Document:

EXHIBIT 10.1

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

SECOND LOAN MODIFICATION AGREEMENT

 

This Second Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of May 9, 2017, by and among (a) SILICON VALLEY BANK, a California corporation (“SVB”), in its capacity as Administrative Agent (“Agent”), (b) SVB, as a Revolving Line Lender and as a Term Loan Lender, MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as a Revolving Line Lender (in such capacity and together with its successors and assigns, “MidCap Revolving Line Lender”), MIDCAP FUNDING III TRUST, a Delaware Statutory Trust and ELM 2016-1 TRUST, a Delaware statutory trust, each as a Term Loan Lender (in such capacity and together with their respective successors and assigns, “MidCap Term Loan Lender”; SVB, the MidCap Revolving Line Lender and the MidCap Term Loan Lender are each referred to herein as a “Lender” and collectively, the “Lenders”), and (c) VERICEL CORPORATION, a Michigan corporation (the “Borrower”).

 

1.             DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to the Lenders, Borrower is indebted to the Lenders pursuant to a loan arrangement dated as of September 9, 2016, evidenced by, among other documents, a certain Loan and Security Agreement dated as of September 9, 2016, by and among Borrower, Agent and the Lenders, as amended by that certain First Loan Modification Agreement, dated as of December 30, 2016 (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

 

2.             DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to the Lenders, the “Security Documents”).

 

Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

 

3.             DESCRIPTION OF CHANGE IN TERMS.

 

A.                                    Modifications to Loan Agreement.

 

1                                         Section 6.9(a) of the Loan Agreement shall be deleted in its entirety and replaced with the following:

 

(a)  Minimum Revenue.  Achieve minimum net revenue (determined in accordance with GAAP), measured on a trailing twelve month basis ending as of the date of measurement, on a consolidated basis of Borrower and its Subsidiaries, in an amount equal to or greater than the amount listed below for each corresponding trailing twelve month period:

 

1

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
Trailing Twelve Month Period Ended
    	
 
    	
Minimum Net Revenue
    
	
 
    	
 
    	
 
    
	
August 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
September 30, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
October 31, 2016
    	
 
    	
$
    	
52,280,500.00
    
	
 
    	
 
    	
 
    
	
November 30, 2016
    	
 
    	
$
    	
50,695,400.00
    
	
 
    	
 
    	
 
    
	
December 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
January 31, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
February 28, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
March 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
April 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
May 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
June 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
July 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
August 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
September 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
October 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
November 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
December 31, 2017
    	
 
    	
$
    	
51,723,000.00
    
	
 
    	
 
    	
 
    
	
January 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
February 28, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
March 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
April 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
May 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
June 30, 2018
    	
 
    	
$
    	
[***]
    

 

2

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
July 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
August 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
September 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
October 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
November 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
December 31, 2018
    	
 
    	
$
    	
[***]
    

 

Minimum net revenue financial covenant requirements for the monthly periods ending after December 31, 2018 will be determined by the Lenders in their reasonable discretion after consultation with Borrower, no later than December 31 of the year immediately preceding each applicable fiscal year, based on the projections delivered by Borrower to Agent and the Lenders in accordance with Section 6.2(e) (which for the avoidance of doubt shall be delivered by Borrower no later than November 30 of the year immediately preceding each applicable fiscal year); provided that, such minimum net revenue threshold for any month following December 31, 2018 shall not be less than the corresponding month for the immediately preceding year.

 

2                                   The definitions of “Availability Amount” and “Term Loan Final Payment” appearing in Section 13.1 of the Loan Agreement shall be deleted in their entirety and replaced with the following:

 

“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) (X) the amount available under the Borrowing Base minus (Y) the Ineligible Reserve; minus (b) the outstanding principal balance of any Advances.

 

“Term Loan Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest, and supplemental of all other fees and expenses due and owing in connection with the Term Loan Advances), in an amount equal to the aggregate original principal amount of the Term Loan Advances advanced to Borrower multiplied by seven percent (7.00%).

 

3                                   The following new terms and their respective definitions shall be inserted in Section 13.1, each in its applicable alphabetical order:

 

“Ineligible Reserve” is (i) from the Second Loan Modification Effective Date through and including the Ineligible Reserve Release Date, [***] Dollars ($[***]); and (ii) commencing on the first day after the Ineligible Reserve Release Date and thereafter, Zero Dollars ($0.00).

 

“Ineligible Reserve Release Date” is the date occurring after the Second Loan Modification Effective Date, so long as no Default or Event of Default has occurred and is continuing, on which Borrower provides Bank evidence satisfactory to Bank, in its sole but reasonable discretion, that Borrower has complied with the Minimum Revenue financial covenant described in Section 6.9(a) for two (2) consecutive quarters. 

 

3

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

Notwithstanding the foregoing, nothing herein shall be deemed a waiver of or release by Bank of any other right or remedy of Bank under this Agreement following the occurrence and during the continuance of an Event of Default, including, without limitation, an Event of Default arising by virtue of Borrower failing to achieve the Minimum Revenue financial covenant requirements described in Section 6.9(a) for any monthly period.

 

“Second Loan Modification Effective Date” is May 9, 2017.

 

4                                   Compliance Certificate.  The Compliance Certificate attached as Exhibit B to the Loan Agreement is deleted in its entirety and replaced with Exhibit A attached hereto.

 

4.             FEES.  Borrower shall reimburse the Lenders for all legal fees and expenses reasonably incurred in connection with the Existing Loan Documents and this Loan Modification Agreement.

