Document:

Exhibit 10.1

 

GUARANTEE

This Guarantee (this “Guarantee”) is made this 5th day of August, 2015, by Atlas Capital Resources II LP and Atlas Capital Resources (P) II LP, on the one hand, and Mueller Industries, Inc., on the other hand, (including their successors and assigns, the “Guarantors”), in favor of Tecumseh Products Company, a Michigan corporation (the “Guaranteed Party”).  Reference is hereby made to the Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among MA Industrial JV LLC, a newly-formed Delaware limited liability company (“Parent”), MA Industrial Sub Inc., a newly-formed Michigan corporation that is a subsidiary of Parent (“Merger Sub”), and the Guaranteed Party.  Capitalized terms used herein but not otherwise defined have the meanings ascribed to them in the Merger Agreement.

1.             Guarantee.  To induce the Guaranteed Party to enter into the Merger Agreement, each Guarantor, intending to be legally bound, hereby absolutely, irrevocably and unconditionally guarantees to the Guaranteed Party, subject to the terms and conditions hereof and of the Merger Agreement each Guarantor’s Pro Rata Portion (as defined below) of Parent’s and/or Merger Subs’ obligation under the Merger Agreement to pay monies resulting from the failure to duly and punctually pay and perform all of Parent’s and/or Merger Sub’s covenants, obligations, agreements and liabilities arising from the Merger Agreement set forth therein  (the “Guaranteed Obligations”); provided, however, that under no circumstances shall either Guarantor have any obligation or liability to any Person (including, without limitation, the Guaranteed Party’s equityholders, affiliates or subsidiaries) relating to, arising out of or in connection with this Guarantee, the Merger Agreement or the Equity Commitment Letters (as defined below), other than as expressly set forth herein or, as applicable, in the Equity Commitment Letters.  If Parent fails to discharge or perform any Guaranteed Obligation when due, then all such Guaranteed Obligations shall, at the Guaranteed Party’s option, become immediately due and payable and the Guaranteed Party may, at any time and from time to time, at the Guaranteed Party’s option, take any and all actions available hereunder or under applicable law to collect the Guaranteed Obligations; provided that, for the avoidance of doubt, each Guarantor shall be liable on a several, and not joint, basis for their respective Pro Rata Portion of the Guaranteed Obligations.  For purposes of this Guarantee, the Pro Rata Portion of each Guarantor shall equal the percentage set forth across from such Guarantor’s name on Schedule 1 hereto.

2.             Terms of Guarantee.

(a)                This Guarantee is an unconditional and continuing guarantee of payment and performance, not of collection, and a separate or joint action or actions may be brought and prosecuted against each Guarantor to enforce this Guarantee, irrespective of whether any action is brought against Parent, Merger Sub or any other Person or whether Parent, Merger Sub or any other Person is joined in any such action or actions.  Except in the case of the insolvency or bankruptcy, or other similar proceeding, of a Guarantor, the Guaranteed Party shall not release a Guarantor from any obligations under this Guarantee except to the extent the Guaranteed Party offers to release the other Guarantor under this Guarantee under the same terms and conditions and in the same proportion.  Notwithstanding anything to the contrary contained in this Guarantee or any other document, the obligations of each Guarantor under this Guarantee to pay monies as provided herein shall be several and not joint.  All payments hereunder shall be made in lawful money of the United States, in immediately available funds.

 

(b)                The liability of each Guarantor under this Guarantee shall, to the fullest extent permitted under applicable law, be absolute, irrevocable and unconditional, irrespective of:

(i)            the value, genuineness, validity, illegality or enforceability of the Merger Agreement or the letter agreements dated as of the date hereof between each Guarantor and Parent, pursuant to which such Guarantors have agreed to make a certain equity contribution to Parent (the “Equity Commitment Letters”) or any other agreement or instrument referred to herein or therein;

(ii)          any release or discharge of any obligation of Parent or Merger Sub contained in the Merger Agreement resulting from any change in the limited partnership or corporate existence, as applicable, structure or ownership of Parent or Merger Sub, or any insolvency, bankruptcy, reorganization, liquidation or other similar proceeding affecting Parent or Merger Sub, or any other Person now or hereafter interested in the transactions contemplated by the Merger Agreement, other than as and if expressly required by Section 2(a), or any of their respective assets;

(iii)         any valid amendment or modification of the Merger Agreement, or any change in the manner, place or terms of payment or performance of, any change or extension of the time of payment or performance of, or any renewal or alteration of any Guaranteed Obligation, any escrow arrangement or other security therefor, or any liability incurred directly or indirectly in respect thereof;

