Document:

Unassociated Document

Exhibit 10.2

SUPERVISORY AGREEMENT

This Supervisory Agreement (Agreement) is made this  1st day of March, 2011 (Effective Date), by and through the Board of Directors (Board) of First Place Bank, Warren, Ohio, OTS Docket No. 14752 (Association) and the Office of Thrift Supervision (OTS), acting by and through its Regional Director for the Central Region (Regional Director);

 

WHEREAS, the OTS, pursuant to 12 U.S.C. § 1818, has the statutory authority to enter into and enforce supervisory agreements to ensure the establishment and maintenance of appropriate safeguards in the operation of the entities it regulates; and

 

WHEREAS, the Association is subject to examination, regulation and supervision by the OTS; and

 

WHEREAS, based on its examination of the Association, the OTS finds that the Association has engaged in unsafe or unsound practices and/or violations of law or regulation; and

 

WHEREAS, in furtherance of their common goal to ensure that the Association addresses the unsafe or unsound practices and/or violations of law or regulation identified by the OTS in the August 2, 2010 Report of Examination (2010 ROE), the Association and the OTS have mutually agreed to enter into this Agreement; and

 

WHEREAS, on February 25, 2011, the Association’s Board, at a duly constituted meeting, adopted a resolution (Board Resolution) that authorizes the Association to enter into this Agreement and directs compliance by the Association and its directors, officers, employees, and other institution-affiliated parties with each and every provision of this Agreement.

  

  

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NOW THEREFORE, in consideration of the above premises, it is agreed as follows:

 

Exhibit A-

 

Problem Assets.

 

1.           Within ninety (90) days, the Association shall submit a detailed, written plan with specific strategies, targets and timeframes to reduce4 the Association’s level of problem assets5 (Problem Asset Reduction Plan) to the Regional Director.  The Problem Asset Reduction Plan, at a minimum, shall include:

 

(a)           quarterly targets for the level of problem assets as a percentage of Tier 1 (Core) Capital plus the allowance for loan and lease losses (ALLL);

 

(b)           a description of the methods for reducing the Association’s level of problem assets to the established targets; and

 

(c)           all relevant assumptions and projections and documentation supporting such assumptions and projections.

 

2.           Within thirty (30) days, the Association shall develop individual written specific workout plans for each adversely classified loan or loan relationship greater than two million dollars ($2,000,000) and for each REO where the original loan amount collateralized by the REO exceeded two million dollars ($2,000,000) (Asset Workout Plans).

 

3.           Within forty-five (45) days after the end of each quarter, beginning with the quarter ending June 30, 2011, the Association shall submit a quarterly written asset status report (Quarterly Asset Report) to the Board.  The Board’s review of the Quarterly Asset Report shall be documented in the Board meeting minutes.  The Quarterly Asset Report shall include, at a minimum:

 

(a)           the current status of all Asset Workout Plans;

 

Exhibit A-4 For purposes of this Paragraph, “reduce” means to sell real estate owned (REO) and to collect, sell, charge off, or improve the quality of a loan sufficient to warrant its removal from adverse criticism or classification.

Exhibit A-5 The term “problem assets” shall include all REO and adversely classified assets.

 

  

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(b)           the ratio of adversely classified assets to Tier 1 (Core) Capital plus ALLL;

 

(c)           a comparison of problem assets at the current quarter end with the preceding quarter;

 

(d)           a breakdown of criticized6 assets by type and risk factor, for example, residential, acquisition and development, construction, land loans, location and origination source;

 

(e)           an assessment of the Association’s compliance with the Problem Asset Reduction Plan;

 

(f)            a discussion of the actions taken during the preceding quarter to reduce the Association’s level of problem assets; and

 

(g)           any recommended revisions or updates to the Problem Asset Reduction Plan.

 

4.           Within forty-five (45) days after the end of each quarter, a copy of the Quarterly Asset Report shall be provided to the Regional Director.

 

Loan Modification Policy.

 

5.            Within sixty (60) days, the Association shall develop a loan modification policy (Loan Modification Policy) that addresses all corrective actions contained in the 2010 ROE concerning loan modifications.  The Loan Modification Policy shall conform to all applicable laws, regulations and regulatory guidance and shall:

 

(a)           establish eligibility criteria that loans must meet to qualify for a modification;

 

(b)           identify acceptable modifications, including guidelines and restrictions on such modifications;

 

(c)           identify the appropriate job positions or committee authorized to approve loan modifications and the procedures for monitoring all approved modified loans;

Exhibit A-6 The term criticized assets includes all adversely classified assets and assets designated as special mention.

