Document:

EXHIBIT 10.1

 

IN THE COURT OF COMMON PLEAS

OF LACKAWANNA COUNTY

 

	LORI GRAY,	 
	derivatively on behalf of	 
	FIRST NATIONAL COMMUNITY	CIVIL ACTION – LAW
	BANCORP.	 
	BANCORP, INC.	
	Plaintiff,	 
	 	 
	vs.	 
	 	 
	LOUIS A. DENAPLES, et al.,	 
	 	2012-CIV-3228
	Defendants,	 
	 	 
	FIRST NATIONAL COMMUNITY	 
	BANCORP, INC.	 
	 	 
	            Nominal Defendant.	 

 

STIPULATION OF SETTLEMENT

 

This Stipulation of Settlement (“Stipulation”),
dated as of November 27, 2013, is entered into, by and through their respective undersigned counsel, by (i) Lori Gray and Frank
Lombardo (collectively, the “Settling Plaintiffs”), (ii) Louis A. DeNaples, Michael J. Cestone, Jr., Joseph Coccia,
Dominick L. DeNaples, Joseph J. Gentile, William P. Conaboy, John P. Moses, Michael Conahan, J. David Lombardi (collectively, the
“Individual Defendants”), Louis A. DeNaples, Jr., Michael G. Cestone, Steven R. Tokach and Thomas J. Melone, the latter
two both individually and as the Special Committee (collectively, the “Additional Directors”), First National Community
Bancorp, Inc. (“FNCB” or the “Company”) and FNCB’s subsidiary, First National Community Bank (the
“Bank”) (the Individual Defendants, the Additional Directors, FNCB and the Bank are collectively referred to herein
as the “Settling Defendants,” and the Settling Plaintiffs and the Settling Defendants are collectively referred to
herein as the “Settling Parties”). This Stipulation is intended by the Settling Parties to fully, finally, and forever
compromise, resolve, discharge, and settle the Released Claims (as defined herein) and this Derivative Litigation (as defined herein)
in accordance with the terms and conditions set forth below, subject to the approval of the Court.

 

    	 

    	 

    

 

WHEREAS, by letter dated December 19, 2011,
Plaintiff Gray, through her undersigned counsel, made a pre-suit demand upon the Board of Directors (“Board”) of the
Company to take action against certain current and former officers and directors of the Company alleging they had breached their
fiduciary duties in various respects (the “Demand Letter”);

 

WHEREAS, on January 11, 2012, in response
to the Demand Letter, the Board, on behalf of the Company, passed a resolution appointing a Special Committee consisting of FNCB
Board members Steven R. Tokach and Thomas Melone to investigate the matters outlined in the Demand Letter (the “Investigation”);

 

WHEREAS, in February 2012, the Special Committee
retained Alexander Kerr, Esquire and Michael M. Horn, Esquire, of the law firm McCarter & English, LLP, to assist with the
Investigation;

 

WHEREAS, Plaintiff Gray and shareholder
Lombardo, through their respective counsel, have raised serious substantive issues with respect to, inter alia, the activities
of the Special Committee and its counsel and their independence;

 

WHEREAS, on May 24, 2012, Ms. Gray, through
her undersigned counsel, commenced an action (the “Gray Action”) by filing a Verified Shareholder Derivative Complaint
for Breach of Fiduciary Duty, Aiding and Abetting Breach of Fiduciary Duty, and Professional Negligence (the “Complaint”)
against the Individual Defendants and Demetrius & Company, LLC (“Demetrius”);

 

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WHEREAS, the Special Committee thereafter
completed its Investigation and on March 27, 2013 issued its Report (the “Report”), which contains certain
non-public information of the Office of the Comptroller of the Currency (“OCC”);

 

WHEREAS, the Company has requested and obtained
the OCC’s consent to release the Report to the parties to the Gray Action, as well as the Court in the Gray
Action, subject to certain redactions and conditions (the “Redacted Report”);

 

WHEREAS, the Company provided the Redacted
Report on August 1, 2013 to counsel for the Settling Parties and Demetrius subject to a Court-approved protective order;

 

WHEREAS, on or about April 4, 2013, Plaintiff
Gray filed a motion to amend the Complaint by including claims against Robert L. Rossi & Company (“Rossi”) and
attached a proposed Verified Amended Shareholder Derivative Complaint for Breach of Fiduciary Duty, Aiding and Abetting Breach
of Fiduciary Duty, Breach of Contract, Negligent Misrepresentation, Unjust Enrichment, Corporate Waste, Abuse of Control, and Professional
Negligence (the “Proposed Amended Complaint”);

 

WHEREAS, in or about June 2012, certain
of the Settling Defendants were advised that Frank Lombardo, a current FNCB shareholder, through his counsel, Richard D. Greenfield,
Esq., was contemplating filing a substantially similar, but broader shareholder derivative complaint against the Individual Defendants
and others (the “Lombardo Complaint”), drafts of which were provided to certain Settling Defendants’ counsel
(the Demand Letter, Complaint, Proposed Amended Complaint, and Lombardo Complaint are collectively referred to as the “Pending
and Threatened Litigation”);

 

WHEREAS, counsel for the Settling Plaintiffs
and counsel for the Individual Defendants engaged in arms’ length negotiations regarding a potential resolution of certain
claims asserted in the Pending and Threatened Litigation;

 

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WHEREAS, it is acknowledged by Plaintiff
Gray and Mr. Lombardo and their counsel that Louis DeNaples took a leave of absence from the Company on February 6, 2008 and, thereafter,
did not serve as an officer or Director of the Company during the time the conduct alleged in the Pending and Threatened Litigation
occurred;

 

WHEREAS, Plaintiff Gray and Mr. Lombardo
in the Pending and Threatened Litigation have, inter alia, claimed that the Individual Defendants, in the operation of the
Company and the Bank, have failed to provide the necessary oversight, prudence and governance required of them pursuant to their
fiduciary duties, applicable law and banking rules and regulations;

 

WHEREAS, the Settling Plaintiffs maintain
that the risk oversight function of the boards of directors of banks and bank holding companies, and of FNCB and the Bank in particular,
has never been more critical and challenging than it is today;

 

WHEREAS, Plaintiff Gray and Mr. Lombardo
recognize and recommend that such oversight at FNCB and the Bank can and should be enhanced by, inter alia, improved governance
practices and procedures, improved oversight by FNCB’s Board and the establishment of a risk management regimen at FNCB and
the Bank.

 

WHEREAS, Plaintiff Gray and Mr. Lombardo
believe and recommend that oversight of risk management will be enhanced by the appointment of an officer of the Bank who is assigned
specific responsibility for risk management.

 

WHEREAS, the Individual Defendants and Additional
Directors, in connection with the Pending and Threatened Litigation, have denied and continue to deny that they have committed
or aided or abetted in the commission of any unlawful or wrongful act alleged in the Pending and Threatened Litigation, and maintain
that they diligently and scrupulously complied with their respective fiduciary and/or other duties to the Bank, to FNCB, and to
FNCB’s shareholders, and the Individual Defendants and the Additional Directors are entering into this Stipulation solely
because the proposed Settlement (defined below) provided for herein will eliminate the potential burden of distracting and costly
litigation and it is expected to generate substantial benefits to FNCB and the Bank;

 

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WHEREAS, as of August 29, 2013, the Settling
Parties entered into a Memorandum of Understanding (the “MOU”) preliminarily providing for the settlement of the Pending
and Threatened Litigation, subject to the execution of a definitive stipulation of settlement, notice to FNCB’s shareholders,
and approval by the Court;

 

WHEREAS, upon the execution of this Stipulation,
the MOU shall be considered null and void and without effect;

 

WHEREAS, Plaintiff Gray and Mr. Lombardo
do not, by entering into this Stipulation, admit that any of the allegations and claims in the Pending and Threatened Litigation
lack merit, or lack foundation in law or fact, or in any way were alleged for an improper purpose, and they are entering into this
Stipulation solely because the proposed Settlement provided for herein will facilitate the effective and efficient resolution of
all of their claims against the Released Parties (as defined below);

 

WHEREAS, the Settling Parties recognize
that the time and expense they would each incur by further litigation related to the Pending and Threatened Litigation and the
uncertainties inherent in such litigation, particularly the potential diversion of attention of certain of the Individual Defendants
and Additional Directors from overseeing the operations of the Company and the Bank;

 

WHEREAS, the Settling Parties agree that
the Settlement set forth herein is the full and final resolution of all potential or actual claims by, between and/or among the
Settling Parties arising from the facts alleged in the Pending and Threatened Litigation, believe settlement is in their best interests,
and therefore wish to settle and resolve the claims, both potential and actual, alleged or threatened in, or related to, the Pending
and Threatened Litigation with respect to any Settling Party;

