Document:

EXHIBIT 10.1

 

AGREEMENT
AND MUTUAL RELEASE

This AGREEMENT AND MUTUAL RELEASE (the
"Agreement") is made as of March 19, 2013 by and among Equal Energy Ltd. ("Equal Energy" or the
"Company"), on the one hand, and Nawar Alsaadi and Adam Arthur Goldstein (each a "Stockholder"
and together, the "Stockholders"), on the other. Equal Energy and the Stockholders are collectively the "Parties"
and individually a "Party".

WHEREAS, Alsaadi is currently the beneficial
owner of 1,650,000 shares of common stock of the Company ("Common Stock"), which represents 4.7% of the issued
and outstanding shares of Common Stock;

WHEREAS, Goldstein is currently the beneficial
owner of 124,700 shares of Common Stock, which represents 0.4% of the issued and outstanding shares of Common Stock;

WHEREAS, the Stockholders currently collectively
own 1,774,700 shares of Common Stock (the "Shares"), which represents 5% of the issued and outstanding shares
of Common Stock;

WHEREAS, the Stockholders filed a Schedule
13D disclosure with the Securities and Exchange Commission (the "SEC") on December 14, 2012 (the "Initial
Schedule 13D");

WHEREAS, the Company filed a complaint
in the United States District Court for the Southern District of New York on January 24, 2013, alleging that the Stockholders violated
Sections 13(d) and 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") by failing to make required
disclosures and by making materially false and misleading statements, including in the Initial Schedule 13D, and seeking declaratory
and injunctive relief, in a case captioned Equal Energy Ltd., v. Nawar Alsaadi, Adam Arthur Goldstein, and John Does 1-250,
No. 13 CV 0541 (the "Action");

WHEREAS, the Stockholders filed a Schedule
13D disclosure with the SEC on February 1, 2013 that amended and supplemented the Initial Schedule 13D (the "Amended Schedule
13D");

WHEREAS, the Company filed an amended complaint
in the Action on February 8, 2013, discontinuing the Section 14(a) claims and alleging that the Stockholders violated Section 13(d)
of the Exchange Act by failing to make required disclosures and by making materially false and misleading statements, including
in the Initial Schedule 13D and Amended Schedule 13D, and seeking declaratory and injunctive relief;

WHEREAS, without admitting or conceding
liability or wrongdoing, the Parties wish to resolve the Action and all matters specified herein in order to avoid the risk, delay,
and cost of further litigation on those matters, and to release claims and potential claims against the other as set forth below
and undertake the actions and agreements contained herein effective on the date of this Agreement,

     

     

    

NOW, THEREFORE, the Parties to this Agreement,
in consideration of the resolution of the Action, the mutual promises, representations, warranties, covenants, and agreements contained
herein, and other good and valuable consideration, the sufficiency of which is acknowledged by each of the Parties, intending to
be legally bound hereby, agree as follows:

1.                 
Effective Date: This Agreement is conditioned upon the delivery of validly executed copies of this Agreement
by the Parties to each other, and this Agreement shall be the effective on the first day upon that condition is fulfilled (the
"Effective Date").

2.                 
Covenants of the Stockholders:

		(a)	Each Stockholder agrees with the Company that it shall abstain from voting any of the shares of Common Stock beneficially owned
by such Stockholder at the Company's 2013 annual meeting of the stockholders (the "2013 Annual Meeting"); provided,
however, that the Stockholders shall each be permitted to vote, in their sole discretion:

		(i)	for each of the Company’s nominees for election to the Company's board of directors (the "Board"); and

		(ii)	in favor of proposals supported by the Board as described in the Company’s Proxy Statement on Schedule 14A that will
be filed with the SEC in connection with the 2013 Annual Meeting.

		(b)	Each Stockholder agrees with the Company that, during the period commencing on the Effective Date and ending on the day that
is the 15-month anniversary of the Effective Date (the “Standstill Period”), he shall not, and shall cause each
of his respective partners, associates, representatives, family members and agents (collectively, “Representatives”)
not to, in any manner, directly or indirectly, alone or in concert with others:

		(i)	effect or seek to effect, whether alone or in concert with others, any tender or exchange offer, merger, consolidation, acquisition,
scheme, arrangement, business combination, recapitalization, reorganization, sale or acquisition of material assets, liquidation,
dissolution or other extraordinary transaction involving the Company or any of its subsidiaries or joint ventures or any of their
respective securities (each, an “Extraordinary Transaction”); provided, however, that this clause shall not
preclude the tender by a Stockholder of any securities of the Company into any tender or exchange offer or vote by a Stockholder
of any voting securities of the Company with respect to any Extraordinary Transaction;

		(ii)	form, join, encourage, influence, advise or in any way participate in a “partnership, limited partnership, syndicate
or other group”

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			(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities of the Company or otherwise in
any manner agree, attempt, seek or propose to deposit any securities of the Company or any securities convertible or exchangeable
into or exercisable for any such securities in any voting trust or similar arrangement, or subject any securities of the Company
to any arrangement or agreement with respect to the voting thereof;

		(iii)	make, engage in, or in any way participate in, directly or indirectly, any “solicitation” of proxies (as such terms
are used in the proxy rules of the SEC but without regard to the exclusion set forth in Rule 14a-1(l)(2)(iv)) or consents to vote,
or seek to advise, encourage or influence any person with respect to the voting of any securities of the Company for the election
of individuals to the Board or to approve stockholder proposals, or become a “participant” in any contested “solicitation”
for the election of directors with respect to the Company (as such terms are defined or used under the Exchange Act), other than
a “solicitation” or acting as a “participant” in support of the nominees recommended by the Board at any
stockholder meeting;

		(iv)	make or be the proponent of any stockholder proposal (pursuant to Rule 14a-8 under the Exchange Act, Section 136 of the Alberta
Business Corporations Act, or otherwise);

		(v)	(A) call or seek to call any meeting or special meeting of stockholders, including by written consent, (B) seek representation
on the Board, (C) seek the removal of any member of the Board, (D) solicit consents from stockholders, (E) conduct a referendum
of stockholders or (F) make a request for any stockholder list or other similar Company records;

		(vi)	initiate contact with or communicate in any manner, whether publicly or privately, with the Company, its Board, directors,
officers, advisors or employees, provided that the Stockholders shall be permitted, in a private manner only, to initiate
contact or communicate with the Company's Chief Executive Officer and the Chairman of the Board, so long as such contact or communication
is not intended to or reasonably expected to require public disclosure of such contact or communication;

		(vii)	sell, offer or agree to sell, any shares of the Company's Common Stock other than on a recognized exchange on which the Company's
Common Shares are listed without the express written consent of the Company, such consent not to be unreasonably withheld;

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		(viii)	sell, offer or agree to sell, all or substantially all, directly or indirectly, through swap or hedging transactions or otherwise,
voting rights decoupled from the underlying Common Stock held by the Stockholders to any Third Party (as defined below);

		(ix)	take any action, alone or in concert with others, in support of or make any proposal or request that constitutes: (A) advising,
controlling, seeking to control, changing or influencing the Board, the management or the policies of the Company, (B) any material
change in the capitalization or dividend policy of the Company, (C) any other material change in the Company’s management,
business or corporate structure, (D) seeking to have the Company waive, or make amendments or modifications to, the Company’s
Articles of Incorporation or Bylaws, or other actions which may impede the acquisition of control of the Company by any person,
(E) causing a class of securities of the Company to be delisted from, or to cease to be authorized to be quoted on, any securities
exchange, or (F) causing a class of equity securities of the Company to become eligible for termination of registration pursuant
to Section 12(g)(4) of the Exchange Act;

		(x)	enter into any discussions, negotiations, agreements or understandings with any Third Party with respect to the foregoing,
or advise, assist, intentionally encourage or seek to persuade any Third Party to take any action with respect to any of the foregoing,
or otherwise take or cause any action inconsistent with any of the foregoing; or

		(xi)	request, directly or indirectly, any amendment or waiver of the foregoing matters.