 

  

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(d)           require the reporting of all modified loans in accordance with generally accepted accounting principles (GAAP), applicable laws, regulations and regulatory guidance, and the Thrift Financial Report (TFR) instructions;

 

(e)           require that modified loans be accurately and timely classified in accordance with the Association’s asset classification policies; and

 

(f)           require that a monthly report be submitted to the Board, beginning with the period ending March 31, 2011, detailing the total number and dollar amount of loan modifications, the number and dollar amount of loans modified since the preceding monthly report, and the types of modifications made.

 

Credit Administration.

 

6.           Within ninety (90) days, the Association shall revise its credit administration policies, procedures, practices, and controls (Credit Administration Policy) to ensure that it is acceptable to the Regional Director and addresses all corrective actions in the 2010 ROE relating to credit administration.  The Credit Administration Policy shall comply with all applicable laws, regulations and regulatory guidance and:

 

(a)           include restrictions on loan renewals granted without modifications;

 

(b)           include restrictions on additional advances to borrowers who have an existing loan with the Association that is adversely classified;

 

(c)           include polices, procedures, and systems to obtain and analyze, on at least an annual basis, updated borrower financial information on nonhomogeneous loans;

 

(d)           include guidelines requiring that collateral properties be re-appraised prior to loans being modified, extended, or refinanced;

 

  

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(e)           include guidelines requiring that current financials statements from the borrower be provided to the Association prior to loans being modified, extended or refinanced and that such financial statements be reviewed to determine whether the borrower has the ability to repay at the modified loan terms;

 

(f)           include an effective system for the retention, review, renewal, and updating by the Association of all required records, filings, and other credit related documents; and

 

(g)           include funding controls over costs on construction projects to prevent disbursements of loan funds in excess of completed construction costs.

 

Allowance for Loan and Lease Losses.

 

7.           Within sixty (60) days, the Association shall revise its policies, procedures, and methodology relating to the timely establishment and maintenance of an adequate ALLL level (ALLL Policy) to ensure that it is acceptable to the Regional Director and addresses all corrective actions set forth in the 2010 ROE relating to ALLL.  The ALLL Policy shall comply with applicable laws, regulations, and regulatory guidance and shall:

 

(a)           incorporate the results of all internal loan reviews and classifications;

 

(b)           address the historical loan loss rates of the Association in compliance with regulatory guidance, which shall be updated quarterly with heavier weighting assigned to rates of the most recent quarters;

 

(c)           require an expanded segmentation of the Association’s loan portfolio for internal loan review analysis;

 

(d)            require the stress testing of loss rates and delinquency rates to: (i) determine the sensitivity of the ALLL methodology to changes from primary inputs; (ii) provide information regarding the risk of miscalculation if the credit environment changes; and (iii) evaluate the appropriateness of the ALLL in a range of credit environments;

 

  

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(e)           address the level and impact of the Association’s current concentrations of credit, including geographic concentrations; and

 

(f)           take into consideration current and prospective market and economic conditions.

 

8.           The Association shall submit a copy of the Board meeting minutes, and copies of all documents made available to the Board members, reflecting the Board’s discussion and adoption of the ALLL Policy to the Regional Director within fifteen (15) days after the Board meeting.

 

9.           Within forty-five (45) days, the Association shall retain a qualified and independent third party, acceptable to the Regional Director, to: (a) assess the adequacy and effectiveness of the Association’s ALLL methodology and its compliance with this Agreement and applicable regulatory guidance; and (b) validate the sufficiency of the ALLL level as of the end of each quarter in 2011 (ALLL Analysis Report).

 

10.           Within sixty (60) days after the end of each quarter in 2011, the Association shall submit a copy of the ALLL Analysis Report to the Regional Director.

 

11.           Within forty-five (45) days after the end of each quarter, beginning with the quarter ending March 31, 2011, the Association shall analyze the adequacy of the ALLL consistent with its ALLL Policy (Quarterly ALLL Report).  The Board’s review of the Quarterly ALLL Report, including, but not limited to, all qualitative factors considered in determining the adequacy of the Association’s ALLL, shall be fully documented in the Board meeting minutes. Any deficiency in the ALLL shall be remedied by the Association in the quarter in which it is discovered and before the Association files its Thrift Financial Report (TFR) with the OTS.  A copy of the Quarterly ALLL
Report and the Board meeting minutes detailing the Board’s review shall be provided to the Regional Director within fifteen (15) days after the Board meeting.

 

  

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Internal Asset Review and Classification.