(iv)        subject to the last sentence of this section 2(b), the existence of any claim, set-off or other right that either Guarantor may have at any time against Parent, Merger Sub or the Guaranteed Party, whether in connection with any Guaranteed Obligation or otherwise;

(v)          the failure of the Guaranteed Party to assert any claim or demand or enforce any right or remedy against Parent, Merger Sub or the Guarantors or any other Person primarily or secondarily liable with respect to any Guaranteed Obligation, other than as and if expressly required by Section 2(a) (including, without limitation, in the event any Person becomes subject to a bankruptcy, reorganization, insolvency, liquidation or similar proceeding instituted by or against either Guarantor);

(vi)        the adequacy of any other means the Guaranteed Party may have of obtaining repayment of any of the Guaranteed Obligations; or

(vii)       any other act or omission that may in any manner or to any extent vary the risk of the Guarantors or otherwise operate as a discharge of either Guarantor as a matter of law or equity (other than as a result of payment of the Guaranteed Obligations in accordance with their terms);

 

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Notwithstanding any other provision of this Guarantee to the contrary, each Guarantor may assert, as a defense to, or release or discharge of, any payment or performance by such Guarantor under this Guarantee, any claim, set-off, deduction, defense or release that Parent or Merger Sub asserts or has the right to assert against the Guaranteed Party subject to the terms of the Merger Agreement that would relieve each of Parent and Merger Sub of its obligations under the Merger Agreement, except as provided in Section 2(b)(ii), which release or discharge the Guarantors may not assert.

(c)                Each Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Guaranteed Party upon this Guarantee or acceptance of this Guarantee.  Without expanding the obligations of each Guarantor hereunder, the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between Parent and/or either Guarantor, on the one hand, and the Guaranteed Party, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee.  Except as provided in Section 2(a), when pursuing any of its rights and remedies hereunder against the Guarantors, the Guaranteed Party shall be under no obligation to pursue (or elect among) such rights and remedies it may have against Parent, Merger Sub, any other Guarantor or any other Person for the Guaranteed Obligations or any right of offset with respect thereto, and any failure by the Guaranteed Party to pursue (or elect among) such other rights or remedies or to collect any payments from Parent, Merger Sub, or any such other Person or to realize upon or to exercise any such right of offset, and any release by the Guaranteed Party of Parent, Merger Sub, or any such other Person or any right of offset, shall not relieve either Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of the Guaranteed Party, subject to the provisions of Section 2(b).

(d)                Each Guarantor irrevocably waives promptness, diligence, grace, acceptance hereof, presentment, demand, notice of non-performance, default, dishonor and protest and any other notice not provided for herein (except for notices to be provided to Parent and its counsel pursuant to the terms of the Merger Agreement).

(e)                The Guaranteed Party shall not be obligated to file any claim relating to any Guaranteed Obligation in the event that Parent becomes subject to a bankruptcy, insolvency, reorganization or similar proceeding, and the failure of the Guaranteed Party to so file shall not affect either Guarantor’s obligations hereunder.  In the event that any payment to the Guaranteed Party in respect of any Guaranteed Obligation is rescinded or must otherwise be returned to Parent, Merger Sub, either Guarantor, or any other Person for any reason whatsoever, the Guarantors shall remain liable hereunder with respect to such Guaranteed Obligation as if such payment had not been made so long as this Guarantee has not terminated in accordance with its terms.

 

