Document:

ex10-6.htm

EXHIBIT 10.6

GUARANTY

THIS GUARANTY (this “Guaranty”), is made as of May 8, 2013, by WSI Industries, Co., a Minnesota corporation, having an address of 213 Chelsea Road, Monticello, MN 55362  (hereinafter called the “Guarantor”) for the benefit of BMO Harris Bank N.A., a national banking association (hereinafter called the “Lender”).

W I T N E S S E T H:

WHEREAS, WSI Industries, Inc., a Minnesota corporation (the “Borrower”), desires to obtain a loan (the “Loan”) from Lender in the aggregate principal amount of Four Million Two Hundred Thousand and no/100 Dollars ($4,200,000.00), pursuant to the terms and conditions of that certain Loan Agreement (the “Loan Agreement”) entered into by and between Borrower and Lender as of the date hereof and which Loan shall be evidenced by a $4,200,000.00 Amended and Restated Promissory Note (the “Note”), and secured by an Amended and Restated Real Estate Mortgage, Security Agreement and Financing Statement dated as of the date hereof (the "Mortgage");

WHEREAS, Guarantor is a related entity to Borrower, is interested in the affairs of Borrower, and has determined it is in the interest of the undersigned that Lender make the Loan to Borrower;

WHEREAS, Lender has required as a condition of making such Loan that Guarantor executes this Guaranty as further security for payment of the Indebtedness (as hereinafter defined) and all of Borrower’s obligations under the Loan Agreement, Note and Mortgage, in manner and form as herein provided, and Guarantor, by reason of its relationship to Borrower and in order to induce Lender to make the Loan, has agreed to execute this Guaranty;

WHEREAS, the Note, Loan Agreement and Mortgage, and all documents executed in conjunction with the Note, Loan Agreement and Mortgage, as from time to time renewed, modified or extended, are hereinafter referred to as the “Loan Documents”; and

WHEREAS, Guarantor will directly benefit from the extension of credit from Lender to Borrower.

NOW, THEREFORE, in consideration of the extension of credit by Lender to Borrower, the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor agrees as follows:

1.           Guaranty of Payment.  For good and valuable consideration, Guarantor absolutely and unconditionally guarantees, jointly and severally with any and all other guarantors now or hereafter guarantying the Note, full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower's obligations under the Note and the Loan Documents.  This is a guaranty of payment and performance and not of collection.  Lender may enforce this Guaranty against Guarantor even when Lender has not commenced or exhausted Lender's remedies against Borrower or any other party obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.  Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower's obligations under the Note and the Loan Documents.  Under this Guaranty, Guarantor's liability is unlimited and Guarantor's obligations are continuing.

 

  

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If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender's rights under all guaranties shall be cumulative.  This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties.  Guarantor's liability will be Guarantor's aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.

2.           Definition of Indebtedness.  The word “Indebtedness” as used in this Guaranty shall mean all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon, and all collection costs and legal expenses related thereto permitted by law, and attorneys' fees arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender.  "Indebtedness" includes, without limitation, loans, advances (including, but not limited to, protective advances made by Lender), debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations and liabilities of Borrower, or any one or more of them, and any present or future judgments against Borrower, or any one or more of them, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.  The definition of “Indebtedness” shall also include the amount of any payments made to Lender on behalf of Borrower (including payments resulting from liquidation of collateral) which are recovered from Lender by a trustee, receiver, creditor or other party pursuant to applicable Federal or state law (the “Surrendered Payments”).  In the event that Lender makes any Surrendered Payments (including pursuant to a negotiated settlement), the Surrendered Payments shall immediately be reinstated as Indebtedness, regardless of whether Lender has surrendered or cancelled this Guaranty prior to returning the Surrendered Payments.

3.           Continuing Guaranty.  THIS IS A "CONTINUING GUARANTY" UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS.  ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR'S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

Guarantor agrees that the obligations of Guarantor hereunder shall be primary obligations, shall not be subject to any counterclaim, set-off, abatement, deferment or defense based upon any claim that Guarantor may have against Lender, Borrower, any other guarantor of the Indebtedness or any other person or entity, and shall remain in full force and effect without regard to, and shall not be released, discharged or affected in any way by, any circumstance or condition (whether or not Guarantor shall have any knowledge thereof), including without limitation:

 

  

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(a)           any lack of validity or enforceability of the Indebtedness or any of the Loan Documents;

(b)           any termination, amendment, modification or other change in the Indebtedness or any of the Loan Documents, including, without limitation, any modification of the interest rate(s) described therein;

(c)           any furnishing, exchange, substitution or release of any collateral securing repayment of the Loan, or any failure to perfect any lien in such collateral;

(d)           any failure, omission or delay on the part of Borrower, Guarantor, any other guarantor of the Indebtedness or Lender to conform or comply with any term of any of the Loan Documents or any failure of Lender to give notice of any Event of Default (as defined in the Loan Documents);

(e)           any waiver, compromise, release, settlement or extension of time of payment or performance or observance of any of the obligations or agreements contained in any of the Loan Documents;