For purposes of this Agreement, the
term “affiliate” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act, and
the term "Third Party" shall mean any person or entity that is not a party to this Agreement or an affiliate thereof,
a member of the Board, a director or officer of the Company, or legal counsel to any party to this Agreement.

 

		(c)	The Stockholders shall, and shall cause their applicable affiliates, if any, to promptly file an amendment to their Schedule
13D filings with the SEC, in the form attached hereto as Exhibit B, reporting entry into this Agreement, amending applicable items
to conform to their obligations hereunder and appending or incorporating by reference this Agreement as an exhibit thereto.

		(d)	The Stockholders hereby represent that they:

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		(i)	have shut down the website www.saveequalenergy.com;

		(ii)	have removed the videos titled "Equal Energy Don Klapko's Final Days in Office," "Equal Energy CEO Don Klapko
Interview," and "Equal Energy & the Shareholders' 5 Point Plan," posted to www.saveequalenergy.com and/or
YouTube; and

		(iii)	shall not republish or otherwise disseminate any of those materials during the Standstill Period.

		(e)	The Stockholders hereby agree to:

		(i)	remove any and all media or online publications authored or created by one or both of the Shareholders characterizing the management
and policies of the Company, including those posted to www.saveequalenergy.com, www.seekingalpha.com, www.investorvillage.com,
Twitter, YouTube, or any other website or online platform, as soon as practicable on or after the date hereof, provided
that if the Stockholders are not permitted to remove such media or online publications directly, they shall use their reasonable
best efforts to cause such items to be removed no later than fourteen (14) days after the Effective Date;

		(ii)	shut down the Equal Energy Yahoo Group previously linked from the website www.saveequalenergy.com (currently on Yahoo!
Finance), as soon as practicable on or after the date hereof, but in no event later than 5:00 p.m. Eastern Standard Time on the
second business day after the Effective Date; and

		(iii)	refrain from republishing or otherwise disseminating any of the materials identified in this Section 2(e) or publishing or
otherwise disseminating any other similar material during the Standstill Period.

3.                 
Covenants of the Company: The Company shall promptly file a Form 8-K with the SEC, in the form attached hereto
as Exhibit C, reporting entry into this Agreement and appending or incorporating by reference this Agreement as an exhibit thereto.

4.                 
Equal Energy's Releases: Effective on the Effective Date, Equal Energy, on behalf of itself and each of its
current and former affiliates, subsidiaries, parents, officers, directors, members, shareholders, managers, partners, employees,
agents, attorneys, successors, assigns and predecessors and each of their current and former respective officers, directors, members,
shareholders, managers, partners, employees, agents, and attorneys (collectively, the "Equal Energy Releasors")
release and discharge the Stockholders and each of their employees, agents, and attorneys, and each of their heirs, executors,
administrators, successors and assigns (collectively, the "Stockholder Releasees"), from all known or unknown,
suspected or unsuspected, contingent or non-contingent claims, actions, causes of action, suits, debts, dues, sums of money, accounts,

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 reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, and demands whatsoever, in law or equity, which each of the Equal Energy Releasors and their successors and
assigns ever had, now have or hereafter can, shall or may have for, upon or by reason of any matter, cause or thing whatsoever
from the beginning of the world to the date of this Agreement (the "Equal Energy Released Claims").

5.                 
Stockholders' Releases: Effective on the Effective Date, the Stockholders, on behalf of themselves, each company
any Stockholder controls, each partnership in which any Stockholder is a general partner, and each of their respective current
and former affiliates, subsidiaries, parents, officers, directors, members, shareholders, managers, partners, employees, agents,
attorneys, predecessors, heirs, executors, administrators, successors and assigns (collectively, the "Stockholder Releasors")
release and discharge Equal Energy and each of its current and former affiliates, subsidiaries, parents, officers, directors, members,
shareholders, managers, partners, employees, agents, attorneys, successors, assigns, and predecessors, and each of their heirs,
executors, administrators, successors and assigns (collectively, the "Equal Energy Releasees"), from all from
all known or unknown, suspected or unsuspected, contingent or non-contingent claims, actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, and demands whatsoever, in law or equity, which the Stockholder Releasors
and their successors and assigns ever had, now have or hereafter can, shall or may have for, upon or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date of this Agreement (the "Stockholder Released Claims").

6.                 
The Parties' Release of Unknown Claims: The Equal Energy Releasors and the Stockholder Releasors hereby expressly
waive any and all provisions, rights and benefits conferred by § 1542 of the California Civil Code, which reads:

SECTION 1542. A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

The Equal Energy Releasors and the Stockholder
Releasors hereby expressly waive any and all provisions, rights and benefits conferred by any law of any state or territory of
the United States, by federal law or regulation or principle of common law, which is similar, comparable or equivalent to §
1542 of the California Civil Code. The Equal Energy Releasors and the Stockholder Releasors may hereafter discover facts other
than or different from those which they know or believe to be true with respect to the claims which are the subject of this Agreement,
but each of the Equal Energy Releasors and the Stockholder Releasors hereby expressly waives and fully, finally and forever settles
and releases any known or unknown, suspected or unsuspected, contingent or non-contingent claims with regard to the Equal Energy
Released Claims and the Stockholder Released Claims, without regard to the subsequent discovery or existence of such different
or additional facts.

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The Parties acknowledge that the foregoing
waivers were separately bargained for and are a key element of this Agreement.

7.                 
Mutual Covenant Not to Sue. The Equal Energy Releasors and the Stockholder Releasors will not file any new
action, suit or proceeding against each other arising from or relating to the Action, any allegation that could have been made
in the Action and/or to any other action or inaction of the Equal Energy Releasees and/or the Stockholder Releasees through the
date of this Agreement. The Equal Energy Releasors and the Stockholder Releasors further agree that this Agreement shall act as
a complete bar to their entitlement to any legal, equitable or administrative relief based upon any action that the Equal Energy
Releasees and/or the Stockholders Releasees took, may have taken, or failed to take through the date of this Agreement. Notwithstanding
the foregoing, the Parties retain the right to sue to enforce the terms of this Agreement.

8.                 
Termination of the Action: Promptly upon the Effective Date, and in no event more than five (5) business days
after the Effective Date, Equal Energy shall file a Notice of Voluntary Dismissal in the United States District Court for the Southern
District of New York, in the form attached hereto as Exhibit A, dismissing all claims in the Action with prejudice.

