Document:

pch-ex101_6.htm

Exhibit 10.1

 

SECOND AMENDMENT TO SECOND AMENDED AND RESTATED TERM LOAN AGREEMENT 

 

THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED TERM LOAN AGREEMENT (this “Amendment”) dated as of December 2, 2019 to the Term Loan Agreement referenced below, is by and among POTLATCHDELTIC CORPORATION, a Delaware corporation (“PotlatchDeltic”), POTLATCHDELTIC FOREST HOLDINGS, INC., a Delaware corporation (“Potlatch Forest”) and POTLATCHDELTIC LAND & LUMBER, LLC, a Delaware limited liability company and a taxable REIT subsidiary of PotlatchDeltic (“Potlatch Land & Lumber”, and, together with PotlatchDeltic and Potlatch Forest, the “Borrowers”), the Guarantors party hereto, the Lenders identified on the signature pages hereto and NORTHWEST FARM CREDIT SERVICES, PCA, as Administrative Agent (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H

 

WHEREAS, term loan facilities have been established in favor of the Borrowers pursuant to the terms of that certain Second Amended and Restated Term Loan Agreement dated as of March 22, 2018 (as amended, restated, modified or supplemented from time to time, the “Term Loan Agreement”) among the Borrowers, the guarantors from time to time party thereto (the “Guarantors”), the Lenders from time to time party thereto (the “Lenders”) and the Administrative Agent;

 

WHEREAS, the Borrowers have requested that the Lenders amend the Term Loan Agreement to provide for the making of a $40,000,000 Term Loan (the “Term Loan N”) to the Borrowers; and

 

WHEREAS, the Lenders party hereto have agreed to provide the Term Loan N and to amend the Term Loan Agreement on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.Defined Terms.  Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Term Loan Agreement.

 

2.Amendment.  Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Term Loan Agreement is hereby amended as follows:

 

(a)In the definition of “Applicable Rate” in Section 1.01 of the Term Loan Agreement, the following new clause (m) is hereby added immediately following clause (l):

 

(m)the Term Loan N, 1-month LIBOR plus 1.85% per annum.

 

(b)In the definition of “Commitment” in Section 1.01 of the Term Loan Agreement, a reference to “and/or Term Loan N Commitment” is hereby added immediately following the reference to “Term Loan M Commitment.”

 

(c)The definition of “Fee Letter” in Section 1.01 of the Term Loan Agreement is hereby amended to add the following new clause (e) immediately following clause (d) thereof:

 

(e) the letter agreement, dated as of December 2, 2019 between PotlatchDeltic and the Administrative Agent.

146574410.1 

 

 

(d)The definition of “Guarantors” in Section 1.01 of the Term Loan Agreement, is hereby amended by adding the following proviso to the end of the last sentence of such definition:

 

“provided that, subject to the terms of Section 5 of the Second Amendment, Del-Tin Fiber, LLC shall be released as a Guarantor hereunder.”

 

(e)In the definition of “Interest Payment Date” in Section 1.01 of the Term Loan Agreement, a reference to “Term Loan N” is hereby added immediately following the reference to “Term Loan I”.

 

(f)In the definition of “LIBOR” in Section 1.01 of the Term Loan Agreement, the last two sentences of such definition are hereby amended and restated to read as follows:

 

For the purposes of this Agreement, (A) the Term Loan C, Term Loan D, Term Loan E and Term Loan I LIBOR Loans will have an interest period of three months, and (B) the Term Loan K, Term Loan L, Term Loan M and Term Loan N LIBOR Loans will have an interest period of one month (other than with respect to (x) in each case, the final interest period, which shall commence on the last Interest Payment Date prior to the applicable Maturity Date and end on the applicable Maturity Date and (y) the Term Loan N (i) for which the initial interest shall begin on the Second Amendment Effective Date and shall mature on January 1, 2020 and (ii) upon the expiration of such initial interest period, the Term Loan N shall automatically continue as another LIBOR Loan having an interest period of one month) and LIBOR will reset on each Interest Payment Date. Notwithstanding the foregoing, if LIBOR shall be less than zero, such rate shall be deemed zero for the purposes of this Agreement; provided that, solely with respect to the Term Loan I, Term Loan K, Term Loan L, Term Loan M and Term Loan N, LIBOR may be less than zero so long as there is a corresponding Swap Contract in place relating to such Term Loan I, Term Loan K, Term Loan L, Term Loan M or Term Loan N, as applicable, that does not have a floor of zero.

 

(g)In the definition of “LIBOR Loans” in Section 1.01 of the Term Loan Agreement, a reference to “and Term Loan N” is hereby added immediately following the reference to “Term Loan M.”

 

(h)In the definition of “Loan” in Section 1.01 of the Term Loan Agreement, a reference to “and Term Loan N” is hereby added immediately following the reference to “Term Loan M.”

 

(i)In the definition of “Maturity Date” in Section 1.01 of the Term Loan Agreement, the following new clause (m) is hereby added immediately following clause (1):

 

(m)the Term Loan N, November 1, 2029. 

 

(j)In the definition of “Term Loans” in Section 1.01 of the Term Loan Agreement, a reference to “Term Loan N” is hereby added immediately following the reference to “Term Loan M.”