 

5.             RATIFICATION OF PERFECTION CERTIFICATE.  Except as set forth on Schedule 5 of the Loan  Modification, Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate, dated as of September 9, 2016, as updated from time to time through the date hereof, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to the Agent and the Lenders in such Perfection Certificate remains true and correct in all material respects as of the date hereof.

 

6.             AUTHORIZATION TO FILE.  Borrower hereby authorizes Agent to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Agent’s interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Agent under the Code.

 

7.             CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

 

8.             RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of the Loan Agreement, each other Loan Document and all security or other collateral granted to the Lenders, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

 

9.             NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against the Lenders with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against any of the Lenders, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES each of the Lenders from any liability thereunder.

 

10.          CONTINUING VALIDITY.  Borrower understands and agrees that in modifying the existing Obligations, each Lender is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  The Lenders’ agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate any Lender to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations.  It is the intention of the Agent, each Lender and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by the Agent and the Lenders in writing.  No maker will be released by virtue of this Loan Modification Agreement.

 

4

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

11.          RIGHT OF SET-OFF.  In consideration of Lenders’ agreement to enter into this Loan Modification Agreement, Borrower hereby reaffirms and hereby grants to Agent for the benefit of the Lenders, a lien, security interest and right of set off as security for all Obligations owed to the Lenders, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Agent or any entity under the control of Agent or any Lender (including a Subsidiary thereof) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Agent may set off the same or any part thereof and apply the same to any Obligations of Borrower then due regardless of the adequacy of any other collateral securing the loan.  ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.          CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.  Section 12 of the Loan Agreement is hereby incorporated by reference in its entirety.

 

13.          COUNTERSIGNATURE.  This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower, Agent and each Lender.

 

[The remainder of this page is intentionally left blank]

 

5

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

IN WITNESS WHEREOF, the parties hereto have caused this Loan Modification Agreement to be executed as of the date first above written

 

	
BORROWER:
    	
 
    
	
 
    	
 
    
	
VERICEL CORPORATION
    	
 
    
	
 
    	
 
    
	
By
    	
/s/ Gerard Michel
    	
 
    
	
Name:
    	
Gerard Michel
    	
 
    
	
Title:
    	
Chief Financial Officer
    	
 
    
	
 
    	
 
    
	
AGENT:
    	
 
    
	
 
    	
 
    
	
SILICON VALLEY BANK,   as Agent
    	
 
    
	
 
    	
 
    
	
By
    	
/s/ Sam Subilia
    	
 
    
	
Name:
    	
Sam Subilia
    	
 
    
	
Title:
    	
VP
    	
 
    

 

	
TERM LOAN LENDERS:
    	
REVOLVING LINE LENDERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
SILICON VALLEY BANK
    	
SILICON VALLEY BANK
    
	
 
    	
 
    
	
By
    	
/s/   Sam Subilia
    	
 
    	
By
    	
/s/ Sam Subilia
    
	
Name:
    	
Sam   Subilia
    	
 
    	
Name:
    	
Sam Subilia
    
	
Title:
    	
VP
    	
 
    	
Title:
    	
VP
    
	
 
    	
 
    
	
 
    	
 
    
	
MIDCAP FUNDING III TRUST
    	
MIDCAP FUNDING IV TRUST
    
	
 
    	
 
    
	
By:
    	
Apollo   Capital Management, L.P., 

its   investment manager
    	
By:
    	
Apollo Capital Management,   L.P.,

its investment manager
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
Apollo   Capital Management GP, LLC,

its   general partner
    	
By:
    	
Apollo Capital   Management GP, LLC,

its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Maurice Amsellem
    	
 
    	
By:
    	
/s/ Maurice Amsellem
    
	
Name:
    	
Maurice   Amsellem
    	
 
    	
Name:
    	
Maurice Amsellem
    
	
Title:
    	
Authorized   Signatory
    	
Title:
    	
Authorized Signatory
    
									

 

6

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
TERM   LOAN LENDERS:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
ELM 2016-1 TRUST
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
MidCap   Financial Services Capital 
    	
 
    	
 
    
	
 
    	
Management,   LLC, as Servicer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Adam Day
    	
 
    	
 
    	
 
    
	
Name:
    	
Adam   Day
    	
 
    	
 
    	
 
    
	
Title:
    	
Authorized   Signatory
    	
 
    	
 
    
							

 

7

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

Exhibit A to Second Loan Modification Agreement

 

EXHIBIT B

COMPLIANCE CERTIFICATE

 

	
TO:
    	
SILICON   VALLEY BANK, as Agent
    	
Date:
    	
 
    
	
FROM:   
    	
VERICEL   CORPORATION
    	
 
    

 

The undersigned authorized officer of Vericel Corporation (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement among Borrower, SILICON VALLEY BANK, a California corporation (“SVB”), in its capacity as Administrative Agent (“Agent”), (b) SVB, as a Revolving Line Lender and as a Term Loan Lender, MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as a Revolving Line Lender (in such capacity and together with its successors and assigns, “MidCap Revolving Line Lender”), MIDCAP FUNDING III TRUST, a Delaware Statutory Trust and ELM 2016-1 TRUST, a Delaware statutory trust, each as a Term Loan Lender (in such capacity and together with their respective successors and assigns, “MidCap Term Loan Lender”; SVB, the MidCap Revolving Line Lender and the MidCap Term Loan Lender are each referred to herein as a “Lender” and collectively, the “Lenders”) (as amended, the “Loan Agreement”), (1) Borrower is in compliance for the period ending                 with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Agent.  Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

	
Please   indicate compliance status by circling Yes/No under “Complies” column.
    