9.             
Non-Admission of Liability. This Agreement compromises allegations that are contested and shall not be deemed
an admission by the Parties as to the merits or veracity of any claim, allegation, or defense. Nothing in this Agreement shall
be deemed a presumption, concession, estoppel, or admission by or of any of the Stockholders regarding any fault, liability or
wrongdoing as to any facts, claims or defenses that were or could have been alleged or asserted, or of any weakness or infirmity
of any claim or defense by or on behalf of any of the Parties, with respect to any of the claims in the Action, and shall not be
interpreted, construed, deemed, invoked, offered, or received in evidence or otherwise used by any person or entity in any other
action or proceeding, whether civil, criminal or administrative, for any purpose other than as provided expressly herein.

10.             
Termination: This Agreement shall remain in full force and effect until the earliest of (a) the expiration
of the Standstill Period, or (b) such other date established by mutual written agreement of the Company and the Stockholders.

11.             
Effect of Termination: Sections 4-7, 9 and 12-27 shall survive the termination of this Agreement. No termination
pursuant to Section 10 shall relieve any Party hereto from liability for any breach of this Agreement prior to such termination.

12.             
Notices: All notices, requests, claims, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given to a Party if delivered in person or sent by overnight delivery (providing proof of delivery)
to the Party at the following addresses (or at such other address for a Party as shall be specified by like notice) on the date
of delivery, or if by facsimile, upon confirmation of receipt:

 

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	If to the Company:	
        Equal Energy Ltd.

        2600, 500 - 4th Avenue S.W.

        Calgary, Alberta, T2P 2V6

        Canada
	 
	 	
        Attention: Don Klapko

        Telephone:403-263-0262

        Facsimile: 403-294-1197

         

         
	 
	with a copy (which shall not constitute notice) to	
        Schulte Roth & Zabel LLP

        919 Third Avenue

        New York, New York 10022
	 
	 	
        Attention:David E. Rosewater, Esq.

        Michael E. Swartz, Esq.

        Telephone:212-756-2000

        Facsimile:212-593-5955

         

         
	 
	If to the Stockholders:	
        Nawar Alsaadi

        2203 – 788 Richards Street

        Vancouver, British Columbia, V6B 0C7

        Canada

        Telephone604-564-2406

        Facsimile:604-564-2406

	 	
         

        -and-

         

        Adam Arthur Goldstein

        550 Warren Street, Apartment 16C

        Fayetteville, New York 13066

        Telephone: 315-632-4726

        

        

	with a copy (which shall not constitute notice) to	
        Kleinberg, Kaplan, Wolff & Cohen, P.C.

        551 Fifth Avenue

        New York, New York 10176

        Attention: David M. Levy, Esq.

        Telephone: 212-986-6000

        Facsimile: 212-986-8866

        

        

  

13.             
Third-Party Beneficiaries: The Parties acknowledge that the Equal Energy Releasees and Stockholder Releasees
are third-party beneficiaries under this Agreement. Nothing in this Agreement, whether express or implied, is intended to or shall
confer any rights, benefits or remedies under or by reason of this Agreement on any persons other than the Parties, the Equal Energy
Releasees, and the Stockholder Releasees, nor is anything in this Agreement intended to relieve or discharge any obligation or
liability of any third person to any Party.

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14.             
Rule of Ambiguities. It is agreed and understood that the general rule that ambiguities are to be construed
against the drafter shall not apply to this Agreement.

15.             
Communications:

		(a)	The Company and the Stockholders shall announce this Agreement and the material terms hereof by means of a press release in
the form attached hereto as Exhibit D as soon as practicable on the date hereof.

		(b)	During the Standstill Period, each Stockholder and the Company shall refrain from making, causing to be made, or allowing any
of its Representatives from making, any public statement or announcement that disparages the other, as well as the business or
any current or former officers, employees, or directors of the other. The foregoing shall not prevent the making of any factual
statement as required by applicable law, regulation, legal process, subpoena, or legal requirement or as part of a response to
a request for information from any governmental authority with jurisdiction over the party from whom information is sought.

16.             
Confidentiality: The Parties agree not to voluntarily disclose any communications or other information shared
between the Company, its Board, directors, officers, advisors, or employees, on the one hand, and the Stockholders or their Representatives,
other than that which already has been publicly disclosed as of the Effective Date of this Agreement or must be publicly disclosed
pursuant to this Agreement ("Confidential Information"), to any person or entity, other than as necessary to their
respective counsel, insurance carriers, and accountants, except as set forth herein. The Agreement shall not prohibit the release
of Confidential Information that is required to be disclosed by law, regulation or pursuant to any valid subpoena issued by or
pursuant to the rules of a court or other authority.  In the event of a valid subpoena or other judicial process seeking disclosure
of Confidential Information, the Party receiving the subpoena or process will promptly provide notice to the other Parties and
will cooperate with the other Parties to allow them, if possible, to have a reasonable opportunity to challenge the production
or disclosure before made.

17.             
Governing Law: This Agreement shall be governed by, construed and enforced in accordance with the laws of
the State of New York, without regard to New York's choice of law rules. The exclusive venue concerning any dispute arising out
of or relating to this Agreement is the Southern District of the State of New York, or, in the event that court declines to exercise
jurisdiction, the Supreme Court of the State of New York, New York County. Each Party hereto (i) consents to personal jurisdiction
in any such action (but in no other action) brought in the designated courts; (ii) consents to service of process by registered
mail upon such Party and/or such Party's agent; (iii) waives any objection to venue in the designated courts and any claim that
the designated courts are inconvenient forums; and (iv) waives any right to demand a jury trial as to any such action. Any Party
initiating an action, suit or proceeding relating to this Agreement shall seek to file it under seal and the Parties shall otherwise
seek to maintain the confidentiality of this Agreement and its terms to the fullest extent permitted by law.

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18.             
Assignment: This Agreement shall be binding upon and inure to the benefit of and be enforceable only by the
Parties hereto. No Party to this Agreement may assign its rights or delegate its obligations under this Agreement.

19.             
Amendments; Waivers: This Agreement may only be amended pursuant to a written agreement executed by all the
Parties, and no waiver of compliance with any provision or condition of this Agreement and no consent provided for in this Agreement
shall be effective unless evidenced by a written instrument executed by the Party against whom such waiver or consent is to be
effective. No failure or delay by a Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power
or privilege hereunder.

20.             
Entire Agreement: This Agreement constitutes the entire agreement of all the Parties and supersedes any and
all prior and contemporaneous agreements, memoranda, arrangements and understandings, both written and oral, between the Parties,
or any of them, with respect to the subject matter hereof. No representation, warranty, promise, inducement or statement of intention
has been made by any Party which is not contained in this Agreement and no Party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not contained herein. The Parties expressly disclaim reliance on
any information, statements, representations or warranties regarding the subject matter of this Agreement other than the terms
of this Agreement.

21.             
Severability. If for any reason any provision of this Agreement is determined to be invalid or unenforceable
by any court of competent jurisdiction, the remaining provisions of this Agreement nevertheless shall be construed, performed,
and enforced as if the invalidated or unenforceable provision had not been included in the text of the Agreement, provided that
the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any
Party.

22.             
Counterparts: This Agreement may be executed in any number of counterparts (including by facsimile or .pdf
transmission), each of which shall be deemed to be an original, but all of which together shall constitute one binding agreement
on the Parties, notwithstanding that not all Parties are signatories to the same counterpart.