 

 

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(k)The following new definitions are hereby added to Section 1.01 of the Term Loan Agreement in the appropriate alphabetical order:

 

“Second Amendment Effective Date” means December 2, 2019.

 

“Second Amendment” means that certain Second Amendment to Second Amended and Restated Term Loan Agreement dated as of December 2, 2019, by and among the Borrowers, the Guarantors party thereto, the Lenders party thereto and the Administrative Agent. 

 

“Term Loan N” has the meaning specified in Section 2.01(n).

 

“Term Loan N Commitment” means, as to each Lender, its obligations to make its portion of the Term Loan N to the Borrowers pursuant to Section 2.01 in the principal amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

(l) In Section 2.01 of the Term Loan Agreement, the following new clause (n) is hereby added immediately following clause (m):

 

(n)Term Loan N.  Subject to the terms and conditions set forth herein, each Lender with a Term Loan N Commitment severally agrees to make, on the Second Amendment Effective Date, its portion of a separate FORTY MILLION DOLLAR ($40,000,000) term loan (identified as Loan 6248044 by NWFCS) to the Borrowers in Dollars in an amount not to exceed such Lender’s Term Loan N Commitment (“Term Loan N”).

 

(m)In Section 2.02 of the Term Loan Agreement, the following sentence is hereby added after the seventh sentence:

 

Each Lender shall make the amount of its Applicable Percentage of Term Loan N available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 12:00 noon on the Second Amendment Effective Date.

 

(n)In Section 2.06(c) of the Term Loan Agreement, the first sentence is amended and restated in its entirety to read as follows:

 

Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto commencing, with respect to the Term Loan N, January 1, 2020, and, in each case, at such other times as may be specified herein.

 

(o)The parenthetical in the last sentence of Section 3.03(b) of the Term Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

(other than with respect to the Term Loan I, Term Loan K, Term Loan L, Term Loan M and/or Term Loan N for so long as there is a corresponding Swap Contract in place relating to such Term Loan I, Term Loan K, Term Loan L, Term Loan M and/or Term Loan N, as applicable, that does not have a floor of zero)

 

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(p)The first sentence of Section 3.03(c) of the Term Loan Agreement is amended and restated in its entirety to read as follows: 

 

On the third, sixth and ninth anniversaries of (i) the Restatement Date, solely with respect to Term Loan B, Term Loan D, Term Loan E, Term Loan F, Term Loan G, Term Loan H, Term Loan I, Term Loan J, Term Loan K and Term Loan L (ii) the First Amendment Effective Date, solely with respect to Term Loan M and (iii) the Second Amendment Effective Date solely with respect to Term Loan N (or such other date approximately preceding any such date as Administrative Agent and the Borrowers may agree) (each such date, a “Reset Reference Point”) Administrative Agent (A) shall determine the difference (in basis points), if any, between the Current Cost of Funds (as defined below) as of such Reset Reference Point and the Restatement Date Cost of Funds (as defined below) and (B) thereafter shall promptly notify the Lenders and the Borrowers of such difference by delivering a certificate in form and substance mutually acceptable to Administrative Agent and the Borrowers.  

 

(q) In Section 3.03(c) of the Term Loan Agreement the definition of “Restatement Date Cost of Funds” is amended and restated in its entirety to read as follows: 

 

“Restatement Date Cost of Funds” means, (a) as of the Restatement Date, 4 basis points, which is the amount by which (x) the LIBOR Floating Note Rate differs from (y) LIBOR for an interest period of one month, in each case determined as of the date that is two Business Days prior to the Restatement Date, (b) as of the First Amendment Effective Date with respect to the Term Loan M, 4 basis points, which is the amount by which (x) the LIBOR Floating Note Rate differs from (y) LIBOR for an interest period of one month, in each case determined as of the date that is two Business Days prior to the First Amendment Effective Date or (c) as of the Second Amendment Effective Date with respect to the Term Loan N, 35 basis points, which is the amount by which (x) the LIBOR Floating Note Rate differs from (y) LIBOR for an interest period of one month, in each case determined as of the date that is two Business Days prior to the Second Amendment Effective Date. 

(r)In clause (z) of Section 5.15 of the Term Loan Agreement, a reference to “and the Term Loan N” is hereby added immediately following the reference to “the Term Loan M”.

 

(s)(i) In Section 1.01 of the Term Loan Agreement (A) the definition of “Term Loan C” is deleted in its entirety, (B) clause (b) of the definition of “Applicable Rate” is amended and restated in its entirety to read “[reserved]” and (C) clause (b) of the definition of “Maturity Date” is amended and restated in its entirety to read “[reserved]”; (ii) Section 2.01(c) of the Term Loan Agreement is amended and restated in its entirety to read “[reserved]”; and (iii) all other references to “Term Loan C” in the Term Loan Agreement are deleted in their entirety.   

 

(t)Schedule 2.01 to the Term Loan Agreement is hereby amended to be supplemented with the information set forth on Schedule 2.01 attached hereto.