 

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WHEREAS, FNCB, the Bank and the Individual
Defendants believe that they may have valid claims against Demetrius, John Demetrius, and/or Rossi related to events alleged in
the Pending and Threatened Litigation, and they are considering whether any such claims should be pursued;

 

WHEREAS, this Stipulation is not intended
to resolve, and does not resolve, any claims that FNCB, the Bank, and/or the Individual Defendants may have against Demetrius,
John Demetrius, and/or Rossi, irrespective of whether said claims are, or are not, asserted or proposed to be asserted or may be
asserted in the Pending and Threatened Litigation;

 

NOW, THEREFORE, without any admission
or concession on the part of Plaintiff Gray and Mr. Lombardo of any lack of merit of the Pending and Threatened Litigation whatsoever,
and without any admission or concession on the part of the Settling Defendants as to the merits of the Pending and Threatened Litigation
or as to any liability or wrongdoing whatsoever,

 

IT IS HEREBY STIPULATED AND AGREED,
by and among the Settling Parties, through their respective counsel, that, subject to the approval of the Court, in consideration
of the mutual agreements set forth herein, the Released Claims shall be finally and fully compromised, settled, and released and
the Pending and Threatened Litigation shall be dismissed with prejudice as to the Released Parties (identified below).

 

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I.           THE
INDIVIDUAL DEFENDANTS’ AND ADDITIONAL DIRECTORS’ DENIALS OF WRONGDOING AND LIABILITY

 

A.           The
Individual Defendants and Additional Directors have denied and continue to deny each and every one of the claims and contentions
alleged in the Pending and Threatened Litigation. The Individual Defendants and Additional Directors also have denied and continue
to deny all allegations that FNCB has suffered damage by or as a result of the conduct alleged in the Pending and Threatened Litigation.
In order to benefit FNCB and the Bank and to eliminate the potential burden, expense, and risks inherent in the litigation, the
Settling Defendants have determined that it is desirable that the Pending and Threatened Litigation be settled in the manner and
upon the terms and conditions set forth herein.

 

B.           Neither
this Stipulation, nor any of its terms or provisions, nor entry of the Judgment (defined below), nor any document or exhibit referred
or attached to this Stipulation, nor any action taken to carry out this Stipulation, may be construed or used as evidence of the
validity of any of the Released Claims, or an admission by or against the Settling Defendants of any fault, wrongdoing or concession
of liability whatsoever.

 

C.           Neither
this Stipulation nor the attached exhibits shall be offered or received into evidence in any action or proceeding in any court
or other tribunal for any purpose whatsoever other than to enforce the provisions of this Stipulation, except that this Stipulation
and the attached exhibits may be filed as evidence of the Settlement or in any action against the Released Parties to support a
defense of res judicata, collateral estoppel, release or other theory of claim or issue preclusion or similar defense or
in any action against Demetrius, John Demetrius, and/or Rossi. Notwithstanding the foregoing, the Settling Parties may use this
Stipulation as evidence of the Settlement in connection with any litigation with the insurance carriers providing directors’
and officers’ liability insurance coverage to the Settling Defendants, or any of them.

 

II.          THE
DERIVATIVE CLAIMS AND THE BENEFITS OF SETTLEMENT

 

A.           Based
on their review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, the Settling Parties
believe that the Settlement set forth herein confers substantial benefits upon, and is in the best interests of the Bank, FNCB,
and FNCB’s shareholders. The Settling Parties have agreed to settle pursuant to the terms and provisions of this Stipulation
after considering, inter alia, the substantial benefits that FNCB and the Bank will receive and the potential risks and
expenses of further litigation.

 

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B.           Although
Plaintiff Gray and Mr. Lombardo believe that the Pending and Threatened Litigation has substantial merit, they and their counsel
recognize and acknowledge the expense and length of time that would be required to prosecute the Pending and Threatened Litigation
through trial and appeal. They and their counsel have also taken into account the uncertain outcome and the risks of litigating
the Pending and Threatened Litigation, as well as the difficulties and delays inherent in such litigation.

 

C.           The
Settling Parties acknowledge that the Gray Action has been commenced and prosecuted by Plaintiff Gray and defended by the Individual
Defendants in good faith and with adequate basis in fact and law. The Settling Parties also acknowledge that they are voluntarily
settling the Pending and Threatened Litigation after consultation with their respective counsel.

 

D.           Counsel
for Plaintiff Gray and Mr. Lombardo, and counsel for the Individual Defendants, have conducted extensive arms’-length negotiations
over an extended period of time and have reached agreement as to, inter alia, a payment of $5,000,000 to FNCB, by or on
behalf of the Individual Defendants, the appointment of two additional independent directors, and enhancement of the corporate
governance of FNCB and the Bank related to, among other things, its compliance and risk management policies and procedures as well
as oversight of these matters by the Boards of Directors of FNCB and the Bank, and FNCB’s Audit Committee (which shall either
be re-named the Audit/Risk Management Committee and assigned additional oversight responsibilities by the Board or a new committee
shall be constituted and named the Risk Management Committtee which shall be assigned oversight responsibilities by the Board),
as set forth below.

 

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Plaintiffs and the Settling Defendants acknowledge
and agree that the Pending and Threatened Litigation pursued by Plaintiff Gray and Mr. Lombardo, and the negotiations leading to
this Settlement, were the principal cause of the decisions by the Boards of Directors of FNCB and the Bank to agree to the appointment
of two additional independent Board members and to enhance FNCB’s corporate governance as set forth below and in the Risk
Management Charter attached hereto as Exhibit “A” as well as the agreement for the Settlement Sum to be paid by or
on behalf of the Individual Defendants.

 

III.         DEFINITIONS

 

As used in this Stipulation, the following
terms have the meanings specified below:

 

3.1.          “Agreed
Upon Term” means the term of the obligations expressed in the Corporate Governance Provisions provided for herein. The Agreed
Upon Term shall be three years from the date the Court enters Judgment approving the Settlement and such Judgment becomes Final
and no longer subject to appeal.

 

3.2.          “Audit/Risk
Management Committee” or “Risk Management Committee” shall be the new name of the presently existing Audit
Committee or the newly constituted committee, respectively, of FNCB’s Board upon its resolution and assignment to such
Committee of the additional responsibilities as provided in the Risk Management Charter attached hereto as Exhibit
“A”. Such resolution and assignment shall occur no later than 30 days following the Settlement Effective
Date.

 

3.3.          “Confirmatory
Discovery” means such reasonable and additional discovery being taken and to be taken subsequent to this Stipulation as is
appropriate and necessary and as agreed to by counsel for the parties to confirm the fairness and reasonableness of the terms of
this settlement.

 

3.4.          “Derivative
Claims” means the claims asserted or encompassed within the Pending and Threatened Litigation.

 

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3.5.          “Derivative
Litigation” means the above-captioned action. The term “Derivative Litigation” shall also include the issues
encompassed by Plaintiff Gray’s Proposed Amended Complaint and all claims alleged informally by FNCB shareholder Lombardo.

 

3.6.          “Final”
means the latest of: (a) the expiration of the time for the filing or noticing of any motion for reconsideration or appeal of the
Judgment (i.e. the expiration of 30 days following entry of the Judgment); (b) the final affirmance of the Judgment on an
appeal or after reconsideration, the expiration of the time for a petition, or a denial of any petition, to review the affirmance
of the Judgment on appeal, or, if such petition is granted, the final affirmance of the Judgment following review pursuant to that
grant; or (c) the final dismissal of any appeal from the Judgment or the final resolution of any proceeding to review any appeal
from the Judgment without any material change to the Judgment.

 

3.7.          “FNCB
Shareholders” mean any Persons (other than FNCB) who own FNCB common stock as of the Record Date.

 

3.8.          “Judgment”
means “the Final Order and Judgment” to be entered by the Court in a form substantially similar to the [Proposed] Final
Order and Judgment attached hereto as Exhibit “B”.

 

3.9.          “Person”
means an individual, business or legal entity, including any corporation, limited liability corporation, professional corporation,
limited liability partnership, partnership, limited partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or agency thereof, and their spouses, heirs, predecessors,
successors, representatives, or assignees.

 

3.10.         “Preliminary
Approval Order” means the order entered by the Court in a form substantially similar to the Proposed Preliminary Approval
Order attached hereto as Exhibit “C”.