 

	
Reporting Covenant
    	
 
    	
Required
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly financial statements with
   Compliance Certificate
    	
 
    	
Monthly within 30 days (for the monthly periods   ending March 31, June 30, September 30 and December 31,   no later than forty-five (45) days after the last day of each such month)
    	
 
    	
Yes No
    
	
Annual financial statement (CPA Audited) + CC
    	
 
    	
FYE within 90 days
    	
 
    	
Yes No
    
	
10-Q, 10-K and 8-K
    	
 
    	
Within 5 days after filing with SEC
    	
 
    	
Yes No
    
	
A/R & A/P Agings, Deferred Revenue report   and
    	
 
    	
Monthly within 30 days
    	
 
    	
Yes No
    

 

8

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
general ledger
    	
 
    	
 
    	
 
    	
 
    
	
Transaction Reports
    	
 
    	
(i) With each request for an Advance and   (ii) within thirty (30) days after the last day of each month
    	
 
    	
Yes No
    
	
Projections
    	
 
    	
FYE within 30 days, and as amended/updated
    	
 
    	
Yes No
    

 

	
Financial Covenant
    	
 
    	
Required
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Maintain as indicated:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Minimum Revenue (monthly, on a trailing 12 month   basis)
    	
 
    	
*
    	
 
    	
$        
    	
 
    	
Yes No
    

 

* See Section 6.9(a)

 

The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

 

 

 

	
Vericel   Corporation   
    	
BANK   USE ONLY        
    
	
 
    	
 
    
	
 
    	
Received   by:
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
Name:
    	
 
    	
 
    	
Date:
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Verified:
    	
 
    
	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Compliance   Status:
    	
Yes No
    
								

 

9

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

SCHEDULE 1 TO COMPLIANCE CERTIFICATE

 

FINANCIAL COVENANTS OF BORROWER

 

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

 

	
Dated:
    	
 
    	
 
    

 

I.             Minimum Revenue (Section 6.9(a))

 

Required:              Minimum Revenue.  Achieve minimum net revenue (determined in accordance with GAAP), measured on a trailing twelve month basis ending as of the date of measurement, on a consolidated basis of Borrower and its Subsidiaries, in an amount equal to or greater than the amount listed below for each corresponding trailing twelve month period:

 

10

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
Trailing Twelve Month Period Ended
    	
 
    	
Minimum Net Revenue
    
	
 
    	
 
    	
 
    
	
August 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
September 30, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
October 31, 2016
    	
 
    	
$
    	
52,280,500.00
    
	
 
    	
 
    	
 
    
	
November 30, 2016
    	
 
    	
$
    	
50,695,400.00
    
	
 
    	
 
    	
 
    
	
December 31, 2016
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
January 31, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
February 28, 2017
    	
 
    	
$
    	
52,000,000.00
    
	
 
    	
 
    	
 
    
	
March 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
April 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
May 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
June 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
July 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
August 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
September 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
October 31, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
November 30, 2017
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
December 31, 2017
    	
 
    	
$
    	
51,723,000.00
    
	
 
    	
 
    	
 
    
	
January 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
February 28, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
March 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
April 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
May 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
June 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
July 31, 2018
    	
 
    	
$
    	
[***]
    

 

11

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
August 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
September 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
October 31, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
November 30, 2018
    	
 
    	
$
    	
[***]
    
	
 
    	
 
    	
 
    
	
December 31, 2018
    	
 
    	
$
    	
[***]
    

 

Minimum net revenue financial covenant requirements for the monthly periods ending after December 31, 2018 will be determined by the Lenders in their reasonable discretion after consultation with Borrower, no later than December 31 of the year immediately preceding each applicable fiscal year, based on the projections delivered by Borrower to Agent and the Lenders in accordance with Section 6.2(e) (which for the avoidance of doubt shall be delivered by Borrower no later than November 30 of the year immediately preceding each applicable fiscal year); provided  that, such minimum net revenue threshold for any month following December 31, 2018 shall not be less than the corresponding month for the immediately preceding year.

 

Actual: all amounts measured on a trailing twelve month basis

 

	
A.
    	
 
    	
Aggregate value of net revenue of Borrower and its   Subsidiaries
    	
 
    	
$
    

 

Is line A equal to or greater than $                                                   ?

 

o No, not in compliance                                                                   o Yes, in compliance

 

2134797.2

 

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CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

SCHEDULE 5

 

Updates to Perfection Certificate

 

13

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

14

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

15

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

16

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

17

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

18

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

19

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

20

 

[***]

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

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[***]Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (this “Agreement”) is entered into to be effective June 1, 2017 between Paul D. Maniscalco (the “Executive”) and PetroShare Corp., a Colorado corporation (the “Company”). The Executive and Company may be referred to in this Agreement as a “Party” or collectively as the “Parties.”

 

BACKGROUND

 

The Company wishes to employ Executive as part of its executive management team in the position described below, and to provide the Executive with compensation and other benefits on the terms and subject to the conditions contained in this Agreement.

 

Executive is willing to accept such employment and perform services for the Company on the terms and subject to the conditions contained in this Agreement.

 

The Parties desire to set forth the terms and conditions upon which Executive will be employed by the Company.