 

3.Conditions Precedent.  This Amendment shall become effective upon the satisfaction of the following conditions:

 

 

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(a)Receipt by the Administrative Agent of counterparts of this Amendment duly executed by the Borrowers, the Guarantors, the Administrative Agent, the Required Lenders and each Lender with a Term Loan N Commitment;

 

(b)Receipt by the Administrative Agent of the following:

 

(i)a certificate of each Loan Party dated as of the Second Amendment Effective Date signed by a Responsible Officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to the Term Loan N, as well as a such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in the jurisdiction of its incorporation or organization and (B) certifying that, before and after giving effect to the Term Loan N, (x) the representations and warranties contained in Article V of the Term Loan Agreement and the other Loan Documents are true and correct as of such date, and except that for purposes hereof, the representations and warranties contained in subsections (a) and (b) of Section 5.01 shall be deemed to refer to the most recent financial statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (y) no Default exists; 

 

(ii)a Note executed by each of the Borrowers in favor of each Lender requesting a Note for the Term Loan N; and

 

(iii) (A) a legal opinion of Michele L. Tyler, Vice President, General Counsel and Corporate Secretary of the Borrowers and Guarantors, and (B) a legal opinion of Perkins Coie LLP, special counsel to the Borrowers, in each case dated as of the Second Amendment Effective Date and in form and substance reasonably satisfactory to the Administrative Agent.

 

(c)The payment by the Borrowers of all fees and expenses due and payable as of the Second Amendment Effective Date, including the reasonable out-of-pocket costs and expenses of the Administrative Agent and the reasonable fees and expenses of Moore & Van Allen PLLC, special counsel to the Administrative Agent.

 

4.Representations and Warranties.  The Loan Parties hereby, jointly and severally, represent and warrant that:

 

(a)the representations and warranties contained in Article V of the Term Loan Agreement are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct as of such earlier date, and except that for purposes hereof, the representations and warranties contained in Sections 5.01(a) and (b) shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01,

 

(b) no Default exists under the Term Loan Agreement on and as of the date hereof and after giving effect to this Amendment,

 

(c)this Amendment has been duly executed and delivered by each Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable 

 

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bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 

 

(d)this Amendment constitutes the legal, valid and binding obligation of each Loan Party, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 

 

(e)the execution, delivery and performance of this Amendment by each Loan Party will not:  (i) contravene the terms of any provision of its articles or certificate of incorporation or bylaws or other organizational or governing documents of such Loan Party; (ii) violate, contravene or materially conflict with any Law or any other law, regulation (including, without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to it, (iii) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any material indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound or (iv) result in or require the creation of any Lien upon or with respect to its properties.

 

5.Guaranty Release.  PotlatchDeltic has notified the Administrative Agent that Del-Tin Fiber, LLC, an Arkansas limited liability company (the “Released Guarantor”), has dissolved as permitted under Section 7.04 of the Term Loan Agreement. Pursuant to Section 9.10 of the Term Loan Agreement, the Administrative Agent on behalf of the Lenders, hereby agrees to release the Released Guarantor from its obligations as a Guarantor under the Guaranty and the other Loan Documents, such release to be effective as of the date hereof.

 

6.No Other Changes; Ratification.  Except as expressly modified or waived hereby, all of the terms and provisions of the Term Loan Agreement (including the schedules and exhibits thereto) and the other Loan Documents shall remain in full force and effect.  The term “this Agreement” or “Term Loan Agreement” and all similar references as used in each of the Loan Documents shall hereafter mean the Term Loan Agreement as amended by this Amendment.  Except as herein specifically agreed, the Term Loan Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.

 

7.Counterparts; Facsimile/Email.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart.  Delivery of an executed counterpart of this Amendment by telecopy or electronic mail by any party hereto shall be effective as such party’s original executed counterpart.

 

8.Loan Modification.  By its execution of this Amendment, the Borrowers hereby authorize the Administrative Agent to consider this Amendment its application for loan modification on the terms and conditions set forth herein.

 

9.Governing Law.  This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New York.

 

10.Entirety.  This Amendment and the other Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject 

 

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matter hereof.  These Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no oral agreements between the parties.

 

 

[SIGNATURE PAGES FOLLOW]

 

 

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.

 

BORROWERS:POTLATCHDELTIC CORPORATION,

a Delaware corporation

By: /s/ Jerald W. Richards

Name: Jerald W. Richards

Title:  VP, Chief Financial Officer

POTLATCHDELTIC FOREST HOLDINGS, INC.,

a Delaware corporation

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

POTLATCHDELTIC LAND & LUMBER, LLC,

a Delaware limited liability company

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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GUARANTORS:POTLATCHDELTIC TIMBER, LLC,

a Delaware limited liability company

 

By:_ /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

 

 

POTLATCH TIMBERLANDS, LLC,

a Delaware limited liability company

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

POTLATCH LAKE STATES TIMBERLANDS, LLC

a Delaware limited liability company

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

POTLATCH MINNESOTA TIMBERLANDS, LLC

a Delaware limited liability company

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

POTLATCHDELTIC MANUFACTURING, LLC

an Arkansas limited liability company

By:  /s/ Jerald W. Richards

Name: Jerald W. Richards

Title: VP, Chief Financial Officer

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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ADMINISTRATIVE AGENT