 

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3.11.         “Plaintiffs’
Counsel” means Joseph Solfanelli, Esq., for Plaintiff Lori Gray, and Richard D. Greenfield, Esq., for FNCB shareholder Frank
Lombardo; with Joseph Solfanelli, Esq. serving as Plaintiffs’ Lead Counsel.

 

3.12.         “Record
Date” means the date of the Preliminary Approval Order.

 

3.13.         “Released
Parties” means all Settling Defendants, all other current or former officers or directors of FNCB and/or the Bank, and each
and all members of their families, parent entities, affiliates, or subsidiaries, and each and all of their respective past, present,
or future officers, directors, employees, attorneys, heirs, executors, personal representatives, estates, administrators, predecessors,
successors, custodians, agents, representatives, trusts, trustees, trust beneficiaries and assigns.

 

3.14.         “Releasing
Parties” means the Plaintiff Gray and Mr. Lombardo (individually, and derivatively on behalf of FNCB) and each and all members
of their families, parent entities, affiliates, or subsidiaries, and each and all of their respective past, present, or future
officers, directors, employees, attorneys, insurers, auditors, heirs, executors, personal representatives, estates, administrators,
predecessors, successors, custodians, agents, representatives, trusts, trustees, trust beneficiaries, and assigns, and all Persons
acting in concert with any of the aforementioned persons and entities, and FNCB, including its affiliates and subsidiaries, and
by operation of law its shareholders.

 

3.15.         “Risk
Management Charter” means the provisions set forth herein as Exhibit “A” hereto, which the Boards of Directors
of FNCB and the Bank shall adopt, in substantially the same form as presented in Exhibit “A”, standing by itself or
incorporated with a revised “Audit/Risk Management Charter” applicable to FNCB and the Bank.

 

3.16.         “Settlement”
means the agreement made and entered into by and among the Settling Parties and set forth in this Stipulation.

 

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3.17.         “Settlement
Effective Date” means the date upon which the Judgment approving the Settlement in accordance with this Stipulation becomes
Final (as defined herein).

 

3.18.         “Settlement
Hearing” means the hearing the Court will hold, following the mailing of the Settlement Notice and the publication of the
Summary Notice, in order to consider and determine, among other things, whether the Settlement should be approved, whether Judgment
should be entered dismissing the Gray Action with prejudice as to the Released Parties, and whether the requested attorneys’
fees and reimbursement of expenses of Plaintiffs’ Counsel should be awarded.

 

3.19.         “Settlement
Notice” means the notice of the Settlement that will be mailed to FNCB Shareholders of record as of the date specified in
the Preliminary Approval Order, substantially in the form attached hereto as Exhibit “D”.

 

3.20.         “Summary
Notice” means the summary form of notice to be published pursuant to the Preliminary Approval Order, substantially in the
form attached hereto as Exhibit “E”.

 

3.21.         “Unknown
Claims” means any Released Claims that any Releasing Party does not know or suspect to exist in his, her, or its favor at
the time of the release of the Released Parties that, if known by him, her, or it might have affected his, her, or its settlement
with, and release of, the Released Parties, or might have affected his, her, or its decision not to object to this Settlement,
including claims based on the discovery of facts in addition to or different from those which he, she, or it now knows or believes
to be true with respect to the Released Claims. The Releasing Parties shall be deemed by operation of the Judgment to have acknowledged
that the release of Unknown Claims was separately bargained for and is a key element of the Settlement.

 

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IV.          SETTLEMENT
OF THE DERIVATIVE LITIGATION

 

In settlement of and as a result of the
Derivative Claims asserted or raised in the Pending and Threatened Litigation, the Settling Parties agree, subject to the Court
entering Judgment approving this Settlement and the securing of sufficient financing by the Individual Defendants which shall be
sought expeditiously, to each of the following:

 

4.1.          Settlement
Consideration- Cash Component. As consideration for the Settlement, within five (5) business days of the Settlement Effective Date,
the Individual Defendants shall cause to be paid to FNCB by wire transfer the amount of $5 million, subject to the allocation set
forth herein (the “Settlement Sum”). If the Court does not approve this Settlement, or the Settlement does not become
effective, the Individual Defendants shall not have any obligation to pay the Company the Settlement Sum. The Settlement Sum shall
be allocated in its entirety to Count One (breach of fiduciary duty) of the Gray Complaint on behalf of all Individual Defendants
except Michael Conahan. In paying FNCB the Settlement Sum, the Individual Defendants reserve all rights to recoup said sum from
the Company’s directors’ and officers’ liability insurer(s), and to request and receive indemnification from
FNCB and/or the Bank.

 

4.2.          Corporate
Governance and Compliance Relief.

 

a)          Two New Independent Members of FNCB’s
Board. As soon as practicable after approval of this Settlement, FNCB’s Board will nominate two additional and independent
members to join the Board. These new directors, upon their acceptance, will join the Board subject to appropriate regulatory approval.
The Board shall appoint one of these new directors to serve on the Board’s Audit/Risk Management Committee or the Risk Management
Committee, as determined by the Board of Directors, for three successive one-year terms.

 

b)          The Board shall cause the enhancement
of FNCB’s Corporate Governance Guidelines including formulation of specific guidelines addressing, inter alia, risk
management, loans to and transactions involving insiders and related parties, out-of-area loans and nominations to the Board.

 

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(1)         Within
30 days following the Settlement Effective Date, the Board of Directors of FNCB shall cause the reconstitution of the presently
existing Audit Committee as the Audit/Risk Management Committee or constitute a new Board committee as the Risk Management Committee.
FNCB’s Board shall concurrently cause an amendment to be made to the presently existing Audit Committee Charter or newly
constituted Risk Management Charter so as to provide for the incorporation therein of substantially similar provisions of the Risk
Management Charter attached hereto as Exhibit “A”. A function of the Audit/Risk Management Committee will be to identify
and monitor material risks faced by FNCB and the Bank and to establish procedures to monitor and insure compliance with the revised
Audit/Risk Management Committee Charter or the Risk Management Committee Charter, as determined by the Board and to report annually
in writing to the full Board of Directors of FNCB as to such compliance, which report shall be included with the minutes of the
Board meetings at which such report is delivered.

 

(2)         In
connection with the foregoing monitoring procedures, the Board of Directors of FNCB shall, following the foregoing report, review
annually the monitoring procedures in place and the compliance therewith. Should such Board of Directors conclude that such monitoring
procedures are inadequate, it shall cause FNCB to retain a qualified and independent consultant to assess the adequacy and effectiveness
of such procedures and to make appropriate recommendations as to their improvement.

 

(3)         The
Individual Defendants will use their best and collective efforts to bring the Bank into compliance with the Tier I capital requirements
as set forth in the Consent Order agreed to by the Bank’s Board of Directors and the OCC on September 1, 2010 (“Consent
Order”).

 

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(4)         The
Boards of Directors of FNCB and the Bank and each Committee thereof shall maintain minutes of all meetings thereof which shall
describe all material issues that arise and shall describe such issues in sufficient detail so that there may be a useful permanent
record of proceedings. To the extent that any votes are taken which are not unanimous, those opposing the resolution or abstaining
from voting thereupon, should be specifically identified in the minutes together with the stated reasons for their opposition and/or
abstention.

 

(5)         In
order to enhance the risk management functions of the Boards of Directors of FNCB and the Bank, the FNCB Compensation Committee
shall at least annually evaluate such entities’ compensation practices to insure that incentive compensation for lending
and other executives does not encourage unnecessary and excessive risks. In connection with this requirement, (a) the members of
the Compensation Committee shall meet at least once annually with the Bank’s appointed senior risk officer to review each
executive’s incentive compensation and verify that such arrangements do not encourage the executive to take undue risks that
would threaten the value of the Bank and the Company; (b) the members of the Compensation Committee shall meet at least annually
with the Bank’s appointed senior risk officer to discuss whether and how each executive’s incentive compensation arrangements
comply with the risk management policies and procedures of FNCB and the Bank; (c) the members of the Compensation Committee and
the Bank’s appointed senior risk officer must identify and limit any features of executive’s incentive compensation
arrangements that could encourage unnecessary or excessive risks; and (d) the Compensation Committee must annually certify to FNCB’s
Board that it has completed these reviews and that it has made reasonable efforts to assure that executive incentive compensation
arrangements do not encourage unnecessary or excessive risks.

 

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(6)         Each
of the foregoing provisions pertaining to the enhancement of the corporate and operational governance of FNCB and the Bank shall
remain in effect for the Agreed Upon Term.

