemnification Payments (or successor thereto). To the extent applicable, and without limiting any other rights of the Bank under this Agreement, incentive-based or other compensation due or payable to Officer is subject to the restrictions under Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, all similar laws, applicable regulations and other published guidance thereto (collectively referred to as the “Act”), and the Bank may, at any time and from time to time, unilaterally modify any such compensation due and any compensation arrangement hereunder in good faith and to the extent reasonably necessary (including implementing any deferral, clawback or other modification to prevent inappropriate risk taking that is the subject of the Act) so as to comply with the Act.  The undersigned agree to work in good faith to comply at all times with the Act, to the extent the same may be applicable.

 

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IN WITNESS WHEREOF, Officer has executed this Agreement, and the Bank has caused this Agreement to be executed by its duly authorized officer, all as of the date first set forth above.

 

	 	
METABANK

	 
	 		 
	 	
By:

	/s/ Rodney G. Muilenburg	 
	 		
Name:

	Rodney G. Muilenburg	 
	 		Title:	
Chairman of the Compensation

Committee of the Bank’s Board of

Directors

	 

 

	 	
OFFICER

	 	 
	 	
/s/ J. Tyler Haahr

	 	
J. Tyler Haahr

 

[Signature Page to Employment Agreement]

 

EXHIBIT A

DEFINITIONS

 

(a)           “Affiliate” of a Person shall mean any Person that directly, or indirectly through one or more other Persons, controls, is controlled by, or is under common control with, such Person.

 

(b)           “Business” shall mean any and all businesses conducted by or definitively planned to be conducted by the Company Group.

 

(c)           “Cause” shall mean or be deemed to exist if, as determined by the Board in its sole, reasonable discretion:

 

(i)          Officer commits a (A) felony (or procedural equivalent), (B) crime of moral turpitude, or (C) another crime that is materially injurious to the Company Group;

 

(ii)         in carrying out Officer’s duties hereunder, Officer engages in conduct, whether by act or omission, that constitutes gross negligence or willful misconduct;

 

(iii)        Officer materially breaches any provision of this Agreement (including the provisions contained in Sections 9 and 10) or any material Company policy, and Officer fails to cure such breach, in each case, to the extent reasonably curable, to the reasonable satisfaction of the Board within thirty (30) days after Officer’s receipt of written notice thereof;

 

(iv)        Officer refuses to comply with, or repeatedly fails to undertake good faith efforts to comply with, a lawful directive from the Board, and such failure to perform continues for fifteen (15) business days after Officer’s receipt of written notice thereof, provided, however, that Officer’s non-compliance with the Board’s directive will not constitute Cause if Officer notifies the Board in writing within fifteen days of receiving said directive that Officer reasonably believes that performance of such directive would constitute an ethical breach, moral turpitude, gross negligence, fraud, and/or violate any applicable law, and, following such written notification by Officer, the Board elects, within Officer’s sole and exclusive discretion, to rescind such directive;

 

(v)        Officer engages, whether by act or omission, in any theft, fraud, misappropriation or embezzlement with respect to the Company Group or any customer or client thereof or engages in any other misconduct that results in material personal gain to Officer at the expense of the Company Group or material injury (whether monetarily or reputationally) to any member of the Company Group; or

 

(vi)        Officer’s use of alcohol or drugs (other than consistent with a lawful prescription) which materially impairs Officer’s performance of Officer’s duties to the Company Group;

 

(vii)       Officer’s failure to cooperate in good faith with any governmental or internal investigation regarding the Company Group; or

 

(viii)      Officer engages in or displays personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated material duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.