	
AND LENDERS:
	
NORTHWEST FARM CREDIT SERVICES, PCA, as Administrative Agent and a Lender

 

By: /s/ Suann Harris

Name: Suann Harris

Title: Relationship Manager, VP

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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AMERICAN AGCREDIT, PCA, as a Lender

 

By: /s/ Michael J. Balok 

Name: Michael J. Balok

Title: Vice President

 

 

 

 

 

 

 

 

 

 

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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CoBank, FCB,

as a Voting Participant

 

By: /s/ Robert Prickett 

Name: Robert Prickett

Title: Vice President

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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AGFIRST FARM CREDIT BANK,

as a Voting Participant

 

By: /s/ Michael C. Hawkins 

Name: Michael C. Hawkins

Title: Assistant Vice President

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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AMERICAN AGCREDIT, FLCA,

as a Voting Participant

 

By: /s/ Michael J. Balok 

Name: Michael J. Balok

Title: Vice President

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Farm Credit Mid-America, FLCA,

as a Voting Participant

 

By: /s/ Tabatha Hamilton

Name: Tabatha Hamilton

Title: Vice President Capital Markets

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Farm Credit Mid-America, FLCA,

as a Voting Participant

 

By: /s/ Ben Fogle

Name: Ben Fogle

Title: Vice President

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Farm Credit West, FLCA,

as a Voting Participant

 

By: /s/ Robert Stornetta

Name: Robert Stornetta

Title: Senior Vice President

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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AgCountry Farm Credit Services, FLCA (fka FCS Commercial Finance Group, for AgCountry Farm Credit Services, FLCA), as a Voting Participant

 

By: /s/ Lisa Caswell

Name: Lisa Caswell

Title: Vice President

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Farm Credit East, ACA,

as a Voting Participant

 

By: /s/ Benjamin E. Thompson

Name: Benjamin E. Thompson

Title: Vice President

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Capital Farm Credit, FLCA,

as a Voting Participant

 

By: /s/ Joseph Slagle

Name: Joseph Slagle

Title: SVP Capital Markets

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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AGRIBANK, FCB,

as a Voting Participant

 

By: /s/ Galen Herr

Name: Galen Herr

Title: VP Credit - Lending Programs

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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COMPEER FINANCIAL, FLCA,

as a Voting Participant

 

By: /s/ Corey J. Waldinger

Name: Corey J. Waldinger

Title: Managing Director, Capital Markets

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Farm Credit of New Mexico, FLCA,

as a Voting Participant

 

By: /s/ Clarissa Shiver

Name: Clarissa Shiver

Title: Vice President Corporate Agribusiness Lending

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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FARM CREDIT SERVICES OF WESTERN ARKANSAS, FLCA

as a Voting Participant

 

By: /s/ Charlie McConnell

Name: Charlie McConnell

Title: SVP, Chief Lending Officer

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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FARM CREDIT SERVICES OF WESTERN ARKANSAS, PCA

as a Voting Participant

 

By: /s/ Charlie McConnell

Name: Charlie McConnell

Title: SVP, Chief Lending Officer

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Fresno-Madera Land Bank Association, FLCA

as a Voting Participant

 

By: /s/ Robert L. Herrick

Name: Robert L. Herrick

Title: Director Capital Markets

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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GreenStone Farm Credit Services, FLCA,

as a Voting Participant

 

By: /s/ Shane Prichard

Name: Shane Prichard

Title: VP of Capital Markets

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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Western AgCredit, FLCA and Western AgCredit, PCA

as a Voting Participant

 

By: /s/ Scott Marchant

Name: Scott Marchant

Title: Credit Manager

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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YOSEMITE LAND BANK, FLCA

as a Voting Participant

 

By: /s/ Steven Mizuno

Name: Steven Mizuno

Title: SVP - Credit Administration

 

PotlatchDeltic Corporation

SECOND Amendment to Second Amended and Restated Term Loan Agreement

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SCHEDULE 2.01

 

TERM LOAN N

 

			
	
Lender
	
Commitment
	
Applicable Percentage

	
Northwest Farm Credit Services, PCA*
	
$40,000,000
	
100.000000000%

	
Total
	
$40,000,000
	
100.000000000%

 

 

* Prior to giving effect to the participations noted below.

 

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Lender
	
Voting Participant
	
Term Loan N Commitment
	
Resulting Term Loan N Commitment / Participation
	
Resulting Applicable Percentage of Term Loan N

	
Northwest Farm Credit Services, PCA
	
-
	
$40,000,000.00
	
$0.00
	
0.000000000%

	
 
	
CoBank, FCB
	
 
	
$9,058,064.51
	
22.645161275%

	
 
	
AgFirst Farm Credit Bank
	
 
	
$5,380,645.16             
	
13.451612900%

	
 
	
American AgCredit, FLCA
	
 
	
$4,774,193.55
	
11.935483875%

	
 
	
Farm Credit Mid-America, FLCA
	
 
	
$4,425,806.45
	
11.064516125%

	
 
	
Farm Credit Services of America, FLCA
	
 
	
$4,425,806.45
	
11.064516125%

	
 
	
Farm Credit West, FLCA
	
 
	