 

4.3.          Claims
Excluded From Settlement. Any claims that FNCB, the Bank, and/or the Individual Defendants may have against Demetrius, John Demetrius,
and/or Rossi, irrespective of whether said claims are, or are not, asserted or proposed to be asserted or may be asserted in the
Pending and Threatened Litigation are not settled pursuant to this Stipulation and are specifically excluded from the Settlement.
FNCB, through its Board, shall in its sole discretion decide whether or not to pursue any such claims. After this Settlement is
approved, neither Plaintiff Gray, nor Mr. Lombardo, shall have any right to pursue, or participate in the pursuit of, any such
claims, absent FNCB’s express consent. In the event that Demetrius or Rossi or both bring against any Settling Defendant
a claim for contribution, subrogation, indemnification, or other similar claim for any Settling Defendant’s alleged share
or equitable share, or to enforce subrogation rights, if any, for any claim against Demetrius or Rossi or both, FNCB and/or the
Bank, as appropriate, shall (1) indemnify the Settling Defendants for any legal fees and costs incurred in defending against
such claims and (2) reduce any judgment against, or settlement with Demetrius or Rossi or both to the extent necessary to satisfy
such contribution, subrogation, indemnification or other claim or judgment against said Settling Defendant. To accomplish this
reduction, any Settling Defendant shall be entitled to request that the Court or appropriate tribunal issue such orders as are
necessary to effectuate the reduction to protect any Settling Defendant from any associated costs in defending against such claim
or from any liability for the judgment.

 

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4.4.          Within
5 business days of the execution of this Stipulation, Plaintiffs’ Lead Counsel shall file with the Court a praecipe pursuant
to Pa. R. Civ. P. 229(b)(1) to discontinue the Derivative Litigation against defendant Louis A. DeNaples without prejudice, with
the understanding that all statutes of limitations applicable to the claims heretofore alleged against him shall be tolled through
and until the occurrence of the Settlement Effective Date.

 

4.5.          No
provision of this Stipulation nor any exhibits hereto shall be deemed to be an admission by any Settling Defendant that the corporate
procedures or governance of FNCB or the Bank were in any way deficient.

 

4.6.          Any
Confirmatory Discovery shall be completed prior to the date of the Settlement Hearing set by the Court.

 

4.7.          After
all material terms of this Stipulation were negotiated, counsel for the Individual Defendants, and Plaintiffs’ Counsel, with
the assistance and recommendation of former federal Chief Judge Edward N. Cahn acting as mediator, negotiated and recommended attorneys’
fees and reimbursement of expenses to be paid to Plaintiffs’ Counsel in the amount of $2,500,000, which amount is included
in and shall come out of the Settlement Sum. It is anticipated that Judge Cahn will submit a report justifying his conclusion that
reasonable attorneys’ fees and expenses in connection with the negotiation and settlement of the Pending and Threatened Litigation
are $2,500,000. Plaintiffs’ Counsel will petition the Court for such an award, and the Settling Defendants will not oppose
that request. Any attorneys’ fees and reimbursement of expenses approved by the Court (the “Approved Fees”) shall
be provided to Plaintiffs’ Lead Counsel and shall be allocated to counsel for Plaintiff Gray and Mr. Lombardo based upon
the cash and non-economic value of the Settlement and upon counsel’s reasonable out-of-pocket expenses. The Approved Fees
shall be provided by FNCB by wire transfer to Plaintiffs’ Lead Counsel, out of the Settlement Sum, within ten (10) days following
the Settlement Effective Date pursuant to written instructions provided by Plaintiffs’ Lead Counsel. In the event that the
Court’s ruling on attorneys’ fees and litigation expenses occurs subsequent to final approval of the Settlement, the
Company shall provide to Plaintiffs’ Lead Counsel for Settling Plaintiffs the Approved Fees, if any, within five (5) business
days after the Company’s receipt of said ruling, or the Company’s receipt of the Settlement Sum, whichever is later.
Plaintiffs’ Lead Counsel shall allocate the amount received to other counsel for Plaintiff Gray and counsel for Mr. Lombardo
to reflect their respective contributions in causing the Settlement to take place and be approved by the Court. The Settling Defendants,
FNCB, and their directors’ and officers’ insurers shall have no obligations or liability with respect to the apportionment
or distribution of any attorneys’ fees or reimbursement of expenses awarded by the Court. An award of attorneys’ fees
or expenses, or both, is not a necessary term of the Settlement and shall not be a condition of the Settlement. None of the Settling
Parties may cancel or terminate the Settlement based on the Court’s, or any appellate court’s, ruling with respect
to attorneys’ fees or litigation expenses to be awarded to Plaintiffs’ Counsel. Except as otherwise expressly provided
in the Settlement, the Settling Parties shall bear their own attorneys’ fees and costs incurred in connection with the Derivative
Litigation and this Settlement.

 

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		V.	PRELIMINARY APPROVAL, NOTICE ORDERS, AND SETTLEMENT HEARING

 

5.1.          Promptly
following the execution of this Stipulation by all Settling Parties, the Settling Parties shall submit this Stipulation, together
with its Exhibits, to the Court, and shall apply for entry of a Preliminary Approval Order that: (a) stays the Gray Action
and takes off the calendar all pending motions, except with respect to activities and filings related to settlement, from the
date of this Stipulation until such time as the Court determines whether, after appropriate notice has been provided to the FNCB
Shareholders, the Settlement referred to herein is fair to FNCB, and its shareholders, and should thus be approved (the “Stay
Period”); (b) preliminarily approves the Settlement set forth in this Stipulation; (c) sets a date, time, and place for
the Settlement Hearing; (d) approves the form and content of the Settlement Notice and the Summary Notice; (e) preliminarily enjoins
the Releasing Parties from commencing, instituting, or prosecuting any of the Released Claims; and (f) enjoins any and all FNCB
Shareholders from commencing any claims related to and/or arising from the Derivative Claims in this Court or any other court
during the Stay Period. The Stay Period shall terminate upon the Settlement Effective Date.

 

    	18

    	 

    

 

5.2.          FNCB
shall cause the mailing of the Settlement Notice to FNCB Shareholders not later than ten (10) business days following entry of
the Preliminary Approval Order. The Settlement Notice shall advise FNCB Shareholders generally of the terms of the Settlement of
the Derivative Claims, the time, date, and place of the Settlement Hearing, the request of counsel for Plaintiff Gray and Mr. Lombardo
for attorneys’ fees and reimbursement of reasonable expenses and the means by which FNCB Shareholders may obtain the Settlement
Notice either online or by mail. FNCB shall cause the Summary Notice to be published once each in the Scranton Times Tribune
 and the Wilkes-Barre Times Leader. FNCB shall cause a copy of this Stipulation together with the Settlement Notice,
substantially in the form attached hereto as Exhibit “D” to be filed with the Securities and Exchange Commission as
an exhibit to a Report on Form 8-K. It shall also cause copies of the same to be submitted to the appropriate offices of the OCC
and Federal Reserve of Philadelphia (“FRB”). The filing of the Form 8-K and the submissions to the OCC and the FRB
shall be concurrent with the filing of this Stipulation with the Court. FNCB shall also cause the Settlement Notice to be sent
by first class mail to each FNCB Shareholder of record on the Record Date not later than ten (10) business days following entry
of the Preliminary Approval Order. Concurrently with such mailing, FNCB shall cause to be posted on its website the Complaint,
this Stipulation and the Settlement Notice. Within 5 days following the filing with the Court of briefs in support of the settlement
and the petition of Plaintiffs’ Counsel for attorneys’ fees and reimbursement of expenses, FNCB shall similarly cause
such documents to be posted on its website.

 

    	19

    	 

    

 

5.3.          FNCB
shall be responsible for paying for the costs associated with the mailing of the Settlement Notice and the publication of the Summary
Notice, as set forth herein, subject to whatever rights it has to recoup the expenses associated therewith from FNCB’s insurers.
None of the other Settling Parties shall be responsible for such costs.

 

5.4.          The
Settling Parties shall request that, after notice of the Settlement is made and the time for objections has passed, the Court shall
hold a Settlement Hearing to consider and determine:

 

a)          whether to approve the Settlement;

 

b)          whether Judgment substantially in the
form attached hereto as Exhibit “B” should be entered dismissing the Derivative Claims with prejudice (other than those
claims asserted against Demetrius, John Demetrius and/or Rossi) with each party to bear his, her, or its own costs;

 

c)          whether permanently to bar and enjoin
the Releasing Parties from litigating any of the Released Claims against any of the Released Parties; and

 

d)          whether to approve an award of attorneys’
fees and reimbursement of reasonable expenses for counsel for Plaintiff Gray and Mr. Lombardo.