 

(d)           “Change of Control” is defined as any one of the following occurrences:  (1) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of the securities of the Company representing more than 50% of (A) the outstanding equity shares or units of the Company or (B) the combined voting power of the Company’s then-outstanding securities; or (2) the sale or disposition of all or substantially all of the Company’s assets (or any transaction having similar effect is consummated); or (3) the Company is party to a merger or consolidation that results in the holders of voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (4) the dissolution or liquidation of the Company; provided, however, that for purposes of this Agreement, the following transactions shall not constitute a Change of Control: (i) any acquisition of Company securities by the Company Group; (ii) any acquisition of Company securities by any employee benefit plan of the Company Group; or (iii) any restructuring of the Company or the Company Group.  Notwithstanding the foregoing, to the extent amounts of “non-qualified deferred compensation” subject to Section 409A become due to Officer in connection with a Change of Control, then for purposes of such amount, the events otherwise constituting a Change of Control will only constitute a Change of Control if they also constitute a “change in control event” (as described in Treas. Reg. Section 1.409A-3(i)(5)(i)) with respect to the Company.

 

(e)           “Claim” shall include any claim, demand, request, investigation, dispute, controversy, threat, discovery request, or request for testimony or information.

 

(f)            “Company Arrangement” shall mean any plan, program, agreement, arrangement, Officer handbook, policy, or corporate governance document of the Company or of any of its Affiliates.

 

(g)           “Company Group” shall have the meaning set forth in the Agreement.  For the avoidance of doubt, reference in the Agreement or any Exhibit to the Company Group shall, unless the context clearly indicates otherwise, be deemed to be a reference to each member of the Company Group (rather than a collective reference to all members of the Company Group).

 

(h)           “Good Reason” shall mean Officer’s voluntary resignation with Company within ninety (90) days following any of the following, which remains uncured by the Company after a thirty (30) day remedial period following written notice from Officer within which to cure such purported Good Reason: (i) a material breach of any material provision of this Agreement by the Company; or (ii) a material change of Officer’s position and/or duties so that Officer’s duties are (A) no longer consistent with the position of a senior executive or (B) Officer no longer reports to the Board or the Officer’s then direct supervisor; or (iii) the Company relocates Officer’s principal place of work to a location more than ten (10) miles from the Company’s headquarters in Sioux Falls, SD, without Officer’s prior written approval. In order to constitute Good Reason hereunder, Officer must provide the Company with written notice of the grounds purporting to constitute Good Reason within thirty (30) days following such initial occurrence.

 

(i)            “Officer” shall have the meaning set forth in the preamble to this Agreement, as may be modified by Section 16(e).

 

(j)            “Parties” shall mean, collectively, Officer and the Company.

 

(k)           “Party” shall mean either of the Parties.

 

(l)            “Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, estate, board, committee, agency, body, employee benefit plan, or other person or entity.

 

(m)          “Proceeding” shall include any actual, threatened or reasonably anticipated action, suit or proceeding, whether civil, criminal, administrative, investigative, appellate, formal, informal, arbitration, or other, pertaining to the meaning, performance, interpretation, enforcement, or termination of this Agreement.

 

(n)           “Termination Date” shall mean the date on which Officer’s employment hereunder terminates in accordance with this Agreement.

 

***

 

EXHIBIT A

PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT

(2016 GRANT)

 

FORM OF

META FINANCIAL GROUP, INC.

2002 OMNIBUS INCENTIVE PLAN

PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is hereby made and entered into as of November 16, 2016 by Meta Financial Group, Inc. (the “Corporation”) and J. Tyler Haahr (the “Grantee”), in accordance with the Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as it may be amended from time to time (the “Plan”).  Any capitalized term used but not defined in this Agreement shall have the meaning set forth in the Plan.

WHEREAS, the Grantee entered into an Employment Agreement (the “Employment Agreement”) with MetaBank, a wholly owned subsidiary of the Corporation, effective October 1, 2016;

WHEREAS, in consideration of the Grantee’s execution of the Employment Agreement, the Committee has determined that it is in the best interests of the Corporation and its shareholders to grant the award of Performance-Based Restricted Shares provided for herein.

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:

1.             Restricted Shares.  Effective November 16, 2016 (the “Grant Date”), the Corporation hereby awards to the Grantee 89,156 shares (the “Restricted Shares”) of the common stock of the Corporation, par value $.01 per share (“Common Stock”), pursuant to the Plan and subject to the restrictions and other terms and conditions set forth in this Agreement.  A copy of the Plan, as currently in effect, is incorporated by reference and is attached to this Agreement.