(f)           any action or inaction by Lender under or in respect of any of the Loan Documents, any failure, lack of diligence, omission or delay on the part of Lender to enforce, assert or exercise any right, power or remedy conferred on it in any of the Loan Documents, or any other action or inaction on the part of Lender;

(g)           any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, liquidation, marshalling of assets and liabilities or similar events or proceedings with respect to Borrower, Guarantor or any other guarantor of the Indebtedness, as applicable, or any of their respective property or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;

(h)           any merger or consolidation of Borrower into or with any entity, or any sale, lease or transfer of any of the assets of Borrower, Guarantor or any other guarantor of the Indebtedness to any other person or entity;

 

 

(i)           any change in the ownership of Borrower or any change in the relationship between Borrower, Guarantor or any other guarantor of the Indebtedness, or any termination of any such relationship;

(j)           any release or discharge by operation of law of Borrower or any other guarantor of the Indebtedness from any obligation or agreement contained in any of the Loan Documents;

(k)           any other occurrence, circumstance, happening or event, whether similar or dissimilar to the foregoing and whether foreseen or unforeseen, which otherwise might constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which otherwise might limit recourse against Borrower or Guarantor; or

(l)           any invalidity, irregularity or unenforceability in whole or in part (including with respect to any netting provision) of any interest rate swap, basis swap, forward rate, interest rate option, collar or corridor agreement or transaction or any similar transaction between Borrower and Lender or any confirmation, instrument or agreement required thereunder or related thereto, or any transaction entered into thereunder, or any limitation on the liability of Borrower thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever.

 

  

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4.           Duration of Guaranty.  This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred shall have been fully and finally paid and satisfied and all of Guarantor's other obligations under this Guaranty shall have been performed in full.  Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty.

5.           Binding Nature; Successors and Assigns.  Guarantor agrees that this Guaranty shall be a continuing guaranty and shall inure to the benefit of and may be enforced by Lender and any subsequent holder of the Note and/or successor in interest under the Loan Agreement and Loan Documents (Guarantor hereby consenting to any transfer of the Note, Loan Agreement, and/or Loan Documents without notice).  This Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.  This Guaranty shall bind Guarantor's estate as to the Indebtedness created both before and after Guarantor's death or incapacity, regardless of Lender's actual notice of Guarantor's death.

6.           Representations and Warranties. Guarantor represents and warrants to Lender that: (a)  no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b)  the making of the Loan by Lender to Borrower confers a real and substantial benefit to Guarantor and is fully supportive of and provides valuable consideration for the execution of this Guaranty; (c) Guarantor is interested in the affairs of Borrower and is thoroughly familiar with the business affairs, books, records, financial condition and operations of Borrower; (d)  Guarantor has full power, right and authority to enter into this Guaranty, and this Guaranty has been duly executed and delivered by Guarantor and constitutes the legally enforceable obligation of Guarantor in accordance with its terms; (e)  the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (f) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein; (g) upon Lender's request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor's financial condition as of the dates the financial information is provided; (h) no material adverse change has occurred in Guarantor's financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor's financial condition; (i) Guarantor has not filed any petition nor has any petition been filed against Guarantor in bankruptcy or insolvency or reorganization or for the appointment of a receiver or trustee or for the arrangement of debts, nor has Guarantor been the subject of such action, nor has such action been threatened by or against Guarantor, and Guarantor is not insolvent nor will Guarantor be rendered insolvent by the consummation of the Loan and execution of this Guaranty; (j) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (k) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; (l) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition; and (m) that if any interest rate swap, basis swap, forward rate, interest rate option, collar or corridor agreement or transaction or any similar transaction between Borrower and Lender shall at any time be in effect, (x) Guarantor has received and examined copies of each document relating to such transaction, the observance and performance of which by Borrower is hereby guaranteed; (y) Guarantor will benefit from Lender entering into each such agreement and any transactions thereunder with Borrower, and Guarantor has determined that the execution and delivery by Guarantor of this Guaranty are necessary and convenient  to the conduct, promotion and attainment of the business of Guarantor; and (z) Lender has no duty to determine whether any such agreement or transaction will be or has been entered into by Borrower for purposes of hedging interest rate, currency exchange rate, or other risks arising in its businesses or affairs and not for purposes of speculation, or is otherwise inappropriate for Borrower.  Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of  its relationship with Borrower or to monitor the performance of Borrower under the Loan Documents.  It is the intention of the parties that Lender may rely completely on this Guaranty for its repayment of the Indebtedness whether or not Borrower is creditworthy and whether or not it would be prudent to make loans or advances to Borrower or to permit the same to remain outstanding.

 

  

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7.           Guarantor’s Authorizations.  Guarantor authorizes Lender, without notice or demand and without lessening Guarantor's liability under this Guaranty, from time to time:  (a) to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower;  (b)  to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term;  (c)  to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral;  (d)  to release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose;  (e)  to determine how, when and what application of payments and credits shall be made on the Indebtedness;  (f)  to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or mortgage, as Lender in its discretion may determine;  (g)  to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and  (h)  to assign or transfer this Guaranty in whole or in part.