23.             
Fees and Expenses: All attorneys’ fees, costs and expenses incurred in connection with this Agreement
and all matters related hereto will be paid by the Party incurring such fees, costs or expenses. Notwithstanding the foregoing,
in the event that any Party brings a suit to enforce the terms of this Agreement or for breach of this Agreement and obtains substantially
the relief sought, whether by compromise, settlement, or judgment ("Prevailing Party"), the Prevailing Party shall
be entitled to recover from the non-Prevailing Party all reasonable attorney's fees, costs and expenses incurred in connection
with such suit.

24.             
Warranties: The Stockholders represent and warrant that (a) they are the only holders and owners of the Stockholder
Released Claims, (b) that none of the Stockholder Released Claims have been assigned, encumbered, or in any manner transferred
in whole or part, (c) that Alsaadi is the owner of 1,650,000 shares of Common Stock, (d) that Goldstein is the owner of 124,700 shares of Common
Stock, and (e)

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 that neither Alsaadi nor Goldstein own any shares of the Company's stock other than the Shares identified herein.

25.             
Signatures. The Parties hereto hereby signify their agreement to the above terms by their signatures below.
Each of the Parties hereto executes this Agreement on its own behalf and represents it has had an opportunity to consult with an
attorney prior to signing this Agreement, that it understands the foregoing Agreement, and that it has affixed its signature hereto
voluntarily and without coercion.

26.             
Captions: The captions contained in this Agreement are for convenience only and shall not affect the construction
or interpretation of any provisions of this Agreement.

27.             
Specific Performance: The Parties agree that irreparable injury would occur in the event any of the provisions
of this Agreement were not performed in accordance with the terms hereof and that such injury would not be adequately compensable
in damages. It is accordingly agreed that the Parties are entitled to seek an injunction or specific performance of the terms hereof
in addition to any other remedies at law or in equity, and a Party will not take any action, directly or indirectly, in opposition
to another Party seeking relief on the grounds that any other remedy or relief is available at law or in equity, and the Parties
further agree to waive any requirement for the security or posting of any bond in connection with such remedy or relief.

[Remainder of Page Intentionally
Left Blank; Signature Page Follows]

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

 

	 	EQUAL ENERGY LTD.

 

 

	 	By:	/s/ Don Klapko	 
	 	Name:	Don Klapko	 
	 	Title:	President and CEO	 
	 	 	 	 	 

 

 

	 	NAWAR ALSAADI	 
	 	 	 
	 	/s/ Nawar Alsaadi	 

 

 

	 	ADAM ARTHUR GOLDSTEIN	 
	 	 	 
	 	/s/ Adam Arthur Goldstein	 

 

 

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EXHIBIT A

 

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

-------------------------------------------------------------x

	
        EQUAL ENERGY LTD.,

         

        Plaintiff,

         

        -against-

         

        NAWAR ALSAADI, ADAM ARTHUR GOLDSTEIN, and JOHN DOES 1-250,

         

        Defendants.

         
	
        :

        :

        :

        :

        :

        :

        :

        :

        :

        :

        :
	
         

        Civil Action No.: 13 CV 0541 (DLC)

         

        notice of VOLUNTARY
        DISMISSAL

 -------------------------------------------------------------x

 

Pursuant to Rule 41(a)(1)(i) of the Federal
Rules of Civil Procedure, Plaintiff Equal Energy, Ltd. and its counsel hereby gives notice that the above-captioned action is hereby
dismissed with prejudice.

 

DATED:March __, 2013

 

	SCHULTE ROTH & ZABEL LLP	 
	 	 
	 	 
	By: 	 	 
	 	Michael E. Swartz	 
	 	Jason Mitchell	 
	 	 
	919 Third Avenue	 
	New York, New York  10022	 
	(212) 756-2000	 
	 	 
	Attorneys for Plaintiff Equal Energy, Ltd.	 

 

 

    	 

    	 

    

EXHIBIT B

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 13D

 

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

(Amendment No.2)

 

EQUAL ENERGY LTD.

(Name of Issuer)

 

Common Shares

(Title of Class of Securities)

 

29390Q109

(CUSIP Number)

 

Nawar Alsaadi

2203 – 788 Richards Street

Vancouver, British Columbia, Canada V6B 0C7

(604) 564-2406

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

 

March 19, 2013

(Date of Event which Requires Filing of this
Statement)

 

If the filing person has previously filed a
statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because
of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. £ £

 

Note: Schedules filed in paper format
shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to
whom copies are to be sent.

 

* The remainder of this cover page shall be
filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for
any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

 

The information required on the remainder of
this cover page shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of
1934 (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other
provisions of the Act. (However, see the Notes).

 

 

 

 

 

     

     

    

 

 

 

CUSIP No. 29390Q109

 

 

	(1)	Name of Reporting Persons: Nawar Alsaadi

 

 

	(2)	Check the Appropriate Box if a Member of a Group:

 

 

	 	(a) S

 

	 	(b) £

 

 

	(3)	SEC Use Only

 

 

	(4)	Source of Funds: PF

 

 

	(5)	Check box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e): £

 

 

	(6)	Citizenship or Place of Organization: France

 

Number of Shares Beneficially Owned by Each Reporting
Person with:

 

	 	(7)        Sole Voting Power: 1,650,000

 

 

	 	(8)        Shared Voting Power: 0

 

 

	 	(9)        Sole Dispositive Power: 1,650,000

 

 

	 	(10)      Shared Dispositive Power: 0

 

 

	(11) 	Aggregate Amount Beneficially Owned by Each Reporting Person: 1,650,000

 

	(12) 	Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares: £

 

 

	(13)	Percent of Class Represented by Amount in Row (11): 4.7%

 

 

	(14)	Type of Reporting Person: IN

 

 

     

     

    

CUSIP No. 29390Q109

 

 

	(1)	Name of Reporting Persons: Adam Arthur Goldstein

 

 

	(2)	Check the Appropriate Box if a Member of a Group:

 

 

	 	(a) S

 

	 	(b) £

 

 

	(3)	SEC Use Only

 

 

	(4)	Source of Funds: PF

 

 

	(5)	Check box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e): £

 

 

	(6)	Citizenship or Place of Organization: United States

 

Number of Shares Beneficially Owned by Each Reporting
Person with:

 

	 	(7)        Sole Voting Power: 124,700

 

 

	 	(8)        Shared Voting Power: 0

 

 

	 	(9)        Sole Dispositive Power: 124,700

 

 

	 	(10)      Shared Dispositive Power: 0

 

	(11) 	Aggregate Amount Beneficially Owned by Each Reporting Person: 124,700

 

	(12) 	Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares:  £

 

 

	(13) 	Percent of Class Represented by Amount in Row (11): 0.4%

 

 

	(14) 	Type of Reporting Person: IN

 

 

     

     

    

  

 

This statement is filed with respect to the common shares of Equal
Energy Ltd. (the "Issuer"), beneficially owned by Nawar Alsaadi and Adam Arthur Goldstein (collectively, the “Investors”)
as of March 19, 2013 and amends and supplements the Schedule 13D filed on December 14, 2012, as amended on February 1, 2013 (collectively,
the "Schedule 13D"). Except as set forth herein, the Schedule 13D is unmodified.

 

The Investors are the beneficial owners of 1,774,700 shares or approximately
5.0% of the Issuer’s common shares. Mr. Alsaadi has the sole power to vote and sole power to dispose of 1,650,000 common
shares of the Issuer. Dr. Goldstein has the sole power to vote and sole power to dispose of 124,700 common shares of the Issuer.