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3.             Sole Remedy; No Recourse.  The Guaranteed Party acknowledges and agrees that the sole asset of Parent is cash in a de minimis amount and that no additional funds are expected to be contributed to Parent unless and until the Closing occurs.  Notwithstanding anything that may be expressed or implied in this Guarantee or any document or instrument delivered in connection herewith, by its acceptance of the benefits of this Guarantee, the Guaranteed Party further agrees that, except (i) pursuant to the Guaranteed Party’s rights against each Guarantor (and not, except for Fraud, against any Related Party of such Guarantor) as a third-party beneficiary under the Equity Commitment Letter to the extent provided therein, (ii) for the Guaranteed Party’s rights against the Guarantors under this Guarantee, (iii) for the Guaranteed Party’s remedies against Parent, Merger Sub and their respective assignees under the Merger Agreement; (iv) for remedies against the Guarantors or any of their respective affiliates under the Confidentiality Agreement; and (v) for Fraud (as defined in the Merger Agreement), neither the Guaranteed Party nor any other Person (including, without limitation, the Guaranteed Party’s equityholders, affiliates and subsidiaries) has any right of recovery against, and no personal liability shall attach to, either Guarantor, any former, current or future, direct or indirect director, officer, employee, agent or affiliate of either Guarantor, any former, current or future, direct or indirect holder of any equity interests or securities of either Guarantor (whether such holder is a limited or general partner, member, manager, stockholder or otherwise), any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate, controlling person, representative or assignee of any of the foregoing (each such Person, a “Related Person”) (provided that a Related Person shall not include any other Guarantor solely in its capacity as such under any other Equity Commitment Letter or Guarantee), relating to, arising out of, or in connection with this Guarantee, the Equity Commitment Letter, the Merger Agreement or the transactions contemplated hereby and thereby, through Parent or otherwise, whether by or through attempted piercing of the corporate, limited partnership or limited liability company veil, by or through a claim by or on behalf of Parent against either Guarantor or any Related Person (except for any claim to compel Parent to enforce the Equity Commitment Letters in accordance with their terms).  The Guaranteed Party hereby covenants and agrees that it shall not institute and shall cause its controlled affiliates and subsidiaries not to institute, any proceeding or bring any other claim arising under, or in connection with, this Guarantee, the Merger Agreement, the Equity Commitment Letter or the transactions contemplated hereby or thereby (or the failure of such to be consummated), against either Guarantor or any Related Person, except for (A) claims of the Guaranteed Party against either Guarantor under and in accordance with this Guarantee, (B) claims of the Guaranteed Party against Parent or Merger Sub under and in accordance with the Merger Agreement, (C) claims of the Guaranteed Party under the Confidentiality Agreement, (D) the exercise of the Guaranteed Party’s third party beneficiary rights under and in accordance with the Equity Commitment Letters, (E) for Fraud and (F) the exercise of the Guaranteed Party’s third party beneficiary rights under and in accordance with the Equity Commitment Letter of each other Guarantor, and the Guaranteed Party hereby, on behalf of itself and its controlled affiliates and subsidiaries, waives any and all claims arising under, or in connection with, the Merger Agreement, this Guarantee, the Equity Commitment Letters or, in each case, the transactions contemplated hereby or thereby against each Guarantor or any Related Person (each, a “Permitted Claim”).  Nothing set forth in this Guarantee shall affect or be construed to affect any liability of Parent or Merger Sub to the Guaranteed Party or shall confer or give or shall be construed to confer or give to any Person (including, without limitation, any Person acting in a representative capacity or any stockholder of the Guaranteed Party), other than the Guaranteed Party, any rights or remedies against any Person, including, without limitation, either Guarantor, except as expressly set forth herein.

 

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4.             Subrogation.  The Guarantors will not exercise against Parent or Merger Sub any rights of subrogation or contribution, whether arising by contract or operation of law (including, without limitation, any such right arising under bankruptcy or insolvency Laws) or otherwise, by reason of any payment by it pursuant to the provisions of Section 1 hereof unless and until the Guaranteed Obligations have been paid in full.

5.             Termination.  This Guarantee shall remain in full force and effect and shall be binding on each Guarantor and its successors and assigns until the Guaranteed Obligations are satisfied in full.  Notwithstanding the foregoing, this Guarantee shall terminate and each Guarantor shall have no further obligations hereunder after the three year anniversary of the Effective Time, unless prior to such date the Guaranteed Party shall have commenced a legal proceeding against Parent, Merger Sub or the Guarantors pursuant to Section 9.04(c)(ii) of the Merger Agreement or against the Guarantors under this Guarantee, in which case this Guarantee shall terminate upon either (i) a final, non-appealable resolution of such claim and payment of the Guaranteed Obligations, if applicable or (ii) a written agreement signed by each of the parties hereto terminating this Guarantee.

6.             Continuing Guarantee.  Unless terminated pursuant to the provisions of Section 5 hereof, this Guarantee is a continuing one and shall remain in full force and effect until the indefeasible payment and satisfaction in full of the Guaranteed Obligations, shall be binding upon the Guarantors and their successors and assigns, and shall inure to the benefit of, and be enforceable by, the Guaranteed Party and its successors, permitted transferees and permitted assigns; provided that notwithstanding anything to the contrary in this Guarantee, the provisions of this Guarantee that are for the benefit of any Related Person (including, without limitation, the provisions of Sections 3, 5, 12, 13 and 16) shall indefinitely survive any termination of this Guarantee for the benefit of either Guarantor and any Related Persons.  All obligations to which this Guarantee applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon.