8.           Waivers by Guarantor.  Except as prohibited by applicable law, Guarantor waives any right to require Lender:  (a)  to continue lending money or to extend other credit to Borrower;  (b)  to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations;  (c)  to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor;  (d)  to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person;  (e)  to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code;  (f)  to pursue any other remedy within Lender's power; or  (g)  to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.

 

  

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Guarantor also waives any relief available under valuation and appraisement laws and any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of: (i)  any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or if permitted by applicable law by exercise of a power of sale;  (ii)  any election of remedies by Lender which destroys or otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness;  (iii)  any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower's liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness;  (iv)  any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness;  (v)  any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or  (vi)  any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.  Without limiting the provisions of the last two (2) sentences of Section 2 above, if payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.

Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law.  If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

9.             Acknowledgments of Guarantor.  Guarantor acknowledges and agrees that Lender has not made any representations or warranties with respect to, does not assume any responsibility to Guarantor for, and has no duty to provide information to Guarantor regarding, the collectability or enforceability of the Indebtedness or the financial condition of Borrower or any Guarantor.  Guarantor has independently determined the collectability and enforceability of the Indebtedness and, until the Indebtedness is paid in full, will independently and without reliance on Lender continue to make such determinations.  Guarantor agrees that Guarantor has read and fully understands the terms of this Guaranty, Guarantor has had the opportunity to be advised by Guarantor's attorney with respect to this Guaranty, and the Guaranty fully reflects Guarantor's intentions and parol evidence is not required to interpret the terms of this Guaranty.  Guarantor hereby indemnifies and holds Lender harmless for, from and against all losses, claims, damages, and costs (including Lender's attorneys' fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this Section.

10.            Subordination of Debts to Guarantor.  Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent.  Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower.  In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness.  Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness.  If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender.  Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

 

  

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Notwithstanding any payment or performance by Guarantor pursuant to this Guaranty, Guarantor shall not be entitled to be subrogated to any rights of Lender against Borrower or any other guarantor of the Indebtedness prior to the time at which the Indebtedness is repaid in full and all periods under applicable bankruptcy law for the contest of any payment by Guarantor or Borrower as a preferential or fraudulent payment have expired, and Guarantor knowingly and with the advise of counsel waives and releases all rights and claims to indemnification, reimbursement and contribution Guarantor now has or at any time hereafter may have against Borrower or Borrower’s estate prior to the time at which the Indebtedness is repaid in full and all periods under applicable bankruptcy law for the contest of any payment by Guarantor or Borrower as a preferential or fraudulent payment have expired, including, without limitation, any rights which may allow Borrower, Borrower’s successors, a creditor of Borrower, or a trustee in bankruptcy of the Borrower to claim in bankruptcy or any other similar proceedings that any payment made by Borrower or Borrower’s successors and assigns to Lender was on behalf of or for the benefit of Guarantor and that such payment is recoverable by Borrower, a creditor or trustee in bankruptcy of Borrower as a preferential payment, fraudulent conveyance, payment of an insider or any other classification of payment which may otherwise be recoverable from Lender.

11.            Setoff.  To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor's accounts with Lender (whether checking, savings, or some other account).  This includes all accounts Guarantor holds jointly with someone else and all accounts Guarantor may open in the future.  However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Guarantor authorizes Lender, to the extent permitted by applicable law, to hold these funds if there is a default, and Lender may apply the funds in these accounts to pay what Guarantor owes under the terms of this Guaranty.

12.           Applicable Law.  This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Minnesota without regard to its conflicts of law provisions.

13.           CHOICE OF VENUE.  GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY GUARANTOR AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS GUARANTY OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN THE DISTRICT COURT OF HENNEPIN COUNTY, MINNESOTA, OR AT LENDER’S DISCRETION IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA.  GUARANTOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN SUCH COURT.  GUARANTOR WAIVES ANY CLAIM THAT HENNEPIN COUNTY, MINNESOTA, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.  THE EXCLUSIVE CHOICE OF FORUM FOR GUARANTOR SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND GUARANTOR HEREBY WAIVES THE RIGHT, IF ANY, TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.

 

  

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14.           WAIVER OF RIGHT TO JURY TRIAL.  LENDER AND GUARANTOR HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR GUARANTOR AGAINST THE OTHER.

15.           Fees Relating to Enforcement.  Guarantor agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Guaranty.  Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services.  Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

16.           Annual Financial Information.  Guarantor agrees to furnish Lender Guarantor’s financial statements included as a part of the consolidated financial statement of the Borrower.

17.           Remedy for Failure to Deliver Financial Statements.  Upon any failure of Guarantor to deliver Guarantor’s periodic financial statements as required pursuant to Section 16 above, Lender shall have the option of imposing an administrative fee of Five Hundred Dollars ($500.00) for each such failure and for each entity for which such financial statements were required to be delivered.  Lender shall notify Guarantor of Guarantor’s failure to deliver such financial statements and, if Guarantor does not cure such failure within thirty (30) days after receipt of such notice from Lender, Lender shall have the right to impose such fee by delivering written notice thereof to Guarantor.  Within ten (10) days after receipt of such written notice, Guarantor shall pay the fee to Lender.  Lender’s receipt of such fee in any instance shall not relieve Guarantor from its obligation to deliver the required financial statements, whether for the then-current period or any future period.  A waiver by Lender of its right to impose such fee shall not constitute a waiver of Lender’s right to impose such fee upon any future failure of Guarantor to deliver the required financial statements.