 

AGREEMENT

 

1.                                      Employment; Devotion to Duties.

 

(a)                                 General. During the Term, as defined in Section 2(b),the Company will employ Executive as its Chief Financial Officer reporting to the Company’s Chief Executive Officer (“CEO”) and its Board of Directors (the “Board”), and Executive accepts employment to serve in this capacity, all upon the terms and conditions in this Agreement. Executive will have those duties and responsibilities that are described in the Bylaws for the Treasurer of the Company, as well as other duties consistent with Executive’s position as Chief Financial Officer, and otherwise as determined by the CEO and the Board. The Company reserves the right, in its sole discretion, to change or modify Executive’s position, title and duties during the term of this Agreement, subject to Executive’s rights under Section 7(d).

 

(b)                                 Devotion to Duties. During the Term, Executive (i) will faithfully, with diligence and to the best of his ability, experience and talents, devote all of his business time and efforts to the performance of his duties on the Company’s behalf, and (ii) will not at any time or place or to any extent whatsoever, without the express written consent of the Board, engage in any outside employment, or in any activity competitive with or adverse to the Company’s business or affairs, whether alone or as partner, manager, member, officer, director, employee, or shareholder of any entity or as a trustee, fiduciary, consultant or other representative.  This description is not intended to prohibit Executive from engaging in activities such as personal investments, a family business or charitable work, so long as those activities do not conflict with Executive’s duties and responsibilities to the Company and, in the case of positions on other boards of directors or similar bodies, receive the prior written approval of the Board. Participation to a reasonable extent in civic, social, community or charitable activities is encouraged. Notwithstanding anything herein to the contrary, any outside activities will be

 

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conducted in compliance with the Company’s corporate governance policies and other policies and procedures as in effect from time-to-time.

 

(c)                                  Section 16 Insider.  Executive acknowledges that he may, by virtue of his position with the Company, be deemed an “insider” for purposes of Section 16 of the Securities Exchange Act of the 1934, as amended, and required to file reports with the U.S. Securities and Exchange Commission (“SEC”).  If notified by the Company that he is subject to such requirements, Executive agrees to comply with such rules and regulations as may be adopted by the SEC in regard to the ownership, acquisition or disposition of any securities of the Company.

 

2.                                      Term.

 

(a)                                 Initial Term. Executive will commence employment with the Company under the terms of this Agreement starting on June 1, 2017 (the “Commencement Date”). Executive will be employed under this Agreement until December 31, 2018 (the “Initial Term”), unless the term is extended under Section 2(b), or Executive’s employment is terminated earlier pursuant to Section 7.

 

(b)                                 Renewal Term. Following the Initial Term, this Agreement and the Executive’s employment shall renew automatically for successive one-year periods (each, a “Renewal Term”), unless at least 90 days before the end of the Initial Term or any Renewal Term, either party gives notice to the other party that this Agreement will terminate at the end of the Initial Term or any Renewal Term (the Initial Term, together with any Renewal Terms, the “Term”). Notwithstanding the above, the Executive’s employment is subject to earlier termination under Section 7. If the Company timely elects not to renew this Agreement at the end of the Initial Term or any Renewal Term, the Executive’s termination of employment will be characterized as a termination without Cause under Section 7(c).

 

3.                                      Location. The location of Executive’s principal place of employment will be at the Company’s principal executive offices in Douglas County, Colorado; provided, however, the Executive understands and agrees that he may be required to travel and perform services outside of this area as reasonably necessary to properly perform his duties under this Agreement. Travel away from Colorado may be necessary for, among other things, meetings and presentations with investors, potential investors, investment bankers and analysts.

 

4.                                      Base Salary. The Company will pay Executive an annual base salary (“Base Salary”) in the amount of $12,500 per month ($150,000 per year). The Base Salary will be paid in accordance with the Company’s payroll practices in effect from time-to-time. Executive’s Base Salary will be reviewed at least annually in accordance with the Company’s executive compensation review policies and practices and may be increased in accordance with such review, looking to the results of such review and the Company’s financial progress, among other things, as guides in making any adjustments. All payments to Executive under this Agreement will be subject to withholding as required by applicable law.

 

5.                                      Incentive Compensation.

 

(a)                                 Annual Bonus. Executive will be eligible to receive additional cash compensation in the form of bonuses based on criteria established by and in the sole discretion of

 

2

 

the CEO, the Board or one of its committees. Unless deferred pursuant to a plan that complies with Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), this bonus, if any, will be paid to the Executive no later than two and one-half months following the end of the relevant fiscal year in which the services were performed.

 

(b)                                 Equity Incentive. Executive will also be eligible to receive equity grants under the Company’s Equity Incentive Plan(s) in accordance with his position with the Company, as determined by the Board or a committee of the Board in its sole and absolute discretion. In addition to any other grants for which Executive may be eligible, upon execution of this Agreement, the Company shall grant Executive 50,000 shares of Restricted Stock, which grant shall be represented by a Restricted Stock Agreement, the form of which is attached hereto as Exhibit A. The Restricted Stock is granted pursuant to the terms and conditions of the Company’s Amended and Restated Equity Incentive Plan, the terms of which will be incorporated into the Restricted Stock Agreement. The grant of such equity incentive compensation may have tax consequences to the Employee, and Employee hereby acknowledges that he is aware of and accepts the risk of such tax consequences.