 

Item 4. Purpose of Transaction

 

Item 4 of this Schedule 13D is supplemented by the following:

 

On March 19, 2013, the Investors entered into an agreement with
the Issuer, pursuant to which the Investors and Issuer settled the action recently filed in the United States District Court for
the Southern District of New York styled Equal Energy Ltd v. Nawar Alsaadi, et al., 13 CV 0541 (DC) (the “Settlement Agreement”).
Without admitting or conceding liability or wrongdoing, the Investors sought to resolve such action in order to avoid the risk,
delay, and cost of further litigation on such matters.

 

The Settlement Agreement was filed as an attachment to the Form
8-K filed by the Issuer on March 19, 2013 with the Securities and Exchange Commission (“SEC”), and is incorporated
herein by reference. Such agreement is publicly available on EDGAR at www.sec.gov.

 

Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer

 

Item 6 of this Schedule 13D is supplemented by the following:

 

On March 19, 2013, the Investors and Issuer entered into the Settlement
Agreement. A copy of the Settlement Agreement is attached hereto as Exhibit C and is incorporated herein by reference.

 

Item 7. Materials to be Filed as Exhibits

 

Exhibit A – Letter to the Issuer from
the Investors dated December 13, 2012 (previously filed)

 

Exhibit B – Joint Filing Agreement (previously
filed)

 

Exhibit C – Settlement Agreement dated
as of March 19, 2013 by and among the Investors and the Issuer. The Settlement Agreement, which was publicly filed by the Issuer
on March 19, 2013 with the SEC on a Form 8-K, is publicly available on EDGAR at www.sec.gov and is incorporated herein by reference.

 

 

 

 

 

     

     

    

 

 

SIGNATURES

 

After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and correct.

 

	Date:	March 19, 2013	 
	 	 	 
	Signature:	 	 
	 	 	 
	Name/Title:	Nawar Alsaadi	 
	 	 	 
	Date:	March 19, 2013	 
	 	 	 
	Signature:	 	 
	 	 	 
	Name/Title:	Adam Arthur Goldstein	 

 

 

     

     

    

 

EXHIBIT C

 

 

[See the Current Report on Form 8-K filed with
the SEC on March 19, 2013]

     

     

    

EXHIBIT D

 

[See the Press Release dated March 19, 2013,
attached as Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on March 19, 2013]3rd Amendment

Exhibit 10.1

THIRD AMENDMENT TO SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Third Amendment") is made as of this 15th day of March, 2013, by and among BANK OF AMERICA, N.A., a national banking association ("Bank of America") with an office at 135 South LaSalle Street, 4th Floor, Chicago, Illinois 60603, individually as a Lender and as Agent ("Agent") for itself and any other financial institution which is or becomes a party hereto (each such financial institution, including Bank of America, is referred to hereinafter individually as a "Lender" and collectively as the "Lenders"), the LENDERS and MFRI, INC., a Delaware corporation ("MFRI"), MIDWESCO FILTER RESOURCES, INC., a Delaware corporation ("Midwesco"), PERMA‐PIPE, INC., a Delaware corporation ("Perma‐Pipe"), THERMAL CARE, INC., a Delaware corporation ("Thermal Care"), TDC FILTER MANUFACTURING, INC., a Delaware corporation ("TDC"), MIDWESCO MECHANICAL AND ENERGY, INC., a Delaware corporation ("Mechanical") and PERMA‐PIPE INTERNATIONAL COMPANY, LLC, a Delaware limited liability company ("Perma‐Pipe International") and PERMA-PIPE CANADA, INC., a Delaware corporation ("Perma‐Pipe Canada").  Capitalized terms used in this Agreement have the meanings assigned to them in Appendix A, General Definitions.  Accounting terms not otherwise specifically defined herein shall be construed in accordance with GAAP consistently applied.  MFRI, Midwesco, Perma‐Pipe, Thermal Care, TDC, Mechanical, Perma‐Pipe International and Perma‐Pipe Canada are sometimes hereinafter referred to individually as a "Borrower" and collectively as "Borrowers".
WHEREAS, Borrowers, Agent, and the Lender signatories thereto hereto entered into that certain Second Amended and Restated Loan and Security Agreement dated April 30, 2012 as amended by a certain First Amendment to Second Amended and Restated Loan and Security Agreement by and among Borrowers, Agent and the Lender signatories thereto dated June 8, 2012 and by a certain Second Amendment to Second Amended and Restated Loan and Security Agreement by and among Borrowers' Agent and the Lender signatures hereto dated October 12, 2012 (said Second Amended and Restated Loan and Security Agreement, as amended from time to time, the "Loan Agreement");
NOW, THEREFORE, in consideration of the following terms and conditions, the parties agreed as follows:
1.Definitions.  Except as otherwise specifically provided for herein, all capitalized terms used herein without definition shall have the meanings contained in the Loan Agreement.

2.Amended and Additional Definitions.  The definition of "Applicable Margin" contained in Appendix A to the Loan Agreement is hereby deleted and the following in inserted in its stead.  The following definitions of "Reporting Trigger Period," "Term Loan Notes", "Third Amendment Term Loan", "Third Amendment Term Loan Commitment", "Third Amendment" and "Third Amendment Effective Date" are hereby inserted into Appendix A of the Loan Agreement in appropriate alphabetical order:

Applicable Margin:  with respect to any Type of Loan, the margin set forth below, as determined by average Availability for the ninety (90) day period ending the date immediately prior to the first day of each fiscal quarter:
	
							
	Level
	Availability
	Base Rate Revolving Portion
	LIBOR Revolving Portions
	Base Rate Term Portion
	LIBOR Term Portion
	Unused Line Fee

	I
	≤ $5,500,000
	0.75%
	2.75%
	1%
	3%
	0.375%

	II
	> $5,500,000,   but   ≤  $7,500,000
	0.5%
	2.5%
	0.75%
	2.75%
	0.375%

	III
	> $7,500,000,   but ≤    $9,500,000
	0.25%
	2.25%
	0.5%
	2.5%
	0.375%

	IV
	> $9,500,000
	—%
	2%
	0.25%
	2.25%
	0.375%

Until May 1, 2013, margins shall be determined as if Level I were applicable.  Thereafter, the margins shall be subject to increase or decrease upon the first day of each fiscal quarter.  The foregoing notwithstanding, if Borrowers' Fixed Charge Coverage Ratio for the most recently ended "Applicable Margin Measuring Period" (as hereinafter defined) is 1.00 to 1.0 or more, then the percentages in the above grid (other than with respect to the Unused Line Fee) shall be reduced by 0.50% (e.g., Level I Base Rate Revolving Portion would reduce from 0.75% to 0.25%, etc.).  Applicable Margin Measuring Period means the six (6) month period ended April 30, 2013 and each twelve (12) month period ended May 31, 2013 and the last day of each calendar month thereafter.
Reporting Trigger Period - the period (a) commencing on the day that an Event of Default occurs, or Availability is less than the greater of (x) $9,500,000 and (y) 25% of the Borrowing Base at any time; and (b) continuing until, during the preceding 60 consecutive days, no Event of Default has existed and Availability has been greater than the greater of (x) $9,500,000 and (y) 25% of the greater of the Borrowing Base and the Revolving Credit Maximum Amount, at all times.
Term Loan Notes - prior to the funding of the Third Amendment Term Loan, the Secured Promissory Notes executed by Borrowers on or about March 28, 2005 in favor of each applicable Lender to evidence its 2005 Term Loan and upon the funding of Third Amendment Term Loan, the Term Loan Note attached to the Third Amendment as Exhibit 1.3, together with any replacement or successor notes therefor.
Third Amendment Term Loan Commitment - with respect to any Lender, the amount of such Lender's Third Amendment Term Loan Commitment pursuant to subsection 1.3 of the Agreement (as Section 1.3 is amended by the Third Amendment), as set forth below such Lender's name on the signature pages to the Third Amendment or any Assignment and Acceptance Agreement executed by such Lender.  In the event that the aggregate and if the amount of the Third Amendment Term Loan is less than $2,500,000, then each Lender's Third Amended Term Loan Commitment shall be proportionately reduced.
Third Amendment - that certain Third Amendment to Loan and Security Agreement dated as of March 15, 2013 by and among Borrowers, Lenders and Agent.
Third Amendment Effective Date - as defined in Section 14 of the Third Amendment.