18.           No Waiver by Lender.  Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender.  No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right.  A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty.  No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender's rights or of any of Guarantor's obligations as to any future transactions.  Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

  

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IN WITNESS WHEREOF, the undersigned Guarantor has executed and delivered this Guaranty to take effect as of the date first above written.

GUARANTOR:

WSI Industries, Co.

By:                                                                                 

Name:   Paul D. Sheely

Title:     Vice President/Chief Financial Officer

STATE OF MINNESOTA                   )

 ) SS

COUNTY OF                                         )

 

 

On this __ day of May 2013, before me appeared Paul D. Sheely, to me personally known, who, being by me duly sworn, did say that he/she is the Vice President/Chief Financial Officer of WSI Industries, Co., a Minnesota corporation, and that said instrument was signed on behalf of said company by its authority, and said person acknowledged said instrument to be the free act and deed of said company.

 

In Testimony Whereof, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

                                                                         

Name:                                                              

Notary Public, State of                                                              

My Commission Expires:                                             

 

9ex10-1.htm

Exhibit 10.1

 

DEFERRED COMPENSATION PLAN

 

THIS DEFERRED COMPENSATION PLAN (this “Plan”), adopted this 19th day of December, 2012, by Park Sterling Bank located in Charlotte, North Carolina (hereinafter referred to as the “Bank”).

 

WITNESSETH:

 

WHEREAS, the Bank recognizes the valuable services the Participants have performed for the Bank and wishes to encourage the Participants’ continued service and to provide the Participants with additional incentive to achieve corporate objectives;

 

WHEREAS, the Bank wishes to provide the terms and conditions upon which the Bank shall pay additional retirement benefits to the Participants;

 

WHEREAS, the Bank and the Participants intend this Plan shall at all times be administered and interpreted in compliance with Code Section 409A; and

 

WHEREAS, the Bank intends this Plan shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Participants, members of select group of management or highly compensated employee of the Bank;

 

NOW THEREFORE, in consideration of the premises forgoing the Bank hereby creates the following:

 

ARTICLE 1

DEFINITIONS

 

For the purpose of this Plan, the following phrases or terms shall have the indicated meanings:

 

1.1           “Administrator” means the Board or its designee.

 

1.2           “Affiliate” means any business entity with whom the Bank would be considered a single employer under Section 414(b) and 414(c) of the Code.  Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

 

1.3           “Base Salary” means the cash compensation relating to services performed during any calendar year, excluding bonuses, commissions, distributions from nonqualified deferred compensation plans, fringe benefits, incentive payments, non-monetary awards, overtime, relocation expenses, stock options and other fees, and automobile and other allowances paid to the Participant for services rendered (whether or not such allowances are included in the Participant’s gross income).  Base Salary shall be calculated before reduction for amounts voluntarily deferred or contributed by the Participant pursuant to qualified or non-qualified plans and shall be calculated to include amounts not otherwise included in the Participant’s  gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by the Bank; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Participant.

 

1.4           “Beneficiary” means the person or persons designated in writing by the Participant to receive benefits hereunder in the event of the Participant’s death.

 

  

  

  

 

1.5           “Beneficiary Designation Form” means the form established from time to time by the Administrator that the Participant completes signs and returns to the Administrator to designate one or more Beneficiaries.

 

1.6           “Board” means the Board of Directors of the Bank.

 

1.7           “Bonus” means the cash bonus, if any, awarded to the Participant for services performed for the Bank during the Plan Year.

 

1.8           “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Bank; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Participant’s employment with the Bank; or fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Participant’s employment and resulting in a material adverse effect on the Bank.

 

1.9           “Change in Control” means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Code Section 409A and regulations thereunder.

 

1.10          “Contribution” means the amount the Bank contributes to the Deferral Account, calculated according to the provisions of Article 2.

 

1.11          “Crediting Rate” means the Wall Street Journal prime rate as of the first day of each calendar quarter, provided however that at no point shall the Crediting Rate be less than fifty (50) basis points.

 

1.12          “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

 

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

 

1.14          “Deferral Account” means the Bank’s accounting of the accumulated Deferrals and Contributions plus accrued interest.

 

1.15          “Deferral Election Form” means each form established from time to time by the Administrator that the Participant completes, signs and returns to the Administrator to designate the amount of Deferrals.

 

1.16          “Deferrals” means the amount of Base Salary, Bonus and/or Fees the Participant elects to defer according to this Plan.

 

1.17          “Disability” means a condition of the Participant whereby the Participant either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank.  The Administrator will determine whether the Participant has incurred a Disability based on its own good faith determination and may require the Participant to submit to reasonable physical and mental examinations for this purpose.  The Participant will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

 

  

  

  

 

1.18           “Distribution Date” means the date, if any, selected by the Participant on the Deferral Election Form to receive an In Service Distribution.

