Document:

Exhibit 10.1

 

THIS LOAN AGREEMENT is made, entered into and effective as of the 27th day of February, 2015, by ENERGY SERVICES OF AMERICA CORPORATION, a Delaware corporation, C. J. HUGHES CONSTRUCTION COMPANY, INC., a West Virginia corporation, NITRO ELECTRIC COMPANY, INC., a West Virginia corporation, CONTRACTORS RENTAL CORPORATION, a West Virginia corporation, and S T PIPELINE, INC., a West Virginia corporation, (collectively “Borrower”), UNITED BANK, INC., a West Virginia banking corporation (“Lender”), and DOUG REYNOLDS and MARSHALL REYNOLDS (collectively “Guarantor”).

WHEREAS, Borrower has applied to Lender for a revolving line of credit in the maximum principal amount of Ten Million Dollars ($10,000,000.00) to replace the existing revolving line of credit; and

WHEREAS, Lender has considered Borrower’s request for financing and is willing to extend such financing to Borrower in accordance with the terms and conditions of this Agreement and the other Loan Documents (as hereinafter defined), and compliance by Borrower with all of the terms and provisions and the fulfillment of all conditions precedent to Lender’s obligations contained therein;  and

WHEREAS, Guarantor has agreed to guarantee the repayment of the Revolving Line of Credit for the purpose of inducing Lender to lend the funds to Borrower;

NOW, THEREFORE, in consideration of the premises which are not mere recitations but which form an integral part of this Agreement, and for other good and valuable consideration, the sufficiency and receipt of all of which are acknowledged by the parties hereto, the parties agree as follows:

ARTICLE I

DEFINITIONS, TERMS AND REFERENCES

1.01   Certain Definitions.  In addition to such other terms as elsewhere defined herein, as used in this Agreement and in any Exhibits, the following terms shall have the following meanings, unless the context requires otherwise.

“Account Debtor” shall mean any Person obligated to Borrower on an Account.

“Account(s) or Accounts Receivable(s)” shall mean any right to payment of a monetary obligation, whether or not earned by performance, including, without limitation, any receivable, contract right, note draft, instrument, acceptance, chattel paper, lease, or other writing or open account resulting from the sale, lease, license, assignment or other disposal of property by Borrower, or from services rendered or to be rendered by Borrower.

 

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“Actual Knowledge” means:

(a)           With respect to any Person who is an individual, the actual knowledge, after a Good Faith inquiry, of such Person;

(b)           With respect to any Person which is a corporation, limited liability company, partnership, or limited partnership, the actual knowledge, after a Good Faith inquiry, of:

(i)           Any officer, director, shareholder, member, manager or general partner of such Person; or

(ii)          Any employee of such Person, with management responsibilities.

“Advance” shall mean a disbursement of proceeds of the Revolving Credit Facility.

“Affiliate(s)” of Borrower shall mean:

(a)           Any Person who is now or who may hereafter be a shareholder having 20% or more of the voting power of Borrower; or

(b)           Any Person, including, but not limited to, a principal or family member related by blood or marriage, who, directly or indirectly, at any time is in control of, is controlled by, or is under common control with, Borrower.

“Agreement” shall mean this Loan Agreement and all of the schedules and exhibits as the same may be amended or supplemented from time to time.

“Applicable Accounting Standards” means (a) GAAP, or (b) another comprehensive basis of accounting (OCBOA) approved by Lender.

“Approved Accountants” means any of the top U.S. national accounting firms as of the date hereof or another independent public accountant acceptable to Lender.

“Audited Financial Statements” means, for any Person, Financial Statements of such Person in reasonable detail and accompanied by an opinion thereon of independent public accountants of recognized standing acceptable to Lender to the effect that such Financial Statements were prepared in accordance with Applicable Accounting Standards consistently maintained and applied (except as noted therein), and that the examination of such accounts in connection with such Financial Statements has been made in accordance with Applicable Accounting Standards and accordingly, includes such tests of the accounting records and such other auditing procedures as were considered necessary under the circumstances.

 

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“Borrower” shall mean both jointly and severally Energy Services of America Corporation, a Delaware corporation, C. J. Hughes Construction Company, Inc., a West Virginia corporation, Nitro Electric Company, Inc., a West Virginia corporation, Contractors Rental Corporation, a West Virginia corporation, and S T Pipeline, Inc., a West Virginia corporation.

“Borrowing Base” shall mean an amount equal to the sum of:

(a)           Fifty percent (50%) of Eligible Account Receivables; and

(b)           Sixty-Five percent (65%) of Eligible Equipment less the amount of term debt outstanding (whether by Lender or other Equipment Lender).

“Borrowing
Base Report” means that report on Lender’s standard form, or on a form acceptable to Lender, to be prepared by
Borrower in accordance with Lender’s instructions, and submitted to Lender by Borrower at specified intervals and/or occasions,
and detailing pertinent information as regards the Eligible Accounts Receivable including but not limited to an accounts receivable
aging report.  The Borrowing Base Report shall be signed by the President or Chief Financial Officer of Borrower setting
forth and certifying the calculation of the Borrowing Base as of the end of that period or for the date upon which any Advance
is requested.

“Business Day” means a day other than a Saturday, Sunday or other day of which commercial banks in West Virginia are authorized by law to close.

“Claims” means any and all:

(a)           Damages, claims, liabilities, causes of action, contracts or controversies or any type, kind, nature, description or character;

(b)           Debts, accounts, sums of money, compensation, losses, costs, or expenses;

(c)           Breaches of contract, duty, or any other type of relationship;

(d)           Acts of omission, misfeasance, or malfeasance; and

 

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(e)           Commitments or promises of any type made prior to the date of this Agreement.

“Closing or Closing Date” shall mean the date on which this Agreement and other Loan Documents shall have been executed and delivered, and all conditions precedents set forth herein are met.

“Collateral” as utilized herein shall mean, all assets or property (whether real, personal or mixed) to which Lender is entitled to look now or hereafter for recovery for any and/or all of Borrower’s obligations under any of the Loan Documents and includes, without limitation, all of the personal property and guarantees described in Article III.

“Collateral Documents” shall mean all of the instruments and rights securing the Obligations.

“Corporate Documents” means, for any corporation, the following:

(a)           Copy of the Articles of Incorporation of such corporation, and all amendments thereto, certified as complete and correct by the Secretary of State (or other appropriate officer) of the state of incorporation;

(b)           A current certificate of corporate existence and good standing of such corporation, issued by the appropriate officer or department of the state of incorporation, and, if the corporation is doing business in other states, either:

(1)          Evidence that the activities of such corporation do not require that such corporation qualify to do business in said states, or

(2)          A current certificate issued by the Secretary of State of such states evidencing the continuing authority of such corporation to do business in the said states; or

(3)          A current certificate issued by the Secretary of State of said states evidencing the continuing authority of such corporation issued by the applicable authority of the state, confirming the filling of all required franchise tax reports and the payment of all franchise taxes due;

(c)           A signed certificate of the Secretary or Assistant Secretary of such corporation certifying the names of the officers of such corporation authorized to sign each of the Loan Documents to which it is a party and the other documents or certificates to be delivered pursuant to the Loan Documents to which it is a party, together with the true signature of each such officer.  Lender may conclusively rely on such certificate until Lender shall receive a further certificate of the Secretary or Assistant Secretary of such corporation canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate;  and

 

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(d)           Resolutions of such corporation approving the execution, delivery and performance of Loan Documents to which such corporation is party and the transactions contemplated therein, duly adopted by the Board of Directors of such corporation and accompanied by a certificate of the Secretary or Assistant Secretary of Borrower stating that such Resolutions are true and correct, have not been altered or repealed and are in full force and effect.

“Credit Insurance” means a policy of credit insurance, satisfactory to Lender, insuring Accounts collaterally assigned to Lander naming Lender as a “loss payee”.

“Debtor Relief Laws” means any applicable relief, liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar laws affecting the rights or remedies of creditors generally, as in effect from time to time.

“Default Rate” shall mean that interest rate per annum equal to five percent (5%) per annum in excess of the Interest Rate set forth in the Note.

“Dividends” means, with respect to any Person:

(a)           The payment of any dividends or distributions (whether by cash, property, securities, partnership interest or profits interest in such Person); or

(b)           The redemption or acquisition of securities of or any other ownership interest in such Person unless made contemporaneously from the net proceeds of the sale of such securities or ownership interest.

“Eligible Accounts Receivable” means all Accounts of Borrower which are not Ineligible Accounts.

“Eligible Equipment” means all Equipment of Borrower and Guarantor which is not Ineligible Equipment.

“Event(s) of Default” shall have the meaning set forth in Article IX hereof.

 

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“Exhibits” or “Schedules” shall mean those exhibits and schedules attached to and made a part of this Agreement.

“Financial Statements” means, with respect to any Person, such balance sheets, statements of operations, statements of cash flow, statements of changes in partners’ capital or shareholders’ equity and other financial information with respect to such Person as shall be reasonably required by Lender, and which shall be prepared in accordance with Applicable Accounting Standards, consistently applied for all periods.

“Financing Statements” means financing statements to be filed with the appropriate state or county offices, or both, for the perfection of a security interest in any of the Collateral or any other collateral or security for the credit facilities described herein.

“Fiscal Year” means, for any Person, the calendar year or such other period as such Person may designate and Lender may approve in writing.

“GAAP” means those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants or by the Financial Accounting Standards Board or through appropriate boards or committees thereof after the date hereof, and which are consistently applied for all periods, so as to properly reflect the financial position of a Person, except that any accounting principle or practice required or permitted to be changed by the Financial Accounting Standards Board (or other appropriate board or committee of that Board) in order to continue as a generally accepted accounting principle or practice may be so changed, so long as such required or permitted change shall not have the effect of permitting such Person’s compliance with any financial covenant or performance requirements contained in the Loan Documents when, without such change, such Person would not so comply.  The term “consistently applied” shall, however, mean not only that the accounting principles observed in the current period are comparable in all material respects to those applied in the preceding period, but that, in the case of financial statements furnished to Lender, the methods of calculation, aggregation and presentation of the balance sheet, statements of income and retained earnings and statements of cash flows shall be substantially the same and as required by this Agreement.

“Good Faith” means honesty in fact in the conduct or transaction concerned. The burden of establishing lack of Good Faith is on the party against whom the power has been exercised.

 

“Governmental Authority(ies)” shall mean all federal, state and local governments, including the United States of America, and any subdivision of any of the foregoing, and any agency, department, commission, board, authority or instrumentality, bureau or court having jurisdiction over the Collateral, or over Borrower, or any of its respective businesses, operations, assets, or properties.

 

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“Governmental Requirements” means all laws, ordinances, rules and regulations of any Governmental Authority applicable to Borrower, the Collateral or Lender, including, without limitation, all applicable licenses, building codes, restrictive covenants, zoning and subdivision ordinances, flood disaster and environmental protection law, and the American Disabilities Act.

“Guarantor” shall mean, individually and collectively, jointly and severally, Doug Reynolds and Marshall Reynolds, each of whom is an indirect beneficiary of the Loan.

“Indebtedness or Debt” means all moneys now or hereafter owed or liabilities incurred, outright or otherwise, which give rise to an obligation of any Person to perform payment whether in the form of cash or otherwise.

“Ineligible Accounts Receivable” means the following Accounts of Borrower:

(a)           Aged Accounts.  Accounts aged more than ninety (90) days from the original invoice due date;

(b)           Contra Accounts.  Accounts subject to set-off, defense, warranty claim, credit, allowance or adjustment by the Account Debtor except any normal discount allowed for prompt payment; PROVIDED THAT, if Accounts payable by Borrower to an Account Debtor shall be netted against Accounts due from such debtor and the difference (if positive) shall constitute Eligible Accounts from such debtor for purposes of determining the Borrow­ing Base;

(c)           Cross Aging Rule.  Accounts due Borrower or Guarantor from an Account Debtor which has twenty-five percent (25%) (upon notice, such other percentage as Lender, in its discretion, shall determine), or more of its total aggregate Accounts more than ninety (90) days past the original invoice date.  None of the Account’s Debtor’s Accounts shall thereafter be Eligible Accounts, until such time, if any, as the Lender may, in its sole discretion, determine that the Account Debtor’s percentage of past due Accounts has been satisfactorily reduced or eliminated.

(d)           Bonded Accounts.  Accounts which have been bonded or become subject to a suretyship or similar arrangement;

(e)           Affiliated Accounts.  Accounts due Borrower or Guarantor from an Affiliate;

 

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(f)           Foreign Accounts.  Foreign Accounts, unless such account shall be insured by Credit Insurance, or such account shall be supported by a letter of credit for the benefit of, and acceptable to, Lender or such Account shall be eligible pursuant to a duly executed Loan Authorization Agreement issued by the Small Business Administration of the United States Government in favor of Lender, or such Account is eligible pursuant to a duly executed Borrower Agreement issued by the Export-Import Bank of the United States in favor of Lender, or such Account is otherwise expressly approved by Lender in writing.  A Foreign Account is any Account due from any Person located outside the fifty states comprising the United States of America and the District of Columbia.

(g)           Bill and Hold Accounts.  Accounts generated by the sale of goods or performance of services for which an invoice has been issued to the Account Debtor but the goods represented by the Account remain on the premises of Borrower, or the performance of service has not been completed.