 

(c)                                  Clawback. The compensation and benefits provided pursuant to this Agreement are subject to any compensation recoupment policy or policies and related practices that may be adopted by the Company and in effect from time-to-time, designed to recover any amounts paid to the Executive based on inaccurate or incomplete financial information (each, a “Clawback Policy”). By signing this Agreement, Executive agrees to fully cooperate with the Company in assuring compliance with such policies and the provisions of applicable law, including, but not limited to, promptly returning any compensation subject to recovery by the Company pursuant to a Clawback Policy and applicable law.

 

6.                                      Executive Benefits.

 

(a)                                 Fringe Benefits; Paid Time Off. The Company will provide Executive with those fringe and other executive benefits on the same terms and conditions as are generally available to senior management from time-to-time (e.g., health and other insurance programs, etc.); provided, however, that the Company reserves the right to amend or terminate any employee or executive benefit plan or program at any time. Executive shall be entitled each year to one or more vacations and other paid time off (“PTO”) in an amount not to exceed 30 days, or otherwise in accordance with the Company’s PTO policies as in effect from time-to-time. Vacations and other PTO shall be scheduled so as to not unreasonably interfere with the business of the Company.

 

(b)                                 Reimbursement of Expenses. Executive is entitled to be reimbursed by the Company for reasonable business expenses incurred in performing his duties under the Company’s expense reimbursement policies as in effect from time-to-time or as otherwise approved by the CEO or the Board.

 

7.                                      Termination of Employment During the Term of the Agreement. Upon, and as of, the date of the Executive’s termination of employment with the Company for any reason, the Executive will be deemed to have resigned from all positions he then holds as an officer or

 

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director of the Company. The Executive’s employment may be terminated during the Term of this Agreement pursuant to the following terms and conditions:

 

(a)                                 Disability.

 

(i)                                     Should the Executive be unable to engage in any significant activity required by the terms of this Agreement by reason of any medically-determinable physical or mental impairment that lasts for a continuous period of three months or more, Executive shall be deemed “disabled” and the Company shall be entitled to terminate his employment. The Board shall have the right to determine disability for the purposes of this provision, relying where necessary on the advice of qualified medical providers, and any such determination shall be evidenced by the Board’s written opinion delivered to the Executive and shall be final and binding on the Executive. Such written opinion shall specify with particularity the reasons supporting such opinion and shall be signed by at least a majority of the Board. The Executive’s employment will terminate on the first day following the determination that the Executive is disabled.

 

(ii)                                  Upon a determination that the Executive is disabled, the Company shall pay to the Executive (1) all earned but unpaid Base Salary through the date of termination, prorated for any partial period of employment, (2) any benefits to which Executive is entitled under any benefit plan maintained by the Company to the date of termination; (3) any accrued but unused vacation or PTO in accordance with Company policy, and (4) any unreimbursed business expenses in accordance with the applicable policies of the Company (collectively, the “Accrued Obligations”). Upon payment of the Accrued Obligations, the Company’s obligations to Executive under this Agreement shall cease.

 

(b)                                 Company Terminates Executive’s Employment for Cause.

 

(i)                                     Definition. For purposes of this Agreement,  Cause means (1) the Executive’s failure to substantially perform his reasonably-assigned duties  under this Agreement (other than on account of disability); (2) any conviction of Executive of a felony or crime of moral turpitude; (3) the Executive engages in the use of alcohol or narcotics to the extent that the performance of his duties is materially impaired; (4) the Executive materially breaches the terms of this Agreement; (5) the Executive engages in willful misconduct that is materially injurious to the Company, other than business decisions made in good faith; (6) the Executive commits an act which constitutes in fact and/or law a breach of fiduciary duty; (7) any professional license held by the Executive’s is revoked or suspended ; or (8) any act or omission not described above that constitutes material and willful misfeasance, malfeasance, or gross negligence in the performance of his duties to the Company.

 

(ii)                                  Effective Date of Termination. Executive’s employment will terminate immediately upon written notice by the Company to Executive stating that Executive’s employment is being terminated for Cause.

 

(iii)                               Compensation and Benefits. If the Company terminates the Executive’s employment for Cause, the Company will pay Executive the Accrued Obligations, following which the Company’s obligations to Executive shall cease.

 

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(c)                                  Company Terminates Executive’s Employment Without Cause.

 

(i)                                     Effective Date of Termination. Executive’s employment will terminate on the 30th day after the Company gives written notice to Executive stating that Executive’s employment is being terminated without Cause. The Company may, at its discretion, place Executive on a paid administrative leave during all or any part of the notice period. During the administrative leave, the Company may bar Executive’s access to its offices or facilities or may provide Executive with access subject to such terms and conditions as the Company chooses to impose.

 

(ii)                                  Compensation and Benefits. If the Company terminates Executive’s employment without Cause on or before December 31, 2017, the Company shall pay to the Executive the Accrued Obligations, following which the Company’s obligations to Executive shall cease.  If the Company terminates Executive’s employment without Cause (subject to all of the terms and conditions of this Agreement, including without limitation Section 7(h)) after December 31, 2017, the Company will pay or provide Executive the sum of:

 

(1)                                 the Accrued Obligations; plus

 