2.             Transfer Restrictions and Restriction Period.

		a.	
During the period commencing on the Grant Date and ending on October 1, 2024 (the “Restriction Period”), any unvested Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered by the Grantee, except by will or the laws of descent and distribution in the event of the Grantee’s death, pursuant to a qualified domestic relations order as defined in the Code or the rules thereunder, or as provided in this Agreement.  Except as otherwise provided in the Plan or this Agreement or as determined by the Committee in its discretion in accordance with Section 6(b) of the Plan, provided that the Grantee maintains Continuous Service during the Restriction Period, and the required performance criteria set forth in Section 2.b. of this Agreement are satisfied, the Restricted Shares shall vest and become transferable in accordance with the following schedule (provided that any fractional shares resulting from application of the following schedule will be reduced to the nearest whole share and released from the restrictions hereunder only upon such fractional share becoming a whole share under the terms of this Agreement):

 

	
Vesting Date

	
Number of Restricted Shares that Vest

	
October 1, 2017

	
11,145

	
October 1, 2018

	
11,145

	
October 1, 2019

	
11,145

	
October 1, 2020

	
11,145

	
October 1, 2021

	
11,144

	
October 1, 2022

	
11,144

	
October 1, 2023

	
11,144

	
October 1, 2024

	
11,144

 

		b.	
For  the four quarters ending June 30 immediately preceding each Vesting Date in Section 2.a. of this Agreement (the “Measurement Period”), the Committee shall certify whether MetaBank (together with its Affiliates, as applicable) has satisfied capital requirements under the Basel III Capital Rules or such other capital requirements as may be promulgated by the Federal Reserve and the Office of the Comptroller of the Currency (or their successors having jurisdiction over such matters) (the “Capital Requirements”); provided that, solely for the October 1, 2017 Vesting Date, the Measurement Period shall be the period beginning January 1, 2017 and ending June 30, 2017.  If the Committee determines that MetaBank (and applicable Affiliates) has not satisfied the Capital Requirements for the Measurement Period preceding the applicable Vesting Date, the number of Restricted Shares that would otherwise vest on the applicable Vesting Date following the Measurement Period shall be forfeited without consideration therefor.  The Committee shall look at the Capital Requirements for each Measurement Period immediately preceding each Vesting Date in Section 2.a. and make a good faith determination as to whether the Capital Requirements have been satisfied with respect to the Measurement Period preceding the applicable Vesting Date and such decision shall not affect any portion of the Restricted Shares that are scheduled to vest in subsequent fiscal years.

3.             Documentation of Restricted Shares.  As of the Grant Date, the Corporation shall issue Common Stock either in certificate form or book-entry form in the Grantee’s name with respect to the Restricted Shares and such certificates shall be held on behalf of the Grantee until such Restricted Shares become vested as described in Section 2 above.  Such certificates shall bear the following (or a similar) legend or, if issued in book-entry, include a similar notation:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) contained in the Corporation’s 2002 Omnibus Incentive Plan, as amended, and an agreement entered into between the registered owner and the Corporation.  Copies of such Plan and the agreement are on file in the offices of the Secretary of the Corporation, 5501 South Broadband Lane, Sioux Falls, South Dakota 57108.”

The Corporation may require the Grantee to execute and deliver stock powers in favor of the Corporation with respect to the certificates representing the Restricted Shares.

 

4.             Delivery of Shares of Common Stock.  Upon the vesting of the Restricted Shares in accordance with Section 2, the Corporation shall, as applicable, either remove the restrictive notations on any such shares of Restricted Stock issued in book-entry form or deliver to the Grantee (or, if the Grantee has died, the Grantee’s legal representative) a certificate representing such Common Stock free of the restrictions described in Section 2 and excluding the restrictive legend described in Section 3.