 

1.19           “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs following a Change in Control or due to termination for Cause.

 

1.20           “Effective Date” means January 1, 2013.

 

1.21           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

1.22           “Fees” means the total amount of fees payable to a member of the Board.

 

1.23           “In Service Distribution” means a distribution from the Deferral Account made at the election of the Participant and prior to Separation from Service, Disability, Change in Control and the Participant’s death.  The election to receive an In Service Distribution shall be made by the Participant on a Deferral Election Form.

 

1.24           “Normal Retirement Age” means the Participant attaining age sixty-five (65).

 

1.25           “Participant” means an employee or director of the Bank (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Participation Agreement, (iv) whose Participation Agreement, Beneficiary Designation Form and Deferral Election Form are accepted by the Administrator, (v) who commences participation in the Plan, and (vi) whose participation has not terminated.

 

1.26           “Participation Agreement” means the form established by the Administrator that the Participant completes, signs and returns to the Administrator to acknowledge participation in the Plan.

 

1.27           “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year.  The initial Plan Year shall commence on the Effective Date and end on the following December 31.

 

1.28           “Separation from Service” means, with respect to any Participant, a termination of the Participant’s service with the Bank and its Affiliates for reasons other than death or Disability.  A Separation from Service may occur as of a specified date for purposes of the Plan even if the Participant continues to provide some services for the Bank or its Affiliates after that date, provided that the facts and circumstances indicate that the Bank and the Participant reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Participant performed services for the Bank, if that is less than thirty-six (36) months).  A Separation from Service will not be deemed to have occurred while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Participant with the right to reemployment with the Bank.  If the Participant’s leave exceeds six (6) months but the Participant is not entitled to reemployment under a statute or contract, the Participant incurs a Separation of Service on the next day following the expiration of such six (6) month period.  In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3).  The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

 

1.29           “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Bank as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Bank is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m).  If a Participant is a key employee at any time during the twelve (12) months ending on December 31, the Participant is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

 

  

  

  

 

1.30           “Unforeseeable Emergency” means a severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Beneficiary, or the Participant’s dependent (as defined in Section 152(a) of the Code), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

 

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

 

2.1           Selection by Administrator.  Participation in the Plan shall be limited to those employees and directors of the Bank selected by the Administrator, in its sole discretion, to participate in the Plan.  Participation in the Plan shall be limited to a select group of management or highly compensated individuals employed by or providing services to the Bank.

 

2.2           Enrollment Requirements.  As a condition to participation, and in addition to the requirements in Section 2.1, each selected individual shall complete, execute and return to the Administrator (i) a Participation Agreement Form, (ii) a Beneficiary Designation Form and (iii) a Deferral Election Form.  In addition, the Administrator may establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

 

2.3           Eligibility; Commencement of Participation.  Provided an individual selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Administrator, that individual will become a Participant, be covered by the Plan and will be eligible to receive benefits at the time and in the manner provided hereunder, subject to the provisions of the Plan.

 

2.4          Termination of Participation.  If the Administrator determines that a Participant no longer qualifies as a member of a select group of management or highly compensated employees as such group is determined according to ERISA, the Administrator shall have the right to prevent the Participant from accruing additional benefits hereunder.

 

ARTICLE 3

DEFERRALS

 

3.1           Elections Generally.  Each Participant may annually file a Deferral Election Form with the Administrator no later than the end of the Plan Year preceding the Plan Year in which services leading to the compensation to be deferred will be performed.

 

3.2           Initial Election.  After being notified by the Administrator of becoming eligible to participate in this Plan, each Participant may make an initial deferral election by delivering to the Administrator a signed Deferral Election Form within thirty (30) days of becoming eligible.  The Deferral Election Form shall set forth the amount of Base Salary, Bonus and/or Fees to be deferred.  However, if the Participant was eligible to participate in any other account balance plans (as referenced in Code Section 409A) sponsored by the Bank prior to becoming eligible to participate in this Plan, the initial election to defer under this Plan shall not be effective until the Plan Year following the Plan Year in which the Participant became eligible to participate in this Plan.

 

3.3           Election Changes.  The Participant may modify the amount of Deferrals annually by filing a new Deferral Election Form with the Bank.  The modified deferral shall not be effective until the calendar year following the year in which the subsequent Deferral Election Form is received by the Bank.  Any changes to an In Service Distribution election must comply with the restrictions described in Section 5.16.

 

  

  

  

 

3.4           Hardship.  If an Unforeseeable Emergency occurs, a Participant, by written instructions to the Bank, may discontinue deferrals hereunder.  Any subsequent Deferral Elections may be made only in accordance with Section 3.1 hereof.

 

3.5           Bank Contributions.  In addition to any Deferrals, the Bank may, at any time, make a Contribution to the Deferral Account.  Such Contributions, at the election of the Bank, be subject a vesting schedule or such other provisions as the Bank may provide.