 

    	20

    	 

    

 

VI.          RELEASES
AND BAR

 

6.1.          Upon
the Settlement Effective Date, each of the Releasing Parties, on behalf of themselves and any other person or entity who could
assert any of the Released Claims (defined below) on their behalf, in such capacity only, shall be deemed to have and by operation
of the Judgment shall have fully, finally, and forever released, settled, and discharged, and shall forever be enjoined from prosecuting,
any and all manner of claims, demands, rights, liabilities, losses, obligations, duties, damages, costs, debts, expenses, interest,
penalties, sanctions, fees, attorneys’ fees, actions, potential actions, causes of action, suits, agreements, judgments,
decrees, matters, issues and controversies of any kind, nature, or description whatsoever, whether known or unknown, disclosed
or undisclosed, accrued or unaccrued, apparent or not apparent, foreseen or unforeseen, matured or not matured, suspected or unsuspected,
liquidated or not liquidated, fixed or contingent, whether for contribution or indemnity, including Unknown Claims, whether based
on state, local, foreign, federal, statutory, regulatory, common, or other law or rule, that are, have been, could have been, could
now be, or in the future could, can, or might be asserted, in the Pending and Threatened Litigation or in any other court, tribunal,
or proceeding by the Settling Plaintiffs, any other FNCB shareholder directly or derivatively on behalf of FNCB or by FNCB directly
against any of the Released Parties which, now or hereafter, are based upon, arise out of, relate in any way to, or involve, directly
or indirectly, any of the actions, transactions, occurrences, statements, representations, misrepresentations, omissions, allegations,
facts, practices, events, claims or any other matters, things or causes whatsoever, or any series thereof, that were alleged, asserted,
set forth, claimed, embraced, involved, or referred to in, or related to the Pending and Threatened Litigation, except for claims
relating to the enforcement of this Stipulation (the “Released Claims”). For the avoidance of doubt, the Released Claims
include all of the claims asserted or threatened in the Pending and Threatened Litigation, except those asserted or threatened
against Demetrius, John Demetrius, Rossi or any of them. For the avoidance of doubt, the Released Claims do not include claims
based on future conduct of the Released Parties.

 

    	21

    	 

    

 

6.2.          Upon
the Settlement Effective Date, each of the Settling Defendants, on behalf of himself, herself, and/or itself and each and all members
of his, her and/or its families, parent entities, affiliates, or subsidiaries, and each and all of his, her and/or its respective
past, present, or future officers, directors, employees, attorneys, insurers, heirs, executors, personal representatives, estates,
administrators, predecessors, successors, custodians, agents, representatives, trusts, trustees, trust beneficiaries and assigns
shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and discharged
the Settling Plaintiffs and counsel for Plaintiff Gray and Mr. Lombardo from all claims or demands relating to, arising out of,
or connected with the institution, prosecution, assertion, settlement, or resolution of the Derivative Litigation and/or the Released
Claims.

 

6.3.          Pending
the Judgment becoming Final, the Releasing Parties are barred and enjoined from commencing, prosecuting, instigating, continuing,
or in any way participating in the commencement or prosecution of any action asserting any Released Claims against any of the Released
Parties or challenging the Settlement other than in this action in accordance with the procedures established by the Court (the
“Injunction”). If any action is taken by any Releasing Party in violation of the Injunction, Plaintiff Gray and Mr.
Lombardo, if requested, shall join in any motion and shall otherwise use their reasonable best efforts to affect a withdrawal,
dismissal, transfer or stay of such action.

 

VII.         CONDITIONS
OF SETTLEMENT; EFFECT OF DISAPPROVAL, CANCELLATION OR TERMINATION

 

7.1.          In
the event that the Settlement is not approved by the Court, or is terminated for any reason, the Settling Parties shall be restored
to their respective positions in the Derivative Litigation immediately prior to the signing of the MOU, and all negotiations, proceedings,
documents prepared, and statements made in connection with the Settlement shall be without prejudice to the Settling Parties, shall
not be deemed or construed to be an admission by any Settling Party of any act, matter or proposition, and shall not be used in
any manner or admissible for any purpose in the Derivative Litigation or in any other action or proceeding.

 

    	22

    	 

    

 

7.2.          In
the event that the Settlement is not approved by the Court, or is terminated for any reason, the terms and provisions of this Stipulation
and the MOU shall have no further force and effect with respect to the Settling Parties, and shall not be used or admitted in the
Derivative Litigation or in any other action or proceeding for any purpose, and any judgments or orders entered by the Court in
accordance with the terms of this Stipulation shall be treated as vacated.

 

VIII.         MISCELLANEOUS
PROVISIONS

 

8.1.          Neither
this Stipulation nor the Settlement reflected herein shall constitute a waiver of any rights the Settling Defendants have against
insurance carriers of FNCB and the Bank, including, but not limited to, Fidelity and Deposit Company of Maryland, against whom
FNCB, the Bank and the Individual Defendants have filed claims in the United States District Court for the Middle District of Pennsylvania
in a case bearing the caption: Fidelity and Deposit Company of Maryland v. First National Community Bancorp, Inc., First National
Community Bank, Louis A. DeNaples, Michael J. Cestone, Jr., Joseph Coccia, Dominick L. DeNaples, Joseph J. Gentile, William P.
Conaboy, John P. Moses, Michael Conahan and David J. Lombardi, Civ. Action No. 3:12-1784 (M.D. Pa.).

 

8.2.          It
is understood by the Settling Parties that the payment of the Settlement Sum by or on behalf of the Individual Defendants shall
not constitute a waiver of any rights, including indemnification rights, the Individual Defendants or Additional Directors have
against the Company and/or the Bank pursuant to their respective By-Laws and Bank Resolutions, the Pennsylvania Business Corporation
Law and any and all rights they have against FNCB’s and the Bank’s insurance carriers, and that this right to request
and receive indemnification of the Individual Defendants is a material term and condition of this Stipulation. The Settling Parties:
(a) acknowledge that it is their intent to consummate the terms and conditions of this Stipulation and to do so as soon as practicable;
and (b) agree to cooperate to the extent reasonably necessary to effectuate and implement all terms and conditions of this Stipulation,
to exercise their best efforts to accomplish the foregoing terms and conditions of this Stipulation, and to obtain preliminary
and final approval of the Settlement.

 

    	23

    	 

    

 

8.3.          The
Settling Defendants agree to provide Plaintiffs’ Counsel copies of all material filings with respect to the action captioned
Fidelity and Deposit Company of Maryland v. First National Community Bancorp et al., No. 12-cv-01784 (M.D. Pa.) as soon
as practicable following such filings having been made.

 

8.4.          The
Settling Parties intend this Settlement to be a final and complete resolution of all disputes among themselves with respect to
the Released Claims. The Settlement compromises claims that are contested and shall not be deemed an admission by any Settling
Party as to the merits of any claim, demand, or defense. While the Individual Defendants and the Additional Directors deny that
the claims and contentions advanced in the Derivative Litigation, and the Pending and Threatened Litigation are meritorious, they
agree that the Derivative Claims were pursued by Plaintiffs and their counsel in good faith and are being settled voluntarily after
negotiating at arm’s-length and in good faith after consultation with competent legal counsel. The Settling Parties agree
not to assert in any forum that the Derivative Claims were brought, commenced, threatened, prosecuted or defended in bad faith.

 

8.5.          This
Stipulation and its Exhibits constitute the entire agreement among the Settling Parties concerning the settlement of the Derivative
Claims, and no representations, warranties, or inducements have been made by any party hereto concerning this Stipulation and its
Exhibits other than those contained and memorialized in such documents.

 

8.6.          All
of the Exhibits to this Stipulation are material and integral parts hereof and are fully incorporated herein by this reference.

 

8.7.          All
the agreements made and orders entered in the Gray Action concerning the confidentiality of documents and information and
all agreements made by counsel for any of the Settling Parties concerning the confidentiality of documents and information shall
survive this Stipulation and Settlement.

 

    	24

    	 

    

 

8.8.          Any
written or oral public statement regarding the Settlement contained in this Stipulation or other issues related to it (other than
those filed by the Settling Parties in support of the Settlement and/or by counsel for Plaintiff Gray and Mr. Lombardo in support
of their application for attorneys’ fees and reimbursement of expenses), absent written agreement among the Settling Parties,
shall be limited to the terms set forth in this Stipulation and to statements that the Derivative Claims were resolved to the mutual
satisfaction of the Settling Parties. None of the Settling Parties shall make any public statement regarding the terms of this
Stipulation, the Settlement contained herein or the petition of Plaintiffs’ Lead Counsel for an award of fees and reimbursement
of reasonable expenses that is critical of or disparages the Settlement, the conduct of the Settling Parties or their counsel or
such application by Plaintiffs’ Lead Counsel.