Third Amendment Term Loan - as defined in Section 1.3 of the Loan Agreement (as Section 1.3 is amended by the Third Amendment).
3.Term Loan.  Section 1.3 of the Loan Agreement is hereby deleted and the following is inserted in its stead: 
"1.3 Term Loan.  On or about March 28, 2005, each Lender made a term loan (collectively, the "2005 Term Loan") to Borrowers in the original aggregate principal amount of $4,300,000.  Upon [ten (10)] Business Days' prior written notice to Agent, each Lender shall make additional term loans (the "Third Amendment Term Loan") to Borrowers. The aggregate amount of the Third Amendment Term Loan shall be equal to (x) the lesser of (i) $2,500,000 and (ii) 85% net orderly liquidation value of Borrower's Equipment as determined by an appraisal in form and substance reasonably acceptable to Agent and dated no later than sixty (60) days prior to the date of the requested Third Amendment Term Loan minus (y) the outstanding principal balance of the 2005 Term Loan as of the date the Third Amendment Term Loan is to be advanced.  The proceeds of such Third Amendment Term Loan shall be used solely for purposes for which the proceeds of the Revolving Credit Loans are permitted to be used.  The 2005 Term Loan and the Third Amendment Term Loan are hereunder collectively referred to as the "Term Loan".  The Term Loan shall be repayable in accordance with the terms of the Term Loan Notes (which Borrowers agree to execute and deliver to the Lenders prior to or simultaneously with the making of the Third Amendment Term Loan) and shall be secured by all of the Collateral.  The foregoing notwithstanding, Borrowers shall not be permitted to request and Lenders shall not be required to make any Third Amendment Term Loans if (x) after giving effect thereto, a Default or Event of Default exists or (y) MRFI's chief financial officer has not delivered to Agent a Compliance Certificate in form and substance reasonably acceptable to Agent evidencing that the Fixed Charge Coverage Ratio for the most recently ended Measuring Period equaled or exceeded 1.00 to 1.0." 
4.Principal Payments of Revolving Credit Loans.  Clause (i) of Subsection 3.2.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead. 

"3.2.1    Principal.
(i)Revolving Credit Loans.  Principal on account of Revolving Credit Loans shall be payable by Borrowers to Agent for the ratable benefit of Lenders immediately upon the earliest of (i) while a Trigger Period exists, the receipt by Agent or any Borrower of any proceeds of any of the Collateral (except as otherwise provided herein), including without limitation pursuant to subsections 3.3.1 and 6.2.4, to the extent of said proceeds, subject to Borrowers' rights to reborrow such amounts in compliance with subsection 1.1.1 hereof; (ii) the occurrence of an Event of Default in consequence of which Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations, or (iii) termination of this Agreement pursuant to Section 4 hereof; provided, however, that, if an Overadvance shall exist at any time, Borrowers shall, on demand, repay the Overadvance.  Each payment (including principal prepayment) by Borrowers on account of principal of the Revolving Credit Loans shall be applied first to the Base Rate Portion, and second to LIBOR Portions."
*    *    *
5. Term of Agreement.  Section 4.1 of its Loan Agreement is hereby deleted and the following is inserted in its stead:
"4.1  Term of Agreement.  Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any Default or Event of Default, this Agreement shall be in effect for a period through and including November 30, 2016 (the "Term"), unless terminated as provided in Section 4.2 hereof."

6. Cash Dominion.  Subsection 6.2.4 of the Loan Agreement is hereby deleted and the following is inserted in its stead.

"6.2.4    Maintenance of Dominion Account.  Borrowers shall maintain a Dominion Account or Accounts pursuant to lockbox and blocked account arrangements acceptable to Agent with Bank.  Borrowers shall issue to Bank an irrevocable letter of instruction directing Bank to deposit all payments or other remittances received in the lockbox and blocked accounts to the Dominion Account. While a Trigger Period exists, all funds deposited in any Dominion Account shall immediately become the property of Agent, for the ratable benefit of Lenders and shall be applied on account of the Obligations as provided in subsection 3.2.1. Borrowers shall obtain the agreement by Bank in favor of Agent to waive any recoupment, setoff rights, and any security interest in, or against, the funds so deposited.  Agent assumes no responsibility for such lockbox and blocked account arrangements, including, without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder."

7. Quarterly Financial Statements for MFRI and its domestic Subsidiaries.  The following is inserted into subsection 8.1.3 as clause (ii)-(a) and the last sentence of subsection 8.1.3 is hereby deleted and the following is inserted in its stead:

"8.1.3    Financial Statements.  Keep, and cause each of its Subsidiaries to keep, adequate records and books of account with respect to its business activities in which proper entries are made in accordance with customary accounting practices reflecting all its financial transactions; and cause to be prepared and furnished to Agent and each Lender, the following, all to be prepared in accordance with GAAP applied on a consistent basis, unless MFRI's certified public accountants concur in any change therein and such change is disclosed to Agent and is consistent with GAAP:
*    *    *
(ii)-(a) not later than 30 days after the end of each fiscal month unaudited interim financial statements of MFRI and its domestic Subsidiaries as of the end of such month and of the portion of the fiscal year then elapsed, on a Consolidated and consolidating basis, certified by the principal financial officer of MFRI as prepared in accordance with GAAP and fairly presenting in all material respects the financial position and results of operations of MFRI and its domestic Subsidiaries for such month and period subject only to changes from audit and year-end adjustments and except that such statements need not contain notes and do not include MFRI's Foreign Subsidiaries; the monthly financial statements to be delivered pursuant to this clause (ii)-(a) of subsection 8.1.3 are in addition those to be delivered pursuant to clause (ii) of subjection 8.1.3;"
*    *    *
Concurrently with the delivery of the financial statements described in paragraphs (i), (ii) and (ii)-(a) of this subsection 8.1.3, or more frequently if reasonably requested by Agent, MFRI shall cause to be prepared and furnished to Agent a Compliance Certificate in the form of Exhibit 8.1.3 hereto executed by the Chief Financial Officer of MFRI (a "Compliance Certificate")."
8. Borrowing Base Certificates.  Subsection 8.1.4 of the Loan Agreement is hereby deleted and the following is inserted in its stead.

