Document:

ex10-19.htm

Exhibit 10.19

  

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 1st day of October, 2015, by and among First National Community Bank, a national banking association (the “Bank”) and a wholly owned subsidiary of First National Community Bancorp, Inc., (the “Company”) and Brian C. Mahlstedt (“Officer”).

 

RECITAL

 

The Bank desires to retain Officer as Chief Lending Officer. Officer desires to continue his employment, all upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the recital, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be legally bound, agree as follows:

 

	
1.
	
Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below:

 

	 	
1.1.
	
“Commencement Date” means October 1, 2015 except as otherwise provided for in this Agreement. 

 

	 	
1.2.
	
“Bank Regulatory Agency” means any governmental authority, regulatory agency, ministry, department, statutory corporation, central bank or other body of the United States or of any other country or of any state or other political subdivision of any of them having jurisdiction over the Company or the Bank or any transaction contemplated, undertaken or proposed to be undertaken by the Company or the Bank, including, but not limited to:

 

	 	
(a)
	
the Federal Deposit Insurance Corporation;

	 	
(b)
	
the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of Philadelphia;

	 	
(c)
	
the Comptroller of the Currency; or

	 	
(d)
	
any predecessor or successor of any of the foregoing, or any Bank Regulatory Agency which the Company or Bank may become subject to supervision by as a result of a change in chartering agency or membership status in the Federal Reserve System, or change in applicable law.

 

	 	
1.3.
	
“Bank Board” means the Board of Directors of First National Community Bank.

 

	 	
1.4.
	
“Bank Bylaws” means the Bylaws of First National Community Bank as in effect from time to time.

 

	 	
1.5.
	
“Bank Chairman” means the Chairman of the Board of First National Community Bank.

 

	 	
1.6.
	
“Code” means the Internal Revenue Code of 1986, as amended.

 

 

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1.7.
	
“Company Board” means the Board of Directors of First National Community Bancorp, Inc.

 

	 	
1.8.
	
“Company Bylaws” means the Bylaws of First National Community Bancorp, Inc. as in effect from time to time.

 

	 	
1.9.
	
“Company Chairman” means the Chairman of the Board of First National Community Bancorp, Inc.

 

	 	
1.10.
	
“Compensation Committee” means the Compensation Committee of the Company Board, or such other or successor committee of the Board of the Directors of the Company delegated to establish or approve executive officer compensation, and that meets the requirements for independence for such committees established under applicable law, regulation and the listing requirements of any exchange on which the Company’s securities are traded (“Listing Requirements”).

 

	 	
1.11.
	
“Executive Capacity” means a position that is a Named Executive Officer (NEO) for SEC reporting purposes or an equivalent senior leadership position within the Company. 

 

	 	
1.12.
	
“Person” means any individual, firm, association, partnership, corporation, limited liability company, group, governmental agency or other authority, or other organization or entity.

 

	
2.
	
Employment; Term.

 

	 	
2.1.
	
Position. The Bank hereby employs Officer to serve as its Chief Lending Officer, and Officer accepts such employment.

 

	 	
2.2.
	
Term.

 

	 	
(a)
	
The term of this Agreement shall commence on the Commencement Date and continue for a three (3) year period (“Three Year Term”) with an automatic annual renewal subject to earlier termination in accordance with the provisions of this Agreement. The first annual renewal will occur on March 31, 2016 and will continue on each March 31st thereafter. Prior to the automatic renewal as described in this section, the Bank Board will review the terms and the compensation arrangements included in the Agreement. Should the Board determine that it will not provide an additional annual renewal to this Agreement, the Board will inform the Officer in writing to that effect. In such case, the Agreement will remain in effect for the remainder of its Term unless the Officer separates under the terms of Section 5.2, Section 5.3 or Section 7 of this Agreement or upon the Officer’s death. In the event of the Officer’s death, Sections 5.4(b), 5.4(c) and 7.3(b) will remain in effect. 

 

	
3.
	
Duties of Officer.

 

	 	
3.1.
	
Duties. Officer is employed as the Chief Lending Officer of the Bank, reporting directly to the President and CEO of the Bank and Company. Subject to the President and CEO’s direction, the Officer shall perform all duties and shall have all powers which are commonly incident to the office of Chief Lending Officer or which, consistent with those offices, are delegated to him by the Board. The Officer's duties include, but are not limited to, those General Responsibilities/Job Summary, more fully described in the Company and Bank’s Job Description for the Job Title of Chief Lending Officer, a copy of which is attached hereto and made a part hereof, marked Exhibit “A”.

 

 

 

2

 

 

	 	
3.2.
	
Performance of Services. Officer agrees to devote his full business time and attention to the performance of his duties and responsibilities under this Agreement, and shall use his best efforts and discharge his duties to the best of his ability for and on behalf of the Bank and to its successful operation. Officer shall comply with all laws, statutes, ordinances, rules and regulations relating to his employment and duties. During the term of this Agreement, Officer shall not at any time or place directly or indirectly engage or agree to engage in any business or practice related to the banking business with or for any other Person to any extent whatsoever, other than to the extent required by the terms and conditions of this Agreement. Officer agrees that while employed by the Bank he will not, without the prior written consent of the Bank Board, engage, or obtain a financial or ownership interest, in any other business, employment, consulting or similar arrangement, or other undertaking (an “Outside Arrangement”) if such Outside Arrangement would interfere with the satisfactory performance of his duties to the Bank, present a conflict of interest with the Company or Bank, breach his duty of loyalty or fiduciary duties to the Company or Bank, or otherwise conflict with the provisions of this Agreement; provided, however, that Officer shall not be prevented from investing his assets in such form or manner as would not require any services on the part of Officer in the operation or the affairs of the entities in which such investments are made and provided such investments do not present a conflict of interest with the Company or Bank. Officer shall promptly notify the Bank Board of any Outside Arrangement and provide the Bank Board with any written agreement in connection therewith.

 

	 	
3.3.
	
Change of Duties or Title: The Board of Directors may reassign the Officer to different duties or position title at its discretion. Should that occur, the terms of this contract will remain in effect until 1) the contract terminates without renewal as described in Section 2.2 (a) or 2) the Board and Officer execute a new Agreement. 

 

	
4.
	
Compensation and Benefits. As full compensation for all services rendered pursuant to this Agreement and the covenants contained herein, the Bank shall pay to Officer the following:

 

	 	
4.1.
	
Salary. Beginning on the Commencement Date, Officer shall be paid a base salary (“Salary”) of $192,000 on an annualized basis. Officer’s Salary may be increased (but not decreased) from time to time at the discretion of the Bank Board based upon the recommendation of the Compensation Committee (or other approval procedure required by applicable law, regulation or Listing Requirement). Any and all such increases in Salary shall be deemed to constitute amendments to this subsection to reflect the increased amounts, effective as of the dates established for such increases by appropriate corporate action. 

 

	 	
4.2.
	
The Bank shall pay Officer’s Salary in equal installments in accordance with the Bank’s regular payroll periods. Payments of Salary and Bonus shall be subject to the customary withholding of income and other employment taxes as is required with respect to compensation paid by an employer to an employee.

 

 

 

3

 

 

	 	
4.3.
	
Executive Incentive Plan Eligibility. During the term of this Agreement, Officer shall be eligible for an annual cash bonus payment in such amount and in such form as shall be approved by the Bank Board for the Officer’s position, under the terms of the Executive Incentive Plan or other bonus or incentive compensation plan, program, arrangement or award adopted or approved by the Bank Board upon the recommendation of the Compensation Committee thereof (or other approval procedure required by applicable law, regulation or Listing Requirement). 

 

	 	
4.4.
	
Long Term Incentive Plan Awards: Officer shall receive awards under the terms of the Bank’s Long Term Incentive Plan (LTIP) or any other equity based compensation program which the Bank or Company may determine appropriate based upon the recommendation of the Compensation Committee (or other approval procedure required by applicable law regulation or Listing Requirements) of the Company or Bank Board. If granted, the target value of the awards shall be approximately equal to the target annual cash award for which Officer may be eligible under the terms and conditions of the Executive Incentive Plan or other annual cash bonus Plan that may be in effect.