(h)           Government Accounts.  Accounts due from any branch or agency of the Federal Government for which the proper Assignment of Claims form and Notice of Assignment form have not been fully executed, and Accounts due from any Governmental Agency which, by contract from the Agency, precludes and/or prohibits the Assignment of the Accounts to a third party;

(i)            Doubtful Collection.  Accounts, which at the sole discretion of Lender are deemed doubtful for collection for any reason to include, but not be limited to, disputes, returns and legal proceedings, whether in process or pending;

(j)            Concentrated Accounts.  Accounts due Borrower from an Account Debtor and any Affiliates of the Account Debtor which comprise more than fifty percent (50%) of Borrower’s total aggregate dollar amount of all outstanding Accounts;

(k)           Insolvency of Account Debtor.  Accounts owed by an Account Debtor as to which Borrower or Lender has received notice or has knowledge of the Account Debtor’s bank­ruptcy, insolvency or other facts which make collection doubt­ful;

(l)            Instruments/Chattel Paper.  Accounts evidenced by a promissory note or other instrument;

(m)          Encumbered Accounts.  Accounts which are not subject to a perfected first security interest in favor of Lender or are subject to any other lien;

 

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(n)           Other Accounts.   Accounts which are for:

(1)           Contractor progress billings;

(2)           Retainage;

(3)           Sales to employees;

(4)           Assignments or guaranteed sales; or

(5)           Claim types (i.e., insurance warranty claims or freight claim damage).

“Ineligible Equipment” means the following equipment of Borrower:

(a)           Which is not legally owned by the Borrower;

(b)           In which Lender does not have a perfected lien;

(c)           If applicable, not properly registered and/or titled;

(d)           Is damaged or with missing component/parts and not in a whole condition;

(e)           Is otherwise deemed ineligible by Lender at its sole discretion.

“Initial Financial Statements” means the Financial Statements delivered to Lender pursuant to Section 4.01 of this Agreement.

“Interest Rate” shall mean the Interest Rate as calculated, determined and defined in the Note.

“Late Payment Fee” means an amount equal to five percent (5%) of the overdue payment for which such Late Payment Fee is charged.

“Legal Opinion” means one or more favorable opinions of counsel for Borrower, each acceptable to lender as to form, scope and substance, which opinions as a minimum shall provide:

(a)           That Borrower is valid legal entity and has the power and authority to enter into this agreement and this transaction is not prohibited by any other agreement to which Borrower is a party of which such counsel has knowledge;

 

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(b)           That the documents, which evidence and secure the credit facilities are duly and validly executed and each constitutes a valid and legal binding obligation of Borrower;

(c)           That the documents create valid liens on the Collateral;

(d)           That the credit facilities and their terms do not violate any laws including, but not limited to, any usury laws or similar laws; and

(e)           There are no pending or threatened actions or suits against Borrower that shall have a Material Adverse Effect of its financial condition, or impair the ability of the Borrower to carry on its business substantially as now conducted.

“Lender” shall mean United Bank, Inc., a West Virginia banking corporation.

“Lien” means any lien, security interest, tax lien, pledge or encumbrance, or conditional sale or title retention agreement, or any other interest in property designed to secure the repayment of Indebtedness, whether arising by agreement or under any statute or law, or otherwise.

“Limited Liability Company Documents” means for any limited liability company, the following:

(a)           A copy of the Articles of Organization of such limited liability company, amendments thereto, and all other organizational documents of the limited liability company, all filed with and certified by the Secretary of State;

(b)           A copy of the operating agreement certified by a manager of the limited liability company or its members as to its completeness and accuracy; and

(c)           A declaration from the members authorizing the execution, delivery and performance of the Loan Documents on or in a form provided by or acceptable to Lender.

  “Loan” or “Loans” shall mean the credit facility(ies) described in Article II of this Loan Agreement.

  “Loan Documents” shall mean this Agreement, the Note, Collateral Documents, any Financing Statements covering the Collateral, and any and all other documents, instruments, certificates and agreements executed and/or delivered by Borrower in connection herewith, or any one or more or all of the foregoing, all as the context shall require.

 

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“Lock Box Agreement” means that certain Lock Box Agreement by and between Borrower and Lender.

“Material Adverse Effect” or “Material Adverse Change” means any (a) material adverse effect whatsoever upon the validity, performance or enforceability of any Loan Documents, (b) material adverse effect upon the financial condition or business operations of Borrower or any Guarantor, or (c) material adverse effect or change upon the ability of Borrower to fulfill its obligations under the Loan Documents, or which causes an Event of Default or any event which, with notice or lapse of time or both, could become an Event of Default.

 

“Maturity” or “Maturity Date” shall mean February 27, 2016.

“Note” or “Revolving Credit Note” shall mean that certain note made by Borrower to the order of Lender in the principal amount of Ten Million Dollars ($10,000,000.00) and delivered by Borrower pursuant to paragraph 2.01.

“Obligations” means all present and future indebtedness, obligations, and liabilities of Borrower to Lender, and all renewals and extensions thereof, or any part thereof, arising:

(a)           Pursuant to this Loan Agreement or represented by the Note, and all interest accruing thereon and fees and charges thereunder, and attorneys’ fees incurred in the drafting, negotiation, enforcement or collection thereof, regardless of whether such indebtedness, obligations, and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several; together with all indebtedness, obligations and liabilities of Borrower evidenced or arising pursuant to any of the other Loan Documents, and all renewals, modifications, increases and extensions thereof, or any part thereof;

(b)           Pursuant to any other loan or advances which Lender may hereafter make to Borrower in connection with this Loan Agreement or the Collateral;

(c)           Pursuant to any and all “Rate Management Obligations”; and

(d)           Pursuant to all other and additional debts, obligations and liabilities of every kind and character of Borrower now or hereafter existing in favor of Lender in connection with the Note or the Collateral, regardless of whether such debts, obligations and liabilities be direct or indirect, primary or secondary, joint, several or joint and several, fixed or contingent, and regardless of whether such present or future debt, obligations and liabilities may, prior to their acquisition by Lender, be or have been payable to or in favor of some other person or entity or have been acquired by Lender in a transaction with one other than Borrower.

 

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“Organizational Documents” means, for any Person which is limited liability company, copies of the Limited Liability Company Documents or for any person which is a corporation, the Corporate Documents, as applicable.

“Permits” means all licenses, permits, approvals, authorizations, exemptions, registrations, variances, rights-of-way, franchises, privileges, immunities, grants, ordinances, classifications, certificates and registrations which are necessary to conduct Borrower’s operations in the manner they have been and will be conducted.

“Permitted Encumbrances” shall mean, without duplication:

(a)           Liens for taxes not yet due and payable; and

(b)           Such other liens as are set forth in Schedule 1.01(a) attached hereto.

 

“Person” shall mean, and include, any individual, corporation, partnership, joint venture, association, joint stock company, trustee, an organization, government or any agency or political subdivision thereof, or any other form of entity.

“Potential Default” means any event which would, if uncured following the giving of notice or passage of any applicable cure period, or both, constitute an Event of Default.

“Revolving Credit Commitment” or “Revolving Credit Facility” means the revolving credit facility of even date herewith extended by Lender in favor of Borrower in the principal amount of Ten Million Dollars ($10,000,000.00) pursuant to paragraph 2.01.

“Signatory” means, with respect to any document or instrument, Borrower and each Guarantor, and any Affiliate of any of the foregoing, to the extent that any such Person is a party thereto.

“UCC” or “Code” means Uniform Commercial Code in effect from time to time in the State of West Virginia, or such other state or states having jurisdiction with respect to all or any part of the Collateral.

“Unaudited Financial Statements” means, for any Person, Financial Statements of such Person in reasonable detail and certified by such person (if such Person is an individual) or by a responsible and authorized officer or representative of such Person.

 

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1.02           Rules of Construction.  The following rules of construction shall apply:

(a)           Use of Defined Terms. All terms defined in this Agreement and the Exhibits shall have the same defined meanings when used in any other Loan Documents, unless the context shall require otherwise.

(b)           Accounting Terms. All accounting terms not specifically defined herein shall have the meanings generally attributed to such terms under generally accepted accounting principles consistently applied.

(c)           UCC Terms. The terms “Equipment”, “Fixtures”, “Accounts”, “Inventory”, “Chattel Paper”, “Instruments”,  “General Intangibles”, “Proceeds”, “Products”, and “Account Debtors” as and when used in the Loan Documents, shall have the same meanings given to such terms under the UCC.

(d)           Terminology.  All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural should include the singular. Titles of Articles, Sections and paragraphs in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Sections, paragraphs, clauses, subclauses or Exhibits shall refer to the corresponding Section, paragraph, clause, subclause of, or Exhibit attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions, divisions of, or Exhibit to, another document or instrument.

(e)           Exhibits. Any Exhibits/Schedules attached hereto are by reference made a part hereof as fully as if the contents thereof were set forth expressly herein.

 

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ARTICLE II

FINANCING/FEES

2.01. Revolving Line of Credit Facility.  Upon the execution of this Agreement and compliance with its terms and conditions by Borrower and Guarantor, and so long as there is not in existence any Potential Default or Event of Default, Lender hereby estab­lishes a Revolv­ing Line Credit Facility in favor of the Borrower as follows:

(a)           Amount of Revolving Credit Facility.  The total amount of the Revolving Credit Facility estab­lished in favor of Borrower is Ten Million Dollars ($10,000,000.00).  The Revolving Credit Facility is evidenced by and shall be payable and otherwise be made on the terms set forth in the Note.  Borrower may obtain an Advance under the Revolving Line of Credit Facility in accordance with the terms established in this Loan Agree­ment.

(b)           Interest Rate; Default Rate.  The Revolving Credit Facility shall bear interest from the date hereof until Maturity at the Interest Rate set forth in the Note.  In an Event of Default the Note shall bear interest until paid at the Default Rate.

(c)          Late Payment Fee. In the event any payment of princi­pal or interest on the Note becomes overdue for a period in excess of ten (10) days, Borrower shall pay to Lender a Late Payment Fee in connection with such overdue payment, which amount as speci­fied by Lender is an estimate of the additional adminis­trative costs and expenses Lender will incur in servicing such late payment.

(d)           Repayments.  Repayment of principal and interest on the Revolving Credit Facility shall be due and payable as follows:

(1)       Accrued interest shall be paid monthly beginning April 1, 2015 and continuing on the first day of each month thereafter until the Maturity Date.

(2)       If at any time the outstanding principal balance shall exceed the Borrowing Base, Borrower shall make a principal payment equal to such excess.

(3)       All principal and interest shall be due and payable on the Maturity Date.

Borrower shall cause all payments to be made to Lender at the address set forth in the Note, or such other address as Lender may from time to time designate in accordance with this Agreement.  After the Maturity of the Revolving Credit Facility, no further Advances shall be made and the obligations of Borrower and the rights and privileges of Lender under the Loan Documents shall continue in full force and effect until the Revolving Credit Facility has been paid and performed in full.

Lender may, at its option and in its sole discretion, elect to extend the Maturity Date of the Revolving Credit Facili­ty for an additional year.  Lender, however, is under no obligation to extend the Maturity Date or refinance the indebtedness evidenced by the Note.

 

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(e)           Manner and Application of Payments.  All pay­ments of principal and interest on the Note, and of all other amounts payable under this Loan Agreement or the other Loan Documents by Borrower to or for the account of Lender, shall be made by Borrower to Lender, before 2:00 p.m. (Eastern Standard time) in federal or other immediately available funds, without setoff, counterclaim or deduction for any reason.  Should any payment required hereby or under any other Loan Document become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day.  Funds received after 2:00 p.m. (Eastern Standard Time) shall be treated for all purposes as having been received by Lender on the first Business Day next following receipt of such funds.  All payments made on the Revolving Credit Facility, so long as no Event of Default has occurred and is continuing, shall be applied first to any payment on the Revolving Credit Facility (including princi­pal, interest, costs, fees and expenses) then due and owing, second to any past-due payment on the Revolving Credit Facility, and third, to any remaining Obligations in such order and manner as Lender may determine, any instructions from Borrow­er or any other Person to the contrary notwithstanding.  All payments made on the Note, so long as an Event of Default has occurred and is continu­ing, shall be applied to the Obligations in such order and manner as Lender may determine, any instructions from Borrower or any other Person to the contrary notwithstand­ing.  Subject to the foregoing limitations, Lender may, in its sole and absolute discretion, apply payments first to satisfy the portion of the Obligations, if any, for which Borrower or any other Person has no personal, partnership or corporate liability, and then to the remaining Obligations.

(f)            Prepayment of Loan.  Subject to the terms of the Note, Borrower at any time and from time to time may prepay the principal of the Revolving Credit Facility then outstand­ing, in whole or in part, without premium or penal­ty.

(g)           Proceeds.  Borrower covenants and agrees that the Advances made herein shall be used by Borrower solely for the purpose of providing working capital.