(2)                                 four months of Executive’s then-current Base Salary, payable monthly in accordance with the Company’s then-current payroll practice (unless otherwise delayed under Section 7(h) below), unless such termination is within six months before or at any time following a Change in Control, in which case the payments described in this Section 7(c)(ii) shall be paid in full within 60 days of the date of termination. For purposes of this Section 7, “Change in Control” shall mean (A) a tender offer made and consummated for the ownership of 50% or more of the outstanding voting securities of the Company; (B) the sale of 50% or more of the outstanding voting securities of the Company in a single transaction or a series of transactions occurring during a period of not more than twelve months; (C) the Company is merged or consolidated with another corporation and as a result of such merger or consolidation less than 50% of the outstanding securities of the surviving or resulting corporation is owned in the aggregate by the shareholders of the Company that existed immediately prior the merger or consolidation; (D) the Company sells substantially all of its assets to another corporation that is not a wholly-owned subsidiary of the Company; or (E) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board.  Notwithstanding the foregoing, a Change in Control shall not include a public offering of the Company’s common stock or a transaction with its sole purpose to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction; plus

 

(3)                                 The continuation of all Company welfare benefits, including any medical, dental, vision, life and disability benefits pursuant to plans maintained by the Company under which the Executive and/or the Executive’s family were receiving benefits and/or coverage, for the four-month period following the date of the Executive’s termination, with such benefits provided to the Executive at no less than the same coverage level as in effect as of the date of termination and the Executive shall pay any portion of such cost as was required to be borne by key executives of the Company generally on the date of termination; provided,

 

5

 

however, that, the coverage for any plan subject to COBRA will discontinue if such coverage terminates under Section 4980B of the Code; and

 

(iii)                               Release Agreement. The Company will not make any payment to Executive or furnish any benefit under this Section 7(c) unless Executive signs (and does not revoke) a legal release (“Release Agreement”), in the form and substance reasonably requested by the Company.  The Release Agreement will require Executive to release the Company, directors, officers, employees, agents and other affiliates with the Company from any and all claims, including claims relating to Executive’s employment with the Company and the termination of Executive’s employment.  The Release Agreement must be executed and returned to the Company within either the 21 or 45 day period described in the Release Agreement (if applicable) and it must not be revoked by Executive within the seven-day revocation period described in the Release Agreement (if applicable).  Notwithstanding anything in this Agreement to the contrary, (1) the Company will provide the Release Agreement to the Executive in a timely manner to comply with the provisions under Code Section 409A, and (2) if the Company concludes, in the exercise of its discretion, that the payments due pursuant to this Agreement are subject to Section 409A of the Code, and if the consideration period, plus the revocation period described in the Release Agreement, spans two calendar years, the payments will be begin in the second calendar year.

 

(d)                                 Death.

 

(i)                                     Effective Date of Termination. Executive’s employment will terminate immediately upon the Executive’s death.

 

(ii)                                  Compensation and Benefits. Upon Executive’s death, the Company will pay or provide to Executive’s surviving spouse, or if none, to Executive’s heirs or devisees, the same compensation and benefits as if Executive was terminated by the Company without cause as set forth in Section 7(c)(ii).

 

(e)                                  Executive Voluntarily Resigns With Good Reason.

 

(i)                                     Definition. For purposes of this Agreement,  Good Reason means (1) any material diminution or alteration of Executive’s position, authority or duties under this Agreement without Executive’s prior written consent; (2) removing Employee from his position as described in Section 1 without his prior written consent, except for a termination of employment for death, disability or termination by the Company with or without Cause; (3) a reduction of Executive’s Base Salary, or any other failure of the Company to comply with Sections 4, 5 or 6; or (4) any material breach of this Agreement by the Company. Notwithstanding the above provisions, a condition is not considered Good Reason unless (X) Executive gives the Company written notice of such condition within 30 days after the condition comes into existence;  (Y) the Company fails to cure the condition within 30 days after receiving Executive’s written notice; and (Z) Executive terminates his employment within 60 days after the expiration of the Company’s cure period if the termination is to be treated as for Good Reason based on the uncured Good Reason event.

 

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(ii)                                  Effective Date of Termination. Executive’s employment will terminate on the earlier to occur as determined in the sole discretion of the Company of (x) the date that Executive terminates his employment or (y) the 60th day after the expiration of the Company’s cure period as specified in Section 7(e)(i).

 

(iii)                               Compensation and Benefits. If the Executive voluntarily resigns his employment for Good Reason (subject to all of the terms and conditions of this Agreement, including without limitation Section 7(h)), Company will pay or provide Executive the same compensation and benefits as if the Executive was terminated by the Company without Cause as set forth in Section 7(c)(ii).

 

(iv)                              Release Agreement. The Company will not make any payment to Executive or furnish any benefit under this Section 7(e) unless Executive signs (and does not revoke) a Release Agreement pursuant to the same terms and conditions as set forth in Section 7(c)(iii).

 

(f)                                   Executive Voluntarily Resigns Without Good Reason.

 

(i)                                     Effective Date of Termination. Executive’s employment will terminate on the 30th day after Executive gives written notice to the Company stating that Executive is resigning his employment with the Company for any reason other than Good Reason, unless the Company waives in writing all or part of this notice period (in which case the termination of employment is effective as of the date of the waiver).

 

(ii)                                  Compensation and Benefits. If the Executive voluntarily resigns without Good Reason, the Company will pay Executive the Accrued Obligations.

 

(g)                                  Leave of Absence. At the Company’s sole discretion, Executive may be placed on a paid administrative leave of absence for a reasonable period of time (not to exceed 60 days unless otherwise reasonably required to resolve matters under investigation) should the Board believe it necessary for any reason, including, but not limited to confirm that reasonable grounds exist for a termination for Cause, for example, pending the outcome of any internal or other investigation or any criminal charges.  During this leave, the Company may bar Executive’s access to the Company’s or any affiliate’s offices or facilities or may provide Executive with access subject to terms and conditions as the Company chooses to impose.  The Company’s decision to place Executive on a paid leave of absence will not constitute grounds for Executive to terminate his employment for Good Reason and receive any severance payments or benefits pursuant to Section 7(e).