$3,819,354.84
	
9.548387100%

	
 
	
AgCountry Farm Credit Services, FLCA (fka FCS Commercial Finance Group, for AgCountry Farm Credit Services, FLCA)
	
 
	
$3,341,935.48
	
8.354838700%

	
 
	
Farm Credit East, ACA
	
 
	
$2,387,096.78
	
5.967741950%

	
 
	
Capital Farm Credit, FLCA
	
 
	
$2,387,096.78
	
5.967741950%

	
TOTAL
	
 
	
$40,000,000.00
	
$40,000,000.00
	
100.000000000%

Voting Participants at Closing - Commitments and Applicable Percentages

 

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146574410.1Exhibit

Exhibit 10.4

November 6, 2019                        
Elizabeth Spaulding 
San Francisco, CA
Re:    Offer of Employment 
Dear Elizabeth,
On behalf of Stitch Fix, Inc. (the “Company”), I am pleased to offer you employment at the Company on the terms set forth in this offer letter agreement (the “Agreement”).  As discussed, the terms of this Agreement govern with respect to your employment, effective as of the date it is signed by you.
1.Employment by the Company.
(a)    Position and Duties.  You will serve as the Company’s President, you will report to the Company’s Chief Executive Officer and you will have the level of authority and responsibility and perform those duties as are customary for the position of President, as are directed by the Chief Executive Officer.  For purposes of this Agreement, your title, your reporting structure and your level of authority, responsibility and duties, all as described in the preceding sentence are hereinafter referred to collectively as your “Duties.”  During the term of your employment with the Company, you will devote your best efforts and substantially all of your business time and attention to the business of the Company, except for approved vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies. The Company agrees that you may engage in civic, charitable and philanthropic activities and, subject to the Company’s prior approval, serve on the board of directors or as an advisor for up to three for-profit companies, provided that such activities do not interfere with your ability to fulfill your obligations to the Company as President.  The Company may modify your Duties as it deems necessary and appropriate in light of the Company’s needs and interests from time to time; provided, however, that any such modification will not have any effect on the protections afforded to you in the event of your resignation for “Good Reason” all as set forth below.
(b)    Location.  Your primary office location will be the Company’s offices in San Francisco, CA.  Notwithstanding the foregoing, the Company reserves the right to reasonably require you to perform your duties at places other than your primary office location from time to time, and to require reasonable business travel.  

2

(c)    Start Date.  We anticipate that your start date will be January 27, 2020 and we look forward to confirming the specific date in the next two weeks.
2.    Base Salary and Employee Benefits.
(a)    Salary.  You will receive for services to be rendered hereunder base salary paid at the rate of $600,000 per year, less standard payroll deductions and tax withholdings.  Your base salary will be paid on the Company’s ordinary payroll cycle.  As an exempt salaried employee, you will be required to work the Company’s normal business hours, and such additional time as appropriate for your work assignments and position, and you will not be entitled to overtime compensation.
(b)    Bonus.  You will be eligible to participate in the Company’s executive bonus program, as such program may be in effect from time to time and subject to the bonus program terms as determined by the Company’s Compensation Committee.  The target bonus opportunity for your role under our 2020 fiscal year bonus plan is forty-five percent (45%) of your base salary.
(c)    Benefits.  As a regular full-time employee, you will to be eligible to participate in the Company’s standard employee benefits offered to executive level employees, as in effect from time to time and subject to plan terms and generally applicable Company policies.  Details about these benefit plans will be provided, upon request.
3.    Expenses.  The Company will reimburse you for reasonable travel, entertainment or other expenses incurred by you in furtherance or in connection with the performance of your duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time. The Company will reimburse you for the legal expenses incurred in the review and negotiation of this Agreement in an amount not to exceed $10,000.00.
4.    Equity Compensation.  Following your start date, the Company will recommend to its Compensation Committee that the Company grant you equity awards valued at $15,520,000 with fifty percent (50%) of that value granted as a stock option (the “Option”) and fifty (50%) of that value granted as restricted stock units (the “RSUs”).  The number of Class A Common Stock shares subject to the awards will be determined in accordance with the Company’s equity grant practices by the Compensation Committee (or its delegate) in its sole discretion.  The exercise price per share of the Option will be equal to the closing price quoted on the NASDAQ Global Select Market on the date the Option is granted.  Twelve and one-half percent (12.5%) of the shares subject to the Option shall vest upon completion of six-months of employment at the Company and the remaining shares subject to the Option shall vest in equal monthly installments over the next forty-two (42) months.  The RSUs shall vest as to twelve and one-half percent (12.5%) of the shares subject to the RSUs on the Company’s first quarterly RSU vesting date that is at least six months following your employment start date.  1/16th of the RSU shares shall vest on each subsequent quarterly RSU vesting date over the next forty-two (42) months.  The Option and RSU award will be made in accordance with and subject to the Company’s applicable Equity Incentive Plan (the “Plan”) and related documents, including the award grant notices that you will be required to sign.  Vesting in the awards is subject to your continued service with the Company through each vesting date, as described in the applicable award agreement, and 