 

	 	
4.5.
	
Supplemental Executive Retirement Plan (SERP): Officer will be eligible to participate in a Supplemental Executive Retirement Plan under the terms and conditions that are described in the SERP Plan Document. 

 

	 	
4.6.
	
Vacation and Leave. Officer shall be entitled to twenty (25) days of vacation and leave annually, of which ten (10) days may be carried over to the following year under the terms and conditions of the Bank’s personnel policies as in effect from time to time. Paid sick leave and excused absences will be provided in accordance with the Bank’s leave policies. 

 

	 	
4.7.
	
Automobile. The Bank shall provide Officer during his employment under this Agreement with the full time use of a car selected by Officer but comparable to cars available to other executive officers. Such car shall be used by Officer in accordance with any and all general car policy(ies) as the Bank may from time to time adopt. Such car shall be selected, maintained and replaced in accordance with the Bank’s general policy on cars for employees having need of a car for such use.

 

	 	
4.8.
	
Benefits. The Bank will provide Officer with employee benefits consistent with those that are offered to other executive officers and employees of the Bank which comply with applicable law, regulation or Listing Requirements.

 

	 	
4.9.
	
Expenses. The Bank shall promptly upon presentation of proper expense reports therefor reimburse Officer, in accordance with the policies and procedures established from time to time by the Bank Board for its senior executive officers, for all reasonable and customary travel and other out-of-pocket expenses incurred by Officer in the performance of his duties and responsibilities under this Agreement and promoting the business of the Bank, including appropriate membership fees, dues and the cost of attending meetings and conventions.

 

	 	
4.10.
	
Membership Dues. The Bank will provide Officer with repayment of annual dues at a Country Club and/or other social club(s) based in Northeastern Pennsylvania, subject to the agreement by the Bank Board Chairperson. This payment is being provided with the expectation that such membership will assist the Bank with business development.

 

 

 

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4.11.
	
Retirement Plans. Officer shall be entitled to participate in any and all qualified pension or other qualified retirement plans of the Bank, which may be applicable to executive personnel of the Bank.

 

	 	
4.12.
	
Eligibility. Participation in any health, life, accident, disability, medical expense or similar insurance plan or any qualified pension or other retirement plan shall be subject to the terms and conditions contained in such plan. All matters of eligibility for benefits under any insurance plans shall be determined in accordance with the provisions of the applicable insurance policy issued by the applicable insurance company.

 

	
5.
	
Termination of Agreement. This Agreement may be terminated prior to expiration of the Term as provided below.

 

	 	
5.1.
	
Definition of Cause. For purposes of this Agreement, “Cause” means:

 

	 	
(a)
	
any act of theft, fraud, intentional misrepresentation or similar conduct by Officer in connection with or associated with the services rendered by Officer to the Bank under this Agreement;

 

	 	
(b)
	
any Bank Regulatory Agency formal action or proceeding against Officer as a result of his negligence, fraud, malfeasance or misconduct;

 

	 	
(c)
	
any of the following conduct on the part of Officer that has not been corrected or cured within thirty (30) days after having received written notice from the Bank Board detailing and describing such conduct:

 

	 	
(i)
	
the use of drugs, alcohol or other substances by Officer to an extent which materially interferes with or prevents Officer from performing his duties under this Agreement;

 

	 	
(ii)
	
failure by or the inability of Officer to devote full time, attention and energy to the performance of his duties pursuant to this Agreement (other than by reason of his death or disability). 

 

	 	
(iii)
	
intentional material failure by Officer to carry out the explicit lawful and reasonable directions, instructions, policies, rules, regulations or decisions of the Company Board or Bank Board, which are consistent with his position as Chief Lending Officer of the Bank;

 

	 	
(iv)
	
any action (including any failure to act) or conduct by Officer in violation of a material provision of this Agreement (including but not limited to the provisions of Section 6 hereof, which shall be deemed to be material);

 

	 	
(v)
	
willful or intentional misconduct on the part of Officer that results in material injury to the Company or Bank or any of its subsidiaries or affiliates;

 

 

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(vi)
	
any willful or intentional violation of the Bank’s Code of Business Conduct and Ethics Policy or Conflict of Interest Policy (or their successor policies addressing the same subject matter); or

 

	 	
(vii)
	
any willful or intentional violation of the Bank’s Employee Conduct Policy as defined in the Bank’s Employee Handbook.

 

	 	
5.2.
	
Termination by Bank.

 

	 	
(a)
	
For Cause. The Bank shall have the right to cancel and terminate this Agreement and Officer’s employment for Cause immediately on written notice, with his or her compensation and benefits ceasing as of his or her last day of employment, provided, however, that Officer shall be entitled to benefits through the last day of employment and accrued compensation to that date.

 

	 	
(b)
	
Without Cause. The Bank shall have the right to cancel and terminate this Agreement and Officer’s employment at any time without cause on written notice for any or no reason, with Officer’s compensation and benefits ceasing as of his last day of employment, subject to the provisions of Section 5.4 and Section 7. Officer agrees that if the Bank terminates his employment Without Cause, he will immediately resign from any and all positions held with the Bank or any other subsidiary, trust, plan or other entity for which Officer may be serving as a director, officer, member, trustee, employee or otherwise.

  

	 	
5.3.
	
Termination by Officer. Officer shall have the right to cancel and terminate this Agreement and his employment at any time on thirty (30) days prior written notice to the Bank Board, with his compensation and benefits ceasing as of his last day of employment, provided, however, that he shall be entitled to benefits through the last day of employment and accrued compensation to that date. Officer agrees to resign from any and all positions held with the Bank or any other subsidiary, trust, plan or other entity for which Officer may be serving as a director, officer, member, trustee, employee or otherwise, effective upon the date of delivery of his written notice terminating this Agreement.

 

	 	
5.4.
	
Severance. If Officer’s employment with the Bank is terminated by the Bank or its successors during the term Without Cause, the Bank or its successors shall:

 

	 	
(a)
	
pay to Officer a total Severance payment equal to 2.99 years base salary at the highest rate in effect during the twelve (12) month period immediately preceding Officer’s last day of employment plus the average cash award paid to Officer over the last three preceding years from the Executive Incentive Plan. 

 

	 	
(b)
	
pay any Severance due Officer pursuant to Section 5.4 in installments on the same schedule as he was paid immediately prior to the date of termination, each installment to be the same amount he would have been paid under this Agreement if he had not been terminated. In the event of the Officer’s death during the period of time while he is receiving Severance, Officer’s estate will be paid the remaining component of Severance to which the Officer is entitled under the terms of this Agreement. In the event Officer breaches any provision of Section 6 of this Agreement, Officer’s entitlement to any Severance and benefits, if and to the extent not yet paid, shall thereupon immediately cease and terminate. Notwithstanding anything to the contrary contained herein, if Officer’s termination of employment occurs less than 21 days prior to the end of any calendar year, no Severance payment shall be made hereunder until after the commencement of the next calendar year.

 

 

 

6

 

 

	 	
(c)
	
provide Officer at no charge, during the period that Officer is receiving Severance payments as described in 5.4 (a) and (b), with a continuation of medical benefits at terms no less favorable than the health and medical benefits in effect on the date of termination of the Officer’s employment and including any dependents being covered by the Officer on the date of his termination who remain eligible for medical benefits under the terms of the Bank’s medical plan. To the extent such benefits cannot be provided under a plan because Officer is no longer an employee of the Bank or it is not in the Bank’s best interests to provide such benefits due to the applicable nondiscrimination requirements set forth in Section 1001 of the Patient Protection and Affordable Care Act, as amended, a dollar amount equal to the after-tax cost (estimated in good faith by the Bank) of obtaining such benefits, or substantially similar benefits, shall be paid to the Officer within thirty (30) days following the date of termination, on a date determined by the Bank; provided, however, that Officer shall not be entitled to any such payments if employment is terminated in accordance with the provisions of Section 5.2(a) or Section 5.3.