7.             Entire Agreement.  This Guarantee, the Merger Agreement, the Equity Commitment Letter and the Confidentiality Agreement constitute the entire agreement with respect to the subject matter hereof and thereof, and supersede all other prior agreements and understandings, both written and oral, among Parent, Merger Sub and/or either Guarantor or any of their respective affiliates, on the one hand, and the Guaranteed Party or any of its affiliates, on the other hand and this Guarantee is not intended to and shall not confer upon any Person (including, without limitation, the Guaranteed Party’s equityholders, affiliates and subsidiaries) other than the parties hereto and any Related Person any rights or remedies.

8.              Changes in Obligations; Certain Waivers.  Each Guarantor agrees that the Guaranteed Party may, in its sole discretion, at any time and from time to time, without notice to or further consent of either Guarantor, extend the time of payment of the Guaranteed Obligations, and may also make any agreement with Parent or Merger Sub for the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, or for any modification of any agreement between the Guaranteed Party and Parent or Merger Sub, without in any way impairing or affecting the Guarantors’ obligations under this Guarantee.

9.             Acknowledgement.  The Guarantors acknowledge that they will receive substantial indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in this Guarantee are knowingly made in contemplation of such benefits.  The Guarantors hereby covenant and agree that each shall not institute, and shall cause its controlled affiliates not to institute, any proceeding asserting that this Guarantee is illegal, invalid or unenforceable in accordance with its terms.

 

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10.          Amendments and Waivers.  Any provision of this Guarantee may be amended or waived if, and only if, such amendment or waiver is in writing and signed by each Guarantor and the Guaranteed Party.  Notwithstanding the foregoing, no failure or delay by any party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.

11.          Counterparts.  This Guarantee may be executed in counterparts (including, without limitation, by facsimile or electronically transmitted signature pages), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile, portable document format or otherwise) to the other parties.

12.          Notices.  All notices required to be given hereunder, including, without limitation, service of process, shall be sufficient if in writing, and sent by facsimile transmission (provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day), reliable national overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:

if to the Guarantor:

Atlas Holdings LLC

100 Northfield Street

Greenwich, CT 06830

Attention:  Tim Fazio

Mueller Industries, Inc.

8285 Tournament Drive, Suite 150

Memphis, TN 38125

Attn: Greg Christopher

and

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Facsimile:  (212) 728-9981

Attention:  Steven A. Seidman,

Mark. A. Cognetti, Serge Benchetrit,

Sean M. Ewen

 

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If to the Guaranteed Party, as provided in Section 11.01 of the Merger Agreement; or to such other address as any party shall specify by prior written notice so given.  Any party to this Guarantee may notify any other party of any changes to the address or any of the other details specified in this paragraph; provided, however, that such notification shall only be effective on the date specified in such notice or two (2) Business Days after the notice is given, whichever is later.  Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall toll the date by which any notice must be received until three (3) Business Days following receipt of an updated address.

13.          Governing Law.  This Guarantee shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

14.          Jurisdiction; Waiver of Service of Process.

(a)                 Jurisdiction.  The parties hereto irrevocably agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, with respect to, or in connection with, this Guarantee or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or assigns shall be brought exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware, or if such court shall not have jurisdiction, in any federal court located within the State of Delaware, and each of the parties hereby irrevocably consents and submits with regard to any action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) and agrees that it will not bring any action relating to this Guarantee or any of the transactions contemplated by this Guarantee in any court other than the aforesaid courts.  Each of the parties hereby irrevocably waives, to the fullest extent permitted by law, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Guarantee (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by applicable Law, that (i) any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or (ii) that any such suit, action or proceeding brought in any such court has been brought in an inconvenient or improper forum, or (iii) this Guarantee, or the subject matter thereof, may not be enforced in or by such courts. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 14(b) shall be deemed effective service of process on such party.

(b)                 Service of Process.  Each party hereby (i) consents to service of process in any action between the parties arising in whole or in part under or in connection with this Guarantee in any manner permitted by Delaware law, (ii) agrees that service of process made in accordance with clause (i) or made by registered or certified mail, return receipt requested, at its address specified pursuant to Section 11, will constitute good and valid service of process in any such action and (iii) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such action any claim that service of process made in accordance with clause (i) or (ii) does not constitute good and valid service of process.

 

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15.          Representations and Warranties.  Each Guarantor hereby represents and warrants to the Guaranteed Party that (a) it is duly organized and validly existing under the laws of its jurisdiction of organization; (b) it has all requisite power and authority to enter into this Guarantee and to consummate the transactions contemplated hereby; (c) the execution and delivery of this Guarantee and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of each Guarantor and no other proceedings on the part of either Guarantor are necessary therefor; (d) this Guarantee has been duly and validly executed and delivered by it and constitutes a valid and legally binding obligation of it, enforceable against each Guarantor in accordance with its terms (subject to, (i) with respect to the Guarantors, the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law); (e) the execution, delivery and performance by the undersigned of this Guarantee do not and will not violate the organizational documents of the undersigned or violate any applicable law; and (f) each Guarantor has uncalled capital commitments in excess of the Guaranteed Obligations.