 

ARTICLE 4

DEFFERAL ACCOUNT

 

4.1           Establishing and Crediting.  The Bank shall establish a Deferral Account on its books for the Participant and shall credit to the Deferral Account the following amounts:

 

	 	
(a) 

	
Any Deferrals or Contributions hereunder; and

	 	
(b) 

	
Interest as follows:

(i)            On the last day of each month during and immediately prior to the distribution of any benefits, but only until commencement of benefit distributions under this Plan, interest shall be credited on the Deferral Account balance at an annual rate equal to the Crediting Rate; and

(ii)             On the last day of each month during any installment period, interest shall be credited on the unpaid Deferral Account balance at an annual rate equal to the Crediting Rate less fifty (50) basis points, compounded monthly.

 

4.2           Recordkeeping Device Only.  The Deferral Account is solely a device for measuring amounts to be paid under this Plan and is not a trust fund of any kind.

 

ARTICLE 5

PAYMENT OF BENEFITS

 

5.1           In Service Distributions.  If the Participant has properly elected an In Service Distribution on the Deferral Election Form, and the Distribution Date occurs prior to Separation from Service, Disability, Change in Control and the Participant’s  death, the Bank shall pay the Participant the In Service Distribution Amount on the Distribution Date.  Any In Service Distribution will reduce the Deferral Account balance.

 

5.2           Normal Retirement Benefit.  Upon Separation from Service on or after Normal Retirement Age, the Bank shall pay the Participant the Deferral Account balance calculated at Separation from Service.  This benefit shall be paid as elected by the Participant on the Participant’s Participation Agreement.

 

5.3           Early Termination Benefit.  If Early Termination occurs, the Bank shall pay the Participant the Deferral Account balance calculated at Separation from Service in lieu of any other benefit hereunder.  This benefit shall be paid as elected by the Participant on the Participant’s Participation Agreement.

 

5.4           Disability Benefit.  If the Participant experiences a Disability prior to Normal Retirement Age, the Bank shall pay the Participant the Deferral Account balance calculated as of the date of Disability in lieu of any other benefit hereunder.  This benefit shall be paid as elected by the Participant on the Participant’s Participation Agreement.

 

5.5           Change in Control Benefit.  If a Change in Control occurs, the Bank shall pay the Participant the Deferral Account balance calculated as of the date of Change in Control in lieu of any other benefit hereunder. This benefit shall be paid as elected by the Participant on the Participant’s Participation Agreement.

 

  

  

  

 

5.6           Death Prior to Commencement of Benefit Payments.  In the event the Participant dies prior to Separation from Service, Disability and Change in Control, the Bank shall pay the Beneficiary the Deferral Account balance calculated as of the date of the date of the Participant’s  death.  This benefit will be paid in a lump sum within sixty (60) days following the Participant’s  death, with the actual date of payment determined by the Bank in its sole discretion.

 

5.7           Death Subsequent to Commencement of Benefit Payments.  In the event the Participant dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Bank shall pay the Beneficiary the remaining Deferral Account balance in a lump sum within sixty (60) days following the Participant’s  death, with the actual date of payment determined by the Bank in its sole discretion.

 

5.8           Hardship Distribution.  If an Unforeseeable Emergency occurs, the Participant may petition the Board to receive a distribution from the Plan (a “Hardship Distribution”).  The Board in its sole discretion may grant such petition.  If granted, the Participant shall receive, within sixty (60) days, a distribution from the Plan only to the extent deemed necessary by the Board to remedy the Unforeseeable Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution.  In any event, the maximum amount which may be paid out as a Hardship Distribution is the Deferral Account balance as of the day the Participant petitioned the Board to receive a Hardship Distribution.  A Hardship Distribution shall reduce the Deferral Account balance.

 

5.9           Termination for Cause.  If the Bank terminates a Participant’s service for Cause, then the Participant shall forfeit all amounts credited to the Deferral Account except the Deferrals.

 

5.10           Restriction on Commencement of Distributions.  Notwithstanding any provision of this Plan to the contrary, if the Participant is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder.  Distributions which would otherwise be made to the Participant due to Separation from Service shall not be made during the first six (6) months following Separation from Service.  Rather, any distribution which would otherwise be paid to the Participant during such period shall be accumulated and paid to the Participant in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Participant’s death.  All subsequent distributions shall be paid as they would have had this Section not applied.

 

5.11           Acceleration of Payments.  Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder.  Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cash outs (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Plan fails to meet the requirements of Code Section 409A.

 

5.12           Delays in Payment by Bank.  A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event.  The delay in the payment will not constitute a subsequent deferral election, so long as the Bank treats all payments to similarly situated Participants on a reasonably consistent basis.

 

(a)           Payments subject to Code Section 162(m).  If the Bank reasonably anticipates that the Bank’s deduction with respect to any distribution under this Plan would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the entire amount of any distribution from this Plan is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Plan.  The delayed amounts shall be distributed to the Participant (or the Beneficiary in the event of the Participant’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

 

  

  

  

 

(b)           Payments that would violate Federal securities laws or other applicable law.  A payment may be delayed where the Bank reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Bank reasonably anticipates that the making of the payment will not cause such violation.  The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c)           Solvency.  Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Bank to continue as a going concern.