 

12.          Within sixty (60) days, the Association shall revise its written internal asset review and classification program (IAR Program) to address all corrective actions set forth in the 2010 ROE relating to internal asset review and classification and that complies with all applicable laws, regulations and regulatory guidance.  At a minimum, the IAR Program shall:

 

(a)           ensure the accurate and timely identification, classification, and reporting of the Association’s assets, including the designation of loans as special mention or placement of loans on a watch list where a borrower’s credit standing has deteriorated;

 

(b)           detail the Association’s loan grading system and specify parameters for the identification of problem loans for each type of loan offered by the Association;

 

(c)           establish specific review and classification standards for any loans where interest, loan fees, late fees, loan costs, or collection costs of problem loans have been capitalized into the loan balance;

 

(d)           require internal asset reviews and updates for commercial loans and commercial real estate loans (both owner and non-owner occupied) to be conducted not less than every three (3) months;

 

(e)           require monthly reports be submitted to the Board detailing the Association’s adversely classified, special mention and delinquency ratios; and

 

(f)           provide for the appointment of a qualified, experienced, and independent third party to conduct, at a minimum, quarterly reviews of the Association’s commercial loans and commercial real estate loans (both owner and non-owner occupied) and assessments of the Association’s internal asset review process thereof.

 

  

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Liquidity Management.

 

13.         Within forty-five (45) days, the Association shall revise its liquidity and funds management policy (Liquidity Management Policy) to address all corrective actions set forth in the 2010 ROE relating to liquidity and funds management.  The Liquidity Management Policy shall comply with all applicable laws, regulations and regulatory guidance.

 

14.         The Liquidity Management Policy shall include a Contingency Funding Plan, which shall, at a minimum, include:

 

(a)           alternative funding sources for meeting extraordinary demands or to provide liquidity in the event the sources identified are insufficient.  Such alternative funding sources must consider, at a minimum, the selling of assets, obtaining secured lines of credit, recovering charged-off assets, injecting additional equity capital, and the priority of their implementation;

 

(b)           appropriate lines of credit at correspondent banks, including the Federal Reserve Bank, that would allow the Association to borrow funds to meet depositor demands if the Association’s other provisions for liquidity prove to be inadequate; and

 

(c)           retention of investment securities and other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Association’s total assets) to ensure the maintenance of the Association’s liquidity position at a level consistent with short-and-long-term liquidity objectives.

 

Interest Rate Risk Management.

 

15.   Within ninety (90) days, the Association shall revise its policies and procedures governing the Association’s interest rate risk (IRR) management (IRR Policy) to ensure that it is acceptable to the Regional Director and addresses all corrective actions in the 2010 ROE related to IRR.  The Association’s IRR Policy shall comply with all applicable laws, regulations and regulatory guidance.

 

  

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Business Plan.

 

16.         By June 30, 2011, the Association shall submit to the Regional Director an updated business plan for the period beginning July 1, 2011 through December 31, 2012 (Business Plan).  At a minimum, the Business Plan shall conform to applicable laws, regulations, and regulatory guidance and include:

 

(a)            plans to improve the Association’s core earnings and achieve profitability;

 

(b)           strategies for ensuring that the Association has the financial and personnel resources necessary to implement and adhere to the Business Plan, adequately support the Association’s risk profile, maintain compliance with applicable regulatory capital requirements, and comply with this Agreement;

 

(c)           quarterly pro forma financial projections (balance sheet and income statement for the period covered by the Business Plan), including Tier 1 (Core) and Total Risk-Based Capital Ratios;

 

(d)           strategies to stress-test and adjust earnings forecasts based on continuing operating results, economic conditions, and credit quality of the loan portfolio; and

 

(e)           identification of all relevant assumptions made in formulating the Business Plan and a requirement that documentation supporting such assumptions be retained by the Association.

 

17.         Upon receipt of written notification from the Regional Director that the Business Plan is acceptable, the Association shall implement and adhere to the Business Plan.

 

  

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18.         Any material modifications7 to the Business Plan shall receive the prior written non-objection of the Regional Director.  The Association shall submit proposed material modifications to the Regional Director at least forty-five (45) days prior to implementation.

 

19.         By December 31, 2011, and each December 31st thereafter, the Business Plan shall be updated and submitted to the Regional Director pursuant to Paragraph 16 above incorporating the Association’s budget plan and profit projections for the next two (2) calendar years taking into account any revisions to the Association’s loan, investment and operating policies.

 

20.         Within forty-five (45) days after the close of each quarter, after implementation of the Business Plan, the Board shall review written quarterly variance reports on the Association’s compliance with the Business Plan (Variance Reports).  The Variance Reports shall:

 

(a)           identify variances in the Association’s actual performance during the preceding quarter as compared to the projections set forth in the Business Plan;

 

(b)           contain an analysis and explanation of identified variances; and

 

(c)           discuss the specific measures taken or to be taken by the Association to address identified variances.

 

21.         A copy of each Variance Report shall be provided to the Regional Director within seven (7) days after review by the Board.

 

Financial Reporting.

 

22.         Effective immediately, the Association shall ensure that its financial reports and statements are timely and accurately prepared and filed in compliance with applicable laws, regulations, and regulatory guidance including, but not limited to, 12 C.F.R. Part 562 and the Thrift Financial Report (TFR) instructions.