 

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(h)           Draw Requests.  Lender shall grant Borrower such Advances on the Revolving Credit Facility as the Borrower may from time to time request in accordance with the provisions of this Loan Agreement; provided, however, that in no event shall the amount outstanding under the Revolving Credit Facility exceed the lesser of, (i) Ten Million Dollars ($10,000,000.00), or (ii) the “Borrowing Base.”  The Eligible Accounts and Eligible Equipment used in the Borrowing Base calculation shall be deter­mined by Lender in its sole discretion.  If Lender, at any time in its sole discretion, determines that any such method of valuation overstates the actual fair market value at the time, Lender may recalculate the values used for fair market value.  Lender may from time to time adjust the preceding percentage or modify or add categories of eligibility in order to reflect the composition of and actual experience with the eligible collateral.  Only collateral for which Borrower’s representations and warranties under this Loan Agreement and the other Loan Documents are true and correct at the time of calculation shall be included in the aggregate Borrowing Base.  Borrower acknowledges and understands that characterization of any Account due from an Account Debtor as an Eligible Account shall not be deemed a determination by Lender as to its actual value nor in any way obligate Lender to accept any account subse­quently arising from such debtor to be, or to continue to deem such account to be, an Eligible Account; it is Borrower’s respon­sibility to determine the credit worthiness of Account Debtors and all risks concerning the same and collection of Accounts are with Borrower; and all Accounts, whether or not Eligible Accounts, constitute Collateral.

 

(i)            Procedures and Conditions for Advances.  The obtaining by Borrower of each Advance pursuant hereto shall be subject to the following terms and conditions:

(1)       Whenever Borrower desires to obtain an Advance pursuant to this Loan Agreement, the Borrower shall by writing, during the Lender’s normal business hours, request dis­bursement of an Advance, specifying the amount of the Advance requested and the date on which Borrower wishes the funds to be made available which date shall be no sooner than two (2) Busi­ness Days after receipt by Lender of such request.  Borrower hereby agrees to deliver to Lender, prior to each Advance, written confirmation of such request, in form and substance acceptable to Lender specifying the amount of the Advance re­quested, the date on which Borrower wishes the funds to be made available, and a current Borrowing Base Report.  All advances made shall be deposited into Borrower’s Account No. 06266-6383, established with Lender.

(2)       Borrower shall not be entitled to obtain any  Advance if any Event of Default or Potential Default shall exist in this Agreement or any other Loan Documents.

(3)       Each request by Borrower for an Advance shall, in and of itself, constitute a continuing representation and warranty by Borrower to Lender:

(i)           That the Borrower then is, and at the time the Advance is actually made will be, enti­tled under this Loan Agreement to obtain that Advance; and

 

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(ii)          That all of the covenants, agreements, representations and warranties made by the Borrower herein, in any of the Loan Documents and in any writing delivered pursuant hereto or thereto are true and correct, and have been fully complied with, as of such date.

(j)            Additional Limitations on Advances.  The Line of Credit must rest at zero dollars for at least sixty (60) total days over the three hundred and sixty five (365) term of the Loan, provided, however, thirty (30) of the days must come between December 1 and February 28.

(k)           Borrowing Base Report.   Borrower shall submit a current Borrowing Base Report to Lender on a monthly basis within ten (10) days after the end of each calendar month.

(l)        
   On Site Reviews.  Representatives of Lender’s Asset-Based Lending Services department shall
conduct periodic on site reviews of the Borrower's
financial records, inventory and procedures at intervals deemed appropriate by the Lender.  Borrower shall allow the
Lender or its agent(s) access to the books and records of the Borrower and shall allow Lender to make copies thereof.  Borrower
agrees to pay to Lender as reimbursement for expenses incurred in the proper monitoring and management of the Accounts, including,
but not limited to, travel expenses, specialized equipment needed to count or value goods pledged as Collateral to Lender, the
use of outside firms to perform on-site  Asset Based Lending Collateral Reviews/Examinations as deemed necessary by
Lender to properly manage/monitor Collateral, with said reimbursements being represented by receipts and/or listing of expenses
submitted to Borrower by Lender, along with Lender’s invoice for payment/reimbursement.

 

2.02.            Application Fee. On the date hereof, unless sooner paid, there shall be due and owing to Lender from Borrower an initial and annual fee of Fifty Thousand Dollars ($50,000.00) to compensate Lender for its expenses incurred in underwrit­ing this transaction, separate and apart from any interest charge.

2.03.            Professional Fees, Expenses.  On demand, Borrower shall pay to Lender all reasonable payments made or costs (including legal fees and expenses) by Lender in extending credit hereunder or in exercising any of its rights herein.

In the event Borrower fails to pay any fees set forth above or the expenses described herein at the time of demand therefore or at the time due, Lender may, at its option, advance said fee against the Revolving Credit Facility.  Any fees not paid on demand or through an Advance under the Revolving Credit Facility shall, without waiving any Potential Default or Event of Default resulting from such nonpayment, bear interest from the date of demand at the same rate of interest charged on the Revolving Credit Facility until paid.

 

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2.04             Fees for Asset-Based Lending Services.  Borrower shall pay to Lender such fees as have been agreed upon and set forth in the Lock Box Agreement.  In addition, Borrower shall pay to Lender as reimbursement for expense(s) incurred in the proper monitoring and management of the Accounts by the Lender and any unusual expense(s) such as, but not limited to, travel expense(s), specialized equipment needed to count and/or value goods pledged as collateral to Lender, the use of outside firms to perform On-Site Asset-Based Lending Collateral Re­views/Examinations as deemed necessary by Lender to properly man­age/monitor collateral, with said reimbursement being represented by receipts and/or listing of expense(s) submitted to the Borrower by Lender along with the Lender's invoice for pay­ment/reimbursement.

ARTICLE III

SECURITY INTEREST - COLLATERAL

3.01.            Security for the Obligations. Borrower shall provide the following security for the Loan:

 

 

(a)           Security Agreement.  Borrower shall execute and deliver a Security Agreement and such other documents required by Lender whereby Borrower shall grant a lien to Lender encumbering all business assets of Borrower, including, but not limited to, all Accounts, Equipment and other property of every kind or nature, whether now or hereafter owned by Borrower.

(b)           Life Insurance Policy.  Doug Reynolds shall use his best efforts to obtain a life insurance policy for One Million Dollars, which policy shall be collaterally assigned to Lender.

3.02.            Guarantor.  The Loan shall be guaranteed by the Guarantor in accordance with the terms of the Guaranty Agreement.  The Guaranty Agreement shall be:

(a)           An absolute, irrevocable, and unconditional guarantee, joint and several; and

(b)           Upon such other terms and provisions as are set forth in the Guaranty Agreement.

3.03.            Lender Offset.  Borrower and Guarantor hereby grants to Lender a right of offset, to secure repayment of the Obligations, upon any and all monies, securities, or other property of Borrower and Guarantor, respectively, and the proceeds therefrom, now or hereafter held or received by or in transit to Lender,  from or for the amount of Borrower and Guarantor, whether for safekeeping, custody, pledge, transmission, collection, or otherwise, and also upon any and all  deposits (general or specified) and credits of Borrower or Guarantor, and any and all claims of Borrower or Guarantor against Lender at any time existing.  Lender is hereby authorized at any time and from time to time during the occurrence of an Event of Default, without notice to Borrower or Guarantor to offset, appropriate, apply, and enforce such right of offset against any and all terms hereinabove referred to against the Obligations.  For purposes of this Section 3.02, Borrower and Guarantor shall each be deemed directly indebted to Lender in the full amount of the Obligations, and Lender shall be entitled to exercise the rights of offset provided for above.

 

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3.04.            Further Assurances.  Borrower and Guarantor will make, execute or  endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, additional agreements, undertakings, conveyances,  deeds of trust, mortgages, transfers, assignments, financing statements or other assurances, and take all such other action, as Lender may, from time to time, in Good Faith deem necessary or proper in connection with  this Loan Agreement or any of the other loan documents, the obligations of Borrower and Guarantor hereunder or thereunder, or for better assuring and confirming unto Lender all or any part of the security for any of the Obligations.

3.05.            Priority of Liens.  The liens on the Collateral in favor of Lender given to secure the Term Note dated January 14, 2014 previously executed by Borrower in favor of Lender and the liens on the collateral pledged to secure the Revolving Line of Credit Note established by Lender herein in favor of Borrower shall be cross-collateralized and shall both be co-first liens equal in lien priority and dignity.  In the event of foreclosure upon the Collateral, the foreclosure shall be on a pro rata basis as to the outstanding principal and accrued interest due under each of the above notes.  Any Event of Default under any security agreement given to secure the above indebtedness shall be an Event of Default under all security agreements.

ARTICLE IV

CONDITIONS OF LENDING

The effectiveness of this Loan Agreement and the obligations of Lender to extend the financing described herein are subject to the conditions precedent set forth as follows:

4.01.            Documents to be Delivered Prior to Loan Closing.  The following documents shall be delivered at least two (2) days prior to the Closing:

(a)           Company Formation.  Lender shall have received from Borrower a copy of their formation and Organizational Documents and all amendments thereto currently certified by an authorized officer or member, and a Certificate of Existence and Authorization to do Business issued by the State of Delaware and West Virginia and all other documents relating to the organization and operation of Borrower.

 

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(b)           Evidence of Authority.  Lender shall have received:

(1)           Evidence of Borrower’s actions taken and authority to enter into the Loan Documents and carry out their terms; and

(2)           Evidence of the authority of the representative of Borrower who has executed, is executing, or will execute this Agreement and the other Loan Documents to act on behalf of Borrower.

(c)           Financial Statements.  Borrower and Guarantor shall deliver to Lender a copy of annual Financial Statements, such statements to include:

(1)           The balance sheet as of the end of each Fiscal Year requested by Lender; and

(2)           The related income statement, statement of retained earnings and statement of changes in the financial position for each Fiscal Year, prepared by such certified public accountants as may be reasonably satisfactory to Lender.  Borrower also agrees and to deliver to Lender, a copy of income tax returns and also such other finan­cial information with respect to Borrower, or any Guarantor, as Lender may re­quest.

(d)           UCC Report/Lien Report.  Borrower shall provide to Lender a UCC Report from the appropriate Governmental Authority[ies] which sets forth all financing statements and liens filed of record with respect to Borrower or any other entity providing Collateral to Lender.

4.02.            Conditions Precedent to be satisfied at Closing.

(a)           Loan Documents.  Borrower shall deliver fully executed and, where appropriate, acknowledged counterparts of this Loan Agreement, the Note, the Guaranty, the Security Agreement, and the other Loan Documents, all of which shall be in form and substance reasonably satisfactory to Lender.

(b)   Recording of Financing Statements.  At the time of disbursements of the proceeds of the Loan(s), all Financing Statements relating to the Liens granted to Lender under any of the Loan Documents shall have been only recorded and/or filed in such manner and in such places as is required by law to establish, preserve, protect and perfect the interest and rights created by the Loan Documents and all other taxes, fees and other charges in connection with the execution, delivery or filing of the same shall have been duly paid by Borrower.

 

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(c)           Payment of Fees.   Borrower will pay the loan fees and all filing fees for the filing of this instrument, of Financing Statements filed to perfect the Liens provided in this Agreement in connection with this Agreement or under any other Loan Documents.

(d)           Pre-Closing Documents.  Receipt of all matters described in paragraph 4.01 and where appropriate duly executed and in full force in effect.

(e)           No Adverse Material Change.   On the Closing Date, Borrower and Guarantor shall submit to Lender such evidence and information to enable Lender to determine to Lender’s satisfaction:

(1)        That there shall have been no material deterioration in the financial condition of Borrower or Guarantor;

(2)        That Borrower has the financial capacity and is otherwise able to repay all amounts owing or to be owed hereunder in accordance with the terms hereof; and

(3)        That all conditions precedent to the Loan has been fulfilled.

(f)            Correctness of Representations; Absence of Default.  At the time of the making of the Loan, all representations and warranties by Borrower and Guarantor shall be made on and as of the Closing Date, and Borrower and Guarantor shall not be in default in the performance or observance of any covenants and/or agreements contained in this Agreement or in any of the other Loan Documents.

(g)           Opinions of Counsel.  At closing Lender shall have received an opinion letter or letters from counsel to Borrower and counsel to Guarantor, acceptable to Lender:

(1)        Regarding the existence, standing, power and authority of Borrower and Guarantor to execute and deliver the Loan Documents and to perform thereunder;

(2)        That the Loan Documents are valid, binding, and enforceable against all parties thereto (exclusive of Lender) in accordance with their terms;

 

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(3)        That neither the execution, delivery or performance of the Loan Documents, nor the consummation of the transactions contemplated by Lender, Borrower and Guarantor will violate any Laws to which Borrower or Guarantor are subject to create a default under any Material Agreement to which Borrower or Guarantor are a party;

(4)        That there is no litigation threatened or pending affecting Borrower, Guarantor, or their respective assets that would adversely affect the obligations of Borrower or Guarantor under the Loan Documents;

(5)        The loan transactions entered into pursuant to this Agreement are not usurious;

(6)        That, to the extent that Article 9 of the UCC is applicable, Lender shall hold a valid, perfected and enforceable Lien on all Collateral; and

(7)        Any such other matters as Lender may reasonably require.

(h)           Additional Information, Documents.   Lender shall have received from Borrower, Guarantor, and all other Persons such information and other documents as may be reasonably requested by Lender to carry out the terms of this Agreement and the other Loan Documents.

4.03.            Conditions Precedent to be satisfied prior to an Advance under the Revolving Credit Facility

(a)           Compliance with the draw requirements under Paragraph 2.01.

(b)           The representations and warranties made by Borrower and Guarantor in this Loan Agreement, including, but not limited to, these set forth in Article V remain true, complete and correct in all material respects.

(c)           Borrower and Guarantor shall at all times maintain a Lock Box Agreement for the Accounts.

 

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4.04.            Additional General Conditions Precedent.

(a)           Adverse change in Borrower’s Condition.  No adverse change in the condition or operations, financial or otherwise, of the Borrower has occurred which would have a Material Adverse Effect.