	 	 	 
	 	 	
Notwithstanding anything to the contrary herein, in the event that Officer accepts employment during the Severance pay period, as outlined above, with an entity such that the employment by that entity is not in violation of Section 6 of this Agreement, the Bank agrees that payment of the Salary and health and medical benefits shall continue for the Severance pay period with no right of setoff.

  

	 	
5.5.
	
Resignation from Positions. Officer agrees that if his employment is terminated for any reason whatsoever, he will immediately resign from any and all positions held with the Bank or any other subsidiary, trust, plan or other entity for which Officer may be serving as a director, officer, member, trustee, employee or otherwise.

 

	
6.
	
Confidentiality; Non-Competition; Non-Interference.

 

	 	
6.1.
	
Confidential Information. Officer, during employment by the Bank, will have access to and become familiar with various confidential and proprietary information of the Bank, the Company, their subsidiaries and/or affiliates (“Confidential Information”), including, but not limited to: business plans; operating results; financial statements and financial information; contracts; mailing lists; purchasing information; customer data (including lists, names and requirements); feasibility studies; personnel-related information (including compensation, compensation plans, and staffing plans); internal working documents and communications; and other materials related to the businesses or activities of the Company and Bank, their subsidiaries and/or affiliates which is made available only to employees with a need to know or which is not generally made available to the public. Failure to mark any Confidential Information as confidential, proprietary or protected information shall not affect its status as part of the Confidential Information subject to the terms of this Agreement.

 

 

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6.2.
	
Nondisclosure. Officer hereby covenants and agrees that he shall not at any time, directly or indirectly, disclose, divulge, reveal, report, publish, or transfer any Confidential Information to any Person, or use Confidential Information in any way or for any purpose, except as required in the course of his employment by the Bank or as required by law, or to Officer’s personal representatives and professional advisers as is required for purposes of rendering tax or legal advice. The covenant set forth in this Section 6.2 shall not apply to information now known by the public or which becomes known generally to the public (other than as a result of a breach of this Section 6 by Officer).

 

	 	
6.3.
	
Documents. All files, papers, records, documents, compilations, summaries, lists, reports, notes, databases, electronic records, tapes, sketches, drawings, memoranda, and similar items (collectively, “Documents”), whether prepared by Officer, or otherwise provided to or coming into the possession of Officer, that contain any proprietary information about or pertaining or relating to the Company or Bank, their respective parents, subsidiaries and/or affiliates and/or their businesses (“Proprietary Information”) shall at all times remain their exclusive property. Promptly after a request by the Bank Board or the termination of Officer’s employment, Officer shall take reasonable efforts to (i) return to the Bank all Documents in any tangible form (whether originals, copies or reproductions) and all computer disks or other electronic media (including bank-owned or provided electronic devices containing company or bank documents or images) containing or embodying any Document or Proprietary Information and (ii) purge and destroy all Documents and Proprietary Information in any intangible form (including computerized, digital or other electronic format) as may be requested in writing by the Company Chairman or Bank Chairman, and Officer shall not retain in any tangible form any such Document or any summary, compilation, synopsis or abstract of any Document or Proprietary Information.

 

	 	
6.4.
	
Non-Competition.

 

	 	
(a)
	
Officer hereby acknowledges and agrees that, during the course of employment by the Bank, he will become familiar with and involved in all aspects of the business and operations of the Company, the Bank, its subsidiaries and affiliates. Officer hereby covenants and agrees that from the Commencement Date of this Agreement until either: 1) twelve months after the Officer has Separated from employment as described in Section 5.2; or 2) twelve months after a Change of Control Termination has occurred as described in Section 7.2, or, 3) Officer has received a waiver as described in Section 6.4(c), Officer will not at any time, directly or indirectly, in any capacity (whether as a proprietor, owner, agent, officer, director, partner, principal, member, employee, contractor, consultant or otherwise) render any services to a bank or savings and loan or a holding company of a bank or savings and loan company (collectively, hereinafter referred to as a “Financial Institution”) that is headquartered or has a branch located in either Lackawanna, Luzerne or Wayne County, Pennsylvania.

 

	 	
(b)
	
Section 6.4 shall not apply if prior to one year following his last day of employment, there is a Change of Control event as defined in Section 7 of this document.

 

 

 

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(c)
	
In the event that a Financial Institution that is headquartered or has a branch in either Lackawanna, Luzerne or Wayne County, Pennsylvania contacts Officer for the purpose of requesting that Officer engage in competition against Company and Bank during the period of time that Officer is subject to the provisions as described in Section 6.4 (a) Officer may notify the Bank in writing of his request for the Bank to waive the provisions of Section 6.4 of this Agreement. The Bank shall consider Officer’s request for a waiver but is under no obligation to grant the waiver. If, in its absolute and sole discretion, the Bank agrees to grant the waiver request, the waiver shall not become effective until Officer and the Bank shall have entered into a mutually agreed, written and fully executed modification of this Agreement, outlining the terms and conditions of the waiver.

 

	 	
6.5.
	
Non-Interference. Officer hereby covenants and agrees that from the Commencement Date until the provisions of Section 6.4 are no longer in effect, he will not, directly or indirectly, for himself or any other Person (whether as a proprietor, owner, agent, officer, director, partner, principal, member, employee, contractor, consultant or any other capacity), induce or attempt to induce any customers, suppliers, officers, employees, contractors, consultants, agents or representatives of, or any other person that has a business relationship with, the Bank or any of its subsidiaries and affiliates to discontinue, terminate or reduce the extent of their relationship with the Bank and/or any such subsidiary or affiliate or to take any action that would disrupt or otherwise be disadvantageous to any such relationship.

 

	 	
6.6.
	
Injunction. In the event of any breach or threatened or attempted breach of any such provision by Officer, the Bank shall, in addition to and not to the exclusion of any other rights and remedies at law or in equity, be entitled to seek and receive from any court of competent jurisdiction (i) full temporary and permanent injunctive relief enjoining and restraining Officer and each and every other Person involved therein from the continuation of such violative acts and (ii) a decree for specific performance of the applicable provisions of this Agreement, without being required to furnish any bond or other security.

 

	 	
6.7.
	
Reasonableness.

 

	 	
(a)
	
Officer has carefully read and considered the provisions of Section 6 and, having done so, agrees that the restrictions and agreements set forth in Section 6 are fair and reasonable and are reasonably required for the protection of the interests of the Bank and its business, the Company’s shareholders, directors, officers and employees. Officer further agrees that the restrictions set forth in this Agreement will not impair or unreasonably restrain his ability to earn a livelihood.

 

	 	
(b)
	
If any court of competent jurisdiction should determine that the duration, geographical area or scope of any provision or restriction set forth in this Section 6 exceeds the maximum duration, geographic area or scope that is reasonable and enforceable under applicable law, the parties agree that said provision shall automatically be modified and shall be deemed to extend only over the maximum duration, geographical area and/or scope as to which such provision or restriction said court determines to be valid and enforceable under applicable law, which determination the parties direct the court to make, and the parties agree to be bound by such modified provision or restriction.

 

 

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7.
	
Change in Control.

 

	 	
7.1.
	