 

8.9.          This
Stipulation may be amended or modified only by a written instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.

 

8.10.         This
Stipulation shall be binding upon, and inure to the benefit of, the Settling Parties and their respective successors, assigns,
heirs, spouses, marital communities, executors, administrators, and legal representatives.

 

8.11.         This
Stipulation shall not be construed more strictly against any Settling Party than another merely by virtue of the fact that it,
or any part of it, may have been prepared by counsel for one of the Settling Parties, it being recognized that this Stipulation
is the result of arm’s-length negotiations between the Settling Parties and all Settling Parties have contributed substantially
and materially to the preparation of this Stipulation.

 

    	25

    	 

    

 

8.12.         All
Persons executing this Stipulation and any of the Exhibits hereto, or any related Settlement documents, warrant and represent that
they have the full authority to do so and that they have the authority to take appropriate action required or permitted to be taken
pursuant to the Stipulation to effectuate its terms.

 

8.13.         The
waiver by any party of any breach of this Stipulation shall not be deemed or construed as a waiver of any other breach, whether
prior or subsequent to, or contemporaneous with, the execution of this Stipulation.

 

8.14.         Without
affecting the finality of the Judgment entered in accordance with this Stipulation, the Court shall retain jurisdiction with respect
to the implementation and enforcement of the terms of this Stipulation, and the Settling Parties hereto submit to the jurisdiction
of the Court for purposes of implementing and enforcing the Settlement embodied in this Stipulation.

 

8.15.         The
rights and obligations of the Settling Parties to this Stipulation shall be construed and enforced in accordance with, and governed
by, the internal, substantive laws of the Commonwealth of Pennsylvania without giving effect to any state’s choice-of-law
principles.

 

8.16.         Notwithstanding
any other provision of this Stipulation, no Released Party shall be relieved of, or released from, any personal or other similar
financial obligation or commitment such Released Party has to FNCB and/or the Bank, including, but not limited to, any outstanding
loan, guaranty, line of credit, debt, or judgment, that was in existence prior to the execution of this Stipulation.

 

8.17.         Any
notice required by this Stipulation shall be submitted in writing and delivered by overnight mail, electronic mail, e-mail, or
in person to counsel for all Settling Parties at the addresses set forth beneath their signatures hereunder.

 

8.18.         The
Stipulation may be executed in one or more scanned, faxed or individually-signed counterparts which, when taken together, shall
constitute a complete document.

 

[SIGNATURE PAGES FOLLOW]

 

    	26

    	 

    

 

Executed as of November 27, 2013

 

	 	PLAINTIFFS, LORI GRAY, ET AL.
	 	 
	 	By:/s/ Joseph R. Sofanelli
	 	 	Name: Joseph R. Sofanelli
	 	 	Of Counsel,O’MALLEY & LANGAN, P.C.
	 	 
	 	NOMINAL DEFENDANT, FIRST NATIONAL 

COMMUNITY BANCORP, INC. AND FOR 

NON-PARTY FIRST NATIONAL COMMUNITY

 BANK
	 	 
	 	By:  /s/ Stephen T. Burdumy
	 	 	Name: Stephen T. Burdumy
	 	 	DRINKER BIDDLE & REATH LLP
	 	 
	 	LOUIS A. DeNAPLES, MICHAEL J. CESTONE,

 JR., JOSEPH COCCIA, DOMINICK L.

 DeNAPLES, JOSEPH J. GENTILE, JOHN P.

 MOSES, WILLIAM P. CONABOY, MICHAEL

 CONAHAN, LOUIS A. DeNAPLES, JR., AND 

MICHAEL G. CESTONE
	 	 
	 	By: /s/ Patrick J. O’Connor
	 	 	Name: Patrick J. O’Connor
	 	 	COZEN O’CONNOR
	 	 
	 	J. DAVID LOMBARDI
	 	 
	 	By: /s/ Philip Gelso
	 	 	Name: Philip Gelso
	 	 	LAW OFFICES OF PHILIP GELSO
	 	 
	 	FRANK LOMBARDO
	 	 
	 	By: /s/ Richard D. Greenfield
	 	 	Name: Richard D. Greenfield
	 	 	GREENFIELD & GOODMAN, LLC

 

    	27

    	 

    

 

	 	STEVEN R. TOKACH AND THOMAS J. 

MELONE, both individually and as the Special

 Committee
	 	 
	 	By: /s/ Michael M. Horn
	 	 	Name: Michael M. Horn
	 	 	MCCARTER & ENGLISH, LLP

 

    	28Exhibit 10.1

  

 

 

Construction

Contract & Agreement

 

Between

 

 

LIMONEIRA COMPANY

(owner)

 

And

 

(design-build
contractor)

 

 

  

    	1

    	 	 	 

    

 

TABLE OF CONTENTS

 

	Article	Name	Page
	 	 	 
	Article 1	Scope of Work	4
	 	 	 
	Article 2	Contract Documents	4
	 	 	 
	Article 3	Interpretation and Intent	5
	 	 	 
	Article 4	Ownership of Work Product	5
	 	 	 
	Article 5	Contract Time	6
	 	 	 
	Article 6	Contract Price	7
	 	 	 
	Article 7	Procedure for Payment	9
	 	 	 
	Article 8	Termination for Convenience	10
	 	 	 
	Article 9	Representatives of the Parties	11
	 	 	 
	Signature Page	12

 

    	2

    	 	 	 

    

 

EXHIBITS

 

Exhibit A:

  

Submittal Drawings from General
Building Contractor and all Design – Build Sub Contractors and their associated Scopes of Work

  

DATED: 11.26.13 (Preliminary
as of this date. They become final upon approval from Ventura County)

   

Exhibit B:

  

Construction Schedule

  

DATED: 11.26.13

   

Exhibit C:

  

Estimated Cost of Construction
Spreadsheet

  

DATED: 11.26.13 (Final spreadsheet
to be completed upon receipt of approved drawings from Ventura County)

   

Exhibit D:

  

General Conditions

  

DATED: 11.26.13

 

    	3

    	 	 	 

    

  

This AGREEMENT
is made as of the First day of October in the year of 2013, by and between the following parties,
for services in connection with the Project identified below: 

 

OWNER:

 

Limoneira Company

1141 Cummings Road

Santa Paula, CA 93060

 

DESIGN-BUILDER:

 

NEXGEN Builders, Inc.

225 Demeter Street

East Palo Alto, CA 94303

CA LIC 709928

 

PROJECT:

 

Limoneira Company

Packing House Expansion

1141 Cummings Road

Santa Paula, CA 93060

 

In consideration of the mutual covenants
and obligations contained herein, Owner and Design-Builder agree as set forth herein.

 

Article
1

 

Scope
of Work

 

1.1           Design-Builder
shall perform all design and construction services, and provide all material, equipment, tools and labor, necessary to complete
the Work described in and reasonably inferable from the Contract Documents and also described as “Packing House Expansion”
and an addition to an existing cold storage building to be used for upgrading the citrus packing operations.

 

Article
2

 

Contract Documents

 

		2.1	The Contract Documents are comprised of the following:

 

2.1.1           All
written modifications, amendments, minor changes, and Change Orders to this Agreement issued in accordance with General Conditions
of Contract.

 

    	4

    	 	 	 

    

 

2.1.2           The
GMP Exhibit referenced in Section 6.6.1.1 herein or, if applicable, the GMP Spreadsheet accepted by Owner in accordance with Section
6.6.2 herein,

 

2.1.3           This
Agreement, including all exhibits A, B, C, D,

 

2.1.4           The
General Conditions of Contract, GMP Spreadsheet, Schedule and Drawings

 

2.1.5           Construction
Documents prepared and approved in accordance with Section 2.4 of the General Conditions of Contract.

 

Article
3

 

Interpretation
and Intent

 

3.1          Design-Builder
and Owner, prior to execution of the Agreement (and again, if applicable, at the time of acceptance of the GMP Spreadsheet by Owner
in accordance with Section 6.6.2 hereof), shall carefully review all the Contract Documents, including the various documents comprising
the Basis of Design Documents, for any conflicts or ambiguities. Design-Builder and Owner will discuss and resolve any identified
conflicts or ambiguities prior to execution of the Agreement or, if applicable, prior to Owner’s acceptance of the GMP Spreadsheet.