 

(h)                                 Compliance with Code Section 409A.

 

(i)                                     Capitalized terms in this Section 7(h) not otherwise defined in this Agreement shall have the meaning assigned to them in the Code and the rules and regulations promulgated thereunder.

 

(ii)                                  This Agreement is intended to comply with Section 409A of the Code and shall be construed and operated accordingly. The Company may amend this Agreement at any time to the extent necessary to comply with Section 409A. The Executive shall

 

7

 

perform any act, or refrain from performing any act, as reasonably requested by the Company to comply with any correction procedure promulgated pursuant to Section 409A.

 

(iii)                               To the extent required to avoid the imposition of penalties or interest under Section 409A, any payment or benefit to be paid or provided on account of the Executive’s Separation from Service within the meaning of Section 409A if the Executive is a specified employee (within the meaning of Section 409A(a)(2)(B) of the Code) that would be paid or provided prior to the first day of the seventh month following the Executive’s Separation from Service shall be paid or provided on the first day of the seventh month following the Eligible Individual’s Separation from Service or, if earlier, the date of the Executive’s death. Further, if required to avoid imposition of penalties or interest under 409A, the amounts payable under this Agreement and subject to 409A(a)(2)(B)(i) may not be paid before the later of (1) 18 months following the date of this Agreement, or (2) six months following the payment event.

 

(iv)                              Each payment to be made under this Agreement is a separately identifiable or designated amount for purposes of Section 409A.

 

(i)                                     Mitigation/Offset. The Executive is under no obligation to seek other Employment or to otherwise mitigate the obligations of the Company under this Agreement, and the Company may not offset against amounts or benefits due Executive under this Agreement or otherwise on account of any claim (other than any preexisting debts then due in accordance with their terms) the Company or its affiliates may have against him or any remuneration or other benefit earned or received by Executive after such termination.

 

8.                                      Other Obligations.

 

(a)                                 Ownership of Work, Materials and Documents. The Executive will disclose promptly to the Company any and all inventions, discoveries, and improvements (whether or not patentable or registrable under copyright or similar statutes), and all patentable or copyrightable works, initiated, conceived, discovered, reduced to practice, or made by him, either alone or in conjunction with others, during the Executive’s employment with the Company and related to the business or activities of the Company and its affiliates (the “Developments”). Except to the extent any rights in any Developments constitute a work made for hire under the U.S. Copyright Act, which the parties acknowledge are owned by the Company and/or its applicable affiliate, the Executive assigns all of his right, title and interest in all Developments (including all intellectual property rights) to the Company or its nominee without further compensation, including all rights or benefits, including, without limitation, the right to sue and recover for past and future infringement.  Whenever requested by the Company, the Executive will execute any and all applications, assignments or other instruments which the Company deems necessary to apply for and obtain trademarks, patents or copyrights of the United States or any foreign country or otherwise protect its interests. These obligations continue beyond the end of the Executive’s employment with the Company with respect to inventions, discoveries, improvements or copyrightable works initiated, conceived or made by the Executive while employed by the Company, and are binding upon the Executive’s employers, assigns, executors, administrators and other legal representatives. Immediately upon the Company’s request at any time during or following the Term, Executive is required to return to the Company any and all Confidential and Proprietary Information (as defined hereinafter) and any other property of the

 

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Company then within Executive’s possession, custody and/or control. Failure to return this property, whether during the term of this Agreement or after its termination, is a breach of this Agreement.

 

(b)                                 Confidential and Proprietary Information. During the course of Executive’s employment, Executive will be exposed to a substantial amount of confidential and proprietary information, including, but not limited to, financial information, annual reports, audited and unaudited financial reports, operational budgets and strategies, geologic and well data, methods of operation, customer lists, strategic plans, business plans, marketing plans and strategies, new business strategies, merger and acquisition strategies, management systems programs, computer systems, personnel and compensation information and payroll data, and other such reports, documents or information (collectively the “Confidential and Proprietary Information”).  Due to Executive’s senior position with the Company and its affiliates, Executive acknowledges that he regularly receives Confidential and Proprietary Information with respect to the Company and/or its affiliates; for the avoidance of doubt, all such information is expressly included in Confidential and Proprietary Information. Executive promises that Executive will not retain, take with Executive or make any copies of such Confidential and Proprietary Information in any form, format, or manner whatsoever (including paper, digital or other storage in any form) nor will Executive disclose the same in whole or in part to any person or entity, in any manner either directly or indirectly, either while the Executive is employed by the Company or following termination of his employment for any reason. Excluded from this Agreement is information that (i) is or becomes publicly known through no violation of this Agreement; (ii) is lawfully received by the Executive from any third party without restriction on disclosure or use; (iii) is required to be disclosed by law; or (iv) is expressly approved in writing by the Company for release or other use by the Executive. Executive and the Company also acknowledge that because Executive is a senior executive he will have access to information (some of which is Confidential and Proprietary Information and some of which is not), employees and knowledge about the Company that is extremely valuable to the Company and which the Company needs to protect for a period of time after Executive terminates employment. Additionally, the Parties agree that the covenants in this Section 8 are reasonable and necessary to protect the Company’s legitimate business interests. Executive and the Company agree that the foregoing restrictive covenants are fair and reasonable and are freely, voluntarily and knowingly entered into. Further, each party has been given the opportunity to consult with legal counsel before entering into this Agreement.