Definition. “Change in Control” means and shall be deemed to have occurred if:

 

	 	
(a)
	
there shall be consummated (1) any consolidation, merger, share exchange, or similar transaction relating to the Company, in which the Company is not the continuing or surviving entity or pursuant to which shares of the Company’s capital stock are converted into cash, securities of another entity and/or other property, other than a transaction in which the holders of the Company’s voting stock immediately before such transaction shall, upon consummation of such transaction, own at least fifty percent (50%) of the voting power of the surviving entity, or (2) any sale of all or substantially all of the assets of the Company or Bank, other than a transfer of assets to a related person which is not treated as a change in control event under §1.409A-3(i)(5)(vii)(B) of U.S. Treasury Regulations;

 

	 	
(b)
	
any person (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall after the Commencement Date become the beneficial owner (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty-one percent (51%) or more of the voting power of then all outstanding securities of the Company entitled to vote generally in the election of directors of the Company (including, without limitation, any securities of the Company that any such person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, which shall be deemed beneficially owned by such person), provided, however that the acquisition by any person or group of persons acquiring beneficial ownership of such level of voting power in connection with a recapitalization transaction or the purchase of newly issued securities directly from the Company, approved by the Company Board in office as of the date of this Agreement (the “Incumbent Board”), shall not be considered a Change in Control for purposes of this Section 7.1(b), and provided further that any person who becomes a member of the Company Board and whose nomination, election or appointment as a director was approved by at least a majority of the directors comprising the Incumbent Board, or by a nominating committee of the Company Board, the membership of which was approved by at least a majority of the directors comprising the Incumbent Board, shall, for purposes of this Section 7.1(b) be considered as a member of the Incumbent Board;

 

	 	
(c)
	
where over a twelve month period, a majority of the members of the Board of Directors of the Company (the “Board”) are replaced by directors whose appointment or election was not endorsed by a majority of the members of the Board in office prior to such appointment or election; or

 

	 	
(d)
	
Notwithstanding the foregoing, if the event purportedly constituting a Change in Control under Section 7.1(a), Section 7.1(b) or Section 7.1(c) does not also constitute a “change in ownership” of the Company, a “change in effective control” of the Company, or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and administrative guidance promulgated thereunder (“Section 409A”), then such event shall not constitute a “Change in Control” hereunder. Additionally, no event shall constitute a “Change of Control” under Section 7.1(a), Section 7.1(b) or Section 7.1(c) to the extent that the acquisition of beneficial ownership of voting securities of the Company by the person or group results from an acquisition directly from the Company (or from an underwriter with which the Company has entered into an agreement for a firm commitment underwriting of the Company’s securities) in a capital raising transaction, or pursuant to an agreement with the Company to voluntarily convert the Company’s Subordinated Notes due 2019 for voting securities of the Company.

 

 

 

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7.2.
	
Change in Control Termination. For purposes of this Agreement, a “Change in Control Termination” means that while this Agreement is in effect:

 

	 	
(a)
	
Officer’s employment with the Bank is terminated without Cause within one hundred twenty (120) days immediately prior to and in conjunction with a Change in Control or within one (1) year following consummation of a Change in Control; or

 

	 	
(b)
	
Within one year following consummation of a Change in Control, 1) the Officer’s duties or position have been materially reduced such that Officer is not in a comparable position (with the same Salary and at least the same level of other compensation and benefits in effect immediately prior to the Change in Control) with the surviving corporation to the position he held immediately prior to the Change in Control, or, 2) Officer’s position is based entirely or in part in a location outside Lackawanna, Luzerne or Wayne County, Pennsylvania, and within fifteen (15) days after notification of such position reduction, relocation or change of business travel requirements, Officer notifies the Bank Board or its successors that he is terminating his employment due to such change in his employment unless such change is cured within thirty (30) days of such notice by providing him with a comparable position (including the same Salary, and at least the same level of other comparable compensation and benefits in effect immediately prior to the Change in Control), and/or an office location based solely within Lackawanna, Luzerne or Wayne County, Pennsylvania. If Officer’s employment is terminated under this Section, his last day of employment shall be mutually agreed to by Officer and the Bank Board or its successors, but shall be not more than sixty (60) days after such notice is given by Officer.

 

	 	
7.3.
	
Change in Control Payment.

 

	 	
(a)
	
If there is a Change in Control Termination, the Bank or its successor shall pay to Officer cash compensation equal to 2.99 years base salary at the highest rate in effect during the twelve (12) month period immediately preceding Officer’s last day of employment plus the average cash award paid to Officer over the last three years from the Executive Incentive Plan. Payments shall be made to Officer in installments on the same schedule as he was paid immediately prior to the Change of Control Termination.

 

	 	
(b)
	
In the event of the Officer’s death during the period of time while he is receiving Change of Control payments, Officer’s estate will be paid the remaining Change of Control payments to which the Officer is entitled under the terms of this agreement. In the event Officer breaches any provision of Section 6 of this Agreement, Officer’s entitlement to any Severance and benefits, if and to the extent not yet paid, shall thereupon immediately cease and terminate.

 

 

 

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(c)
	
If this Agreement is terminated pursuant to Sections 7.2(a) or 7.2(b), then the Bank shall continue to administer and pay for Officer’s health and medical insurance benefits (substantially similar to those which Officer is receiving immediately prior to the occurrence of the circumstance giving rise to such termination), so long as the Bank is permitted pursuant to regulatory provisions, until the date that Officer ceases receiving payments under this Agreement. Such months of continued coverage will be counted towards the number of months of continued coverage to which Officer (and any of his covered dependents) is entitled pursuant to COBRA or any similar law.

 

	 	
(d)
	
Notwithstanding anything to the contrary herein, in the event that Officer accepts employment during the Change of Control payment period, as outlined above, with an entity such that the employment by that entity is not in violation of Section 6 of this Agreement, the Company and Bank agree that payment of the Salary and health and medical benefits shall continue for the Change of Control payment period with no right of setoff.

 

	 	
(e)
	
Notwithstanding anything to the contrary contained herein, the rights of Officer under this Section 7.3 and the rights of Officer under Section 5.4 of this Agreement shall be mutually exclusive. Officer shall have the right to the payments and benefits under whichever Section is applicable, but shall not have the right to recover under both Sections.

 

	 	
7.4.
	
Adjustment.

 

	 	
(a)
	
Notwithstanding anything in this Agreement to the contrary, if the Determining Firm (as defined in Section 7.4(b) determines that any portion of the Change Payment and/or the portions, if any, of other payments or distributions in the nature of compensation by the Bank to or for the benefit of Officer (including, but not limited to, the value of the acceleration in vesting of restricted stock, options or any other stock-based compensation) whether or not paid or payable or distributed or distributable pursuant to the terms of this Agreement (collectively with the Change Payment, the “Aggregate Payment”), would cause any portion of the Aggregate Payment to be subject to the excise tax imposed by Code Section 4999 or would be nondeductible by the Company or Bank pursuant to Code Section 280G (such portion subject to the excise tax or being nondeductible, the “Parachute Payment”), the Aggregate Payment will be reduced, beginning with the Change Payment, to an amount which will not cause any portion of the Aggregate Payment to constitute a Parachute Payment.

 

	 	
(b)
	
All determinations required to be made under this Section 7.4, will be made by a reputable law or accounting firm (the “Determining Firm”) selected by the Company. All fees and expenses of the Determining Firm will be obligations solely of the Bank. The determination of the Determining Firm will be binding upon Officer and the Bank.

 

	 	
7.5.
	
Construction; Compliance with 409A, Delay in Payment.

 

	 	
(a)
	
It is the intention of the parties hereto that this Agreement and the payments provided for hereunder shall be in accordance with Section 409A, and thus avoid the imposition of any excise tax and interest on Officer pursuant to Section 409A(a)(1)(B) of the Code, and this Agreement shall be interpreted and construed consistent with this intent. Officer acknowledges and agrees that he shall be solely responsible for the payment of any excise tax or penalty which may be imposed or to which he may become subject as a result of the payment of any amounts under this Agreement.

 

 

12

 

  

	 	
(b)
	
Notwithstanding anything to the contrary contained herein, any payment hereunder that is considered “nonqualified deferred compensation” that is to be made to Officer while he is a “specified employee”, in each case as defined and determined for purposes of Section 409A, within six months following Officer’s “separation from service” (as determined in accordance with Section 409A), then to the extent that such payment is not otherwise permitted under Section 409A such that it would be exempt from the excise tax thereunder, such payment shall be delayed and shall be paid on the first business day of the seventh calendar month following Officer’s separation from service, or, if earlier upon Officer’s death. To the extent that any payment to Officer which is payable in installments is required to be deferred pursuant to this Section 7.5(b), such deferred installments shall be paid on the first business day of the seventh month following Officer’s separation from service, or, if earlier upon Officer’s death, and any remaining installments shall be paid as scheduled. For purposes of this Agreement, any payment to Officer which is payable in installments represents the right to a series of separate payments.