The Corporation’s obligation to deliver shares of Common Stock hereunder shall, if the Committee so requires, be conditioned upon the receipt of a representation as to the investment intention of the Grantee or any other person to whom such shares are to be delivered, in such form as the Committee shall determine to be necessary or advisable to comply with the Securities Act of 1933, as amended, or any other federal, state or local securities law or regulation.  In requesting any such representation, the Committee may provide that such representation requirement shall become inoperative upon a registration of such shares or other action eliminating the necessity of such representation under the Securities Act of 1933 or other securities law or regulation.  The Corporation shall not be required to deliver any Common Stock upon the vesting of the Restricted Shares prior to (i) the admission of such shares to listing on any stock exchange or system on which the shares of Common Stock may then be listed, and (ii) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Committee shall determine to be necessary or advisable.

5.            Termination of Service or Death of the Grantee.  Except as otherwise provided in the Employment Agreement, if the Grantee ceases Continuous Service for any reason other than death, total or partial disability, Retirement, termination without Cause, or resignation for Good Reason (“Cause” and “Good Reason” shall have the same meanings as defined by the Employment Agreement), all Restricted Shares that are unvested at the time of such termination of Continuous Service automatically shall be forfeited to the Corporation.  If the Grantee ceases to maintain Continuous Service due to death, total or partial disability, Retirement, or termination without Cause, or resignation for Good Reason, all Restricted Shares that are unvested at the time of such termination of Continuous Service shall vest in accordance with the terms of the Grantee’s Employment Agreement with MetaBank, or if such Employment Agreement is silent with respect to such matters, then in accordance with the Plan, as applicable.  If the Continuous Service of the Grantee is terminated for Cause, all rights under this Agreement shall expire immediately upon the Corporation’s notification to the Grantee of such termination.

6.            Adjustments for Changes in Capitalization of the Corporation.  In the event of any change in the outstanding shares of Common Stock by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, or any change in the corporate structure of the Corporation or in the number of shares of Common Stock, the number and class of shares covered by this Agreement shall be proportionately and equitably adjusted by the Committee, whose determination shall be conclusive.

7.             Effect of Change in Control.  Without limiting any rights of the Committee under the Plan, the treatment of unvested Restricted Shares in connection with a “Change of Control” (as defined in the Employment Agreement) shall be determined under the Grantee’s Employment Agreement with MetaBank.

 

8.             Stockholder Rights with respect to Restricted Shares.  Subject to the restrictions and limitations set forth in the Plan and this Agreement, the Grantee shall have all of the rights of a stockholder of the Corporation with respect to the Restricted Shares, including, but not limited to, the right to receive all dividends paid on the Restricted Shares and the right to vote the Restricted Shares.

9.             Binding Effect of Agreement.  The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and the successors and assigns of the Corporation and any person to whom the Restricted Shares are transferred by will or by the laws of descent and distribution.

10.           Withholding Tax.  Upon the vesting of the Restricted Shares in accordance with Section 2 (or at such earlier time, if any, that the Grantee elects under Code Section 83(b) to include the value of the Restricted Shares in taxable income), the Corporation shall have the right to: (i) require the Grantee or such other person to pay to the Corporation the amount of any taxes which the Corporation or any of its Affiliates is required to withhold with respect to such Restricted Shares; (ii) to retain, or sell without notice, a sufficient number of such shares to cover the amount required to be withheld or in lieu of any of the foregoing; or (iii) to withhold a sufficient sum from the Grantee’s compensation payable by the Corporation to satisfy the Corporation’s tax withholding requirements.  The Corporation shall have the right to deduct from any dividends paid with respect to the Restricted Shares the amount of any taxes the Corporation is required to withhold with respect to such dividend payments.  The Corporation’s method of satisfying its withholding obligations shall be solely in the discretion of the Corporation, subject to applicable federal, state and local law.

11.           Notices.  All notices hereunder to the Corporation shall be delivered or mailed to it addressed to the Secretary of Meta Financial Group, Inc., 5501 South Broadband Lane, Sioux Falls, South Dakota 57108.  Any notices hereunder to the Grantee shall be delivered personally or mailed to the Grantee’s address noted below.  Such addresses for the service of notices may be changed at any time provided written notice of the change is furnished in advance to the Corporation or to the Grantee, as the case may be.