"8.1.4    Borrowing Base Certificates.  On or before the 15th day of each month (third Business Day of each week if a Reporting Trigger Period exists) from and after the date hereof, Borrowers shall deliver to Agent, in form acceptable to Agent, a Borrowing Base Certificate (on a Consolidated and consolidating basis) as of the last day of the immediately preceding month (or week, if a Reporting Trigger Period exists), with such supporting materials as Agent shall reasonably request.  If Borrowers deem it advisable, or Agent shall request, Borrowers shall execute and deliver to Agent Borrowing Base Certificates more frequently than monthly (weekly, if a Reporting Trigger Period exists)."
9. Total Indebtedness.    Clause (xv) of subsection 8.2.3 of the Loan Agreement is hereby deleted and the following is inserted in its stead.

"8.2.3    Total Indebtedness.  Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur or suffer to exist, any Indebtedness, except:
*    *    *
(xv) Money Borrowed incurred by foreign Subsidiaries of Borrowers which does not exceed at any time, in the aggregate, the amount of such all Indebtedness existing as of the Third Amendment Effective Date (approximately $14,500,000) plus $15,000,000 and the guaranty of such Money Borrowed by Borrowers so long as all such guaranties are unsecured; for purposes of this clause (xv) of subsection 8.2.3 only the amount of outstanding Money Borrowed with respect to any outstanding letter of credit or letter of credit guaranty issued on behalf of a Foreign Subsidiary of Borrower shall be deemed to be $0 until such time as a draw has been made on such letter of credit or letter of credit guaranty;"
*    *    *
10. Stock Repurchases.    Clause (iv) of subsection 8.2.7 of the Loan Agreement is hereby deleted and the following is inserted in its stead:

"8.2.7    Distributions.  Except as otherwise provided for in Section 8.2.6, declare or make, or permit any Subsidiary of any Borrower to declare or make, any Distributions, except for:
*    *    *
(iv)    Repurchases by MFRI of outstanding shares of its publicly owned common stock provided that after giving effect to any such repurchase, each of the following conditions precedent is satisfied:  (1) no Default of Event of Default has occurred and is continuing; (2) Availability equals or exceeds Eleven Million Dollars ($11,000,000); (3) the aggregate amount of such repurchases does not exceed One Million Five Hundred Thousand Dollars ($1,500,000); and (4) the Fixed Charge Coverage Ratio for the most recently ended twelve month period computed on a pro forma basis treating the repurchase in question and all other such repurchases made within the current month as having been made within such most recently ended twelve month period equals or exceeds 1.10 to 1."
11. Restricted Investment.  Subsection 8.2.12 is hereby deleted and the following is inserted in its stead:

"8.2.12  Restricted Investment.
(a)    Make or have, or permit any Subsidiary of any Borrower to make or have, any Restricted Investment, except for (w) Restricted Investments existing as of January 13, 2013, 

(x) so long as after giving effect to such Restricted Investments no Default or Event of Default exists, Restricted Investments with an amount equal to $500,000 or less (aggregating all related Restricted Investments in determining whether such $500,000 basket is exceeded), (y) such other Restricted Investments made after January 13, 2013 as consented to in writing by Agent and (z) Restricted Investments permitted pursuant to clauses (b), (c) and/or (d) below;
(b)    Other than (x) with respect to cash investments in Bayou Perma Pipe Canada, Ltd. ("Canadian Joint Venture") existing in the amount of $7,003,757 as of June 1, 2012, (y) as provided in clause (c) below and (z) as provided in the next sentence, make or have or permit any Subsidiary of any Borrower to make or have any cash investments in Canadian Joint Venture.  Agent and Lenders shall also have been deemed to have consented to MFRI executing a limited guarantee (for an amount not to exceed $3,000,000) in connection with a mortgage loan to Canadian Joint Venture, the proceeds of which shall be used by Canadian Joint Venture for working capital purposes, so long as Agent shall have received substantially final copies of such limited guaranty and the underlying documents and the form and substance of such limited guaranty and underlying documents are acceptable to Agent.  MFRI's obligations under such limited guaranty shall not be secured by a Lien on any asset of MFRI or its domestic Subsidiaries; 
(c)    Borrowers may make an additional $1,000,000 cash investment in Canadian Joint Venture so long as (x) after giving effect to any such investment, no Default or Event of Default exists and (y) such additional cash investment is made with the equal proceeds of a Distribution or repayment of intercompany Money Borrowed by Canadian Joint Venture or a Foreign Subsidiary; and
(d)    Borrowers may make additional Restricted Investments so long as, after giving effect to any such Restricted Investment, (x) no Default or Event of Default exists, (y) Availability computed immediately after giving effect to any such Restricted Investments and on a pro form basis for the 30 days immediately proceeding the date on which such Restricted Investment is to be made, assuming that such Restricted Investment was made on the first day of such 30 day period exceeds $9,500,000 and (z) the Fixed Charge Coverage Ratio for the most recently ended Measuring Period equaled or exceeded 1.20 to 1.0." 
12. Financial Covenant.  Exhibit 8.3 to this Loan Agreement is hereby deleted and Exhibit 8.3 attached to this Third Amendment is inserted in its stead.

13. Amendment Fee.  In order to induce Agent and Lenders to enter into this Third Amendment, Borrowers agree to pay to Agent for the ratable benefit of Lenders an amendment fee in the amount of One Hundred Fourteen Thousand Dollars ($114,000).  Said amendment fee shall be due and payable and be deemed fully earned and non-refundable on the date hereof.

14. Conditions Precedent.  This Third Amendment shall become effective upon satisfaction of each of the following conditions precedent:
a.Borrowers, Agent and Lenders shall have executed and delivered to each other this Third Amendment;
b.Each Borrower shall have delivered to Agent a Certificate of the Secretary of such Borrower, together with true and correct copies, of the resolutions of the Board of Directors (Members) authorizing or ratifying the execution, delivery and performance of this Third Amendment and the other Loan Documents to be executed by such Borrower and the names of the officer or officers of each such Borrower 

authorized to sign this Third Amendment and the other Loan Documents to be executed by each such Borrower together with a sample of the true signature of each such officer;
c.Borrowers shall have executed and delivered to Agent an amended and restated Fee Letter; and
d.Borrowers shall have paid to Agent for the ratable benefit of Lenders the Amendment fee referred to in Section 13 of the Third Amendment.

The date on which all of the above conditions precedent have been satisfied or waived is hereinafter referred to as the "Third Amendment Effective Date."

15. Governing Law.  This Third Amendment shall be governed by, and construed in accordance with, the laws of the State of Illinois, without regard to the principles thereof relating to conflict of laws.

16. Execution in Counterparts.  This Third Amendment may be executed in any number of counterparts, which shall, collectively and separately, constitute one Agreement.

17. Continuing Effect.  Except as otherwise provided herein, the Loan Agreement remains in full force and effect.

(Signature Page Follows)

(Signature Page to Third Amendment to Second Amended and
Restated Loan and Security Agreement)

	
			
	 
	 
	MFRI, INC.

By: /s/ Karl J. Schmidt

	 
	 
	Karl J. Schmidt

	 
	 
	Vice President and Chief Financial Officer

	 
	 
	 

	 
	 
	MIDWESCO FILTER RESOURCES, INC.

By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	PERMA‐PIPE, INC.
By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	THERMAL CARE, INC.

By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	TDC FILTER MANUFACTURING, INC.

By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	MIDWESCO MECHANICAL AND ENERGY, INC.