 

	 	
(c)
	
The parties hereto agree that they shall take such actions as may be necessary and permissible under applicable law, regulation and guidance to amend or revise this Agreement in order to fully comply with Section 409A.

  

	 	
7.6.
	 	Claw Back Provision: 
	 	 	 	
Officer agrees that the Bank can suspend, prevent or claw back the Separation Payments or Change of Control Payments paid to the Officer pursuant to paragraphs 5.4 or 7.3 of this Agreement in the event that either the Bank or a federal or state regulatory or law enforcement authority determines that the Officer:

 

	 	
a)
	
Committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Bank or Company that has had or is likely to have a material adverse effect on the Bank or Company; 

 

	 	
b)
	
Was substantially responsible for the insolvency of, the appointment of a conservator or receiver for, or the troubled condition, as defined by applicable regulations of the appropriate federal banking agency, of the Company or Bank; 

 

	 	
c)
	
Materially violated any applicable federal or state banking law or regulation that has had or is likely to have a material effect on the Company or Bank; or 

 

	 	
d)
	
Violated or conspired to violate one or all of Sections 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of Title 18 of the United States Code, or Sections 1341 or 1343 of such Title affecting a federally insured financial institution as defined in title 18 of the United States Code.

 

 

 

13

 

 

	
8.
	
Certain Regulatory Events.

 

	 	
8.1.
	
If Officer is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the FDIA, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order.

 

	 	
8.2.
	
If a notice served under Sections 8(e)(3) or 8(g)(1) of the FDIA suspends and/or temporarily prohibits Officer from participating in the conduct of the Bank’s affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may, in its discretion, (i) pay Officer all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations that were suspended.

 

	 	
8.3.
	
If the Bank is prohibited from making a payment hereunder, or agreeing to make a payment hereunder, under Part 359 of the regulations of the Federal Deposit Insurance Corporation (the “FDIC”), then the Bank shall not be obligated to make such payment, and Officer shall have no right to receive such payment, provided however that the Bank shall use its reasonable best efforts to make a partial payment(s) and to contest any adverse finding or payment prohibition. If the Bank is prohibited from making a payment hereunder without the prior consent or approval of the FDIC, OCC or another appropriate federal banking agency, then the Bank shall not be obligated to make such payment, and Officer shall have no right to receive such payment, unless such consent or approval is received.

 

	 	
8.4.
	
The occurrence of any of the events described in paragraphs (8.1) or (8.2) above may be considered by the Bank in connection with a termination for Cause.

 

	
9.
	
Assignability. Officer shall have no right to assign this Agreement or any of his rights or obligations hereunder to another party or parties.

 

	
10.
	
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania applicable to contracts executed and to be performed therein, without giving to the choice of law rules thereof.

 

	
11.
	
Legal Expenses. The Bank shall reimburse Officer for all reasonable legal fees and expenses he may incur in seeking to obtain or enforce any right or benefit provided by this Agreement, but only with respect to such claim or claims upon which Officer prevails. Such payments shall be made within fourteen (14) days after delivery of Officer’s written request for payment accompanied with such evidence of fees and expenses incurred as the Bank may reasonably require.

 

	
12.
	
Notices. All notices, requests, demands and other communications required to be given or permitted to be given under this Agreement shall be in writing and shall be conclusively deemed to have been given (1) when hand delivered to the other party, or (2) three (3) business days after the same have been deposited in a United States post office with first-class certified mail, return receipt, postage prepaid and addressed to the parties as set forth below; or (3) the next business day after same have been deposited with a national overnight delivery service reasonably approved by the parties (Federal Express and UPS being deemed approved by the parties), postage prepaid, addressed to the parties as set forth below with next-business-day delivery guaranteed, provided that the sending party received a confirmation of delivery from the delivery service provider. The address of a party set forth below may be changed by that party by written notice to the other from time to time pursuant to this Section.

 

 

 

14

 

 

To:                                                                  Chairman of the Board               

First National Community Bank     

102 E. Drinker Street                    

Dunmore, PA 18512                                        

 

With a copy to:                                            General Counsel

First National Community Bank

102 E. Drinker Street

Dunmore, PA 18512

 

Brian C. Mahlstedt

205 Crossgate Drive

Clarks Summit, PA 18411

 

	
13.
	
Entire Agreement. This Agreement contains all of the agreements and understandings between the parties hereto with respect to the employment of Officer by the Bank, and supersedes all prior agreements, arrangements and understandings related to the subject matter hereof. No oral agreements or written correspondence shall be held to affect the provisions hereof. No representation, promise, inducement or statement of intention has been made by either party that is not set forth in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not so set forth.

 

	
14.
	
Headings. The Section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

	
15.
	
Severability. Should any part of this Agreement for any reason be declared or held illegal, invalid or unenforceable, such determination shall not affect the legality, validity or enforceability of any remaining portion or provision of this Agreement, which remaining portions and provisions shall remain in force and effect as if this Agreement has been executed with the illegal, invalid or unenforceable portion thereof eliminated.

 

	
16.
	
Amendment: Waiver. Neither this Agreement nor any provision hereof may be amended, modified, changed, waived, discharged or terminated except by an instrument in writing signed by the party against which enforcement of the amendment, modification, change, waiver, discharge or termination is sought. The failure of either party at any time or times to require performance of any provision hereof shall not in any manner affect the right at a later time to enforce the same. No waiver by either party of the breach of any term, provision or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term, provision or covenant contained in this Agreement.

 

	
17.
	
Binding Effect. This Agreement is and shall be binding upon, and inures to the benefit of the Bank, their respective successors and assigns, and Officer and his heirs, executors, administrators, and personal and legal representatives.

 

 

 

15

 

 

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

 

 

 

FIRST NATIONAL COMMUNITY BANK

 

 

By:      /s/Dominick DeNaples                    

          Dominick DeNaples

 

Title: Chairman of the Board                        

 

/s/Brian C. Mahlstedt

Brian C. Mahlstedt

 

 

 

16ex10-1.htm

Exhibit 10.1

 

4/13 PPA Loan to Loan

 

PROGRESS PAYMENT AGREEMENT

 

(Loan to Loan) 

 

This Progress Payment Agreement, dated as of _______________________________ (this “Agreement”), is among Apio, Inc. (“Borrower”) and General Electric Capital Corporation, as lender (together with its successors and assigns, if any, in such capacity, “Lender”).

 

RECITALS

 

A.     General Electric Capital Corporation (“GECC”) and Borrower have entered into that certain Master Security Agreement, dated as of April 23, 2012 (the “Master Agreement”). Capitalized terms used herein without definition shall have the meaning ascribed to such terms in, or incorporated by reference into, the Master Agreement. Borrower desires to have Lender finance Borrower’s purchase of the equipment listed on Annex I hereto (the “Equipment”) pursuant to the terms and conditions of a Schedule (the “Schedule”) to, and incorporating by reference the terms and conditions of, the Master Agreement. The loan evidenced by the Schedule and (to the extent incorporated by reference in the Schedule) the Master Agreement and the Note executed in connection with the Schedule is hereinafter referred to as the “Term Loan.”

 

B.      Borrower has heretofore entered into certain supply contracts, purchase orders, purchase agreements or similar agreements (collectively, “Supply Contract”) with the respective suppliers named therein (individually and collectively, “Supplier”), pursuant to which such Supplier has agreed to sell on the terms and conditions therein set forth, and Borrower has agreed to acquire from such Supplier, certain or all of the Equipment.

 

C.     The Equipment is scheduled to be installed, manufactured or assembled over time commencing on or about the date hereof and continuing through (and including) April 1, 2016 (the “Installation Period”). Since certain Suppliers require progress payments prior to completion, delivery and acceptance of the Equipment, Borrower is desirous of having Lender finance progress payments and other amounts in respect of the applicable Equipment as such Equipment is installed, manufactured or assembled. It is expected that all amounts advanced hereunder will be refinanced through the funding of the Term Loan. Subject to the terms and conditions hereof, Lender is willing to advance money in respect of the Equipment.