16.          No Assignment.  Neither this Guarantee nor any of the rights, interests or obligations hereunder shall be assignable without the prior written consent of the Guaranteed Party (in the case of an assignment by either Guarantor) or each Guarantor (in the case of an assignment by the Guaranteed Party).

17.          Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS GUARANTEE HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS GUARANTEE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS CONTAINED IN THIS SECTION 17.

18.          Severability.  Any term or provision of this Guarantee which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the sole extent of such invalidity or unenforceability without rendering invalid or unenforceable the remainder of such term or provision or the remaining terms and provisions of this Guarantee in any jurisdiction and, if any provision of this Guarantee is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.  No party hereto shall assert, and each party shall cause its respective affiliates and subsidiaries not to assert, that this Guarantee or any part hereof is invalid, illegal or unenforceable.

19.          Headings.  Headings of the Sections of this Guarantee are for convenience only and shall be given no substantive or interpretive effect whatsoever.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have caused this Guarantee to be executed and delivered as of the date first written above.

 

	 	
ATLAS CAPITAL RESOURCES II LP

	 	 
	 	
By: Atlas Capital GP II LP, its general partner

	 	
By: Atlas Capital Resources GP II LLC, its general partner

 

	 	
By:

	
/s/ Timothy J. Fazio

	 	
Name:

	
Timothy J. Fazio

	 	
Title:

	
Managing Partner

	 	 	 
	 	 	 
	 	
ATLAS CAPITAL RESOURCES (P) II LP

	 	 	 
	 	
By: Atlas Capital GP II LP, its general partner

	 	
By: Atlas Capital Resources GP II LLC, its general partner

 

	 	
By:

	
/s/ Timothy J. Fazio

	 	
Name:

	
Timothy J. Fazio

	 	
Title:

	
Managing Partner

	 	 	 
	 	 	 
	 	
MUELLER INDUSTRIES, INC.

	 	 	 
	 	
By:

	
/s/ Gregory L. Christopher

	 	
Name:

	
Gregory L. Christopher

	 	
Title:

	
Chief Executive Officer

	 	 	 
	 	 	 
	 	
TECUMSEH PRODUCTS COMPANY

	 	 	 
	 	
By:

	
/s/ Harold Karp

	 	
Name:

	
Harold Karp

	 	
Title:

	
President and Chief Executive Officer

 

 

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Schedule 1

 

	
Atlas Capital Resources II LP

	
48.55%

	 	
	
Atlas Capital Resources (P) II LP

	
1.45%

	 	
	
Mueller Industries, Inc.

	
50%

 

 

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EXHIBIT 4.2

 

AMENDED AND RESTATED

 

FIRST NATIONAL COMMUNITY BANCORP, INC.

 

DUNMORE, PA 18512

 

9% FIXED RATE

 

SUBORDINATED NOTE

 

 

 

ISSUE DATE:     June 30, 2015

 

DUE DATE:     September 1, 2019

 

For value received in good and lawful currency of the United States from:

 

	
Name:
	  
	
Address:
	
 

	
Telephone:
	 	Fax:	 
	
E-mail
	  

 

(hereinafter referred to as “Lender”)

 

in the amount of ____________(hereinafter referred to as Principal Amount”), First National Community Bancorp, Inc. (hereinafter referred to as “Borrower”) promises to pay to Lender or Lender’s order at the address listed above the Principal Amount with interest fixed at 9% per annum in accordance with the terms and conditions set forth in this promissory note (hereinafter referred to as the “Note”).

 

THIS NOTE IS NOT A SAVINGS ACCOUNT OR DEPOSIT OF ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS NOTE IS NOT GUARANTEED UNDER THE FEDERAL DEPOSIT INSURANCE CORPORATION’S TEMPORARY LIQUIDITY GUARANTEE PROGRAM.

 

THE NOTE IS INELIGIBLE AS COLLATERAL FOR ANY LOAN OR OTHER EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES. THIS NOTE IS UNSECURED.

 

Principal Amount Due. The Principal Amount is due September 1, 2019 and shall be paid in accordance with the terms and conditions set forth herein.

 

 

 

 

 

Interest Only for Five Years. Notwithstanding any provision to the contrary in this Note, the Lender is only entitled to, and Borrower is only obligated to pay, interest on the Principal Amount for the five years commencing September 1, 2009 through to, and including, August 31, 2014.