 

Exhibit A-7   A modification shall be considered material under this Paragraph if the Association: (a) plans to engage in any activity that is inconsistent with the Business Plan; or (b) exceeds the level of any activity contemplated in the Business Plan by more than ten percent (10%).

Exhibit A-

 

  

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Violations of Law.

 

23.           Within ninety (90) days, the Association shall ensure that all violations of law and/or regulation discussed in the 2010 ROE are corrected and that adequate policies, procedures and systems are established or revised and thereafter implemented to prevent future violations.

 

Board Oversight of Compliance with Agreement.

 

24.           Within thirty (30) days, the Board shall designate a committee to monitor and coordinate the Association’s compliance with the provisions of this Agreement and the completion of all corrective actions required in the 2010 ROE (Oversight Committee).  The Oversight Committee shall be comprised of five (5) or more directors, all of whom shall be independent8 directors.

 

25.           Within fifteen (15) days after the end of each quarter, beginning with the quarter ending March 31, 2011, the Oversight Committee shall submit a written compliance progress report to the Board (Compliance Tracking Report).  The Compliance Tracking Report shall, at a minimum:

 

Exhibit A-8 For purposes of this Agreement, an individual who is “independent” with respect to the Association shall be any individual who:

Exhibit A-              (a)            is not employed in any capacity by the Association, its subsidiaries, or its affiliates, other than as a director;

Exhibit A-              (b)            does not own or control more than ten percent (10%) of the outstanding shares of the Association or any of its affiliates;

Exhibit A-              (c)            is not related by blood or marriage to any officer or director of the Association or any of its affiliates, or to any shareholder owning more than ten percent (10%) of the outstanding shares of the Association or any of its affiliates, and who does not otherwise share a common financial interest with any such officer, director or shareholder;

Exhibit A-              (d)            is not indebted, directly or indirectly, to the Association or any of its affiliates, including the indebtedness of any entity in which the individual has a substantial financial interest; and

Exhibit A-              (e)            has not served as a consultant, advisor, underwriter, or legal counsel to the Association or any of its affiliates.

Exhibit A-

Exhibit A-

Exhibit A-

 

  

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(a)           separately list each corrective action required by this Agreement and the 2010 ROE;

 

(b)           identify the required or anticipated completion date for each corrective action; and

 

(c)           discuss the current status of each corrective action, including the action(s) taken or to be taken to comply with each corrective action.

 

26.         Within thirty (30) days after the end of each quarter, beginning with the quarter ending March 31, 2011, the Board shall review the Compliance Tracking Report and all reports required to prepared by this Agreement.  Following its review, the Board shall adopt a resolution: (a) certifying that each director has reviewed the Compliance Tracking Report and all required reports; and (b) documenting any corrective actions adopted by the Board.  A copy of the Compliance Tracking Report and the Board resolution shall be provided to the Regional Director within fifteen (15) days after the Board meeting.

 

27.         Nothing contained herein shall diminish the responsibility of the entire Board to ensure the Association’s compliance with the provisions of this Agreement.  The Board shall review and adopt all policies and procedures required by this Agreement prior to submission to the OTS.

 

Dividends and Other Capital Distributions.

 

28.         Effective immediately, the Association shall not declare or pay dividends or make any other capital distributions, as that term is defined in 12 C.F.R. § 563.141, without receiving the prior written approval of the Regional Director in accordance with applicable regulations and regulatory guidance.  The Association’s written request for approval shall be submitted to the Regional Director at least thirty (30) days prior to the anticipated date of the proposed declaration, dividend payment or distribution of capital.

 

  

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Growth.

 

29.         Effective immediately, the Association shall not increase its total assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the prior quarter without the prior written non-objection of the Regional Director.

 

Golden Parachute Payments.

 

30.         Effective immediately, the Association shall not make any golden parachute payment9 unless, with respect to such payment, the Association has complied with the requirements of 12 C.F.R. Part 359.

 

Directorate and Management Changes.

 

31.         Effective immediately, the Association shall comply with the prior notification requirements for changes in directors and Senior Executive Officers10 set forth in 12 C.F.R. Part 563, Subpart H.

 

Employment Contracts and Compensation Arrangements.

 

32.         Effective immediately, the Association shall not enter into any new contractual arrangement or renew, extend, or revise any contractual arrangement relating to compensation or benefits for any Senior Executive Officer or director of the Association, unless it first provides the Regional Director with not less than thirty (30) days prior written notice of the proposed transaction.  The notice to the Regional Director shall include a copy of the proposed employment contract or compensation arrangement or a detailed, written description of the compensation arrangement to be offered to such Senior Executive Officer or director, including all benefits and perquisites.  The Board shall ensure that any contract, agreement, or arrangement submitted
to the Regional Director fully complies with the requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12 C.F.R. Part 570 – Appendix A.