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no right to any equity is earned or accrued until such time that vesting occurs, nor does the grant confer any right to continued vesting or employment.
5.    Compliance with Confidentiality Agreement and Company Policies.  As a condition of our employment, you agree to the Company’s At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement (the “Confidentiality Agreement”).  In addition, you are required to abide by the Company’s policies and procedures, as modified from time to time within the Company’s discretion (including without limitation, acknowledging in writing that you have read and will comply with any applicable Company Employee Handbook); provided, however, that in the event the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
6.    Protection of Third Party Information.  In your work for the Company, you will be expected not to make any unauthorized use or disclosure of any confidential or proprietary information, including trade secrets, of any former employer or other third party to whom you have contractual obligations to protect such information.  Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.  You represent that you are able to perform your job duties within these guidelines, and you are not in unauthorized possession of any unpublished documents, materials, electronically-recorded information, or other property belonging to any former employer or other third party to whom you have a contractual obligation to protect such property.  In addition, you represent and warrant that your employment by the Company will not conflict with any prior employment or consulting agreement or other agreement with any third party, that you will perform your duties to the Company without violating any such agreement(s), and that you have disclosed to the Company in writing any contract you have signed that may restrict your activities on behalf of the Company.
7.    At-Will Employment Relationship.  You should be aware that your employment with the Company is for no specified period and constitutes at-will employment.  As a result, you are free to resign at any time, for any reason or for no reason.  Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice.  The at will employment relationship between you and the Company may not be changed, except by a specific written agreement signed by the CEO of the Company.  We request that, in the event of resignation, you give the Company at least two (2) weeks’ notice.
8.    Severance.  You will be eligible for the following severance benefits (the “Severance Benefits”), each as described and pursuant to the terms and conditions set forth below.
(a)    Termination without Cause/Resignation for Good Reason Not in Connection with a Change in Control.  If the Company terminates your employment without Cause (as defined below) (other than as a result of your death or disability) or you resign for Good Reason (as defined below) (either such termination referred to as a “Qualifying Termination”) and the Company is not in a Change in Control Period (as defined in Section 8(b)), and provided such termination or resignation constitutes a Separation from Service (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative 

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definition thereunder, a “Separation from Service”), then subject to Sections 10 (“Conditions to Receipt of Severance Benefits”) and 11 (“Return of Property”) below and your continued compliance with the terms of this Agreement (including without limitation Section 5 (“Compliance with Confidentiality Agreement and Company Policies”) above), the Company will provide you with the following as your sole severance benefits:
1)    Cash Severance.  The Company will pay you, as cash severance, six (6) months of your base salary in effect as of your Separation from Service date, less standard payroll deductions and tax withholdings.  Subject to Section 14, the Company may pay this severance amount in either a lump sum payment or in installments in the form of continuation of your base salary payments.  The Company will notify you of its election within ten (10) business days following the Qualifying Termination.  Should the Company elect to pay you in a lump sum, such payment will be made on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date.  Should the Company elect to pay you in installments, such installments will be paid on the Company’s ordinary payroll dates, commencing on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date, and shall be for any accrued base salary for the sixty (60)‐day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable, and all salary continuation payments thereafter, if any, shall be made on the Company’s regular payroll dates.
2)    COBRA Severance.  As an additional Severance Benefit, the Company will continue to pay the cost of your health care coverage in effect at the time of your Separation from Service, either under the Company’s regular health plan (if permitted), or by paying your COBRA premiums (the “COBRA Severance”), for a maximum of six (6) months.  The Company’s obligation to pay the COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law.  You must notify the Company within two (2) weeks if you obtain coverage from a new source.  This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law.  Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether you elect COBRA continuation coverage and shall end on the earlier of (x) the date upon which you obtain other coverage or (y) the last day of the sixth (6th) calendar month following your Separation from Service date.
3)    Accelerated Vesting.  As an additional Severance Benefit in the eighteen (18) months following your Start Date, in the event of a Qualifying Termination, the Company shall accelerate the vesting of any equity awards then held by you that would have vested if you had remained employed by the Company for an additional six (6) months and such awards shall be deemed immediately vested (and, as applicable, exercisable) as of the date of your Separation from Service.