12.           Plan and Plan Interpretations as Controlling.  Except as otherwise explicitly noted in this Agreement, or by reference the Employment Agreement, this Agreement and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan, which are controlling.  All determinations and interpretations of the Committee shall be binding and conclusive upon the Grantee or his legal representatives with regard to any question arising under this Agreement or under the Plan.

13.           Grantee Service.  Nothing in this Agreement shall limit the right of the Corporation or any of its Affiliates to terminate the Grantee’s service as a director, officer or employee, or otherwise impose upon the Corporation or any of its Affiliates any obligation to employ or accept the services of the Grantee.

 

14.           Grantee Acceptance.  The Grantee shall signify his/her acceptance of the terms and conditions of this Agreement by signing in the space provided below and returning a signed copy of this Agreement to the Corporation at the address set forth in Section 11 above.  In signing this Agreement, the Grantee, to the extent such Grantee is an executive officer, director or ten percent stockholder of the Corporation or MetaBank acknowledges that the Restricted Shares may not be sold or otherwise transferred by the Grantee except in accordance with the provisions of Section 16 of the Securities Act of 1934, as amended from time to time.

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

	
META FINANCIAL GROUP, INC.

	 	
GRANTEE

	 	 	 
	
By:

	 	 	
	 	
Rodney G. Muilenburg

	 	
J. Tyler Haahr

	 	
Chairman, Compensation Committee

	 	 

 

EXHIBIT B

PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT

(2017 GRANT)

 

FORM OF

META FINANCIAL GROUP, INC.

 

2002 OMNIBUS INCENTIVE PLAN

PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is hereby made and entered into as of January 1, 2017 by Meta Financial Group, Inc. (the “Corporation”) and J. Tyler Haahr (the “Grantee”), in accordance with the Meta Financial Group, Inc. 2002 Omnibus Incentive Plan, as it may be amended from time to time (the “Plan”).  Any capitalized term used but not defined in this Agreement shall have the meaning set forth in the Plan.

WHEREAS, the Grantee entered into an Employment Agreement (the “Employment Agreement”) with MetaBank, a wholly owned subsidiary of the Corporation, effective October 1, 2016;

WHEREAS, in consideration of the Grantee’s execution of the Employment Agreement, the Committee has determined that it is in the best interests of the Corporation and its shareholders to grant the award of Performance-Based Restricted Shares provided for herein.

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:

1.             Restricted Shares.  Effective January 1, 2017 (the “Grant Date”), the Corporation hereby awards to the Grantee 10,844 shares (the “Restricted Shares”) of the common stock of the Corporation, par value $.01 per share (“Common Stock”), pursuant to the Plan and subject to the restrictions and other terms and conditions set forth in this Agreement.  A copy of the Plan, as currently in effect, is incorporated by reference and is attached to this Agreement.

2.             Transfer Restrictions and Restriction Period.

		a.	
During the period commencing on the Grant Date and ending on October 1, 2024 (the “Restriction Period”), any unvested Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered by the Grantee, except by will or the laws of descent and distribution in the event of the Grantee’s death, pursuant to a qualified domestic relations order as defined in the Code or the rules thereunder, or as provided in this Agreement.  Except as otherwise provided in the Plan or this Agreement or as determined by the Committee in its discretion in accordance with Section 6(b) of the Plan, provided that the Grantee maintains Continuous Service during the Restriction Period, and the required performance criteria set forth in Section 2.b. of this Agreement are satisfied, the Restricted Shares shall vest and become transferable in accordance with the following schedule (provided that any fractional shares resulting from application of the following schedule will be reduced to the nearest whole share and released from the restrictions hereunder only upon such fractional share becoming a whole share under the terms of this Agreement):

 