Exhibit A-9 The term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).

Exhibit A-10 The term “Senior Executive Officer” is defined at 12 C.F.R.  § 563.555.

 

  

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Third Party Contracts.

 

33.           Effective immediately, the Association shall provide the Regional Director with written notice of all arrangements or contracts with third party service providers consistent with the requirements of 12 U.S.C. § 1464(d)(7)(D)(ii).  Such notice shall be provided to the Regional Director not later than sixty (60) days after the earlier of: (a) the date on which the Association enters into the contract; or (b) the date on which the performance of the service is initiated.  The Board shall review all arrangements or contracts with third party service providers covered by this Paragraph to ensure compliance with the standards and guidelines set forth in TB 82a.

 

Transactions with Affiliates.

 

34.           Effective immediately, the Association shall not engage in any new transaction with an affiliate unless, with respect to each such transaction, the Association has complied with the notice requirements set forth in 12 C.F.R. § 563.41(c)(4), which shall include the information set forth in 12 C.F.R. § 563.41(c)(3).  The Board shall ensure that any transaction with an affiliate for which notice is submitted pursuant to this Paragraph, complies with the requirements of 12 C.F.R. § 563.41 and Regulation W, 12 C.F.R. Part 223.

 

Effective Date.

 

35.           This Agreement is effective on the Effective Date as shown on the first page.

 

Duration.

 

36.           This Agreement shall remain in effect until terminated, modified or suspended, by written notice of such action by the OTS, acting by and through its authorized representatives.

 

  

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Time Calculations.

 

37.         Calculation of time limitations for compliance with the terms of this Agreement run from the Effective Date and shall be based on calendar days, unless otherwise noted.

 

Submissions and Notices.

 

38.         All submissions to the OTS that are required by or contemplated by the Agreement shall be submitted within the specified timeframes.

 

39.         Except as otherwise provided herein, all submissions, requests, communications, consents or other documents relating to this Agreement shall be in writing and sent by first class U.S. mail (or by reputable overnight carrier, electronic facsimile transmission or hand delivery by messenger) addressed as follows:

(a)           To:         the OTS

 

Regional Director

Office of Thrift Supervision

One South Wacker Drive, Suite 2000

Chicago, Illinois  60606

Facsimile: (312) 917-5001

(b)           To:         the Association

Chairman of the Board

First Place Bank

185 East Market Street

Warren, Ohio   44481

Facsimile: (330) 393-5578

No Violations Authorized.

 

40.           Nothing in this Agreement shall be construed as allowing the Association, its Board, officers or employees to violate any law, rule, or regulation.

 

OTS Authority Not Affected.

 

41.           Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking any other action affecting the Association if at any time the OTS deems it appropriate to do so to fulfill the responsibilities placed upon the OTS by law.

 

  

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Other Governmental Actions Not Affected.

 

42.           The Association acknowledges and agrees that its execution of the Agreement is solely for the purpose of resolving the matters addressed herein, consistent with Paragraph 41 above, and does not otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any actions, charges against, or liability of the Association that arise pursuant to this action or otherwise, and that may be or have been brought by any governmental entity other than the OTS.

 

Miscellaneous.

 

43.           The laws of the United States of America shall govern the construction and validity of this Agreement.

 

44.           If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, unless the Regional Director in his or her sole discretion determines otherwise.

 

45.           All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors, successors, and assigns.

 

46.           The section and paragraph headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

47.           The terms of this Agreement represent the final agreement of the parties with respect to the subject matters thereof, and constitute the sole agreement of the parties with respect to such subject matters.

 

  

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Enforceability of Agreement.

 

48.           This Agreement is a “written agreement” entered into with an agency within the meaning and for the purposes of 12 U.S.C. § 1818.

 

Signature of Directors/Board Resolution.

 

49.           Each Director signing this Agreement attests that he or she voted in favor of a Board Resolution authorizing the consent of the Association to the issuance and execution of the Agreement.  This Agreement may be executed in counterparts by the directors after approval of execution of the Agreement at a duly called board meeting.  A copy of the Board Resolution authorizing execution of this Agreement shall be delivered to the OTS, along with the executed original(s) of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

  

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WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of the Association, hereby execute this Agreement.