 

(c)                                  Judicial Amendment. If the scope of any provision of this Section 8 of this Agreement is found by a court to be too broad to permit enforcement to its full extent, then that provision will be enforced to the maximum extent permitted by law. The parties agree that, if legally permissible, the scope of any provision of this Agreement may be modified by a judge in any proceeding to enforce this Section 8, so that the provision can be enforced to the maximum extent permitted by law. If any provision of this Agreement is found to be invalid or unenforceable for any reason, the parties agree that it will not affect the validity and enforceability of the remaining provisions of this Agreement.

 

(d)                                 Injunctive Relief, Damages and Forfeiture. Due to the nature of Executive’s position with the Company, and with full realization that a violation of this Section 8 may cause immediate and irreparable injury and damage, which is not readily measurable, and to protect the parties’ interests, the parties understand and agree that either party

 

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may also seek injunctive relief to enforce this Agreement in a court of competent jurisdiction to cease or prevent any actual or threatened violation of this Agreement.  In any action brought pursuant to this Section 8(d), the prevailing party will be entitled to an award of attorney’s fees and costs.

 

(e)                                  Survival. The provisions of this Section 8 survive the termination of this Agreement.

 

(f)                                   Cooperation; No Disparagement. So long as Executive is receiving any payments from the Company, Executive agrees to provide reasonable assistance to the Company (including assistance with litigation matters), upon the Company’s request, concerning the Executive’s previous employment responsibilities and functions with the Company. Company will reimburse Executive for his reasonable out-of-pocket expenses Executive incurs in connection with such cooperative efforts. Additionally, at all times after the Executive’s employment with the Company has terminated, Company (defined for these purpose only as any Company press release and the Board, the CEO and the CEO’s direct reports, and no other employees) and Executive agree to refrain from making any disparaging or derogatory remarks, statements and/or publications regarding the other, its employees or its services.

 

9.                                      General Provisions.

 

(a)                                 Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any applicable law, then, if legally permissible, such provision will be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no modification will make the provision legal, valid and enforceable, then this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly.

 

(b)                                 Assignment by Company. Nothing in this Agreement precludes the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation or entity that assumes this Agreement and all obligations and undertakings hereunder. Upon any consolidation, merger or transfer of assets and assumption, the term “Company” means any other corporation or entity, as appropriate, and this Agreement will continue in full force and effect.

 

(c)                                  Entire Agreement. This Agreement and any agreements concerning equity compensation or other benefits, embody the Parties’ complete agreement with respect to the subject matter in this Agreement and supersede any prior written or contemporaneous oral, understandings or agreements between the parties that may have related in any way to the subject matter in this Agreement, including but not limited to any offer letter provided to or signed by Executive. This Agreement may be amended only in writing executed by the Company and Executive.

 

(d)                                 Governing Law. Because the Company is a Colorado corporation, and because it is mutually agreed that it is in the best interests of the Company and all of its employees that a uniform body of law consistently interpreted be applied to the employment agreements to which the Company is a party, this Agreement will be deemed entered into by the

 

10

 

Company and Executive in Colorado. The law of the State of Colorado will govern the interpretation and application of all of the provisions of this Agreement.

 

(e)                                  Notice. Any notice required or permitted under this Agreement must be in writing and will be deemed to have been given when delivered personally or by overnight courier service or three days after being sent by mail, postage prepaid, at the address indicated below or to such changed address as such person may subsequently give such notice of:

 

	
if to the Company:
    	
 
    	
PetroShare Corp.
    
	
 
    	
 
    	
9635 Maroon Circle, Suite 400
    
	
 
    	
 
    	
Englewood, CO 80112
    
	
 
    	
 
    	
Attention:  Chief Executive Officer
    

 

if to Executive:

 

 

(f)                                   Non-Waiver; Construction; Counterparts. The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege conferred in this Agreement, or the waiver by that party of any breach of any of the terms, covenants or conditions of this Agreement,  will not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the waiver will continue and remain in full force and effect as if no such forbearance or waiver had occurred.  No waiver is effective unless it is in writing and signed by an authorized representative of the waiving party. This Agreement will be construed fairly as to both parties and not in favor of, or against, either party, regardless of which party prepared the Agreement. This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original, and all such counterparts will constitute but one instrument.

 

(g)                                  Successors and Assigns. This Agreement is solely for the benefit of the parties and their respective successors, assigns, heirs and legatees. Nothing in this Agreement will be construed to provide any right to any other entity or individual.

 

(h)                                 Indemnification. The Company agrees to indemnify the Executive to the fullest extent provided under the Company’s Bylaws, on the same terms and conditions as indemnification is generally provided to the Company’s officers and directors, in the event that he was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, by reason of the fact that the Executive is or was a director, officer, employee or agent of the Company or any of its affiliates; provided, however, that the Executive is not entitled to indemnification under this Section 9(h) relating to any claims, actions, suits or proceedings arising from his breach of this Agreement.

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement to be effective as of the date first above written.

 

	
 
    	
PETROSHARE CORP., 

a   Colorado corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Stephen J. Foley
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Stephen   J. Foley
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Paul D. Maniscalco
    
	
 
    	
Paul   D. Maniscalco
    

 

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EXHIBIT A

 

Form of Restricted Stock Agreement

 

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