 

3.2          The
Contract Documents are intended to permit the parties to complete the Work and all obligations required by the Contract Documents
within the Contract Time(s) for the Contract Price. The Contract Documents are intended to be complementary and interpreted in
harmony so as to avoid conflict, with words and phrases interpreted in a manner consistent with construction and design industry
standards. In the event inconsistencies, conflicts, or ambiguities between or among the Contract Documents are discovered after
execution of the Agreement, or if applicable, after Owner’s acceptance of the GMP Spreadsheet, Design-Builder and Owner shall
attempt to resolve any ambiguity, conflict or inconsistency informally, recognizing that the Contract Documents shall take precedence
in the order in which they are listed in Section 2.1 hereof.

 

3.3          Terms,
words and phrases used in the Contract Documents, including this Agreement, shall have the meanings given them in the General Conditions
of Contract.

 

3.4          If
Owner’s Project Criteria contain design specifications: (a) Design-Builder shall be entitled to reasonably rely on the accuracy
of the information represented in such design specifications and their compatibility with other information set forth in Owner’s
Project Criteria, including any performance specifications; and (b) Design-Builder shall be entitled to an adjustment in the Contract
Price and/or Contract Time(s) to the extent Design-Builder’s cost and/or time of performance have been adversely impacted
by such inaccurate design specification.

 

3.5          The
Contract Documents form the entire agreement between Owner and Design-Builder and by incorporation herein are as fully binding
on the parties as if repeated herein. The parties except as specifically stated in the Contract Documents have made no oral representations
or other agreements.

 

Article
4

 

Ownership
of Work Product

 

4.1          Work
Product. All drawings, specifications and other documents and electronic data, including such documents identified in the General
Conditions of Contract, furnished by Design-Builder to Owner under this Agreement (“Work Product”) are deemed to be
instruments of service and Design-Builder shall retain the ownership and property interests therein, including but not limited
to any intellectual property rights, copyrights and/or patents, subject to the provisions set forth in Sections 4.2 through 4.5
below.

 

    	5

    	 	 	 

    

 

4.2          Owner’s
Limited License upon Project Completion and Payment in Full to Design-Builder. Upon Owner’s payment in full for all
Work performed under the Contract Documents, Design-Builder transfers to Owner all ownership and property interests,
including but not limited to any intellectual property rights, copyrights and/or patents, in the Work Product. Such transfer
is conditioned on Owner’s express understanding that its alteration of the Work Product without the involvement of
Design-Builder is at Owner’s sole risk and without liability or legal exposure to Design-Builder or anyone working by
or through Design-Builder, including Design Consultants of any tier (collectively the “Indemnified Parties”), and
on the Owner’s obligations to provide the indemnity set forth in Section 4.5 below.

 

4.3          Owner’s
Limited License upon Owner’s Termination for Convenience or Design-Builder’s Election to Terminate. If Owner terminates
this Agreement for its convenience as set forth in Article 8 hereof, or if Design-Builder elects to terminate this Agreement in
accordance with Section 11.4 of the General Conditions of Contract, Design-Builder shall, upon Owner’s payment in full
of the amounts due Design-Builder under the Contract Documents, grant Owner a limited license to use the Work Product to complete
the Project and subsequently occupy the Project, and Owner shall thereafter have the same rights as set forth in Section 4.2 above,
conditioned on the following:

 

4.3.1        Use
of the Work Product is at Owner’s sole risk without liability or legal exposure to any Indemnified Party, and on the Owner’s
obligation to provide the indemnity set forth in Section 4.5 below, and

 

4.4          Owner’s
Limited License upon Design-Builder's Default. If this Agreement is terminated due to Design-Builder's default pursuant to
Section 11.2 of the General Conditions of Contract, then Design-Builder grants Owner a limited license to use the Work Product
to complete the Project and subsequently occupy the Project, and Owner shall thereafter have the same rights and obligations as
set forth in Section 4.2 above.

 

4.5          Owner’s
Indemnification for Use of Work Product. If Owner is required to indemnify any Indemnified Parties based on the use or alteration
of the Work Product under any of the circumstances identified in this Article 4, Owner shall defend, indemnify and hold harmless
such Indemnified Parties from and against any and all claims, damages, liabilities, losses and expenses, including attorneys’
fees, arising out of or resulting from the use or alteration of the Work Product.

 

Article
5

 

Contract
Time

 

5.1          Date
of Commencement. The Work shall commence within five (5) days of Design-Builder’s receipt of Owner’s Notice to
Proceed (“Date of Commencement”) unless the parties mutually agree otherwise in writing.

 

5.2          Substantial
Completion and Final Completion.

 

5.2.1       Substantial
Completion of the entire Work shall be achieved no later than 351 “working” calendar days after the Date of
Commencement (Scheduled Substantial Completion Date May 1st, 2015).

 

The parties agree that
the definition for Substantial Completion set forth in Section 1.2.18 of the General Conditions of Contract is hereby modified
to read as follows:

 

“Substantial Completion is
the date on which the Work, or an agreed upon portion of the Work, is sufficiently complete in accordance with the Contract Documents
so that Owner can occupy and use the Project or a portion thereof for its intended purposes, provided, however, that Substantial
Completion shall be deemed to have been achieved no later than the date of issuance of a Temporary Certificate of Occupancy issued
by the local building official.”

 

    	6

    	 	 	 

    

 

5.2.3       Final
Completion of the Work or identified portions of the Work shall be achieved as expeditiously as reasonably practicable. Final Completion
is the date when all Work is complete pursuant to the definition of Final Completion set forth in Section 1.2.7 of the General
Conditions of Contract.

 

5.2.4       All
of the dates set forth in this Article 5 (collectively the “Contract Time(s)”) shall be subject to adjustment in accordance
with the General Conditions of Contract.

 

		5.3	Time is of the Essence. Owner and Design-Builder
mutually agree that time is of the essence with respect to the dates and times set forth in the Contract Documents.

 

Article
6

 

Contract
Price

 

		6.1	Contract Price.

 

6.1.1       Owner
shall pay Design-Builder in accordance with Article 6 of the General Conditions of Contract a contract price (“Contract Price”)
equal to Design-Builder’s Fee (as defined in Section 6.2 hereof) plus the Cost of the Work (as defined in Section 6.3 hereof),
subject to any GMP established in Section 6.6 hereof and any adjustments made in accordance with the General Conditions of
Contract.

 

6.1.2       For
the specific Work set forth below; Owner agrees to pay Design-Builder, as part of the Contract Price, on the following basis:

 

 

		6.2	Design-Builder’s Fee.

 

		6.2.1	Design-Builder’s Fee shall be:

 

Five point sixty-five
percent (5.65%) of the Cost of the Work, as adjusted in accordance with Section 6.2.2 below.

 

		6.2.2	Design-Builder’s Fee will be adjusted as follows
for any changes in the Work:

 

6.2.2.1    for
additive Change Orders, including additive Change Orders arising from both additive and deductive items, it is agreed that Design-Builder
shall receive a Fee of five point sixty-five (5.65%) of the additional Costs of the Work incurred for that Change Order.

 

		6.2.3	Design-Builders fees shall include a two (2%) fee on
owner provided equipment, for scheduling, site co-ordination and management.

 

6.3         The
Guaranteed Maximum Price (“GMP”).

 

		6.3.1	GMP Established Upon Execution of this Agreement.

 

6.3.1.1   Design-Builder
guarantees that it shall not exceed the GMP of nine million, three hundred four thousand sixty-two dollars and twenty-one cents
($9,304,062.21). Documents used as a basis for the GMP shall be identified in an exhibit to this Agreement (“GMP Exhibit”).

 

    	7

    	 	 	 

    

 

The GMP as established at the time of signing
of this contract document may NOT be the final GMP at the time of commencement of construction. Addendums will allow the Contractor
and Owners to adjust the final GMP as the design process evolves and ultimately a stamped set of construction drawings, approved
by the County of Ventura, has been circulated and ALL subcontractors, and have had five (5) business to review and revise the final
estimated cost of construction. The final cost will establish the contract GMP, and will remain in effect until altered by additional
addendums or change orders submitted by the owners for additional or reduction in scope of work.

 

Design-Builder does not guarantee any specific
line item provided as part of the GMP, and has the sole discretion to change overruns in one line item to savings due to under
runs in any other line item. Design-Builder agrees, however, that it will be responsible for paying all costs of completing the
Work adjusted in accordance with the Contract Documents.

 

6.3.1.2    The
GMP includes a Contingency in the amount of three percent (3%) of the final approved GMP at the time of issuance of any permits
from the County of Ventura. which is available for Owners exclusive use for unanticipated costs
it has incurred that are the basis for a Change Order under the Contract Documents.