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(b)    Termination without Cause/Resignation for Good Reason in Connection with a Change in Control.  In the event of a Qualifying Termination that occurs during the period beginning one month prior to a Change in Control and ending twelve (12) months following the closing of such Change in Control (such period, the “Change in Control Period”), provided such Qualifying Termination constitutes a Separation from Service, then subject to Sections 10 (“Conditions to Receipt of Severance Benefits”) and 11 (“Return of Property”) below and your continued compliance with the terms of this Agreement (including without limitation Section 5 (“Compliance with Confidentiality Agreement and Company Policies”) above), then the Company will provide you with the following as your sole severance benefits:
1)    Cash Severance.  The Company will pay you, as cash severance, twelve (12) months of your base salary in effect as of your Separation from Service date, less standard payroll deductions and tax withholdings.  Subject to Section 14, the Company may pay this severance amount in either a lump sum payment or in installments in the form of continuation of your base salary payments.  The Company will notify you of its election within ten (10) business days following the Qualifying Termination.  Should the Company elect to pay you in a lump sum, such payment will be made on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date.  Should the Company elect to pay you in installments, such installments will be paid on the Company’s ordinary payroll dates, commencing on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date, and shall be for any accrued base salary for the sixty (60)-day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable, and all salary continuation payments thereafter, if any, shall be made on the Company’s regular payroll dates.
2)    COBRA Severance.  As an additional Severance Benefit, the Company will provide you COBRA Severance for a maximum of twelve (12) months.  The Company’s obligation to pay the COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law.  You must notify the Company within two (2) weeks if you obtain coverage from a new source.  This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law.  Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether you elect COBRA continuation coverage and shall end on the earlier of (x) the date upon which you obtain other coverage or (y) the last day of the twelfth (12th) calendar month following your Separation from Service date.
3)    Accelerated Vesting.  As an additional Severance Benefit, the Company shall accelerate the vesting of any equity awards then held by you such that one hundred percent (100%) of such awards shall be deemed immediately vested (and, as applicable, exercisable) as of your Separation from Service date, except to the extent that the equity award grant documentation relating to an equity award contains an explicit provision to the contrary.

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9.    Resignation Without Good Reason; Termination for Cause; Death or Disability.  If, at any time, you resign your employment without Good Reason, or the Company terminates your employment for Cause, or if either party terminates your employment as a result of your death or disability, you will receive your base salary accrued through your last day of employment, as well as any unused vacation (if applicable) accrued through your last day of employment.  Under these circumstances, you will not be entitled to any other form of compensation from the Company, including any Severance Benefits, other than any rights to which you are entitled under the Company’s benefit programs.  In addition, under no circumstance will you receive the Severance Benefits under both Sections 8(a) and 8(b) above.
10.    Conditions to Receipt of Severance Benefits.  Prior to and as a condition to your receipt of any of the Severance Benefits described above, you shall execute and deliver to the Company an effective release of claims in favor of and in a form acceptable (with customary carve outs for continued indemnification by the Company and rights to vested benefits and equity awards) to the Company (the “Release”) within the timeframe set forth therein, but not later than forty-five (45) days following your Separation from Service date, and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within any applicable time period set forth therein (such latest permitted effective date, the “Release Deadline”).
11.    Return of Company Property.  Upon the termination of your employment for any reason, as a precondition to your receipt of the Severance Benefits (if applicable), within five (5) days after your Separation from Service Date (or earlier if requested by the Company), you will return to the Company all Company documents (and all copies thereof) and other Company property within your possession, custody or control, including, but not limited to, Company files, notes, financial and operational information, customer lists and contact information, product and services information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, tablets, handheld devices, and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company, and all reproductions thereof in whole or in part and in any medium.  You further agree that you will make a diligent search to locate any such documents, property and information and return them to the Company within the timeframe provided above.  In addition, if you have used any personally-owned computer, server, or e-mail system to receive, store, review, prepare or transmit any confidential or proprietary data, materials or information of the Company, then within five (5) days after your Separation from Service date you must provide the Company with a computer-useable copy of such information and permanently delete and expunge such confidential or proprietary information from those systems without retaining any reproductions (in whole or in part); and you agree to provide the Company access to your system, as requested, to verify that the necessary copying and deletion is done.  If requested, you shall deliver to the Company a signed statement certifying compliance with this section prior to the receipt of the Severance Benefits.
12.    Outside Activities.  During your employment by the Company, except on behalf of the Company, you will not directly or indirectly serve as an officer, director (except as otherwise provided for in Section 

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1(a) above), stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by you to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that you may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange.
13.    Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:
For purposes of this Agreement, “Cause” for termination will mean your:  (a) conviction (including a guilty plea or plea of nolo contendere) of any felony; (b) commission or attempted commission of or participation in a fraud or act of dishonesty or misrepresentation against the Company; (c) willful and continued failure to follow the lawful directions of the Board or the officers of the Company to whom you report; (d) deliberate harm or injury, or attempt to deliberately harm or injure, the Company; (e) willful misconduct that materially discredits or harms the Company or its reputation; (f) material violation or breach of any written and fully executed contract or agreement between you and the Company, including without limitation, material breach of your Confidentiality Agreement, or of any Company policy, or of any statutory duty you owe to the Company; (g) gross negligence or willful misconduct; (h) failure to cooperate with any investigation as requested by the Board or officers of the Company to whom you report or (i) unauthorized use of confidential information that causes material harm to the Company; provided, however, that, with respect to clauses (c), (f) or (h) and if the event giving rise to the claim of Cause is curable, the Company provides written notice to you of the event within thirty (30) days of the Company learning of the occurrence of such event, and such Cause event remains uncured thirty (30) days after the Company has provided such written notice you.  The determination that a termination is for Cause shall be made by the Company in its sole and reasonable discretion.
For purposes of this Agreement, you shall have “Good Reason” for resigning from employment with the Company if any of the following actions are taken by the Company without your prior written consent:  (a) a material reduction in your base salary or target annual bonus (unless pursuant to a salary reduction program applicable generally to the Company’s similarly situated employees); (b) a material reduction in your Duties; provided, however, that a change in job position (including a change in title or change in reporting structure) resulting from a Change in Control transaction shall not be deemed a “material reduction” in and of itself unless your new authority, responsibilities and/or duties are materially reduced from your prior authority, responsibilities and/or duties; or (c) relocation of your principal place of employment to a place that increases your one‐way commute by more than thirty-five (35) miles as compared to your then-current principal place of employment immediately prior to such relocation.  In order to resign for Good Reason, you must provide written notice to the Company’s Chief Legal Officer within 90 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for your resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, you must resign from all positions you then hold with the Company not later than 30 days after the expiration of the cure period.