 

NOW THEREFORE, in consideration of the premises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.     Progress Payment Loans. Subject to the terms hereof, Lender agrees to make payments to the applicable Supplier(s), and/or to Borrower to reimburse Borrower for previous payments to a Supplier (each such payment, a “Progress Payment Loan”), as authorized and directed in writing by Borrower and approved by Lender in its sole discretion, to finance progress payments and other amounts with respect to the applicable Equipment during the Installation Period. The obligation of Lender to make any Progress Payment Loan is subject to the performance by Borrower of all of its agreements and covenants under this Agreement and the fulfillment of the following conditions (as determined by Lender in its sole discretion): (i) no Event of Default (or event which, with the passage of time or giving of notice or both, would constitute an Event of Default) exists, (ii) Lender’s receipt of a correct original invoice for such Progress Payment Loan made out to Borrower from such Supplier, (iii) Lender’s receipt of a Loan Request in the form of Exhibit A hereto and in substance satisfactory to Lender (in its sole discretion) with respect to the items listed in such invoice, (iv) with respect to any Progress Payment Loan funded to Borrower as reimbursement of amounts paid to a Supplier, Lender shall have received proof of payment of such amount by Borrower to the applicable Supplier, (v) Lender approves such Progress Payment Loan and such Progress Payment Loan, when added to the amount of all prior Progress Payment Loans, does not exceed $14,714,092.00 (the “Maximum Amount”), (vi) there has not occurred (1) any adverse change in the business prospects or projections, operations, management, financial or other conditions of Borrower, any affiliate of Borrower, any Guarantor or any Supplier, or in the industry in which Borrower, any Guarantor or any Supplier operates, or which impairs Lender’s interest in the Equipment or (2) any change in control of any one of the aforesaid parties, (vii) the Installation Period has not has ended, (viii) the representations and warranties of Borrower herein and in any other Debt Document are true and correct as of the date such Progress Payment Loan is funded, (ix) Lender’s receipt of a collateral assignment of each applicable Supply Contract executed by Borrower and Lender, together with a consent to such collateral assignment executed by the applicable Supplier, (x) Borrower has paid Supplier a down payment of $0.00 with respect to the Equipment and (xi) no Progress Payment Loan has been prepaid or repaid. Lender shall be entitled to fully rely and act on a Loan Request provided by Borrower to Lender, and Lender shall have no duty to verify the content of or accuracy of information contained in any such Loan Request, the authority of the person executing such Loan Request or the identity of the sender thereof.

 

2.     Interest, Fees and No Prepayment. During the period from the date the first Progress Payment Loan is funded until the date on which the Term Loan is funded in full by Lender (the “Interim Term”), Borrower agrees to pay Lender interest on the dollar amount of Progress Payment Loans funded by Lender at the Contract Rate as defined below (“Interim Interest”). Such Interim Interest payments shall be due on and made by Borrower, in arrears, on the first calendar day of each month during the Interim Term and on the last day of the Interim Term. Interim Interest shall be calculated on the basis of a 365-day year (or a 366-day leap year, as applicable) and will be charged for each calendar day on which any Progress Payment Loan is outstanding. Upon the full funding by Lender of the Term Loan and payment by Borrower of accrued and unpaid Interim Interest, Borrower’s obligation to pay Interim Interest shall end. If Lender does not receive from Borrower payment in full of any Interim Interest or any other sum due under this Agreement, the Master Agreement or any other Debt Document within ten (10) days after its due date, Borrower agrees to immediately pay a late fee equal to 5% on such late Interim Interest or other sum (but not exceeding any lawful maximum), in addition to any other costs, fees and expenses that Borrower may owe as a result of such late payment. Borrower may not prepay any Progress Payment Loan in whole or in part. For purposes hereof, the “Contract Rate” for each payment of Interim Interest shall be equal to the sum of (i) one and seventy five hundredths percent (1.75%) per annum plus (ii) a variable per annum interest rate, which shall be equal to the rate listed for one month London Interbank Offered Rate (“LIBOR”) which is published in the “Money Rates” column of the Wall Street Journal, Eastern Edition (or, in the event such rate is not so published, in such other nationally recognized publication as Lender may specify) on the first business day of the calendar month during which such Interim Interest has accrued (notwithstanding any statement in such publication as to the effective date of any published rate) . Borrower’s federal tax identification number is 770528042.

 

 

 

 

  

3.     Incorporation of Master Agreement and Assignment. This Agreement is a “Debt Document” as defined in the Master Agreement. The representations, warranties, indemnity obligations and covenants of Borrower set forth in the Master Agreement are incorporated by reference herein in favor of Lender as if Lender were the “Secured Party” thereunder and the Collateral (as defined below) constitutes “Collateral” thereunder. In furtherance of and without limiting the foregoing, Borrower hereby makes such representations and warranties to Lender as of the date hereof and as of the date each Progress Payment Loan is funded by Lender; and Borrower agrees to obtain insurance for the Equipment as required by the Master Agreement with Lender as loss payee. Any breach of this Agreement shall constitute an Event of Default.

 

This Agreement may be assigned, sold or transferred, in whole or in part, by Lender without notice to or the consent of Borrower (a “Transfer”), and may not be assigned, sold or transferred by Borrower. Upon a Transfer of this Agreement in its entirety, Lender shall automatically be relieved, from and after the date of such Transfer, of liability for the performance of any of its obligation contained in this Agreement arising or accruing from or after such Transfer. Upon notification from Lender to Borrower of a Transfer, Borrower agrees to acknowledge such Transfer, and to make any payments required hereunder to the assignee or as directed by Lender. Borrower also agrees to confirm in writing receipt of the notice of a Transfer as may be reasonably requested by the applicable transferee and Borrower hereby waives and agrees not to assert against any applicable transferee any defense, set-off, recoupment claim or counterclaim which Borrower has or may at any time have against Lender for any reason whatsoever.

 

 

4.     Term Loan and Remedies. If an Event of Default occurs during the Installation Period, or if the last day of the Installation Period occurs prior to the date on which the Term Loan is funded in full by Lender (any such occurrence, a “Progress Payment Event of Default”), Lender, at its option, may: (i) declare any or all of the Progress Payment Loans, Interim Interest, the Liquidated Damages Fee (as defined below) and other amounts due hereunder to be immediately due and payable, without demand or notice to Borrower; provided that upon the occurrence of any Event of Default with respect to a bankruptcy, receivership, assignment for the benefit of creditors, insolvency or other similar proceeding involving Borrower or any Guarantor, any and all of the Progress Payment Loans, Interim Interest, the Liquidated Damages Fee and other amounts due hereunder shall automatically become immediately due and payable, without any action by any person or entity, (ii) refuse to extend any further credit to Borrower, (iii) terminate this Agreement immediately without notice, (iv) with or without legal process, enter any premises where the Collateral (as defined below) may be and take possession and/or remove the Collateral from such premises, (v) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at such sale, (vi) lease or otherwise dispose of all or part of the Collateral, applying proceeds therefrom to the obligations then in default, and (vii) hold, appropriate, apply or set-off any and all moneys, credits and indebtedness due from Lender or any of Lender’s affiliates (including any direct or indirect parent, subsidiary or sister entity) to Borrower. In addition to and without limiting Lender’s rights under the Master Agreement and the other Debt Documents, at Lender’s option, the occurrence of a Progress Payment Event of Default shall constitute an Event of Default under the Master Agreement and upon such occurrence, Lender shall, among other rights, have the right to refuse to enter into the Schedule. The accelerated Progress Payment Loans, Interim Interest, the Liquidated Damages Fee and other accelerated amounts due hereunder shall bear interest from the occurrence of the Event of Default (both before and after any judgment) until paid in full at a per annum rate equal to the Per Diem Interest Rate. Lender shall have, in additions to the rights and remedies under this Agreement and the other Debt Documents, all other rights and remedies provided to a secured creditor under the Uniform Commercial Code and under other applicable law, all of which rights and remedies shall be cumulative. Upon payment by Borrower of all amounts owing under this Agreement following the occurrence and continuance of a Progress Payment Event of Default, this Agreement shall be terminated and of no force and effect with no further recourse to any party hereto as to such Equipment that is not delivered and/or accepted. Upon receipt of such payments by Lender, Lender shall release, without warranty or recourse, Lender’s security interest in and to such Equipment. For purposes hereof, the "Liquidated Damages Fee" shall be an amount equal to ten percent (10%) of the Progress Payment Loans funded by Lender (but in no event exceeding any lawful maximum under applicable law). If the Progress Payment Loans or any portion thereof are declared to be due and payable or otherwise accelerated pursuant to this paragraph, Borrower agrees to pay Lender the Liquidated Damages Fee upon demand therefor and agrees that such fee constitutes liquidated damages and is not a penalty. 