(b)           No Misrepresentation.  No material misrepresentation or material omission shall have been made by Borrower to Lender with respect to its business operations, financial condition, or character, or to the credit facilities as contemplated by the Agreement.  All representation and warranties in this Agreement and all other Loan Documents are true and correct prior to and at the time of any Advance in all material respects.

(c)           Absence of Breach.  All of the respective representations and warranties of Borrower or any Guarantor under this Agreement or the Loan Documents shall be true and correct on and as of the date of the execution of those documents or the date of any advances and/or extensions of the loan and/or other financial accommodations described therein.

(d)           Absence of Events of Default.   No Event of Default or Potential Default shall exist under this Agreement or the Loan Documents.

(e)           Additional Information.   Such other information and documents as Lender and its counsel may in Good Faith require.

(f)           Cessation of Advances.    If Lender has made any commitment to make any Advance to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligations to advance or disburse Loan proceeds if:

(1)           Borrower or Guarantor become insolvent, files a petition in bankruptcy similar proceedings, or is adjudged a bankrupt and such petition or proceeding is not dismissed within ninety (90) days after filing thereof;

(2)           There occurs an Adverse Material Change in Borrower’s financial condition or in the value of the Collateral;

(3)           An Event of Default occurs or Potential Default exists, including, without limitation, the unauthorized use of loan proceeds;

(4)           Any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guarantee of the loan or any other loan with Lender;

 

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(5)           Lender, for any reason and in the exercise of its sole discretion, deems itself in Good Faith insecure even though no Event of Default shall have occurred;

(6)           Any legal process is instituted to enforce any liens including but not limited to levies, foreclosures, attachment, execution or distress and Borrower fails to have such process discharge or bonded within a period of sixty (60) days from any attachment or similar writ levied upon any property of Borrower.

ARTICLE V

GENERAL REPRESENTATIONS AND WARRANTIES

Borrower and each Guarantor represent and warrant the following to Lender, and such representations and warranties:

(a)           Are an inducement to Lender to enter into this Agreement and the other Loan Documents and to disburse funds as provided herein;

(b)           Shall be true, complete and correct as of the Closing Date; and

(c)           Shall survive the closing of these Loans.

5.01.            Organization and Qualification of Borrower.  Borrowers are each duly organized and validly existing, and in good standing under the laws of the respective States of Delaware and West Virginia and have the power and authority to carry on their businesses, to own their property, to transact the business in which it is now engaged and proposes to be engaged, and is duly qualified to conduct business as a foreign corporation under the laws of each other state in which such qualifications is required, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.  Borrower has all material licenses, permits, consents or approvals from or by, and has made all filings with, each Governmental Authority having jurisdiction over Borrower or Borrower’s business, to the extent required.  All documents related to Borrower’s formation and operation (the “Organizational Documents”) are in full force and effect and have not been amended or modified.

 

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5.02.            Power and Authority.  Each Borrower is duly authorized to execute, deliver and perform this Agreement and each of the other Loan Documents to which each is a party, without obtaining the consent of any other Person (other than consents to be obtained pursuant to Section 3.01 and consents which have heretofore been obtained), and each Borrower is duly authorized to borrow hereunder.  This Agreement and the other Loan Documents have been duly authorized by all requisite action of Borrower.  Borrower has good, indefeasible and marketable title to the Collateral and no Person other than Borrower has any beneficial or equitable right, title or interest in or to the Collateral (other than Permitted Encumbrances).  The execution, delivery and performance by Borrower and Guarantor of the Loan Documents to which each is a party will not:

 

(a)           Require additional consent or approval of any Person;

(b)           Violate Borrower’s Organizational Documents or agreements pertaining to Borrower’s operations;

(c)           Violate any provision of any law presently in effect having applicability to Borrower or Guarantor;

(d)           Result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower or Guarantor is a party or by which Borrower properties may be bound or affected;

(e)           Result in, or require, the creation or imposition of any Lien upon or with respect to the Collateral now owned or hereafter acquired by Borrower, except that of Lender; or

(f)            Cause Borrower or Guarantor to be in default or breach under any law or any indenture, agreement, contract, lease or instrument to which Borrower or Guarantor, as applicable, is a party or by which their property is bound.

5.03.            Valid and Binding Obligations.  All of the Loan Documents to which Borrower and Guarantor is a party, upon execution and delivery by such Person, will constitute valid and binding obligations of such Person, enforceable in accordance with their terms, except as limited by Debtor Relief Laws.  To Borrower’s and Guarantor’s Actual Knowledge, all of the Loan Documents to which any third party is a party, upon execution and delivery by such Person will constitute valid and binding obligations of such Person, enforceable in accordance with their terms, except as limited by Debtor Relief Laws.

5.04.            Conflicts.  Neither the execution and delivery of this Loan Agreement, the Note or the other Loan Documents to which Borrower or Guarantor is a party, nor consummation of any of the transactions herein or therein contem­plated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will contravene any provision of law, statute, rule or regulation to which such Person is subject or any judgment, decree, license, order or permit applicable to such Person, or will conflict or be incon­sistent with, or will result in any breach of any of the terms of the covenants, conditions or provisions of, or constitute a delay under, or result in the creation or imposition of a Lien (except Liens in favor of Lender) upon any of the property or assets of such Person pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which such Person is a party or by which such Person may be bound, or to which such Person may be subject, or violate any provision of the Organiza­tional Documents of such Person.

 

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5.05.            Consents, Etc.  No consent, approval, authori­zation or order of any court or Governmental Authority or any third party (other than those which have been obtained prior to the date hereof and of which Borrower has notified Lender in writing on the date hereof) is required in connection with the execution and delivery by the Borrower or Guarantor of this Loan Agreement or the other Loan Documents, or to consummate the transactions contemplated hereby or thereby.

5.06.            Pending Litigation.  Except as set forth on Schedule 5.06, there are no proceedings pending, or to Borrower’s knowledge, threatened, against or affecting Borrower, Guaran­tor or the Collateral in any court or before any Governmental Authority or arbitration board or tribunal which involve the possibility of materially and adversely affecting:

(a)           The assets, business, prospects, profits or condition (financial or other­wise) of such Person or the ability of any such Person to perform its respective obligations under the Loan Documents; or

(b)           The Collateral, which call into question the validity, enforceability or performance of any of the Loan Documents.  Neither Borrower nor Guarantor is in default with respect to any order of any Governmental Authority or arbitration board or tribunal.

5.07.            Security Interest/Liens.  The Collateral Documents create a valid, enforceable and perfected first shared priority lien on the Collateral and are enforceable against all third parties in all jurisdictions securing the payment of all Obligations purported to be secured thereby, and all action required to perfect fully such Lien so constituted will have been taken and completed prior to funding of the Loan. There are no Liens on any of the Collateral other than the Lien of Lender granted under the Loan Documents, or the Permitted Encumbrances.  The Collateral is free from all delinquent charges, rents, taxes and assessments and from any past due obligations for sales and payroll taxes and wages.

 

 

5.08.            No Other Names.  Neither Borrower nor Guarantor has used any corporate, trade or fictitious name, other than the names set forth in Schedule 5.08, including with respect to any agreement under which a security interest or Lien upon any of its or his assets was granted or existed within the last five (5) years.  Until this Agreement is terminated, neither Borrower nor Guarantor shall change their respective names from those set forth in Schedule 5.09 without giving at least thirty (30) days’ prior written notice of such change to the Lender.

 

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5.09.            Operation of Business.  As of the closing Date, Borrower has:

 

(a)           Good and marketable title to the Collateral, free and clear of all Liens (other than Permitted Encumbrances);,

 

(b)           Has the unconditional right and authority to grant Lender a Lien on such Collateral;

 

(c)           Is the sole and exclusive owner of the Collateral and no other Person has any or has asserted any right, title or interest in or to any of the Collateral (other than Permitted Encumbrances); and

 

(d)           Has not received notice that any injunction has been obtained restraining, delaying or prohibiting, or that there is any suit, action or other legal proceeding is pending before any Governmental Authority seeking to restrain, delay or prohibit any of the transactions contemplated by this Agreement.

5.10.            Financial Statements and Financial Condition.  The Initial Financial Statements of Borrower and Guarantor were prepared in accordance with Applicable Accounting Standards (but, in the case of Unaudited Financial Statements, only to the extent Applicable Accounting Standards are applicable to interim unaudited reports) consistently applied with that of the preceding Fiscal Year of such Person (except as noted therein), and fairly present the financial condition of such Person as at such date and the results of their respective operations for the period then ended, subject in the case of the Unaudited Financial Statements to changes resulting from audit and normal year-end adjustments and to the absence of complete footnotes.  Since the date of the Initial Financial Statements, no events have occurred which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the financial condition of Borrower or Guarantor as disclosed in the Initial Financial Statement of such Person.  Each such Person has suffi­cient capital to carry on its business and transactions as now conducted and as planned to be conducted in the future.

5.11.            Restrictions.  Borrower is not a party to any contract or agreement, or subject to any charter or other restriction, which materially and adversely affects its business.  Borrower has not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its assets, whether now owned or hereafter acquired, to be subject to any Liens (other than the Permitted Encumbrances, with respect to the Collateral), except as reflected in the Initial Financial Statements.

5.12.            No Default.  After giving effect to the Loan Documents, no Event of Default or Potential Default has occurred and is continuing.

5.13.            ERISA.  Each Employee benefit plan, as defined by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) maintained by the Borrower or by any subsidiary of the Borrower or Guarantor meets, as of the date hereof, the minimum funding standards of Section 3.02 of ERISA, all applicable requirements of ERISA and of the Internal Revenue Code of 1986, as amended, and no “Reportable Event” nor “Prohibited Transaction” (as defined by ERISA) has occurred with respect to any such plan.

 

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5.14.            Indebtedness.  Borrower has not incurred, created, contracted for, assumed, guaranteed or is not otherwise liable in respect of any Indebtedness other than disclosed on the Initial Financial Statement or trade payable incurred in the ordinary course of business.

5.15.            Guarantor.  Guarantor has not incurred Indebtedness other than that disclosed on the Initial Financial Statement of such Person.  No default or failure of performance has occurred and is continuing with respect to any such Indebted­ness.

5.16.            Taxes.  All tax returns required to be filed by Borrower or Guarantor in any jurisdiction have been filed and all taxes, assessments, fees, and other governmental charges upon Borrower or Guarantor or upon any of its proper­ties, income or franchises have been paid that are required to be paid prior to the time that the non-payment of such taxes could give rise to a Lien on any asset of such Person.  There is no proposed tax assessment against Borrower or Guarantor or any basis for such assessment except ad valorem, personal property and income taxes incurred in the ordinary course of business.

5.17.            Location of Borrower and Guarantor.  As of the date hereof, the principal place of business of Borrower and each Guarantor and the address for purposes of notice under this Agreement and the Loan Documents are identified on Schedule 5.17.  Neither Borrower nor Guarantor shall change any such location or address identified above without first providing Lender ten (10) days’ prior written notice of any such change.

5.18.            Full Disclosure.  There is no fact that Borrower has not disclosed to Lender which could have a Material Adverse Effect on Borrower.

5.19.            Ownership.  The officers and directors for each Borrower is set forth on Schedule 5.19.

5.20.            Financing Statements.  Except as described on Schedule 5.20, there are no financing statements or other documents creating or evidencing a Lien now on file with any Governmental Authority covering any of the Collateral, whether such Collateral shall be real or personal, tangible or intangible, or whether Borrower and Guarantor are named or signed as “Debtor”, and until the release and termination of the Financing Statements, Borrower will not execute or allow to be on file with any Governmental Authority any such financing statement or state­ments, except as may have been or may hereafter be granted to Lender. Borrower hereby authorizes Lender to file or place of record a Financing Statement reflecting the security interest granted to Lender in the Collateral.

 

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5.21.            Regulation U.  None of the proceeds of the Loan made pursuant to this Agreement shall be used directly for the purpose of purchasing or carrying any margin stock in violation of any of the provisions of Regulation U of the Board of Governors of the Federal Reserve System.

5.22.            Not Usurious.  The indebtedness evidenced by the Loan, including, without limitation, interest, fees and charges provided for herein, is a business loan.  The Loan is an exempted transaction under the Truth in Lending Act 15 USC §§ 1601, et seq.  The Loan does not and will not, when disbursed, violate the provisions of any consumer credit laws or usury laws.

5.23.            Accuracy of Information.  All statements, certificates and information delivered or to be delivered to Lender pursuant to or as required by this Loan Agreement or any other Loan Document are, or shall be, when delivered, true and correct in all material respects as of the date given and do not, and shall not, when delivered, contain any untrue statement of a material fact or omit to state any material fact necessary to keep the statements contained therein from being materially misleading.

5.24.            Advances.  Each request for an Advance shall constitute, without the neces­sity of specifically containing a written statement, a represen­tation and warranty by Borrower that no Event of Default or Potential Default ­exists and that all representations and warran­ties contained in this Loan Agreement or any other Loan Document are materially true and correct on and as of the date the requested advance is made.

5.25.            Continuing Representation of Representations and Warranties.  If any of the representations and warranties are not true and correct at the time Borrower seeks an Advance, then Lender shall be relieved of its obligation to make any Advance until such representa­tions and warranties are cured and corrected.