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For purposes of this Agreement, “Change in Control” shall have the meaning ascribed to such term in the Stitch Fix, Inc. 2017 Incentive Plan, as it may be amended from time to time.
14.    Compliance with Section 409A.  It is intended that the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) (Section 409A, together with any state law of similar effect, “Section 409A”) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).  For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), your right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that any of the Severance Benefits constitute “deferred compensation” under Section 409A and you are, on the date of your Separation from Service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code (a “Specified Employee”), then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of such Severance Benefits shall be delayed until the earliest of:  (i) the date that is six (6) months and one (1) day after your Separation from Service date, (ii) the date of your death, or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this section shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein.  No interest shall be due on any amounts so deferred.  If any of the Severance Benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which you have a Separation from Service, the Release will not be deemed effective any earlier than the Release Deadline.  The Severance Benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.  Notwithstanding anything to the contrary herein, to the extent required to comply with Section 409A, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A.  With respect to reimbursements or in-kind benefits provided to you hereunder (or otherwise) that are not exempt from Section 409A, the following rules shall apply:  (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any one of your taxable years shall not affect the expenses eligible for reimbursement, or in-kind benefit to be provided in any other taxable year, (ii) in the case of any reimbursements of eligible expenses, reimbursement shall be made on or before the last day of your taxable year following the taxable year in which the expense was incurred, (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.  If the Company’s ability to choose between a lump sum severance payment or a series of severance payments could subject you to adverse taxation under Section 409A, then such severance payments shall be paid in installments in the case of payments under Section 8(a)(1), and in a lump sum in the case of payments under Section 8(b)(1); provided, 

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however, that if this difference in default treatment would subject you to adverse taxation under Section 409A, then such severance payments shall be made in a lump sum in the case of payments under Section 8(a)(1) or 8(b)(1).
15.    Section 280G; Parachute Payments.
(a)    If any payment or benefit you will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount.  The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for you.  If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
(b)    Notwithstanding any provision of subsection (a) above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows:  (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.
(c)    Unless you and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change in control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 15 (“Section 280G; Parachute Payments”).  The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder.  The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together 

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with detailed supporting documentation, to you and the Company within fifteen (15) calendar days after the date on which your right to a 280G Payment becomes reasonably likely to occur (if requested at that time by you or the Company) or such other time as requested by you or the Company.
(d)    If you receive a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 15(a) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, you agree to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 15(a)) so that no portion of the remaining Payment is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 15(a), you shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
16.    Dispute Resolution.  Section 9 of the Confidentiality Agreement (Arbitration; Legal and Equitable Remedies) shall apply to the terms of this letter and any disputes that may arise in connection with your employment with the Company.
17.    Miscellaneous.  This Agreement, together with your Confidentiality Agreement, forms the complete and exclusive statement of your employment agreement with the Company.  It supersedes any other agreements or promises made to you by anyone, whether oral or written.  Changes in your employment terms, other than those changes expressly reserved to the Company’s or Board’s discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company.  This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns.  If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.  This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles.  Any ambiguity in this Agreement shall not be construed against either party as the drafter.  Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.  This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic image copies of signatures shall be equivalent to original signatures.
18.    Conditional Offer.  This offer of employment is conditioned upon the following:
(a)    The Company reserves the right to conduct background investigations, drug screens, and/or reference checks on all of its potential employees.  If we do conduct a background check using an outside agency, you will be provided a disclosure and authorization form and a notice of your rights, as applicable.  This job offer is contingent upon our receipt of satisfactory results from such a background investigation, drug screen, and/or reference check, if any.
(b)    For purposes of federal immigration law compliance, you will be required to provide to the Company appropriate evidence of your identity and eligibility for employment in the United States.  Such 

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documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.
(c)    You will be required to sign an acknowledgment that you have read and will comply with the Company’s Code of Conduct.  As a Company employee, you will be required to abide by all Company policies and directives.
(d)    You are required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement, a copy of which will be included with your new hire paperwork.  Please note that we must receive your signed agreement within the first three business days of employment.
Please sign and date this Agreement and return it to me on or before 5pm pacific time on November 8, 2019 if you wish to accept employment at the Company under the terms described above.  This offer will expire if I do not receive this signed letter by that date.  I would be happy to discuss any questions that you may have about these terms.
We are delighted to be making this offer and the Company looks forward to your favorable reply and to a productive and enjoyable work relationship.
Sincerely,

/s/ Katrina Lake         
Katrina Lake, CEO

Reviewed, Understood, and Accepted:

/s/ Elizabeth Spaulding            November 7, 2019     
Elizabeth Spaulding            Date

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