	
FIRST PLACE BANK

	  	
OFFICE OF THRIFT SUPERVISION

	
Warren, Ohio

	  	  	  
	  	  	  	  
	
/s/ Samuel A. Roth

	  	
By:  

	
/s/ Daniel T. McKee

	
Samuel A. Roth, Chairman

	  	  	
Daniel T. McKee

	  	  	  	
Regional Director, Central Region

	
/s/ A. Gary Bitonte

	  	  	  
	
A. Gary Bitonte, M.D., Director

	  	  	  
	  	  	  	  
	
/s/ Donald Cagigas

	  	  	  
	
Donald Cagigas, Director

	  	  	  
	  	  	  	  
	
/s/ Marie Izzo Cartwright

	  	  	  
	
Marie Izzo Cartwright, Director

	  	  	  
	  	  	  	  
	
/s/ Frank J. Dixon

	  	  	  
	
Frank J. Dixon, Director

	  	  	  
	  	  	  	  
	
/s/ Robert P. Grace

	  	  	  
	
Robert P. Grace, Director

	  	  	  
	  	  	  	  
	
/s/ Thomas M. Humphries

	  	  	  
	
Thomas M. Humphries, Director

	  	  	  
	  	  	  	  
	
/s/ Earl T. Kissell

	  	  	  
	
Earl T. Kissell, Director

	  	  	  
	  	  	  	  
	
/s/ Steven R. Lewis

	  	  	  
	
Steven R. Lewis, Director

	  	  	  
	  	  	  	  
	
/s/ E. Jeffrey Rossi

	  	  	  
	
E. Jeffrey Rossi, Director

	  	  	  
	  	  	  	  
	
/s/ William A. Russell

	  	  	  
	
William A. Russell, Director

	  	  	  
	  	  	  	  
	
/s/ Robert L. Wagmiller

	  	  	  
	
Robert L. Wagmiller, Director

	  	  	  

  

18JOINT VENTURE AGREEMENT

 

THIS JOINT VENTURE AGREEMENT ("Agreement") is made as of the 1st day of March, 2010 between ATLAS CAPITAL HOLDINGS, INC., a Nevada corporation having its principal place of business at 2334 North Federal Highway Boca Raton, Florida 33431(“Atlas”) and CLEAN ENERGY PATHWAYS, INC. a Nevada corporation having its principal place of business at 1521 West Main Street, Dothan Alabama (“CEP”). Atlas and CEP are hereby collectively referred to herein as the "Joint Venturers".

 

WHEREAS, Atlas is a business-consulting firm that also raises capital for its corporate clients throughout the U.S. and Asia and CEP is a clean energy production company specializing in producing clean renewable fuel for its customers;

 

WHEREAS, the Joint Venturers desire to enter into this Agreement to collaborate on providing each of their services to clients that both Atlas and CEP indentify as potential clients of the Joint Venture as defined below;

 

WHEREAS, CEP and Atlas believe it is in their mutual economic interests to form a joint venture for purposes of developing and acquiring technologies that may be used in the production of clean renewable fuel and also to develop medium-size and large scale solar and wind energy projects that in order to sell energy to large to medium size utility companies as more fully described in this Agreement (the “Business”)

 

WHEREAS, each Joint Venturer believes that this Agreement is fair and equitable and performance of this Agreement by the Joint Venture will be of great benefit to Atlas and to CEP;

 

NOW, THEREFORE, in order to set forth the respective rights, interests, duties and obligations to each other, the Joint Venturers agree as follows:

 

  

  

  

1.           PURPOSE, JOINT VENTURE NAME AND STRUCTURE

 

1.1         The Joint Venturers hereby enter into this Joint Venture ("Joint Venture") for the purpose of operating the Business.  The Joint Venturers understand that the intent of the Business is to (i) develop and acquire technologies that may be used in the production of clean renewable fuel and also to develop medium-size and large scale solar and wind energy projects that in order to sell energy to large to medium size utility companies; (ii) to raise capital for the Business from investors; and (iii) structure mutually beneficial joint ventures between clients looking to purchase energy from the projects that the Joint Ventures have developed and other companies.

 

1.2         The Joint Venturers will not form a new entity to engage in the Business. Instead, each of Atlas and CEP she maintain there current corporate structures and shall both provide sufficient resources to explore a merger between both companies. The Joint Venturers will explore a potential merger between their two companies over the course of 90 days from the date of this Agreement. After which, the Joint Venturers shall decide whether they will agree to merger both companies into one entity to pursue the Business of the Joint Venture. Atlas and CEP shall have the equity interests in the Joint Venture as described in Article III of this Agreement.  The above structure is hereinafter included in any reference to the Joint Venture.  Although
the Joint Venture will consist of two separate legal entities, it is the intention of the parties hereto that the Joint Venture shall operate in an integrated manner.

 

2.           RELATIONSHIP OF THE JOINT VENTURERS

 

2.1         Nothing contained in this Agreement shall be construed to create a partnership between the Joint Venturers or give rise to any agency relationship except as specifically necessary and set forth in this Agreement.

 

2.2         Nothing contained in this Agreement shall create or be interpreted or construed so as to create any permanent relationship between the Joint Venturers or limit their respective rights to carry on their individual businesses for their own benefit, including other work, which does not relate to the Business.