 

Borrower agrees to indemnify each of Lender and each other Secured Party Entity and defend and hold each of Lender and each other Secured Party Entity harmless from any costs, losses, expenses and/or liabilities, including without limitation reasonable attorneys’ fees, that arise from or in any way relate to this Agreement or the transactions contemplated hereby, the Supply Contract and/or the Equipment. It is the intent of Lender and Borrower that (i) the advance of Progress Payment Loans hereunder constitutes a financing on behalf of, and/or a loan made to, Borrower by Lender, which amounts Borrower agrees to repay to Lender in accordance with the terms hereof and (ii) upon the full funding by Lender of the Term Loan and payment by Borrower of accrued and unpaid Interim Interest, the aggregate amount of Progress Payment Loans made hereunder shall be deemed to be part of, and refinanced by, the Term Loan advanced by Lender pursuant to the Schedule, the related CSMA and the Note executed in connection with such CSMA. 

 

5.     Security Interest. Borrower hereby grants to Lender and the Secured Party Entities a first priority security interest in all of Borrower’s right, title and interest in and to the Supply Contract, the Equipment, together with all additions, attachments, accessories and accessions thereto whether or not furnished by Supplier of the Equipment, any and all substitutions, upgrades, replacements or exchanges therefor, and any and all insurance and/or other proceeds of the property in and against which a security interest is granted hereunder (the “Collateral”). This security interest is given to secure the prompt payment and performance of all Indebtedness, including, without limitation, all debts, obligations and liabilities of any kind whatsoever of Borrower to Lender and/or any Secured Party Entity, now existing or arising in the future under this Agreement, the Master Agreement or any other Debt Document, and any renewals, extensions and modifications of such debts, obligations and liabilities. Borrower irrevocably authorizes Lender to file UCC financing statements (“UCCs”), and other filings with respect to the Collateral or any other collateral granted to Lender herein and all proper terminations of the filings of other secured parties with respect to the Collateral, in such form and substance as Lender, in its sole discretion, may determine. Borrower acknowledges and agrees that Lender and the Secured Party Entities may perfect the security interest hereunder directly or through any current or future agents, representatives or bailees. Without Lender’s prior written consent, Borrower agrees not to file any corrective or termination statements or partial releases with respect to any UCCs filed by Lender pursuant to this Agreement until all amounts outstanding hereunder (including, without limitation, Progress Payment Loans) and all other Indebtedness have been paid in full. Lender and Secured Party Entities may set off any amounts owed to Borrower and its affiliates under this Agreement, the Master Agreement or any other Debt Document against any amounts owed to Lender or Secured Party Entities by Borrower or any of its affiliates. Borrower hereby appoints Lender its true and lawful attorney, with full power of substitution, which power is coupled with Lender's interest in the Collateral, to take such action as Lender may deem necessary to protect and preserve its security interest in the Collateral, and waives, to the extent permitted by applicable law, all of its right of notice, demand, dishonor, marshalling of the Collateral, to be informed of the place and time of sale, advertising, statutory method of foreclosure, to receive bonds or securities and all rights of redemption. Borrower will not change its state of incorporation or organization, its "location" for purposes of Section 9-307 of the Uniform Commercial Code or its name as it appears in official filings in the state of its incorporation or organization without giving Lender at least sixty (60) days' prior written notice, and Borrower’s "location" for purposes of Section 9-307 of the Uniform Commercial Code is the state of its incorporation or organization.

 

 

 

 

  

6.     Jury Trial Waiver, Governing Law and Jurisdiction. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE. The laws of the state of Connecticut shall govern all matters arising out of, in connection with or relating to this Agreement including, without limitation, its validity, interpretation, construction, performance and enforcement (including, without limitation, any claims sounding in contract or tort law arising out of the subject matter hereof and any determinations with respect to post-judgment interest). Any legal action or proceeding with respect to this Agreement shall be brought exclusively in the federal or state courts located in the state of Connecticut, and, by execution and delivery of this Agreement, Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts; provided that nothing in this Agreement or any other Debt Document shall limit the right of Lender to commence any proceeding (legal or equitable) in the federal, state or other courts of any other domestic or foreign jurisdiction to the extent Lender determines that such action is necessary or appropriate to preserve, protect or enforce its rights or remedies under this Agreement. Borrower hereby irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that it may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions.

 

7.     Miscellaneous. Time is of the essence of this Agreement. Lender’s failure at any time to require strict performance by Borrower of any of the provisions hereof shall not waive or diminish Lender’s right at any other time to demand strict compliance with this Agreement. All notices required to be given hereunder shall be given in accordance with the provisions of the Master Agreement; provided that if GECC is not the Lender hereunder, any notices to Lender shall be given to Lender in care of GECC. This Agreement and Debt Documents to the extent relating hereto constitute the entire agreement of the parties with respect to the subject matter hereof. No variation or modification of this Agreement shall be valid unless in writing and signed by an authorized representative of the parties hereto. Any provisions in this Agreement that are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto. Any consent, approval or waiver referenced in this Agreement or otherwise requested by Borrower with respect thereto, shall be given or withheld in the sole discretion of Lender. This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of an executed signature page of this Agreement or any delivery contemplated hereby by facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart thereof. Each of the parties hereto intends to comply with any applicable law(s) governing the regulation of interest. Accordingly, notwithstanding anything to the contrary herein, in no event shall this Agreement require the payment or permit the collection of interest or any amount in the nature of interest or fees in excess of the maximum amount permitted by applicable law. If for any reason the amount of any interest contracted for, charged or received hereunder shall exceed the maximum amount of interest permitted by applicable law, then (i) any such excess which may have been collected shall, at Lender’s option, be either applied to amounts that are lawfully due and owing hereunder or refunded to Borrower, and (ii) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by a court of competent jurisdiction. Credit to Borrower’s account for payments made hereunder may be delayed if payment is (i) not received at the Lender’s payment address indicated in Lender’s invoice or other instructions from Lender from time to time or (ii) not accompanied by Lender’s invoice number. Preferred forms of payment include direct debit, wires, company checks and certified checks. Payment in any other form may delay processing or be returned to Borrower. Delayed credit may cause Borrower to incur a late payment fee. All credits for payments of Borrower’s account for this Agreement are subject to final payment by the institution on which the item of payment was drawn. Without prejudice to any of the rights and remedies of Lender hereunder or under any of the other Debt Documents, all written communication concerning disputed amounts, including any check or other payment instrument that (i) indicates that the written payment constitutes “payment in full” or is tendered as full satisfaction of a disputed amount or (ii) is tendered with other conditions or limitation must be mailed or delivered to Lender at the address for billing inquiries and/or correspondence shown on the invoice or statement and not to the payment address. Borrower and each of Borrower’s affiliates authorize Lender to disclose information about Borrower and Borrower’s affiliates that Lender may at any time possess to any Lender affiliate, successor, assign and/or participant, whether such information was supplied by Borrower to Lender or otherwise obtained by Lender. Borrower hereby acknowledges that it has not received or relied on any legal, tax, financial or accounting advice from GECC, Lender or any Secured Party Entity and that Borrower has had the opportunity to seek advice from its own advisors and professionals in that regard. 

 

 

 

 

  

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

 

	
LENDER:
	
BORROWER:

	 	 
	
General Electric Capital Corporation
	
Apio, Inc. 