 

5.13           Treatment of Payment as Made on Designated Payment Date.  Solely for purposes of determining compliance with Code Section 409A, any payment under this Plan made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15th day of the third calendar month following the payment due date; (iii) if Bank cannot calculate the payment amount on account of administrative impracticality which is beyond the Participant’s  control, the end of the first calendar year which payment calculation is practicable; and (iv) if Bank does not have sufficient funds to make the payment without jeopardizing the Bank’s solvency, in the first calendar year in which the Bank’s funds are sufficient to make the payment.

 

5.14           Facility of Payment.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee.  Any such distribution shall fully discharge the Bank and the Administrator from further liability on account thereof.

 

5.15           Excise Tax Limitation.  Notwithstanding any provision of this Plan to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Bank shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment.  The Participant shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

 

5.16           Changes in Form of Timing of Benefit Payments.  The Bank and the Participant may, subject to the terms hereof, amend this Plan to delay the timing or change the form of payments.  Any such amendment:

 

(a)           must take effect not less than twelve (12) months after the amendment is made;

(b)           must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c)           must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d)           may not accelerate the time or schedule of any distribution.

 

ARTICLE 6

BENEFICIARIES

 

6.1           Designation of Beneficiaries.  The Participant may designate any person to receive any benefits payable under the Plan upon the Participant’s death, and the designation may be changed from time to time by the Participant by filing a new designation.  Each designation will revoke all prior designations by the Participant, shall be in the form prescribed by the Administrator and shall be effective only when filed in writing with the Administrator during the Participant’s  lifetime.  If the Participant names someone other than the Participant’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Participant’s spouse and returned to the Administrator.  The Participant’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as Beneficiary and the marriage is subsequently dissolved.

 

  

  

  

 

6.2           Absence of Beneficiary Designation.  In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Bank shall pay the benefit payment to the Participant’s spouse.  If the spouse is not living then the Bank shall pay the benefit payment to the Participant’s living descendants per stirpes, and if there no living descendants, to the Participant’s  estate.  In determining the existence or identity of anyone entitled to a benefit payment, the Bank may rely conclusively upon information supplied by the Participant’s personal representative, executor, or administrator.

 

ARTICLE 7

ADMINISTRATION

 

7.1           Administrator Duties.  The Administrator shall be responsible for the management, operation, and administration of the Plan.  When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Bank, Participant or Beneficiary.  No provision of this Plan shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

 

7.2           Administrator Authority.  The Administrator shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes.

 

7.3           Binding Effect of Decision.  The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Plan.

 

7.4           Compensation, Expenses and Indemnity.  The Administrator shall serve without compensation for services rendered hereunder.  The Administrator is authorized at the expense of the Bank to employ such legal counsel and recordkeeper as it may deem advisable to assist in the performance of its duties hereunder.  Expense and fees in connection with the administration of this Plan shall be paid by the Bank.

 

7.5           Bank Information.  The Bank shall supply full and timely information to the Administrator on all matters relating to the Participant’s  compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

 

7.6           Termination of Participation.  If the Administrator determines in good faith that the Participant no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to prohibit the Participant from making any additional Deferrals hereunder.

 

7.7           Compliance with Code Section 409A.  The Bank and the Participants intend that the Plan comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Participant or Beneficiary.  This Plan shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

 

  

  

  

 

ARTICLE 8

CLAIMS AND REVIEW PROCEDURES

 

8.1           Claims Procedure.  A Claimant who has not received benefits under this Plan that he or she believes should be distributed shall make a claim for such benefits as follows.

 

(a)           Initiation – Written Claim.  The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits.  If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the Claimant.

 

(b)           Timing of Administrator Response.  The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c)           Notice of Decision.  If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial.  The Administrator shall write the notification in a manner calculated to be understood by the Claimant.  The notification shall set forth:  (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Plan on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Plan’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

 

8.2           Review Procedure.  If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

 

(a)           Initiation – Written Request.  To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b)           Additional Submissions – Information Access.  The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.  The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c)           Considerations on Review.  In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)           Timing of Administrator Response.  The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review.  If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required.  The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e)           Notice of Decision.  The Administrator shall notify the Claimant in writing of its decision on review.  The Administrator shall write the notification in a manner calculated to be understood by the Claimant.  The notification shall set forth:  (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Plan on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

 

  

  

  

 

ARTICLE 9

AMENDMENT AND TERMINATION

 

9.1           Plan Amendment Generally.  This Plan may be amended only by a written agreement signed by the Bank, provided that such amendment does not reduce or eliminate any vested benefit hereunder.

 

9.2           Amendment to Insure Proper Characterization of Plan.  Notwithstanding anything in this Plan to the contrary, the Plan may be amended by the Bank at any time, if found necessary in the opinion of the Bank, i) to ensure that the Plan is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Plan to the requirements of any applicable law or iii) to comply with the written instructions of the Bank’s auditors or banking regulators.