 

Interest Calculation. The interest is a fixed rate of (a) 9% per annum prior to July 1, 2015 (the “Interest Rate Amendment Date”) and (b) 4.50% per annum on and after the Interest Rate Amendment Date. The interest due and payable on the Principal Amount shall be calculated on the basis of a 360 day year.

 

Timing of Payment of Interest. Interest will be payable quarterly commencing December 1, 2009 and first day of every third month thereafter, i.e. March 1, June 1 and September 1, provided that if such day is not a business day or is a holiday on which banking institutions are required to be closed, the interest due shall be paid on the next succeeding business day (hereinafter referred to as “Interest Payment”).

 

Timing of Repayment of Principal Amount. On June 30, 2015, the Borrower also shall pay to Lender 44% of the Principal Amount and shall pay another 16% of the Principal Amount on September 1, 2017 and pay another 20% each of the Principal Amount on September 1, 2018 and September 1, 2019 at which time the Note shall mature (each a “Principal Repayment”).

 

Option to Defer Interest Payment and Principal Repayment. If the Borrower determines that it does not have sufficient funds to make, or is otherwise prohibited by law or regulatory order from making, a required Interest Payment or Principal Repayment, or both, it may elect, in its sole discretion, to defer such payments (each, a “Deferral”). Within five business days of making any determination to elect to exercise this option, the Borrower shall notify the Lender in writing or by electronic mail to the addresses shown herein that it intends to, or has exercised, a Deferral and for which period the Deferral is being made. There shall be no limit as to the number of times or the number consecutive times which the Borrower may exercise this option and Lender shall cause Borrower to suffer no penalty as a result thereof, including a irrevocable waiver to seek any remedy which otherwise might be available at law or in equity.

 

Option to Make a Pro Rata Partial Payment. Notwithstanding any provision to the contrary in this Note, if the Borrower determines that it does not have sufficient funds to make, or is otherwise prohibited by law or regulatory order from making, a required Interest Payment or Principal Repayment, or both, it may elect, in its sole discretion, to make a partial payment of the Interest Payment or Principal Repayment, or both, on a pro rata basis (each, a “Pro Rata Payment”). Within five business days of making any determination to elect to exercise this option, the Borrower shall notify the Lender in writing or by electronic mail to the addresses shown herein that it intends to, or has exercised, a Pro Rata Payment and for which period the Pro Rata Payment is being made. There shall be no limit as to the number of times or the number consecutive times which the Borrower may exercise this option and Lender shall cause Borrower to suffer no penalty as a result thereof, including a irrevocable waiver to seek any remedy which otherwise might be available at law or in equity.

 

Deferred or Partial Interest Payments or Principal Repayments are Cumulative. If the Borrower determines to make a Deferral or a Pro Rata Payment in accordance with the terms and conditions of this Note, the amounts remaining unpaid shall accrue and continue to be a liability of the Borrower (the “Accrued Amounts”). In such case, all calculations under this Note which would be affected by such Deferral or Pro Rata Payment shall be re-calculated to take into consideration each such Deferral or Pro Rata Payment and such re-calculations shall occur upon each subsequent Deferral or Pro Rata Payment. However, under no circumstances is Borrower liable to Lender to pay any interest on the Accrued Amounts.

 

 

 

 

 

No Redemption Right. The holder of the Note has no right to require the Borrower to redeem the Note. The Borrower, however, in its sole discretion and subject to receipt of any and all required regulatory approvals, may redeem without penalty the Notes as a whole or at any time or in part from time to time upon payment of the outstanding Principal Amount and any Accrued Amount.

 

Debt is Not an Insured Bank Deposit. Lender expressly acknowledges that repayment of principal and interest on the Principal Amount is not a deposit of First National Community Bank (hereinafter referred to as “FNCB”) covered by deposit insurance provided by the Federal Deposit Insurance Corporation.

 

Lender has no Secured Interest. Lender expressly acknowledges that the debt represented by this Note is not secured by any interest in personal or real property owned or under the control of Borrower or FNCB.