	 	 
	
By:
	 	  	
By:
	  
	  	 	  	  	  
	
Name:
	 	  	
Name:
	  
	  	 	  	  	  
	
Title:
	 	  	
Title:
	  
	  	 	  	  	  
	
Date:
	 	  	
Date:
	  

 

 

 

 

 

EXHIBIT A

 

FORM OF LOAN REQUEST

 

LOAN REQUEST NUMBER ______________

 

 

Loan Request Number _____________, dated as of ______________, to Progress Payment Agreement, dated as of ___________________ (the “Progress Payment Agreement”), among Apio, Inc. (“Borrower”) and General Electric Capital Corporation, as lender (together with its successors and assigns, if any, in such capacity, “Lender”). Capitalized terms used herein without definition shall have the meaning set forth in, or incorporated by reference into, the Progress Payment Agreement. This Loan Request is executed by Borrower for the benefit of Lender.

 

Borrower hereby authorizes Lender to pay the Supplier(s) listed below the amounts specified below for the Equipment identified below or to reimburse Borrower for previous payments to such Supplier, all of which payments by Lender shall constitute Progress Payment Loans made by Lender to Borrower under and subject to the Progress Payment Agreement. Correct original invoices made out to Borrower from each Supplier for such payments or reimbursements are attached hereto and delivered to Lender. With respect to any Progress Payment Loan funded to Borrower as reimbursement of amounts paid to a Supplier, proof of payment by Borrower to the applicable Supplier of such amount is also attached.

 

	
Supplier and Address of Supplier

 
	
Equipment
	
Amount
	
Paid to Supplier or Reimbursed to Borrower

	  	  	  	  

 

 

BORROWER HEREBY AGREES, REPRESENTS AND WARRANTS THAT:

 

1.     If applicable, Borrower has inspected the Equipment covered by this Loan Request. The Equipment and products described herein comply with the specifications and requirements under the applicable Supply Contracts and each Supplier has satisfied any applicable conditions precedent for receipt of the amounts specified herein.

 

2.     Borrower confirms that all of the terms and conditions of the Progress Payment Agreement and the Master Agreement are hereby in full force and effect in all respects and reaffirms its obligations thereunder.

 

3.     Total amount of Progress Payment Loans requested hereunder is: $_______________ (the “Requested Amount”).

 

4.     The sum of (i) the Requested Amount and (ii) all Progress Payment Loans funded prior to the date hereof equals $_______________, which does not exceed the Maximum Amount.

 

	
BORROWER:

	 
	
Apio, Inc. 

	 
	
By:
	  
	  	  
	
Name:
	  
	  	  
	
Title:
	  
	  	  
	
Date:
	  

  

 

 

 

 

   

4/13 Loan Request Loan to Loan

 

LOAN REQUEST NUMBER 9829819-002

 

Loan Request Number 9829819-002, dated as of _____________________________, to Progress Payment Agreement, dated as of ___________________________ (the “Progress Payment Agreement”), among Apio, Inc. (“Borrower”) and General Electric Capital Corporation, as lender (together with its successors and assigns, if any, in such capacity, “Lender”). Capitalized terms used herein without definition shall have the meaning set forth in, or incorporated by reference into, the Progress Payment Agreement. This Loan Request is executed by Borrower for the benefit of Lender.

 

Borrower hereby authorizes Lender to pay the Supplier(s) listed below the amounts specified below for the Equipment identified below or to reimburse Borrower for previous payments to such Supplier, all of which payments by Lender shall constitute Progress Payment Loans made by Lender to Borrower under and subject to the Progress Payment Agreement. Correct original invoices made out to Borrower from each Supplier for such payments or reimbursements are attached hereto and delivered to Lender. With respect to any Progress Payment Loan funded to Borrower as reimbursement of amounts paid to a Supplier, proof of payment by Borrower to the applicable Supplier of such amount is also attached.

 

	
Supplier and Address of Supplier

 

 

Apio, Inc.

4575 West Main Street

Guadalupe, CA 93434

 
	
Equipment

 

See Annex A
	
Amount

 

$1,323,083.91
	
Paid to Supplier or

Reimbursed to Borrower

 

Reimbursed to Borrower

 

 

BORROWER HEREBY AGREES, REPRESENTS AND WARRANTS THAT:

 

1.     If applicable, Borrower has inspected the Equipment covered by this Loan Request. The Equipment and products described herein comply with the specifications and requirements under the applicable Supply Contracts and each Supplier has satisfied any applicable conditions precedent for receipt of the amounts specified herein.

 

2.     Borrower confirms that all of the terms and conditions of the Progress Payment Agreement and the Master Agreement are hereby in full force and effect in all respects and reaffirms its obligations thereunder.

 

3.     Total amount of Progress Payment Loans requested hereunder is: $1,323,083.91 (the “Requested Amount”).

 

4.     The sum of (i) the Requested Amount and (ii) all Progress Payment Loans funded prior to the date hereof equals $1,323,083.91, which does not exceed the Maximum Amount.

 

 

 

	
BORROWER:

	 
	
Apio, Inc. 

	 
	
By:
	  
	  	  
	
Name:
	  
	  	  
	
Title:
	  
	  	  
	
Date:
	  

  

 

 

 

 

 

September 16, 2015

 

 

Landec Corporation

3603 Haven Avenue

Menlo Park, CA 94025 

 

RE: Reaffirmation of Continuing Obligations under Guaranty dated April 23, 2012

 

Ladies and Gentlemen:

 

General Electric Capital Corporation (together with its successors and assigns if any, the “Financing Company”) is considering providing lease or (as the case may be) loan financing on or about the date hereof (the “New Financing”) to Apio, Inc. (“Customer”)

 

In connection with prior transactions with Customer, Landec Corporation (“Guarantor”) executed a continuing Guaranty dated April 23, 2012 (the “Guaranty”) in favor of Beneficiary (as defined in the Guaranty) pursuant to which Guarantor guaranteed all of Customer’s Obligations (as defined in the Guaranty) then and thereafter arising. Financing Company is a Beneficiary under the Guaranty. Since this Guaranty is still in effect, it is our understanding that Guarantor is also willing to guarantee the New Financing and all obligations now and hereafter arising in connection therewith.

 

It should be clearly understood that Financing Company would not enter into or advance the monies under the New Financing without the Guarantor’s guaranty of such obligations. Financing Company will be relying upon Guarantor’s financial status as reflected by existing financial statements and such financial statements that Guarantor may deliver in the future to Financing Company as well as the absolute and unconditional continuing obligations of Guarantor under the Guaranty.

 

Please sign below and return the executed copy to our office. By your execution and delivery of this letter you expressly acknowledge and agree that (i) the Guaranty remains in full force and effect, effective for any existing transactions and effective with respect to the New Financing currently contemplated and all obligations now and hereafter arising in connection therewith, (ii) the term “Obligations” as used in the Guaranty includes all of Customer’s present and future obligations and liabilities to Financing Company under any and all agreements, notes, leases, schedules, instruments and other documents now and hereafter executed in connection with the New Financing and (iii) the term Transaction Documents as used in the Guaranty includes any and all agreements, notes, leases, schedules, instruments and other documents now and hereafter executed in connection with the New Financing.

 

Notwithstanding the execution of this letter, the terms and conditions of the Guaranty remain in full force and effect and unmodified.

 

Should you have any questions on this matter, please do not hesitate to contact us for clarification.

 

General Electric Capital Corporation

 

	
By:
	  
	
Name:
	  
	
Title: 
	  
	  	  

 

THE UNDERSIGNED HEREBY AGREES THAT THE UNDERSIGNED HAS READ THE GUARANTY AND THIS LETTER AND UNDERSTANDS ALL OF THE TERMS AND CONDITIONS, AND ACKNOWLEDGES THE UNDERSIGNED’S AGREEMENT TO THE TERMS AND CONDITIONS SET FORTH IN THIS LETTER. 

 

	
Landec Corporation

as Guarantor

By: ____________________________

Name: ____________________________

Title: ____________________________

Date: ____________________________

Attest: _________________________

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