 

		6.3.2	GMP Established after Execution of this Agreement.

 

6.3.2.1    GMP
Spreadsheet. If requested by Owner, Design-Builder shall submit a GMP Spreadsheet to Owner, which shall include the following,
unless the parties mutually agree otherwise:

  

6.3.2.1.1       A proposed GMP, which
shall be the sum of:

 

i. Design-Builder’s
Fee as defined in Section 6.2.1 hereof;

 

ii. Inclusive of any Contingency
as defined in Section 6.3.1.2 hereof; and

 

iii. If applicable, any prices established
under Section 6.1.2 hereof.

 

6.3.2.1.2       The
Basis of Design Documents, which may include, by way of example, Owner’s Project Criteria, which are set forth in detail
and are attached to the GMP Spreadsheet

 

6.3.2.1.3       A
list of the assumptions and clarifications made by Design-Builder in the preparation of the GMP Spreadsheet which list is intended
to supplement the information contained in the drawings and specifications and is specifically included as part of the Basis of
Design Documents;

 

6.3.2.1.4       The
Scheduled Substantial Completion Date upon which the proposed GMP is based, to the extent said date has not already been established
under Section 5.2.1 hereof, and a schedule upon which the Scheduled Substantial Completion Date is based;

 

6.3.2.1.5       If
applicable, a schedule of unit prices.

 

6.3.2.1.6       If
applicable, a statement of Additional Services (Owner provided equipment), which may be performed, but which are not included in
the GMP and which, if performed, shall be the basis for an increase in Contract Time.

 

    	8

    	 	 	 

    

 

6.3.2.2     Review
and Adjustment to GMP Spreadsheet. After submission of the GMP Spreadsheet, Design-Builder and Owner shall meet to discuss and
review the GMP Spreadsheet. If Owner has any comments regarding the GMP Spreadsheet or finds any inconsistencies or inaccuracies
in the information presented, it shall promptly give written notice to Design-Builder of such comments or findings. If appropriate,
Design-Builder shall, upon receipt of Owner’s notice, make appropriate adjustments to the GMP Spreadsheet.

 

6.3.2.3     Acceptance
of GMP Spreadsheet. If Owner accepts the GMP Spreadsheet, as may be amended by Design-Builder, the GMP and its basis shall be set
forth in an amendment to this Agreement.

 

6.3.2.4     Failure
to Accept the GMP Spreadsheet. If Owner rejects the GMP Spreadsheet, or fails to notify Design-Builder in writing on or before
the date specified in the GMP Spreadsheet that it accepts the GMP Spreadsheet, the GMP Spreadsheet shall be deemed withdrawn and
of no effect. In such event, Owner and Design-Builder shall meet and confer as to how the Project will proceed, with Owner having
the following options:

 

6.3.2.4.1     Owner
may suggest modifications to the GMP Spreadsheet, whereupon, if such modifications are accepted in writing by Design-Builder, the
GMP Spreadsheet shall be deemed accepted and the parties shall proceed in accordance with Section 6.3.2.3 above.

 

6.3.2.4.2     Owner
may authorize Design-Builder to continue to proceed with the Work on the basis of reimbursement as provided in Section 6.1 hereof
without a GMP, in which case all references in this Agreement to the GMP shall not be applicable;

 

Article
7

 

Procedure
for Payment

 

		7.1	Progress Payments.

 

7.1.1      Design-Builder shall submit Pay Requests to Owner on the Twenty-eighth (28th) day of each month for review by
owner. If accepted by owner, owner will submit for disbursement on or about the TENTH (10th) day of each month,
beginning with the first month after the Date of Commencement,

 

7.1.2       Owner
shall make payment within ten (10) days after Owner’s receipt of each properly submitted and accurate Application for
Payment in accordance with Article 6 of the General Conditions of Contract, but in each case less the total of payments
previously made, and less amounts properly withheld under Section 6.3 of the General Conditions of Contract.

 

 

7.1.3       General
contractor, as part of the pay application procedure, will also submit the following documents:

 

		1.	Conditional progress payment lien release for all subcontractors
and general contractor.

		2.	Unconditional progress payment lien release from all
payments made in previous months pay application

		3.	Unconditional final progress payment lien releases
upon final payment

 

No payments will be released
without submittal of these documents. 

    	9

    	 	 	 

    

 

7.1.4       If
Design-Builder’s Fee under Section 6.2.1 hereof is a fixed amount, the amount of Design-Builder’s Fee to be included
in Design-Builder’s monthly Application for Payment and paid by Owner shall be proportional to the percentage of the Work
completed, less payments previously made on account of Design-Builder’s Fee.

 

7.2         Final
Payment. Design-Builder shall submit its Final Application for Payment to Owner in accordance with Section 6.7 of the General
Conditions of Contract. Owner shall make payment on Design-Builder’s properly submitted and accurate Final Application for
Payment (less any amount the parties may have agreed to set aside for warranty work) within ten (10) days after Owner’s receipt
of the Final Application for Payment, provided that Design-Builder has satisfied the requirements for final payment set forth in
Section 6.7.2 of the General Conditions of Contract.

 

7.3         Interest.
Payments due and unpaid by Owner to Design-Builder, whether progress payments or final payment, shall bear interest commencing
thirty (30) days after payment is due at the rate of one and one half percent (1.5 %) per month until paid.

 

Article
8

 

Termination
for Convenience

 

8.1         Upon
ten (10) days’ written notice to Design-Builder, Owner may, for its convenience and without cause, elect to terminate this
Agreement. In such event, Owner shall pay Design-Builder for the following:

 

8.1.1       All
Work executed and cost or expenses in connection with the Work;

8.1.2       The
reasonable costs and expenses attributable to such termination, including demobilization costs and amounts due in settlement of
terminated contracts with Subcontractors and Design Consultants.

 

8.1.3       Both
8.1.1 and 8.1.2 will include the profit and overhead (5.65%) as stated in agreed contract

 

8.2         If
Owner terminates this Agreement pursuant to Section 8.1 above and proceeds to design and construct the Project through its employees,
agents or third parties, Owner’s rights to use the Work Product shall be as set forth in Section 4.3 hereof. Such rights
may not be transferred or assigned to others without Design-Builder’s express written consent and such third parties’
agreement to the terms of Article 4.

  

    	10

    	 	 	 

    

 

Article
9

 

Representatives
of the Parties

 

		9.1	Owner’s Representatives.

 

9.1.1       Owner
designates the individual listed below as its Senior Representative (“Owner Senior Representative”), which individual
has the authority and responsibility for avoiding and resolving disputes under Section 10.2.3 of the General Conditions of
Contract:

 

Alex Teague

Senior Vice President

1141 Cummings Road

Santa Paula, CA 93060

805.525.5541

 

9.1.2       Owner
designates the individual listed below as its Owner’s Representative, which individual has the authority and responsibility
set forth in Section 3.4 of the General Conditions of Contract.

 

Doug Hawkins

Project Manager

1141 Cummings Road

Santa Paula, CA 93060

805.525.5541 ext 284

dhawkins@limoneira.com

 

		9.2	Design-Builder’s Representatives.

 

9.2.1       Design-Builder
designates the individual listed below as its Senior Representative (“Design-Builder’s Senior Representative”),
which individual has the authority and responsibility for avoiding and resolving disputes under Section 10.2.3 of the General
Conditions of Contract:

 

Steven Vencill, Program Manager

NEXGEN Builders, Inc.

225 Demeter Street

East Palo Alto, CA 94303

408.781.0094 (c)

650.322.5800 (o)

  

9.2.2       Design-Builder
designates the individual listed below as its Design-Builder’s Representative, which individual has the authority and responsibility
set forth in Section 2.1.1 of the General Conditions of Contract:

 

John McCann, Project Manager

NEXGEN Builders, Inc.

225 Demeter Street

East Palo Alto, CA 94303

831.227.8270 (c)

650.322.5800 (o)

 

    	11

    	 	 	 

    

 

In executing this Agreement, Owner and
Design-Builder each individually represents that it has the necessary financial resources to fulfill its obligations under this
Agreement, and each has the necessary corporate approvals to execute this Agreement, and perform the services described herein.

 

	OWNER:	 	DESIGN-BUILDER:
	 	 	 
	Alex Teague or Representative	 	NEXGEN Builders, Inc.
	(Name of Owner)	 	(Name of Design-Builder)
	 	 	 
	/s/ Alex Teague	 	/s/ Steve Vencill
	(Signature)	 	(Signature)
	 	 	 
	Alex Teague	 	Steve Vencill
	(Printed Name)	 	(Printed Name)
	 	 	 
	Senior Vice President	 	Program Manager
	(Title)	 	(Title)
	 	 	 
	Date: 	11/27/13	 	Date: 	12/3/13

 

    	12

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