 

Junior to Senior Debt. This Note shall rank junior in right of payment to any of the Borrower’s senior indebtedness (“Senior Indebtedness”). Senior Indebtedness includes the principal of, premium, if any, interest thereon and any other payment pursuant to any of the following whether outstanding on the Issue Date or incurred by the Borrower in the future:

 

	
 
	
(1)
	
All indebtedness for borrowed money, including any indebtedness secured by a mortgage or other lien which is given to secure all or part of the purchase price of a property subject to the mortgage or lien, whether given to the vendor of that property or to another lender;

 

	
 
	
(2)
	
All indebtedness evidenced by notes, debentures, bonds, or other similar instruments;

 

	
 
	
(3)
	
All lease obligations which are capitalized on the books of the Borrower in accordance with generally accepted accounting principles;

 

	
 
	
(4)
	
All indebtedness of others of the kinds described in (1) and (2) above and all lease obligations of others of the kind described in (3) above that the Borrower may assume or guaranty or agree to purchase, whether such agreement is contingent or not; and

 

	
 
	
(5)
	
All renewals, extensions or refundings of indebtedness of the kinds described in (1), (2) or (4) above and all renewals or extensions of leases of the kinds described in (3) or (4) above;

 

unless, in the case of any particular indebtedness, lease, renewal, extension or refunding, the instrument or lease creating or evidencing it or the assumption or guaranty relating to it expressly provides that such indebtedness, lease, renewal, extension or refunding is not superior in right of payment to the Borrower’s subordinated debt, including this Note.

 

Junior to Assets of Subsidiaries. Because the Borrower is a holding company, the claims of the Borrower’s subsidiaries, including FNCB, will have a priority over the Borrower’s equity rights and the rights of the Borrower’s creditors, including the holder this Note, to participate in the assets of the Borrower’s subsidiaries upon a subsidiary’s liquidation. Therefore, the FDIC, depositors and secured and unsecured creditors of FNCB will have a priority over the holder of this Note with respect to the assets of FNCB.

 

 

 

 

 

Senior to Junior Note Holders. Under the terms of a Trust Indenture between the Borrower and Wilmington Trust Company, as Trustee for the issuance of Junior Subordinated Notes dated December 14, 2006, the Notes will be senior to the holders of the Junior Subordinated Notes.

 

Senior to General Unsecured Creditors. In the event of dissolution and winding up, the holder of this Note shall be entitled to payment of interest and principal on the Principal Amount from funds legally available therefor, if any, before Borrower shall make payments to other general unsecured creditors. However, the holder of this Note shall have the status of an unsecured creditor of the Borrower and there may be insufficient funds legally available to repay all the interest and principal due on the Notes.

 

Notes are Not Convertible. This Note is not convertible into any other security of the Borrower.

 

Issuance of Additional Debt. Nothing in this Note shall act to prohibit, limit or impede the Borrower from issuing additional debt of the Borrower having the same rank as this Note or which may be senior or junior in rank to this Note.

 

No Trust Indenture and Independent Trustee. The transactions involving the issuance of this Note are exempt from the provisions of the Trust Indenture Act of 1939. Lender expressly acknowledges that neither the Lender nor the debt of the Borrower represented by this Note is subject to a trust indenture with an independent trustee.

 

Debt is Unrated. Lender expressly acknowledges that the debt represented by this Note has not been rated by a nationally recognized statistical rating organization.

 

Debt will not be listed. Lender expressly acknowledges that the debt represented by this Note will not be listed on a national securities exchange.

 

Paying Agent. The Borrower shall act as its own paying agent for all Interest Payments and Principal Repayments.

 

Place of Payment. All Interest Payments and Principal Repayments due hereunder will be paid by either (1) a check drawn on the Borrower’s account at FNCB, Dunmore, PA and mailed by first class mail to the address shown above or (2) at the direction of the Lender, a direct deposit made into a bank account designated in writing by the Lender at FNCB, Dunmore, PA.

 

No Remedies Upon Default. In the event of default, the Lender shall have no right to any special remedy and a default will not result in any lien being placed against the property of the Borrower or FNCB.

 

No Acceleration of Debt. Lender has no right to accelerate repayment of the Principal Amount or any interest due thereon, including but not limited to, a failure by the Borrower to make any payment due under the terms of this Note, breach by the Borrower of any term or condition of this Note, Borrower filing for relief under the United States Bankruptcy Code or Borrower or FNCB suffering an involuntary petition in bankruptcy or receivership.

 

Modification. No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by both parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

 

 

 

 

 

Transfer of the Note. The Note may be transferred only in registered form and in accordance with applicable federal and state securities laws. In order to change the registration of the Note on the books of the Borrower, the transferor and transferee of the Note must provide such evidence as shall be requested by the Borrower before the Borrower will effect a change in registration. No change in the registered form of the Note shall be effective until the day after the next Interest Payment date which occurs after a request for change in registered form has been received by the Borrower. The Borrower agrees to remain bound by the terms of the Note subsequent to any transfer, and agrees that the terms of the Note may be fully enforced by any subsequent holder of the Note.