 

9.3           Plan Termination Generally.  This Plan may be terminated only by a written document signed by the Bank.  In case of such termination, the benefit to be paid to each Participant hereunder shall be the Participant’s Deferral Account balance.  However, except as provided in Section 9.4, Plan termination shall not cause a distribution of benefits hereunder.  Rather, upon termination benefit distributions will be made at the earliest distribution event permitted under Article 4.

 

9.4           Effect of Complete Termination.  Notwithstanding anything to the contrary in Section 9.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Bank may completely terminate and liquidate the Plan.  In the event of such a complete termination, the Bank shall pay the Deferral Account balance to the Participant.  Such complete termination of the Plan shall occur only under the following circumstances and conditions.

 

(a)           Corporate Dissolution or Bankruptcy.  The Bank may terminate and liquidate this Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Plan are included in the Participant’s  gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b)           Discretionary Termination.  The Bank may terminate and liquidate this Plan provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Bank; (ii) all arrangements sponsored by the Bank and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Plan if the termination had not occurred, are made within twelve (12) months of the date the Bank takes the irrevocable action to terminate this Plan; (iv) all payments are made within twenty-four (24) months following the date the Bank takes the irrevocable action to terminate and liquidate this Plan; and (v) neither the Bank nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Participant participated in both arrangements, at any time within three (3) years following the date the Bank takes the irrevocable action to terminate this Plan.

 

  

  

  

 

ARTICLE 10

MISCELLANEOUS

 

10.1           No Effect on Other Rights.  This Plan, and each Participant’s Participation Agreement constitute the entire agreement between the Bank and the Participant as to the subject matter hereof.  No rights are granted to the Participants by virtue of this Plan other than those specifically set forth herein.  Nothing contained herein will confer upon any Participant the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with the Participant without regard to the existence hereof.

 

10.2           State Law.  To the extent not governed by ERISA, the provisions of this Plan shall be construed and interpreted according to the internal law of the State of North Carolina without regard to its conflicts of laws principles.

 

10.3           Validity.  In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

 

10.4           Nonassignability.  Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

10.5           Unsecured General Creditor Status.  Payment to the Participant or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Bank and no person shall have any interest in any such asset by virtue of any provision of this Plan.  The Bank’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future.  In the event that the Bank purchases an insurance policy insuring the life of the Participant to recover the cost of providing benefits hereunder, neither the Participant nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

 

10.6           Unclaimed Benefits.  The Participant shall keep the Bank informed of the Participant’s current address and the current address of the Beneficiary.  If the location of the Participant is not made known to the Bank within three years after the date upon which any payment of any benefits may first be made, the Bank shall delay payment of the Participant’s benefit payment(s) until the location of the Participant is made known to the Bank; however, the Bank shall only be obligated to hold such benefit payment(s) for the Participant until the expiration of three (3) years.  Upon expiration of the three (3) year period, the Bank may discharge its obligation by payment to the Beneficiary.  If the location of the Beneficiary is not made known to the Bank by the end of an additional two (2) month period following expiration of the three (3) year period, the Bank may discharge its obligation by payment to the Participant’s estate.  If there is no estate in existence at such time or if such fact cannot be determined by the Bank, the Participant and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Plan.

 

10.7           Removal. Notwithstanding anything in this Plan to the contrary, the Bank shall not distribute any benefit under this Plan if the Participant is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act.  Furthermore, any payments made to the Participant pursuant to this Plan shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.

 

10.8           Notice.  Any notice, consent or demand required or permitted to be given to the Bank or Administrator under this Plan shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Bank’s principal business office.  Any notice or filing required or permitted to be given to the Participant or Beneficiary under this Plan shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Participant or Beneficiary, as appropriate.  Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

 

  

  

  

 

10.9           Headings and Interpretation.  Headings and sub-headings in this Plan are inserted for reference and convenience only and shall not be deemed part of this Plan.  Wherever the fulfillment of the intent and purpose of this Plan requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

 

10.10         Alternative Action.  In the event it becomes impossible for the Bank or the Administrator to perform any act required by this Plan due to regulatory or other constraints, the Bank or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Plan and is in the best interests of the Bank, provided that such alternative act does not violate Code Section 409A.

 

10.11         Coordination with Other Benefits.  The benefits provided for the Participant or the Beneficiary under this Plan are in addition to any other benefits available to the Participant under any other plan or program for employees of the Bank.  This Plan shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

 

10.12         Inurement.  This Plan shall be binding upon and shall inure to the benefit of the Bank, its successor and assigns, and the Participant, the Participant’s successors, heirs, executors, administrators, and the Beneficiary.

 

10.13        Tax Withholding.  The Bank may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Bank is required by any law or regulation to withhold in connection with any benefits under the Plan.  The Participant shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

 

10.14        Aggregation of Plan.  If the Bank offers other account balance deferred compensation arrangements in addition to this Plan, this Plan and those arrangements shall be treated as a single plan to the extent required under Code Section 409A.

 

 

IN WITNESS WHEREOF, a representative of the Bank has executed this Plan as indicated below:

 

Bank: Park Sterling Bank

 

By:

 

/s/ James C. Cherry

 

James C. Cherry

 

Its:   Chief Executive Officer

 

Date: December 19, 2012

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