ARTICLE VI

AFFIRMATIVE COVENANTS

Until the performance and payment in full of the Obligations of all other obligations under this Loan Agreement and the other Loan Documents, Borrower and Guarantor, to the extent applicable, shall do, or cause to be done, the following (unless Lender shall otherwise consent in writing):

6.01.            Existence.  Each Borrower shall maintain their good standing in the States of Delaware and State of  West Virginia as the case may be and their registrations or qualifications to do business in all jurisdictions where the conduct of their respective businesses or the ownership or leasing of their respective properties requires such registration or qualification, and Borrower shall obtain and maintain all licenses, permits, registrations, trademarks, service marks, and qualifications necessary for the conduct of its business and operations.  Borrower shall perform and observe all of the terms and provisions of their Organizational Documents.

 

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6.02.            Financial Statements, Reports and Documents of Borrower.  Borrower shall deliver to Lender each of the follow­ing:

(a)           Monthly Borrowing Base Report.  Within ten (10) days at the end of each calendar month, submit to Lender for said calendar month a Borrowing Base Report.

(b)           Monthly Financial Information.  As soon as practicable, and in any event within ten (10) days after the end of each calendar month Borrower shall deliver Unaudited Financial Statements of Borrower for such period certified by a responsible and authorized officer of Borrower.

(c)           Annual Financial Statements.  As soon as practicable and in any event within one hundred twenty (120) days after the close of each Fiscal Year of Borrower, Borrower shall deliver annual Audited “Consolidating” Financial Statements of Borrower, including an audit of the Accounts Receivable for such Fiscal Year to be prepared by Approved Accountants.

(d)           Tax Returns.  As soon as practicable and in any event within one hundred and twenty (120) days after the close of each Fiscal Year of Borrower, Borrower shall deliver copies of all federal and state tax returns required to be filed by Borrower together with evidence of payment of any and all taxes shown to be due and owing there­under.

(e)           Certification. All financial information shall be prepared in accordance with Applicable Accounting Standards and must be certified as true and correct by the Borrower.

6.03.       
    Financial Statements, Reports and Documents of Others.  As soon as available, and in
any event on or before one hundred twenty (120) days following the end of each Fiscal Year of any Guarantor, Borrower shall deliver
or cause to be delivered to Lender, Federal Tax Returns for each Guarantor and an Annual Financial Statement for each Guarantor.  In
the event Guarantor files for an extension with the Internal Revenue Service, Guarantor shall provide to Lender, at such time
as the request is filed, a copy of said extension agreement together with an estimate of Guarantor’s income.

6.04             Additional Information.  Within ten (10) days, upon request by Lender, Borrower shall furnish such addi­tional infor­mation, including, but not limited to, lists of assets and liabili­ties, agings of receiv­ables and payables, work-in-progress report, backlog report by subsidiary, list of contracts being bid on, annual CAPEX budget, budgets, forecasts, tax re­turns, and other reports with respect to its financial condi­tion and business operations as Lender may request from time to time.

 

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6.05.            Notice; Correction of Errors.  Borrower and each Guarantor shall promptly notify Lender of:

(a)           Any inaccuracy or breach of any representation or warranty made by either Borrower or Guarantor;

(b)           If discovered, any material factual errors; or

(c)           If discovered, any material factual defects or omissions in the contents of this Agreement or the other Loan Documents or in the execution or acknowledgment thereof, and promptly and with all due diligence take steps to, and in fact, correct and remedy same.

6.06.            Further Documentation.  Borrower and Guarantor shall promptly execute, acknowledge, deliver and record or file such documents or instruments (including further security agreements, financing statements, continuation statements, assignments and notices) and take such actions and do such further acts as may be in Lender’s reasonable discretion necessary to carry out the purposes of this Agreement and the other Loan Documents and to subject to the security interest and Lien hereof any property intended by the terms hereof to be covered hereby, including any renewals, additions, proceeds, products, substitutions, replacements or appurtenances to the Collateral.

6.07.            Material Adverse Changes, Litigation.  Borrower shall prompt­ly inform Lender in writ­ing of:

(a)           All Mate­rial Ad­verse Changes in Borrower’s financial condi­tion; and

(b)           All claims and all threatened litiga­tion and claims affecting Borrow­er which could materi­ally affect Borrower’s finan­cial condi­tion.

6.08.            Other Agreements.  Borrower shall comply with all terms and con­ditions of all Loan Documents, whether now or hereafter existing, between the parties hereto, and Borrower s­hall notify Lender immediately in writing of any Event of Default or Potential Default in connection with any other Loan Documents.

6.09             Loan Proceeds.  Borrower shall use all loan proceeds solely for the purposes stated herein, unless specifi­cal­ly consented to the contrary by Lender in writing.

 

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6.10             Taxes, Charges and Liens.  Borrower shall pay and discharge when due all of its indebtedness and obligations, in­cluding, without limitation, all assessments, taxes, governmen­tal charges, levies and liens of every kind and nature, imposed upon its proper­ties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of its properties, income or profits; provided, however, it will not be required to pay and discharge any such assess­ment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appro­priate proceedings, and (b) it shall have established on its books ade­quate reserves with respect to such contested assess­ment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices.  Upon demand of Lender, it will furnish to Lender evidence of payment of the as­sess­ments, taxes, charges, levies, liens and claims and will authorize the appropriate govern­mental official to deliver to Lender at any time a written statement of any assessments, taxes, char­ges, levies, liens and claims against its prop­erties, income or profits.

6.11.            Operations.  Borrower shall conduct its busi­ness af­fairs in a reason­able and prudent manner and in substantial compliance with all applica­ble federal, state and municipal laws, ordinances, rules and regula­tions respecting its properties, charters, businesses and opera­tions, including compliance with all minimum fund­ing stan­dards and other requirements of ERISA and other laws applica­ble to its employ­ee benefit plans.

6.12.            Inspection.  Borrower shall permit employees or agents of Lender at any reasonable time (scheduled or unsched­uled) to inspect any and all of its properties and to examine or audit its books, accounts, and records and to make copies and memoranda of its books, ac­counts, and records.  If it now or at any time hereafter main­tains any records (including, without limita­tion, computer generated records and computer pro­grams for the generation of such re­cords) in the possession of a third party, it, upon re­quest of Lender, shall notify such party to permit Lender free access to such records at all reason­able times and to provide Lender with copies of any re­cords it may request, all at Borrower’s expense.

6.13.            Legal Name, Place of Business.  Borrower shall notify Lender at least thirty (30) days prior to such event of any change in its exact legal name or of any change in its business location or registered office.

6.14.            Conduct of Business.  Borrower and Guarantor shall preserve and maintain their existence and all of the rights, privileges and franchises necessary or desirable in the normal conduct of their businesses and conduct of their businesses in an orderly and efficient manner consistent with good business practices and in accordance with all valid regulations and orders of any Governmental Authority.

6.15.            Maintenance of Liens.   Borrower and Guarantor shall, at all times, defend any claim by a third party relating to the possession of or any interest in the Collateral or any other material assets of Borrower or Guarantor.  Borrower shall promptly, upon the request of Lender and at Borrower’s expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record in an appropriate governmental office, any document, statements, certificate or instrument supplemental to or confirmatory of the Loan Documents or otherwise reasonably necessary or desirable for the creation, preservation and/or perfection of the Liens created by the Loan Documents and to consummate fully the transactions contemplated by the Loan Documents.

 

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6.16.            Subordination.  Borrower and Guarantor agree that any rights each has with respect to the Collateral shall be subordinate to any Lien or security interest in favor of Lender, whether such rights arise by statute, or otherwise.  Borrower and Guarantor hereby subordinate any Lien, whether statutory or otherwise, which Borrower or Guarantor may have against the Collateral to the Lien granted to Lender in the Collateral.

6.17.            Distributions to Affiliates.   In the event that an Event of Default set forth herein shall have occurred and be continuing or the Note matures, as a result of acceleration or otherwise, of all amounts due under the Loan Documents, then no payment shall be made by Guarantor to Borrower or from Borrower to Guarantor or by Borrower or Guarantor to an Affiliate on account of any outstanding loans or accounts, unless and until all Obligations hereunder shall have been indefeasibly paid in full or until such declaration shall have been rescinded by Lender in writing.

6.18.            Operating Accounts.  Borrower and Guarantor shall maintain their main operating accounts with Lender as an inducement to the Lender in extending this credit; provided, however, the main operating account of S T Pipeline, Inc., shall be maintained at Summit Community Bank, Inc.

6.19.            Payment of Fees. Borrower shall pay to or for the account of Lender from time to time upon demand:

(a)           All of the reasonable out-of-pocket costs, fees and expenses suffered or incurred by Lender in connection with or relating to the Loan(s), or any portion thereof, and the administration and enforcement thereof, including, without limitation, all appraisals, surveys, inspections and such other information reasonably requested by Lender associated with the Collateral; and

(b)           If an Event of Default under this Agreement or any of the other Loan Documents occurs, all out-of-pocket costs, fees and expenses suffered or incurred by Lender, including without limitation, the fees, expenses and disbursements of any attorneys, in connection with such Event of Default, and any related collection, bankruptcy, insolvency and other enforcement or creditors’ rights proceedings.

6.20.            Compliance Certificate. Borrower, upon request in writing by Lender, shall pro­vide Lender, at least annually and at the time of each Advance with a certif­i­cate executed by its chief finan­cial officer, or other officer or person accept­able to Lender, certi­fying that the repre­senta­tions and war­ranties set forth in this Agree­ment are true and correct in all material respects as of the date of the certifi­cate and further certifying that, as of the date of the certifi­cate, no Potential Default or Event of Default ex­ists under this Agreement.

 

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With the submission of each annual report or financial statements, the Approved Accountants shall certify to Lender that they are not aware of any Event of Default or Potential Defau­lt that has occurred and is continuing or that they are aware of such event, describing it and the steps, if any, taken to cure it.

ARTICLE VII

FINANCIAL COVENANTS

Until payment in full of the Note and the performance of all other Obligations under the Loan Agreement and the other Loan Documents, Borrower and Guarantor shall maintain in the aggregate the following financial covenants and ratios all in accordance with Applicable Accounting Standards unless otherwise specified:

7.01.            Debt Service Coverage.  Borrower shall maintain a minimum Debt Service Coverage Ratio of no less than 1.50 to 1.0 tested quarterly, as of the end of each fiscal quarter, based upon the preceding four quarters.  Debt service coverage shall be defined as the ratio of cash flow (net income plus depreciation, amortization and interest expense, plus or minus one-time/non-recurring income and expenses (determined at the Lender’s sole discretion) divided by cash interest expense plus the greater of actual or scheduled principal payments on term debt and capitalized leases for the corresponding period.  Notwithstanding the foregoing, the denominator set forth above shall not include voluntary unscheduled principal payments made to Lender.

7.02.            Minimum Tangible Net Worth.  Borrower shall maintain a minimum Tangible Net Worth of $10,000,000.00 tested quarterly as of the end of each fiscal quarter.  “Tangible Net Worth” shall mean the shareholders’ equity of the Borrower less the aggregate amount of all intangible assets of Borrower.  Intangible assets shall include, but are not limited to, amounts due from stockholders (Members, Partners), goodwill, customer lists, intellectual property, know-how and noncompetition agreements.  Borrower’s failure to maintain its Tangible Net Worth at or above the required minimum as of each testing date shall constitute an Event of Default that is not curable.

 

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7.03.                Debt to Tangible Net Worth.  Borrower shall maintain a Debt to Tangible Net Worth not to exceed (amounts listed in chart) to 1.0 tested quarterly as of the end of each fiscal quarter.  “Debt” shall mean total liabilities that in accordance with GAAP should be classified upon the balance sheet of Borrower as a liability, or to which reference should be made by footnotes thereto.  “Tangible Net Worth” shall mean the shareholders’ equity of the Borrower less the aggregate amount of all intangible assets of Borrower.  Intangible assets shall include, but are not limited to, amounts due from stockholders (Members, Partners), goodwill, customer lists, intellectual property, know-how and noncompetition agreements.  Borrower’s failure to maintain its Debt to Tangible Net Worth ratio below the required maximum ratio as of each testing date shall constitute an Event of Default that is not curable.

	
     Date

	
Debt to TNW

	
6/30/2015

	
       2x

	
12/31/2015

	
     1.75x

	
6/30/2016

	
      1.5x

	
Thereafter

	
      1.5x

7.04.                Current Ratio.  Borrower shall maintain a minimum current ratio of not less than 1.30 to 1.0 tested quarterly as of the end of each fiscal quarter.  Current Ratio is defined as Borrower’s Total Current Assets divided by Borrower’s Total Current Liabilities.  Borrower’s failure to maintain its current ratio at or above the minimum requirement as of each testing date shall constitute an Event of Default that is not curable.

  7.05.               Determination Date.  Each ratio described in paragraphs § 7.01, 7.02, 7.03 and  shall be measured and determined as of each calendar quarter beginning March 31, 2015.

ARTICLE VIII

NEGATIVE COVENANTS

Until payment in full of the Note and the performance of all other obligations under the Loan Agreement and the other Loan Documents, Borrower agrees that (unless Lender shall other­wise consent in writing, which consent may be withheld in Lender’s sole unfettered discretion.):

 

8.01.                Continuity of Operations.  Borrower shall not engage in any business activities substantially different from those in which they are presently engaged or cease to carry on actively any sub­stantial part of its current business.