By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	PERMA‐PIPE INTERNATIONAL COMPANY, LLC.
By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	
			
	 
	 
	PERMA‐PIPE CANADA, INC.
By: /s/ Michael D. Bennett

	 
	 
	Michael D. Bennett

	 
	 
	Vice President, Secretary and Treasurer

	 
	 
	 

	 
	 
	BANK OF AMERICA, N.A., as Agent and as a Lender
By: /s/ Brian Conole

	 
	 
	Brian Conole

	 
	 
	Senior Vice President

	 
	 
	 

	 
	 
	Third Amended Term Loan 
Commitment: up to $2,500,000

EXHIBIT 1.3A
FORM OF TERM LOAN NOTE
	
		
	$______________________
	 ________________, 20_
Chicago, Illinois

FOR VALUE RECEIVED, the undersigned (hereinafter "Borrowers"), hereby, jointly and severally, hereby PROMISE TO PAY to the order of Bank of America, N.A., a national banking association (hereinafter "Lender"), or its registered assigns at the office of Bank of America, N.A., a national banking association, as agent for such Lender, or at such other place in the United States of America as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America, in immediately available funds, at the time of payment, the principal sum of __________ ($______), together with interest from and after the date hereof on the unpaid principal balance outstanding from time to time.
This Note (the "Note") is one of the Term Notes referred to in, and is issued pursuant to, that certain Second Amended and Restated Loan and Security Agreement dated as of April 30, 2012, by and among Borrowers, the lender signatories thereto (including Lender) and Bank of America, a national banking association ("Bank of America") as Agent for said lenders (Bank of America in such capacity "Agent") (hereinafter, as amended from time to time, the "Loan Agreement"), and is entitled to all of the benefits and security of the Loan Agreement.  All of the terms, covenants and conditions of the Loan Agreement and the Security Documents are hereby made a part of this Note and are deemed incorporated herein in full.  All capitalized terms used herein, unless otherwise specifically defined in this Note, shall have the meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and payable on the dates and in the manner hereinafter set forth:
(a)    Interest on the unpaid principal balance outstanding from time to time shall be paid at such interest rates and at such times as are specified in the Loan Agreement;
(b)    Principal shall be due and payable in monthly commencing the first day of the month after the month in which the Third Amended Term Loan is advanced and continuing on the first day of each month thereafter to and including November 1, 2016, in equal installments of $________ each; and
(c)    The entire remaining principal amount then outstanding, together with any and all other amounts due hereunder, shall be due and payable on November 30, 2016.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued interest on this Note shall be due and payable immediately upon any termination of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with the provisions of Section 3.3 of the Loan Agreement.  Borrowers may also prepay this Note in the manner provided in Section 4 of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of Default, this Note shall or may, as provided in the Loan Agreement, become or be declared immediately due and payable.

The right to receive principal of, and stated interest on, this Note may only be transferred in accordance with the provisions of the Loan Agreement.
Except as otherwise provided in the Loan Agreement, demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrowers.
This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois.

	
			
	BORROWERS:
	 
	MFRI, INC.

By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	MIDWESCO FILTER RESOURCES, INC.

By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	PERMA‐PIPE, INC.
By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	THERMAL CARE, INC.

By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	TDC FILTER MANUFACTURING, INC.

By: 

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	MIDWESCO MECHANICAL AND ENERGY, INC.

By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	PERMA‐PIPE INTERNATIONAL COMPANY, LLC.
By:

	 
	 
	Name:

	 
	 
	Title:

	 
	 
	 

	 
	 
	PERMA‐PIPE CANADA, INC.
By:

	 
	 
	Name:

	 
	 
	Title:

EXHIBIT 8.3

FINANCIAL COVENANTS

DEFINITIONS

Availability Threshold - for each period within the Term commencing each May 1 and ending each January 31, $5,000,000.  For each period within the Term commencing each February 1 (January 14, 2013 with respect to 2013 only) and ending each April 30, $3,500,000.  The foregoing notwithstanding, on not more than 3 occasions during any calendar year the $5,000,000 Availability Threshold for periods between May 1 and January 31 shall be $4,000,000 for no more than three consecutive days.
Consolidated Net Income (Loss) - with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance with GAAP on a Consolidated basis with its domestic Subsidiaries; provided, however, Consolidated Net Income shall not include:  (a) the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower or any of its wholly‐owned subsidiaries has an ownership interest unless received in a cash distribution or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date it became a domestic Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts included in determining net income (or loss) in respect of the write‐up of assets on or after the Closing Date, including the subsequent amortization or expensing of the written‐up portion of the assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA ‐ with respect to any fiscal period, the sum of Consolidated Net Income (Loss) before Interest Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary gains for such period); plus the amount of any expenses or charges deducted from Consolidated Net Income for the applicable period in connection with the closure and write down of TDC's facility at 1331 South 55th Court, Cicero, Illinois; provided that the aggregate amount of add backs to EBITDA as a result of any such charges or expenses shall not exceed $2,500,000; plus the cash amount of any Distribution or repayment of intercompany Money Borrowed received by a Borrower from Canadian Joint Venture or a Foreign Subsidiary; plus the amount of any non cash expenses or charges deducted from Consolidated Net Income related to management, director or employee equity incentive plans; provided that, to the extent any Borrower incurs any cash expense, charge or expenditure related to such equity incentive plans or repurchases any Security issued under any such equity incentive plan, the amount of such expense, charge, expenditure or repurchase price, to the extent not already deducted from Consolidated Net Income, shall be subtracted from the applicable period's EBITDA; plus any extraordinary, unusual or nonrecurring items (including fees, expenses, and charge associated with the consolidation or closings of domestic plants or offices, workforce reductions and similar restructuring activities) in an amount not to exceed $2,000,000 within the applicable fiscal period; plus the unrealized losses (and minus the unrealized gains) on any foreign currency transaction or transaction in respect of Indebtedness of any foreign subsidiary to Borrower or any of Borrower's domestic subsidiaries in an amount not to exceed $2,000,000 within the applicable fiscal period; plus, to the extent included in the determination of Consolidated Net Income (Loss), any excise taxes paid in or to India (or any political subdivision thereof) resulting from the repatriation of cash to the United States), all as determined for Borrowers and their domestic Subsidiaries on a Consolidated basis and in accordance with GAAP (except to the extent that the financial operations of MFRI's Foreign Subsidiaries are omitted).
Fixed Charge Coverage Ratio - with respect to any fiscal period, the ratio of (i) EBITDA for such period minus Capital Expenditures incurred by Borrowers or their domestic Subsidiaries (excluding, 

however, Capital Expenditures financed by third party financing) minus income taxes paid in cash by Borrowers and their domestic Subsidiaries in such period to (ii) the sum of Interest Expense paid in cash within such period plus principal payments of Money Borrowed (other than Revolving Credit Loans) made by Borrowers and their domestic Subsidiaries within such period.
Interest Expense - with respect to any fiscal period, interest expense paid or accrued for such period, including without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit and LC Guaranty fees owing for such period, all as determined for MFRI and its domestic Subsidiaries on a Consolidated basis and in accordance with GAAP.
Measurement Period - the most recently ended twelve month period.

COVENANTS

Minimum Fixed Charge Coverage Ratio.  if at any time Availability is less than the Availability Threshold, then Borrowers shall not permit Fixed Charge Coverage Ratio for the most recently ended Measurement Period to be less than 1.00 to 1.

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