 

Restriction on Transfer under Federal Securities Laws. Notwithstanding any provision to the contrary, a transfer of a Note by the original purchaser of the Note is subject to the restrictions set forth in Rule 502(d) of SEC Regulation D as well as the following legend requirement:

 

These securities have been sold pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (“1933 Act”) and Rule 506 of SEC Regulation D, and are deemed to be ‘restricted securities’ and subject to the holding provisions of SEC Rule 144. These securities cannot be transferred absent a registration statement for the securities having been declared effective under Section 5 of the 1933 Act or receipt by the issuer of an opinion of counsel that an exemption from registration is available for the transfer.

 

Corporate Capacity. If the Lender is not an individual, the Lender represents and warrants to the Borrower that:

 

	
 
	
a.
	
It is duly organized, validly existing and in good standing under the laws of the state or jurisdiction of organization and has made all governmental filings to conduct business in those jurisdictions wherever it conducts business;

 

	
 
	
b.
	
It (i) has full corporate power, right and authority to execute, deliver and perform this Note Agreement and (ii) possesses the requisite authority, power, licenses, permits, registrations, and franchises to engage in the transactions contemplated by the Note;

 

	
 
	
c.
	
The execution, delivery and performance of the Note Agreement will not (i) violate any provision in the Lender’s articles of incorporation or bylaws or other organizing documents, (ii) conflict with or violate any legal requirement to which the Lender or its assets are subject or bound, (iii) constitute a breach or default of any agreement to which the Lender is a party or has an interest; and

 

	
 
	
d.
	
When executed and delivered to the Borrower, the Note will be valid and binding upon the Lender and enforceable against the Lender in accordance with its terms.

 

Assignment. This Note may be assigned by the Borrower without the prior written consent of the Lender. This Note may not be assigned by the Lender without the prior written consent of the Borrower.

 

Amendment. Nothing in this Note shall prevent the Lender and Borrower from amending this Note provided that any amendment to this Note must be in writing and signed by the Borrower and the Lender.

 

Entire Agreement. This Note, as it may be amended from time to time, constitutes the entire agreement between Lender and the Borrower.

 

 

 

 

 

Binding Effect. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective representatives, heirs, successors and permitted assigns.

 

Waiver. No delay on the part of the Borrower or Lender in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver of the part of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the Borrower or Lender otherwise may have at law or in equity except as may have been waived herein.

 

Construction. The division of the Note into sections, clauses, paragraphs or subdivisions and the insertion of headings are for convenience only and shall not affect the construction or interpretation of this Note. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

 

Validity. In the event that any provision of the Note shall be held to be invalid as a violation of law or is otherwise declared unenforceable, the remainder of the Note with such provision omitted shall remain in full force and effect.

 

Choice of Law. This Note shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without reference to its conflict of law rules. With respect to any claim or cause of action arising from the Note, Lender irrevocably submits to the jurisdiction of the Court of Common Pleas of Lackawanna County, Pennsylvania, irrevocable waives objection to the laying of venue of such claim or cause of action brought in such court, irrevocably waives any claim that any such claim or cause of action brought in such court has been brought in an inconvenient forum, irrevocably waives the right to object, with respect to such claim or cause of action brought in such court that the court does not have jurisdiction over such party, irrevocably agrees that service of process sufficient to confer personal jurisdiction in any such action may be made by any party on the other by courier service, with a copy by regular mail, with service to be made to the addresses set forth in the books and records of the Borrower above, and irrevocably waives any objection which such party may have to such service of process in any such action.

 

This Note is intended to meet the criteria for qualification of outstanding principal as Tier 2 capital under the regulatory guidelines of the Federal Reserve. The terms shall be interpreted in a manner to satisfy such criteria.

 

Each holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Company on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Company his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein by each holder of claims or indebtedness to which this Note is subordinate, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Payment of interest and principal on the Notes is senior to the payment of dividends or amounts paid in liquidation on any class of capital stock of the Company.

 

 

 

 

 

IN WITNESS WHEREOF, Borrower and Lender, acknowledging receipt of good and valuable consideration and intending to be legally bound, hereto have caused this Note to be duly executed and each of the undersigned hereby warrants and represents that he or she has been and is, on the date of this Note, duly authorized by all necessary and appropriate corporate action to execute this Agreement.

 

FIRST NATIONAL COMMUNITY BANCORP, INC., Borrower

 

By:_________________________

 

Print Name: Steven R. Tokach

Title: President and CEO

 

 

Attest:______________________

             James M. Bone, EVP and CFO

 

By executing this Amended and Restated Note, the Lender agrees to the modifications contained herein to the original Note issued November 9, 2009. 

 

___________________________

 

_______________________________, Lender

 

 

Print Name: ____________________

 

 

Attest:__________________________

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