8.02.                Consolidation, Merger, Conveyance, Transfer or Lease.  Borrower will not change its capital structure, including, but not limited to, the issuance of preferred stock.  Borrower will not consolidate with or merge into any other Person.  Borrow­er will not change its state of organization.  Borrower will not sell, assign, lease, or otherwise dispose of all or substantially all of its assets (other than in the ordinary course of business) to any Person, or acquire substantially all of the assets or the business of any Person.  Specifically, Lender must approve any potential acquisition or Borrower will pay off and terminate the Revolving Line of Credit before the acquisition is closed. Borrower shall not allow any subsidiary of Borrower to be created nor sell, transfer, or otherwise dispose of any interest in any subsidiary.

8.03                 Change in Management.  There shall not be any change in the current management of Borrower.

 

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8.04                 Dividends.  Borrower shall not make or allow to be made any Dividends at any time there is an Event of Default or Potential Default.  In addition the Borrower shall not make or allow any Dividends except for Dividends for which the Borrower is currently contractually obligated to make to the Preferred Shareholders  unless previously approved in writing by Lender at its sole discretion.

8.05                 Name, Fiscal Year and Accounting Method.  Borrower shall not change its Fiscal Year or method of account­ing, or its name, except as approved by Lender.

8.06                 Salaries.  [Omitted]

8.07.                Loans.  Borrower shall make no loans, except between each other.

8.08.                Additional Indebtedness.  Borrow­er shall not assume, guaranty, endorse or otherwise become directly or contin­gently liable in respect of (including, without limitation, by way of agreement, contingent or otherwise, to purchase, provide funds to or other­wise invest in a debtor or otherwise to assure a creditor against loss) any Debt, including capital lease obligations except:

(a)           Debt to Lender;

(b)           Debt presently outstanding and shown on the most recent financial statements submitted to Lender;

(c)           Accounts payable to trade creditors incurred in the ordinary course of business;

(d)           Debt secured by purchase money liens as set forth herein;

(e)           Additional debt not to exceed $250,000, in the aggregate at any time.

8.09                 Liens.  Borrower shall not create, permit to be created or suffer to exist any lien upon any of the Collateral or any of their other property, now owned or hereafter acquired, except:

(a)          Landlords’, mechanics’ and other similar liens arising by operation of law in the ordinary course of its business, and for which appropriate reserves are maintained;

 

 

(b)           Purchase money liens arising in the ordinary course of business (so long as the indebtedness secured thereby does not exceed the lesser of the cost or fair market value of the prop­erty subject thereto, and such lien extends to no other prop­erty);

 

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(c)         Permitted Encumbrances;

(d)           Liens for taxes not yet due and payable or otherwise being contested in good faith and for which appropriate reserves are maintained; or

(e)           Liens in favor of Lender.

8.10.                Capital Expenditures. [Omitted}.

8.11.                Disposition of Collateral.  Borrower and Guarantor shall not sell, as­sign, exchange or otherwise dispose of any of the Collat­eral or any interest therein to any other Person if such disposition would materially affect its opera­tions.

8.12.                Alteration of Material Agreements.  Borrower and Guarantor shall not consent to or permit any alteration, amend­ment, modifi­cation, release, waiver or termina­tion of any materi­al agreement to which it is a party.

ARTICLE IX

EVENTS OF DEFAULT

An “Event of Default” (herein so called) shall exist if any one or more of the following events shall occur and continue:

 

  9.01.                  Default on Indebtedness.  The failure to pay any payment when due pursuant to the terms of the Note or the terms of any other Obligations or any part thereof or in accordance with the terms of this Loan Agreement or any other Loan Document and such nonpayment remains uncured for a period of ten (10) days thereafter or when accelerated pursuant to any power to accelerate contained in this Loan Agreement, the Note or any of the other Loan Documents.

9.02.                 Other Defaults.  The failure of any Person other than Lender to punctually and properly perform any covenant, agreement, obligation, or condition contained herein or in any other Loan Document (except the performance of any part of the Obligations specifically addressed by any other subsection of this Article IX, for which such other subsection shall control) and the continuance of such failure for a period of fifteen (15) days following Borrower’s  Actual Knowledge thereof or written notice thereof from Lender, or if such failure is not reasonably susceptible of cure within said fifteen (15) day period and thereafter Borrower diligently pursues same, provid­ed,  however, that Borrower shall have no more than thirty (30) additional days to remedy the default.

9.03.                  False Statements.  Any statement, representation, or warranty in this Loan Agreement or any other Loan Document or any document or information delivered pursuant hereto or thereto is incomplete, false,  misleading, or erroneous in any material respect.

 

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9.04.                 Cross Default.  The occurrence and continuance of any Event of Default under any other loans or related documents by and between Lender and Borrower or Guarantor.

9.05.                 Rate Management Agreement/Obligations. [Omitted]

9.06.                 Failure to Provide Financial Information.  Any failure to submit to Lender current financial information required by this Loan Agreement or any Loan Document or upon request by Lender and such failure containing ten days following such due date or such request by Lender.

9.07.                 Creditor or Forfeiture Proceedings.  Borrower shall:

(a)           Execute a general assign­ment for the benefit of its creditors;

 (b)          Become the sub­ject, voluntarily, of any bankruptcy, insolvency or reorgani­za­tion proceeding;

(c)           Become the subject, invol­untarily, of any bankruptcy, insolvency or reorganization pro­ceeding, and such proceeding is not dismissed within ninety (90) days following the date such proceeding was commenced;

(d)           Admit in writing that it is unable to pay its debts general­ly as they become due;

(e)           Apply for or consent to the appointment of a custodian, receiver, trustee, or liquidator for itself or of all or a sub­stantial part of its assets, or an order, judgment, or decree shall be entered by any court of competent jurisdiction appointing a custodian, receiver, trustee, or liquidator of Borrower;

(f)            File a voluntary petition seeking protection under any Debtor Relief Laws, or other insol­vency law, now or hereafter existing;

(g)           File an answer admitting the material allegations of, or consenting to, or default in filing an answer to, a petition filed against it in any bankruptcy, reorganization, or other insolvency proceedings; or

(h)           Insti­tute or voluntarily be or become a party to any other judicial pro­ceedings intended to effect a discharge of the debts of Borrower, in whole or in part, or a postpone­ment of the maturity or the collection there­of, or a suspension of any of the rights or powers of Lender granted in this Loan Agreement or the other Loan Documents.

 

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9.08.                 Default in Favor of Third Parties.  Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to repay the Note or perform Borrower’s Obligations under this Agreement or any related document.

9.09.                 Judgment, Attachment of Assets.  The failure of Borrower to pay any money judgment against it, in excess of Five Thousand Dollars ($5,000.00), at least ten (10) Business Days prior to the date on which the assets of Borrower may be sold to satisfy such judgment; or the failure to have discharged or properly bonded within a period of thirty (30) Business Days after the commencement thereof any attachment, sequestration, or similar proceedings against any assets of Borrower.

9.10.                 Dissolution of Borrower.  The liquidation or dissolution of Borrower.

 

 

9.11.                 Death of Principal.  [Omitted]

9.12.                 Adverse Change.  The occurrence of any Material Adverse Change in the assets, business, prospects, profits, or condition (finan­cial or otherwise) of (a) Borrower which threaten Borrower’s ability to repay the Note or the failure by the Borrower to maintain a financial condition acceptable to Lender in its sole discretion, or the occurrence of any event which, in Lender’s sole discretion, would have a Material Adverse Effect on the operation of the Borrower so as to impair the repayment of the Note, or impair the ability of the Borrower or any grantor to pledge the Collateral to secure repayment of the Note.

9.13.                 Validity of Loan Documents.  Any of the Loan Documents shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part; or the validity or enforceability of any Loan Document shall be challenged or denied by any signatory thereto.

9.14.                 Condemnation.  Condemnation of all or any part of the Collateral which, in Lender’s good faith judgment:

(a)           Results or will result in the Collateral failing to comply with any Governmen­tal Requirement or restriction affecting the Collateral; or

(b)           Will adversely affect the operation or use of the Collateral including, without limitation, access or parking.

9.15.                 Disposition of Assets. Except as otherwise provided herein, without the prior written consent of Lender, which consent may be withheld in Lender’s sole and absolute discretion, and whether voluntary or involuntary, Borrower may not transfer, sell, lease, trade, convey, exchange, mortgage, encumber, pledge, assign or otherwise materially dispose of the Collateral, any portion of any interest in, or any profits or proceeds from, any of the Collateral.

 

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9.16.                 Liens in Favor of Lender.  The liens, created (or purported to be created) by the Collateral Documents or by the other Loan Documents should become unenforceable, or cease to be first priority Liens in favor of Lender (except for the Permitted Encumbrances).

9.17.                 Events Affecting Guarantor.  Any of the preceding events occurs with respect to any Guarantor of any of the Obligations or any Guarantor dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Obligations.  The failure to have discharged or properly bonded within a period of thirty (30) Business Days after the commencement thereof of any attachment, sequestration, or similar proceedings against any assets of Borrower or any Guarantor.

ARTICLE X

REMEDIES

10.01.               Acceleration.  At any time upon the occurrence and during the continuation of any Event of Default, Lender may, at its option, declare the indebtedness evidenced by the Note and all or any other portion of the remaining Obligations to be immediately due and payable without presentment, demand, protest, notice of protest and non-payment, or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, all of which are expressly waived by Borrower.

10.02.              Funds of Lender.  Any funds of Lender used for any purpose referred to in this Article X shall constitute a portion of the Obligations, shall bear interest from the date advanced at the Default Rate, shall be secured by all Collateral as security for the Loan and shall be due and payable immediately upon demand.

10.03.               Failure to Provide Financial Statements.  Upon the failure of the Borrower or Guarantor to provide any Financial Statements or information required to be provided to Lender pursuant to this Loan Agreement or any other Loan Documents, Lender, in addition to the remedies described herein, may, at its option and without notice, accrue interest on the outstanding principal balance at the Default Rate from the time the Financial Statements and information was due to such time as such financial information, in a form satisfactory to Lender, is provided to Lender.

10.04.               Other Rights and Remedies.  Unless any Loan Document,  expressly prohibits Lender from acting prior to the occurrence of an Event of Default, and with or without accelerating the Maturity of the Loan, Lender may proceed to take and enforce any of its rights, interests, benefits or privileges under the Loan Docu­ments or which may be otherwise available to Lender at law or in equity.

 

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10.05.        No Waiver or Exhaustion.  No waiver by Lender of any of its rights or remedies hereunder, in the other Loan Documents, or otherwise, shall be considered a waiver of any other or subsequent right or remedy of Lender. No delay or omission in the exercise or enforcement by Lender of any rights or remedies shall ever be construed as a waiver of any right or remedy of Lender and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Lender.

ARTICLE XI

MISCELLANEOUS PROVISIONS

The parties agree to the following miscella­neous provisions:

11.01.        Commercial Purpose.  This Agreement and the Loan Documents and the obligations described herein and therein are executed and/or incurred for commercial and not consumer purposes and all proceeds of Lender’s advances, loans and/or other financial accommodations to Borrower shall be used exclu­sively in the Borrower’s business and for no other purpose.

11.02.        Borrower’s Relationship with Lender.  Borrower and each Guarantor acknowledges as follows:

(a)           Lender has not participated and shall not participate in any type of joint venture or partnership with Borrower or any Guarantor, and the execution and consummation of this Agreement and the Loan Documents and the transactions contemplated therein do not and shall not constitute or amount to a joint venture or partnership.

(b)           Except as expressly set forth in this Agreement or the Loan Documents, Lender has not acted and shall not act in any respect as the agent of Borrower or any Guarantor for any purpose, and no agency relationship has been or shall be created by the execution of this Agreement and the Loan Documents or the consummation of the transactions contemplated thereby.

(c)           Lender does not have and shall not have any fiduciary or similar duty to Borrower or any Guarantor.

(d)           Borrower and Guarantor acknowledges and agrees that Lender has not exercised or attempted to exercise, directly or indirectly, any degree of control or influence of any kind whatsoever over the internal business operations or financial affairs of Borrower. Borrower shall immediately notify and cause Guarantor to immediately notify Lender in writing of any actions that it considers to constitute an exercise or attempt to exercise such control or influence in the future.  Borrower and Guarantor acknowledge and agree that Lender has not acted as a business, investment or financial consultant or advisor to Borrower or Guarantor.  Borrower shall notify and cause such Guarantor to notify Lender in writing of any attempt by Lender to act as a consultant or advisor to those entities in the future.

 

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11.03.        Costs and Expenses.  Borrower agrees to pay upon demand all of Lender’s out-of-pocket expenses, includ­ing attorne­ys’ fees, incurred in connection with this Agree­ment.  Lender may pay someone else to help collect the Loan and to enforce this Agreement and Borrower will pay that amount.  This includes Lender’s attorneys’ fees and legal ex­pens­es, whether or not there is a lawsuit, includ­ing attorneys’ fees for bankruptcy proceedings (in­cluding efforts to modify or vacate any auto­matic stay or injunction), appeals, and any antic­ipated post-judgment collection services.  Borrow­er also will pay any court costs in addition to all other sums provided by law.  In the event Lender voluntarily or otherwise should become a party to any suit or legal proceeding (including a proceeding conducted under the Bankruptcy Code) Borrower and Guarantor agree to pay the reasonable attorney’s fees of the Lender and all related costs of collection or enforcement that may be incurred by Lender.  Borrower and Guarantor shall be liable for such attorney’s fees and costs whether or not any suit or proceeding commences.