3.           GOOD FAITH

 

3.1         Generally.  Each party covenants to operate in good faith, and to use its best efforts to develop the Business to the best advantage of the Joint Venture.  If either party amends its charter then that amendment to the charter documents and other governing documents of each Joint Venturer will contain terms, which are consistent with the terms of this Agreement.

 

4.           INTEREST OF THE PARTIES

 

4.1         The interests and shares of the Joint Venturers in and to the assets and property of the Joint Venture, any revenues, profits, losses and tax benefits which may be derived from the performance of the Business and the obligations and liabilities of each of the Joint Venturers as among themselves in connection with the Joint Venture, and with respect to any and all liabilities in connection therewith, shall be in the following proportions:

 

	
ATLAS

	 	 	50	%
	
CEP

	 	 	50	%

 

  

  

  

 

4.2         The Joint Venturers agree that not less than 50 percent of the net profits earned by the Joint Venture shall be distributed to Atlas and 50 percent to CEP.

 

5.           JOINT VENTURE MANAGEMENT AND MANAGING MEMBERS

 

5.1         The performance of work, and the operations and activities of the Joint Venture in connection therewith, shall be carried out under the general management and direction of a Management Committee (the "Management Committee") consisting of two members from CEP and two members from Atlas.  Each Joint Venturer shall have one (1) vote on any matter brought before the Management Committee.

5.2         The salaries of each member of the Management Committee shall be borne by the respective Joint Venturer appointing such member.

 

5.3         Each Joint Venturer may change its representative on the Management Committee at any time by giving written notice to that effect to the other Joint Venturer.

 

5.4         For any meeting of the Management Committee, a quorum shall be comprised of 2 representatives, one from each Joint Venturer. All decisions, determinations, approvals, consents or other actions shall be determined by vote of the Management Committee but in the event of disagreement a third party will be used to resolve the issues.

 

5.5         Regular meetings of the Management Committee will be held at such intervals and times as deemed appropriate by the Committee for the needs of the Business and operation of the Joint Venture.  In addition, any member of the Committee may call a special meeting of the Committee at any time by giving written or telephonic notice at least two (2) days prior to the meeting, unless such period of notice is reduced or waived by representatives of both Joint Venturers. The Management Committee shall consider any matter submitted by any of its members.

 

5.6         A meeting may be conducted by telephone without prior notice in an emergency, and this method may also be used when such procedure would be expedient for matters needing prompt attention as collectively determined by a Committee member of each Joint Venturer. 

 

6.           MANAGEMENT COMMITTEE AUTHORITY

 

6.1         The Management Committee shall have full authority to (a) review and approve engagements; (b) approve engagement agreements and fees; (c) arrange for and supervise the negotiation of the engagement; (d) call for and require all necessary capital contributions; (e) arrange for prosecution, defense and settlement of any third party claim or lawsuit by or against the Joint Venture arising out of performance of the Business; (f) establish and administer a special bank account for deposits to the Joint Venture and withdrawal of expenses incurred by the Joint Venture; and disbursements of profits upon with winding up of the Joint Venture; (g) approve all major changes in the scope of each client engagement; (h) authorize loans to the Joint Venture; (i) approve
major subcontracts; (j) wind up the business affairs of the Joint Venture; and (k) secure bonds and insurance for the Joint Venture as necessary or appropriate.

 

  

  

  

 

6.3         All Management Committee members shall have the authority to execute all required project documentation with the exception of bank checks that will require a dual signature, one from each of the Joint Venturers. Check signatories may vary from Management Committee members.

 

7.           JOINT VENTURE BANK ACCOUNT AND FUNDS OF THE JOINT VENTURE

 

7.1         The Management Committee may but is not required to establish and administer a special bank account in the name of the Joint Venture (“Operating Account”) in such bank as the Management Committee shall deem appropriate. All capital, including capital contributions, of the Joint Venture and all funds received by the Joint Venture from any source shall be deposited in such bank account or accounts, and such accounts shall be subject to the control of the Management Committee.  All checks drawn on the Operating Account or any other withdrawal shall require two (2) signatures, one from each Joint Venturer.  Each Joint Venturer may designate the person or persons who may sign on its behalf.  All expenses incurred and
approved for payment by the Management Committee will be paid from the Operating Account. The Management Committee may require the bonding of any person or persons authorized to draw upon the funds of the Joint Venture.

 

7.2         The Management Committee may cause funds of the Joint Venture to be invested with interest as deemed appropriate by the Management Committee.

 

7.3         CEP shall contribute $100,000 to Atlas as an initial engagement fee which shall be used by Atlas in furtherance of hiring personnel to assist with the Business and provide for the execution of other objectives on behalf of the Joint Venture.