	
Vesting Date

	
Number of Restricted Shares that Vest

	
October 1, 2017

	
1,356

	
October 1, 2018

	
1,356

	
October 1, 2019

	
1,356

	
October 1, 2020

	
1,356

	
October 1, 2021

	
1,355

	
October 1, 2022

	
1,355

	
October 1, 2023

	
1,355

	
October 1, 2024

	
1,355

 

		b.	
For  the four quarters ending June 30 immediately preceding each Vesting Date in Section 2.a. of this Agreement (the “Measurement Period”), the Committee shall certify whether MetaBank (together with its Affiliates, as applicable) has satisfied capital requirements under the Basel III Capital Rules or such other capital requirements as may be promulgated by the Federal Reserve and the Office of the Comptroller of the Currency (or their successors having jurisdiction over such matters) (the “Capital Requirements”); provided that, solely for the October 1, 2017 Vesting Date, the Measurement Period shall be the period beginning January 1, 2017 and ending June 30, 2017.  If the Committee determines that MetaBank (and applicable Affiliates) has not satisfied the Capital Requirements for the Measurement Period preceding the applicable Vesting Date, the number of Restricted Shares that would otherwise vest on the applicable Vesting Date following the Measurement Period shall be forfeited without consideration therefor.  The Committee shall look at the Capital Requirements for each Measurement Period immediately preceding each Vesting Date in Section 2.a. and make a good faith determination as to whether the Capital Requirements have been satisfied with respect to the Measurement Period preceding the applicable Vesting Date and such decision shall not affect any portion of the Restricted Shares that are scheduled to vest in subsequent fiscal years.

3.             Documentation of Restricted Shares.  As of the Grant Date, the Corporation shall issue Common Stock either in certificate form or book-entry form in the Grantee’s name with respect to the Restricted Shares and such certificates shall be held on behalf of the Grantee until such Restricted Shares become vested as described in Section 2 above.  Such certificates shall bear the following (or a similar) legend or, if issued in book-entry, include a similar notation:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) contained in the Corporation’s 2002 Omnibus Incentive Plan, as amended, and an agreement entered into between the registered owner and the Corporation.  Copies of such Plan and the agreement are on file in the offices of the Secretary of the Corporation, 5501 South Broadband Lane, Sioux Falls, South Dakota 57108.”

 

The Corporation may require the Grantee to execute and deliver stock powers in favor of the Corporation with respect to the certificates representing the Restricted Shares.

4.            Delivery of Shares of Common Stock.  Upon the vesting of the Restricted Shares in accordance with Section 2, the Corporation shall, as applicable, either remove the restrictive notations on any such shares of Restricted Stock issued in book-entry form or deliver to the Grantee (or, if the Grantee has died, the Grantee’s legal representative) a certificate representing such Common Stock free of the restrictions described in Section 2 and excluding the restrictive legend described in Section 3.

The Corporation’s obligation to deliver shares of Common Stock hereunder shall, if the Committee so requires, be conditioned upon the receipt of a representation as to the investment intention of the Grantee or any other person to whom such shares are to be delivered, in such form as the Committee shall determine to be necessary or advisable to comply with the Securities Act of 1933, as amended, or any other federal, state or local securities law or regulation.  In requesting any such representation, the Committee may provide that such representation requirement shall become inoperative upon a registration of such shares or other action eliminating the necessity of such representation under the Securities Act of 1933 or other securities law or regulation.  The Corporation shall not be required to deliver any Common Stock upon the vesting of the Restricted Shares prior to (i) the admission of such shares to listing on any stock exchange or system on which the shares of Common Stock may then be listed, and (ii) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Committee shall determine to be necessary or advisable.

5.             Termination of Service or Death of the Grantee.  Except as otherwise provided in the Employment Agreement, if the Grantee ceases Continuous Service for any reason other than death, total or partial disability, Retirement, termination without Cause, or resignation for Good Reason (“Cause” and “Good Reason” shall have the same meanings as defined by the Employment Agreement), all Restricted Shares that are unvested at the time of such termination of Continuous Service automatically shall be forfeited to the Corporation.  If the Grantee ceases to maintain Continuous Service due to death, total or partial disability, Retirement, or termination without Cause, or resignation for Good Reason, all Restricted Shares that are unvested at the time of such termination of Continuous Service shall vest in accordance with the terms of the Grantee’s Employment Agreement with MetaBank, or if such Employment Agreement is silent with respect to such matters, then in accordance with the Plan, as applicable.  If the Continuous Service of the Grantee is terminated for Cause, all rights under this Agreement shall expire immediately upon the Corporation’s notification to the Grantee of such termination.