In the event Borrower shall fail to maintain insurance, pay taxes or assessments, costs and expenses which Borrower is, under any of the terms hereof or of any Loan Documents, required to pay, or fail to keep any of the properties and assets constituting Collateral free from new security interests, liens, or encumbrances, except as permitted herein, Lender may at its election make expenditures for any or all such purposes and the amounts expended together with interest thereon at the Default Rate, shall become immediately due and payable to Lender, and shall have benefit of and be secured by the Collateral.  Lender shall be under no duty or obligation whatever with respect to any of the foregoing expenditures.

11.04.        Notices.  Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be in writing (except where telephonic instructions or notices are expressly authorized herein to be given) and shall be deemed to be effec­tive:

(a)           If by hand delivery, telex, telecopy or other facsimile transmission, on the day and at the time on which delivered to such party at the address, telex or telecopier numbers specified in Schedule 5.17;

(b)           If by mail, on the day three (3) Business Days after the date upon which it is deposited, postage prepaid, in the United States, registered or certified mail, return receipt requested, addressed to such party at the address specified in Schedule 5.17; or

(c)           If by Federal Express or other reputable express mail service, on the next Business Day following the delivery to such express mail service, addressed to such party at the address set forth in Schedule 5.17:

 

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Failure to deliver copies of notices to parties other than Borrower and Lender shall not affect the effectiveness or validi­ty of notices otherwise properly given.  Any party may change its address for purposes of this Loan Agreement by giving ten (10) days written notice of such change to the other parties pursuant to this Section.

Notwithstanding any provision contained herein or in any of the Loan Documents to the contrary, in the event that Lender shall fail to give any notice to any Person required hereunder or under any other Loan Document or applicable law, the sole and exclusive remedy for such failure shall be to seek appropriate equitable relief to enforce this Loan Agreement and the other Loan Documents to give such notice and to have any action of such Person postponed or revoked and any proceedings in connection therewith delayed or terminated pending the giving of such notice by Lender, and no Person shall have any right to damages (whether actual or consequential) or any other type of relief not herein specifically set out against Lender, all of which damages or other relief are expressly waived by Borrower and Guarantor.  The foregoing is not intended and shall not be deemed under any circumstances to require Lender to give notice of any type or nature to any person except as expressly required by the Loan Documents.

In addition, notice shall be deemed sufficiently given if the notice is served in a manner pre­scribed by the laws of the State of West Virginia for the service of a summons in a civil action.

11.05.        Severability.  If a court of competent juris­dic­tion finds any provision of this Agreement to be invalid or unenforce­able as to any person or cir­cumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances.  If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or va­lidity; however, if the offend­ing provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.

11.06.        Survival.  All warranties, representations cove­nants and indemnities made by Borrower or Guarantor in this Agreement or in any certif­icate or other instru­ment delivered by Borrower or Guaran­tor to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the loan and delivery to the Lender of the related documents, regardless of any investi­gation made by Lender or on Lender’s behalf.  The warranties, covenants and indemnity set forth in this Agree­ment may be assigned or other­wise trans­ferred by Lender to its succes­sors and assigns and to any subse­quent pur­chasers of all or any portion of any Collat­eral by, through or under Lender, without notice to Borrower and Guarantor and with­out any further consent of any other person.

11.07.        Time Is of the Essence.  Time is of the essence in the perfor­mance of this Agreement.

 

    	43

    	 

    
 

 

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

11.09.        Amendments.  No alteration of or amend­ment to this Agree­ment shall be effective unless made in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

11.10.        Waiver of Surety ship Defenses and Impairment of Collat­eral.  Borrower and each Guarantor hereby waive all defenses based on surety ship and impairment of Collat­eral and hereby specifically waive any and all defenses provided under the UCC.

11.11.       Waiver of Jury Trial.  BORROWER, GUARANTOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREE­MENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE LOAN OR THE PROPERTY (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY CLAIMS OR DEFENSES ASSERTING THAT ANY SUCH DOCUMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).  THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO AND ACCEPT THIS AGREEMENT.

11.12.        Assignment and Participation.  Borrower and Guarantor shall not be entitled to assign any of their rights, remedies or obligations described in this Agreement or the Loan Documents without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion.  Lender shall be entitled to grant participation in or assign some or all of its rights and remedies described in this Agree­ment and the Loan Documents without notice to or the prior consent of Borrower in any manner.  Lender’s agreement to provide the Revolving Credit Facility is conditioned upon obtaining participation commitments of not less than forty (40%) of the total credit facility.

 

    	44

    	 

    
 

 

11.13.        Caption Headings.  Caption headings in this Agree­ment are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

11.14.        Binding Agreement.  This Agreement shall be binding upon and shall inure to the benefit of the parties and their successors and assigns; provided that Borrower may not assign or transfer any rights hereunder without Lender’s prior written consent.

11.15.        Duration of Agreement.  This Agreement shall continue in full force and effect so long as any of the Obliga­tions remain outstanding or have not been fully and finally paid, performed or satisfied.

11.16.        Counterparts.  This Agreement may be simul­ta­neously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

11.17.        Payment Application.  The manner in which Lender accounts for the Obligations or applies payments for its regulato­ry or accounting purposes shall not change the Borrower’s legal liability or the manner of application as governed by this Agree­ment.

11.18.        Jurisdiction/Venue.  The forum having proper jurisdic­tion and venue to adjudicate any claim, dispute or default which may arise out of the agreements and delivery of this Agreement in the performance of the transactions contemplat­ed hereby shall be the Circuit Court of Cabell County or the United States District Court for the Southern District of West Virginia.  The parties expressly submit and irrevocably consent to such jurisdiction and venue and specifi­cally waive any and all rights they may have to contest said jurisdiction and/or venue of the above-mentioned forums and to demand any other forums; provided, however, that nothing in this section shall affect the right of the Lender to serve process in any manner permitted by law or limit any right that Lender may have to bring proceedings against any party hereto in courts of any other jurisdiction or en­force in any lawful manner a judgment obtained in one jurisdic­tion or any other jurisdiction.

11.19.        Governing Law.  This Agreement shall be governed by and construed under the laws of the State of West Virginia.

11.20.        Entirety.  The Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof and thereof.

 

    	45

    	 

    
 

 

11.21.        USA Patriot Act.  IMPORTANT INFORMATION ABOUT PROCEDURES REQUIRED BY THE USA PATRIOT ACT.

To help the government fight the funding of terrorism and money laundering activities, Federal Law requires all financial institutions to obtain, verify, and record information that identifies each entity or person who opens an account or establishes a relationship with the Lender.

What this means: When an entity or person opens an account or establishes a relationship with the Lender, the Lender may ask for the name, address, date of birth, and other information that will allow the Lender to identify the entity or person who opens an account or establishes a relationship with the Lender.  The Lender may also ask to see identifying documents for the entity or person.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS.]

 

    	46

    	 

    
 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed under seal and effective as of the day and year first above written.

 

	 	
Energy Services of America Corporation,

a Delaware corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

	 	

C. J. Hughes Construction Company, Inc.

a West Virginia corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

	 	

Nitro Electric Company, Inc.

a West Virginia corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

	 	

Contractors Rental Corporation

a West Virginia corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

	 	

S T Pipeline, Inc.

a West Virginia corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

	 	

United Bank, Inc.,

a West Virginia corporation

	 
	 	 	 	 	 
	
 

	By	
 

	 
	 	 	Its	 	 
	 	 	 	 	 

 

    	47

    	 

    
 

 

SCHEDULE 1.01(a)

TO

LOAN AGREEMENT BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL.

 

PERMITTED ENCUMBRANCES

1.  Those encumbrances appearing on Schedule 5.20 and the Certificates of Title for each motor vehicle.

 

 

    	48

    	 

    
 

 

SCHEDULE 5.06

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL.

 

PENDING LITIGATION

None.

    	49

    	 

    
 

SCHEDULE 5.08

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

PRIOR OR EXISTING CORPORATION,

TRADE OR FICTITIOUS NAMES OF

BORROWER

1.  Nitro Electric – NEC Acquisition Company, Inc.

 

    	50

    	 

    
 

 

SCHEDULE 5.17

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

The principal place of business and address for purposes of notice under the Loan Agreement and Loan Documents are as follows:

 

Borrower/

Guarantors:              75 West Third Avenue

Huntington, WV  25702

 

Lender:                      United Bank, Inc.

Attn.: Vice President

2889 Third Avenue

Huntington, WV  25702

    	51

    	 

    
 

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

ENERGY SERVICES OF AMERICA CORPORATION

Directors:

Marshall Reynolds, Chairman

 

Neal Skaggs

 

Keith Monihan

 

Doug Reynolds

 

Jack Reynolds

 

Joe Williams

 

Samuel Kapourales

 

Nester S. Logan

 

Officers:

 

Doug Reynolds, President/CEO

 

Lane Ferguson, Vice President

 

Charles Crimmel, Secretary/Treasurer

    	52

    	 

    
 

 

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

C. J. HUGHES CONSTRUCTION COMPANY, INC.

Directors:

Marshall Reynolds

 

Charles Crimmel

 

Officers:

Doug Reynolds, President

 

Richard Phillips, Vice President

 

Charles Crimmel, Secretary/Treasurer

 

Tim Donahoe, Asst. Secretary

 

    	53

    	 

    
 

 

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

NITRO ELECTRIC COMPANY, INC.

Nitro Electric Company, Inc.

Directors:

Marshall Reynolds

 

Lane Ferguson

 

Charles Crimmel

 

 

Officers:

Lowell Ferguson, President/CEO

 

Bruce Ward, Executive Vice President

 

Gabe Holstein, Vice President Mechanical Division

 

Charles Crimmel, Secretary

 

Brenda Pauley, Asst. Secretary

 

Doug Reynolds, Treasurer

 

    	54

    	 

    
 

 

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

CONTRACTORS RENTAL CORPORATION

Directors:

Marshall Reynolds

 

Charles Crimmel

 

 

Officers:

Doug Reynolds, President

 

Charles Crimmel, Secretary/Treasurer

 

Tim Donahoe, Asst. Secretary

 

    	55

    	 

    
 

 

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

S T PIPELINE, INC.

Director:

Marshall Reynolds

 

 

Officers:

Doug Reynolds, President

 

Charles Crimmel, Secretary/Treasurer

 

    	56

    	 

    
 

 

SCHEDULE 5.20

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

 

Financing Statements of Record

1.  Energy Services of America Corporation

2.  C. J. Hughes Construction Company, Inc.

3.  Nitro Electric Company, Inc.

4.  Contractors Rental Corporation

5.  S T Pipeline, Inc.                                                                                                                  SEE ATTACHED REPORTS

 

    	57Exhibit 10.1

 

EMPLOYMENT AGREEMENT 

 

This Employment Agreement (“Agreement”)
is entered into and effective as of March 1, 2015 (“Effective Date”), by and between STAAR Surgical Company,
a Delaware corporation on behalf of itself and any and all affiliated entities (together, the “Company”) and
Caren L. Mason (“Executive”).

 

RECITALS

 

A.           The
Company is a leading developer, manufacturer and marketer of implantable lenses for the eye and delivery systems related thereto
(the “Business”).

 

B.           The
Company wishes to employ Executive to serve as its Chief Executive Officer.

 

C.           Executive
wishes to be employed by the Company and to serve in such capacity under the terms and conditions in this Agreement.

 

NOW, THEREFORE, the parties agree as follows:

 

1.           Position
and Duties.

 

(a)          During
the term of this Agreement, Executive will be employed by the Company to serve as Chief Executive Officer of the Company, reporting
to the Company’s Board of Directors (“Board”). As Chief Executive Officer, Executive will, subject to
the supervision and direction of the Board, be responsible for: (i) implementing goals, operating plans, policies and objectives
for the Company; (ii) performing the duties and responsibilities customarily expected to be performed by a Chief Executive
Officer; and (iii) performing such other duties and functions as are reasonably required and/or as may be reasonably prescribed
by the Board from time-to-time.

 

(b)          The
location of Executive’s employment will be the Company’s headquarters offices, but Executive from time to time may
be required to travel to other geographic locations in connection with the performance of her duties.

 

2.          Standards
of Performance. Executive will at all times faithfully, industriously and to the best of her
ability, experience and talents perform all of the duties required of and from her pursuant to the terms of this Agreement. Executive
will devote her full business energies and abilities and all of her business time to the performance of her duties hereunder and
will not, without the Company’s prior written consent, render to others any service of any kind (whether or not for compensation)
that, in the Company’s sole but reasonable judgment, would interfere with the full performance of her duties hereunder.
Notwithstanding the foregoing, Executive is permitted to spend reasonable amounts of time to manage her personal financial and
legal affairs and, with the Company’s consent which will not be unreasonably withheld, to serve on civic, charitable, not-for-profit,
industry or corporate boards or advisory committees, provided that such activities, individually and collectively, do not materially
interfere with the performance of Executive’s duties hereunder. In no event will Executive engage in any activities that
could reasonably create a conflict of interest or the appearance of a conflict of interest. Executive shall be subject to the
Company’s policies, procedures and approval practices, as generally in effect from time to time.

    	 

    	 

    

  

3.          Term.
Executive will be employed for no specific term and until terminated pursuant to the terms of
this Agreement. The Company and Executive shall each have a right to terminate this Agreement as provided in Section 5,
below. 