 

8.           BOOKS OF ACCOUNT AND INSURANCE

 

8.1 CEP shall maintain the Joint Venture books of accounts, vouchers, contracts, inventory, supplies, equipment, property and other data and administrative records of the Joint Venture (“Joint Venture Records”).  CEP shall maintain adequate and complete Joint Venture Records and books of account on a calendar-year basis. Atlas shall prepare and submit quarterly statements, cost reports, summaries and other financial data, in forms and at times specified by the Management Committee.

 

8.2         The Joint Venturers shall determine the amount, type and limits of insurance coverage needed to protect the Joint Venture and Joint Venturers against any risk of loss that will be assumed by the Joint Venture.

 

  

  

  

 

9.           PROFITS OR LOSSES

 

9.1         The net operating income and net operating loss of the Joint Venture shall be allocated between and shared by the Joint Venturers in proportion to their percentage ownership interests in the Joint Venture.

 

10.         LIMITATION OF LIABILITY

 

10.1               In no event shall any Joint Venturer be liable to any other Joint Venturer or the Joint Venture, in contract, tort or otherwise (including negligence, warranty and strict liability) for any special, indirect or consequential damages including, without limitation, loss of revenues or profits, cost of capital, loss of goodwill or similar damages.

 

11.         NOTICES

 

Any notice which is required or permitted to be given under any provision of this Agreement, except notices of special meetings of the Management Committee as provided in Section 5 (Management Committee), shall be given in writing and shall be delivered either in person or by registered or certified mail, by telegram or cable, and shall be deemed effective if and when received by the party to be notified at such party's address as set forth below. Each Joint Venturer may, by written notice to the other Joint Venturer as provided in this Section, change its address for receiving such notices.

 

	
Atlas Capital Partners, LLC

2334 North Federal Highway

Suite 330

Boca Raton, Florida 33431

561-488-7624

	
Clean Energy Pathways, Inc.

1521 West Main St.

Dothan, AL, 36301

888-412-9787

 

12.         TERM OF THE JOINT VENTURE

 

This Agreement is effective as of the date hereof and shall remain in effect indefinitely, until terminated by mutual agreement of the parties or upon termination of the Joint Venture contemplated hereby.  The sale or transfer of either party’s shares of stock in the Venture Companies shall not operate so as to terminate this Agreement.

 

13.         BEST EFFORTS.

 

Each Joint Venturer shall use its best efforts to carry out the purposes of this Agreement, to cooperate with the Joint Venturer fully; and to attend all meetings of the Management Committee to the end that the business affairs of the Joint Venture shall be conducted in an orderly and businesslike manner. In no event shall the existence of any dispute excuse either party from the full and faithful performance of this Agreement.

 

  

  

  

 

14.        Disputes, Governing Law and Jurisdiction.

This Agreement shall be governed by and shall be construed and interpreted in accordance with the laws in effect in the State of Florida and in accordance with all applicable Federal laws. The Parties shall, in good faith, expend commercially reasonable efforts to resolve amicably any claim or dispute as to any matter arising out of, or relating to, this Agreement  (“Dispute”).  If the Parties are unable to resolve the Dispute then such Dispute or other matters in question between the Parties arising out of or relating to this Agreement, or breach thereof, shall be subject to and decided by a national dispute resolution provider selected by the Parties. Judgment on the arbitration award may be entered in any Florida court having jurisdiction. Each party shall bear its own costs of

such arbitration.

 

15.         MISCELLANEOUS

 

15.1       No Waiver. Neither the failure of any Venturer to exercise any power given to such Venturer under this Agreement or to insist upon strict compliance by the other Venturer with such other Venturer's obligations under this Agreement, nor any custom or practice of the Venturers at variance with the terms hereof, shall constitute a waiver of any Venturer's right to demand exact, full and complete compliance by the other Venturer with the terms and provisions of this Agreement.

 

15.2       Confidentiality.  During the term of this Joint Venture, each Venturer shall consider all information provided by the other Venturer as confidential, unless such information is already in existence as common or public knowledge, and shall in no event disclose such information to any third party.

 

15.3       Entire Agreement. This Agreement contains and constitutes the entire agreement between the Joint Venturers with respect to the Joint Venture for the performance of services for the Business.

 

15.4       Severability of Invalid Provision. If any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect under the laws of the State of Florida, any such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been incorporated herein and the rights of the Venturers hereto shall be construed and enforced accordingly.

 

15.5       Amendments. This Agreement shall not be changed, amended, modified or waived otherwise than by a written instrument signed by a duly authorized representative of each Joint Venturer.

 

(Signatures Follow)

 

  

  

  

 

IN WITNESS HEREOF, ATLAS and CEP have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

 

	
ATLAS CAPITAL PARTNERS, LLC

	 	
CLEAN ENERGY PATHWAYS, INC.

	 	 	 
	
By:

	
Christopher K. Davies

	 	
By:

	
J. Michael Parsons

	
Its:

	
CEO

	 	
Its:

	
CEO

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