6.            Adjustments for Changes in Capitalization of the Corporation.  In the event of any change in the outstanding shares of Common Stock by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, or any change in the corporate structure of the Corporation or in the number of shares of Common Stock, the number and class of shares covered by this Agreement shall be proportionately and equitably adjusted by the Committee, whose determination shall be conclusive.

 

7.            Effect of Change in Control.  Without limiting any rights of the Committee under the Plan, the treatment of unvested Restricted Shares in connection with a “Change of Control” (as defined in the Employment Agreement) shall be determined under the Grantee’s Employment Agreement with MetaBank.

8.            Stockholder Rights with respect to Restricted Shares.  Subject to the restrictions and limitations set forth in the Plan and this Agreement, the Grantee shall have all of the rights of a stockholder of the Corporation with respect to the Restricted Shares, including, but not limited to, the right to receive all dividends paid on the Restricted Shares and the right to vote the Restricted Shares.

9.            Binding Effect of Agreement.  The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and the successors and assigns of the Corporation and any person to whom the Restricted Shares are transferred by will or by the laws of descent and distribution.

10.           Withholding Tax.  Upon the vesting of the Restricted Shares in accordance with Section 2 (or at such earlier time, if any, that the Grantee elects under Code Section 83(b) to include the value of the Restricted Shares in taxable income), the Corporation shall have the right to: (i) require the Grantee or such other person to pay to the Corporation the amount of any taxes which the Corporation or any of its Affiliates is required to withhold with respect to such Restricted Shares; (ii) to retain, or sell without notice, a sufficient number of such shares to cover the amount required to be withheld or in lieu of any of the foregoing; or (iii) to withhold a sufficient sum from the Grantee’s compensation payable by the Corporation to satisfy the Corporation’s tax withholding requirements.  The Corporation shall have the right to deduct from any dividends paid with respect to the Restricted Shares the amount of any taxes the Corporation is required to withhold with respect to such dividend payments.  The Corporation’s method of satisfying its withholding obligations shall be solely in the discretion of the Corporation, subject to applicable federal, state and local law.

11.           Notices.  All notices hereunder to the Corporation shall be delivered or mailed to it addressed to the Secretary of Meta Financial Group, Inc., 5501 South Broadband Lane, Sioux Falls, South Dakota 57108.  Any notices hereunder to the Grantee shall be delivered personally or mailed to the Grantee’s address noted below.  Such addresses for the service of notices may be changed at any time provided written notice of the change is furnished in advance to the Corporation or to the Grantee, as the case may be.

12.           Plan and Plan Interpretations as Controlling.  Except as otherwise explicitly noted in this Agreement, or by reference the Employment Agreement, this Agreement and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan, which are controlling.  All determinations and interpretations of the Committee shall be binding and conclusive upon the Grantee or his legal representatives with regard to any question arising under this Agreement or under the Plan.

 

13.           Grantee Service.  Nothing in this Agreement shall limit the right of the Corporation or any of its Affiliates to terminate the Grantee’s service as a director, officer or employee, or otherwise impose upon the Corporation or any of its Affiliates any obligation to employ or accept the services of the Grantee.

14.           Grantee Acceptance.  The Grantee shall signify his/her acceptance of the terms and conditions of this Agreement by signing in the space provided below and returning a signed copy of this Agreement to the Corporation at the address set forth in Section 11 above.  In signing this Agreement, the Grantee, to the extent such Grantee is an executive officer, director or ten percent stockholder of the Corporation or MetaBank acknowledges that the Restricted Shares may not be sold or otherwise transferred by the Grantee except in accordance with the provisions of Section 16 of the Securities Act of 1934, as amended from time to time.

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

	
META FINANCIAL GROUP, INC.

	 	
GRANTEE

	 	 	 
	
By:

		 	 
	 	
Rodney G. Muilenburg

	 	
J. Tyler Haahr

	 	
Chairman, Compensation Committee

	 	 

 

EXHIBIT C

PRIOR INNOVATIONS

 

None.

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