 

4.          Compensation,
Benefits and Policies.

 

(a)          Base
Salary. As an annual base salary (“Base Salary”) for all services rendered pursuant to this Agreement,
Executive will be paid an initial Base Salary in the gross amount of five hundred twenty five thousand dollars ($525,000) calculated
on an annualized basis, less necessary withholdings and authorized deductions, and payable pursuant to the Company’s regular
payroll practices at the time. The Base Salary is subject to periodic review and adjustment not less frequently than annually
within the first three (3) months after the end of each fiscal year, in the sole discretion of the Board.

 

(b)          Performance
Bonus. During Executive’s employment under this Agreement, Executive will be eligible for a performance bonus, subject
to the terms and conditions of the bonus plan applicable to senior executives of the Company, if any, established by the Board.
The target amount of the annual bonus is seventy-five percent(75%) of Executive’s annual Base Salary. However, payment of
the bonus will be conditioned on the Company’s achievement of financial objectives established by the Board and individual
performance objectives to be established annually by the Board, and the bonus may be zero. For the avoidance of doubt, the performance
bonus will be payable only if financial and performance objectives established by the Board are achieved. To encourage continued
tenure with the Company, Executive must be employed by the Company as of the payment date to be eligible for a performance bonus
for the year to which the bonus relates. Performance bonuses will be paid out according to the terms of the applicable bonus plan,
if any, but in no event later than the end of the first quarter of the year that immediately follows the fiscal year to which
the bonus relates.

 

(c)          Long
Term Incentive Compensation. Executive will be eligible to participate in the long term incentive plans applicable to senior
executives of the Company as may be established by the Board from time to time, subject to the terms and conditions of any such
plans. The incentive may vary from year to year, and may consist of restricted stock grants, stock options or other forms of incentive,
or a combination of more than one type of incentive. Subject to full execution of this Agreement, Executive will receive an option
to purchase up to 400,000 shares of STAAR Surgical Company’s common stock. The grant will be effective and priced on March
3, 2015, provided that is your first day of employment and this Agreement is fully executed. These options will vest in increments
of one third on the first year anniversary, one third on the second year anniversary and one third on the third year anniversary.
All of these options shall have a ten year term after vesting. In addition, the Executive will have twelve (12) months to exercise
all of her vested stock options after termination of service with the Company, unless terminated by the Company with cause.

    	-2-

    	 

    

 

(d)          Paid
Time Off and Benefits. Executive is entitled to participate in any plans regarding benefits of employment, including pension,
profit sharing, group health, disability insurance and other employee pension and welfare benefit plans now existing or hereafter
established to the extent that Executive is eligible under the terms of such plans and if the other executive officers of the
Company generally are eligible to participate in such plan. The Company may, in its sole discretion and from time-to-time, establish
additional senior management benefit plans as it deems appropriate. Executive understands that any such plans may be modified
or eliminated in the Company’s sole discretion in accordance with applicable law, provided that no such modification or
elimination shall result in reducing or eliminating any benefits in which Executive’s right has vested.

 

(e)          Reimbursement
of Business Expenses. The Company will promptly reimburse to Executive her reasonable, customary and documented out-of-pocket
business expenses in connection with the performance of her duties under this Agreement, and in accordance with the policies and
procedures established by the Company. If such expense qualifies hereunder for reimbursement, then the Company will reimburse
Executive for that expense in accordance with the Company’s policy

 

(f)          Sarbanes-Oxley
Act Loan Prohibition. To the extent that any Company benefit, program, practice, arrangement or this Agreement would
or might otherwise result in Executive’s receipt of an illegal loan (the “Loan”), the Company shall use
commercially reasonable efforts to provide Executive with a substitute for the Loan that is lawful and of at least equal value
to Executive. If this cannot be done, or if doing so would be significantly more expensive to the Company than making the Loan,
the Company need not make the Loan to Executive or provide her a substitute for it.

 

5.           Termination
of Employment.

 

(a)          By
Company Without Cause. The Company may terminate Executive's employment without Cause (as defined in this Agreement) at any
time and without prior notice, written or otherwise. In the event the Company terminates Executive's employment for other than
Cause, Incapacity (as defined in this Agreement) or death, and subject to the other provisions of this Agreement, Executive will
be entitled to:

 

(i)          continued
coverage under the Company’s insurance benefit plans through the termination date and such other benefits to which she may
be entitled pursuant to the Company’s benefit plans (other than any severance plan);

 

(ii)         payment
of all earned but unpaid compensation (including accrued unpaid vacation) through the effective date of termination, payable on
or before the termination date; and

 

    	-3-

    	 

    

 

(iii)        reimbursement
of expenses incurred on or before the termination date in accordance with Section 4(e), above; plus

 

(iv)         payment
of the equivalent of the Base Salary she would have earned over the next eighteen (18) months following the termination date (less
necessary withholdings and authorized deductions) at her then current Base Salary rate (the “Severance Payment”),
payable, at the option of the Board, in (a) equal monthly installments over the eighteen (18) months following the termination
date (the “Severance Period”), or (b) in a lump sum, subject in either case to Section 16, below; and

 

(v)          at
Executive’s option, reimbursement of insurance premiums payable to retain group health coverage as of the termination date
for herselfand her eligible dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”)
for 18 (18) months.

 

The payments and benefits set forth in
Sections 5(a)(i)-(iii) shall be referred to as the “Accrued Benefits”, and the payments and benefits
set forth in Sections 5(a)(iv)-(v) shall be referred to as the “Severance Benefits”. Executive
shall not receive the Severance Benefits unless Executive executes the separation agreement and general release attached as Exhibit A,
and the same becomes effective pursuant to its terms. In addition, if Executive accepts other employment within the Severance
Period, the Company’s obligation under Section 5(a)(v) above will be extinguished as of the date Executive becomes
covered under the group health plan of Executive’s new employer.

 

(b)          By
Company With Cause. The Company may terminate Executive’s employment at any time and without prior notice, written or
otherwise, for Cause. As used in this Agreement, “Cause” shall mean any of the following conduct by Executive: (i) material
breach of this Agreement, or of a Company policy or of a law, rule or regulation applicable to the Company or its operations;
(ii) demonstrated and material neglect of duties, or failure or refusal to perform the material duties of his position, or
the failure to follow the reasonable and lawful instructions of the Board; (iii) dishonesty, self-dealing, fraud, misrepresentation,
gross negligence or serious misconduct; or (iv) conviction of or plea of guilty or nolo contendere to any felony crime.
Termination pursuant to Section 5(b)(ii) shall be effective only if such failure continues after Executive has
been given written notice thereof and fifteen (15) business days thereafter in which to present her position to the Board
or to cure the same, unless the Board reasonably determines that the reason(s) for termination are not capable of being cured.
In the event of termination for Cause, Executive will be entitled only to the Accrued Benefits through the termination date, which
will be the date on which the notice is given. The Company will have no further obligation to pay any compensation of any kind
(including without limitation any bonus or portion of a bonus that otherwise may have become due and payable to Executive with
respect to the year in which such termination date occurs), or severance payment of any kind nor to make any payment in lieu of
notice.

    	-4-

    	 

    

  

(c)           Incapacity
or Death.

 

(i)          “Incapacity”
means that Executive is (A) unable to perform the essential functions of her position, with or without reasonable accommodation,
by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected
to last for a continuous period of not less than twelve (12) months, or (B) by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months, and is receiving income replacement benefits for a period of not less than three months under an accident
and health plan covering the Company's employees, or (C) determined to be totally disabled by the Social Security Administration,
as interpreted by the Company in its discretion, or (D) deemed to be disabled in accordance with the applicable disability insurance
program of the Company, provided that the definition of "disability" applied under such disability insurance program
complies with the requirements of this subsection, as determined by the Company in its discretion. A determination of Incapacity
shall not be arbitrary or unreasonable and the Company, in making such determination, shall take into consideration the opinion
of Executive's personal physician, if reasonably available, and any other physician deemed appropriate by the Company, but such
determination by the Company shall be final and binding on the parties hereto. The Company will provide all applicable legally-required
leaves to Executive, which shall be provided on an unpaid basis unless pay is otherwise required under applicable law. This provision
shall be interpreted and applied in a manner consistent with all applicable laws, including laws regarding workers' compensation,
reasonable accommodation of disability, and family and medical leave laws. The Company has the right to terminate Executive’s
employment for Incapacity on fifteen (15) days’ written notice. In the event of termination for Incapacity, Executive
will be entitled to receive the Accrued Benefits.

 

(ii)         Executive’s
employment pursuant to this Agreement shall be immediately terminated without notice by the Company upon the death of Executive.
If Executive dies while actively employed pursuant to this Agreement, the Company will pay the Accrued Benefits to his estate
or designated beneficiaries within sixty (60) days.

 

(d)          Resignation
for Good Reason. Executive may resign and terminate this Agreement for Good Reason (as defined below) by giving written notice
of resignation to the Company. As used in this Agreement, “Good Reason” shall mean any one of the following:
(i) a material reduction in Executive’s Base Salary and/or a material failure to provide the benefits required in Section 4,
(ii) any action or inaction that constitutes a material breach by the Company of this Agreement; (iii) a material diminution
in Executive’s authority, duties or responsibilities such that they are materially inconsistent with her position as Chief
Executive Officer of the Company; and (iv) relocation of the Company’s headquarters to a location that materially increases
Executive’s commute. Resignation for Good Reason shall not be effective unless all of the following conditions are satisfied:
(A) Executive has given the Company written notice (pursuant to Section 11 below) within thirty (30) days of the initial
occurrence of any of the above-specified events or conditions constituting the Good Reason and has requested a specific reasonable
cure, (B) the Company has failed to cure the occurrence within thirty (30) days of receiving written notice from Executive
(the “Cure Period”), and (C) Executive provides written notice of a resignation date that is after the expiration
of the Cure Period but no more than ninety (90) days after the initial occurrence of the event giving rise to the resignation
for Good Reason. In the event of a resignation for Good Reason, Executive will be entitled to the Accrued Benefits and the Severance
Benefits, on the same conditions set forth in the final paragraph of Section 5(a), specifically including, but not
limited to, the signing of the severance agreement and general release document, attached hereto as Exhibit A.

    	-5-

    	 

    

 

(e)          Resignation
or Termination Following a Change in Control. Executive may resign and terminate this Agreement following a Change in Control
(as defined below) if the successor to the Company fails to offer or maintain Executive in the position of Chief Executive Officer
of the successor company reporting to the Board of the successor to the Company, with compensation and benefits substantially
similar to those enjoyed by Executive immediately preceding the Change in Control for a period of eighteen (18) months following
the Change in Control. Resignation following a Change in Control shall not be effective unless all of the following conditions
are satisfied: (A) Executive has given the Company written notice (pursuant to Section 11 below) within thirty (30)
days of the change in position and/or compensation and benefits and has requested a specific reasonable cure, (B) the Company
has failed to restore Executive’s position and/or compensation and benefits within thirty (30) days of receiving written
notice from Executive, and (C) Executive provides written notice of a resignation date that is after the time for the Company
to restore Executive’s position and/or compensation and benefits has expired, but no more than ninety (90) days after the
change in position and/or compensation and benefits. In the event of Executive’s resignation following a Change in Control
in accordance with this subsection, or if the Company terminates Executive without Cause within twelve (12) months after a Change
in Control, subject to the same conditions set forth in the final paragraph of Section 5(a), specifically including,
but not limited to, the signing of the severance agreement and general release document, attached hereto as Exhibit A,
Executive will be entitled to the Accrued Benefits and the Severance Benefits, plus an amount equal to his bonus, if any, for
the year prior to his resignation or termination and an amount equal to his target bonus for the year in which his resignation
or termination occurs. In such event, STAAR agrees that all stock options, restricted stock and other incentive compensation awards
of the Executive that are outstanding at the time of such termination and that have not previously become exercisable, payable
or free from restrictions shall immediately become exercisable, payable or free from restrictions, as the case may be, in their
entirety, and that, the exercise period of any stock option shall continue for the length of the exercise period specified in
the grant of the award determined without regard to the Executive’s termination of employment(collectively, the “Change
in Control Benefits”).

 

As used in this Agreement, a “Change
in Control” shall mean any of the following events:

 

(i)          any
person, including a group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (the “1934 Act”),
but excluding Broadwood Partners, L.P. or a group of which it is a member, becomes the beneficial owner of stock of the Company
with respect to which twenty-five percent (25%) or more of the total number of votes for the election of the Board may be cast;

 

    	-6-

    	 

    

 

(ii)         as
a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets
or contested election, or combination of the foregoing, persons who were directors of the Company just prior to such event shall
cease to constitute a majority of the Board;

 

(iii)        the
stockholders of the Company approve an agreement providing either for a transaction in which the Company will cease to be an independent
publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Company;

 

(iv)         acquisition
in a single or series of related transactions, including without limitation a tender offer or exchange offer, by any person or
related group of persons (other than the Company or by a Company-sponsored employee benefit plan), of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities; or

 

(v)          any
other event that a majority of the incumbent Board in its sole discretion determines to be a Change in Control.

 

Notwithstanding the foregoing, the formation
of a holding company for the Company in which the stockholdings of the holding company after its formation are substantially the
same as for the Company prior to the holding company formation does not constitute a Change in Control for purposes of this Agreement.

 

(f)          Voluntary
Resignation without Good Reason. Executive may terminate this Agreement without Good Reason effective on sixty (60) day’s
written notice, unless the Company in its sole discretion accepts the resignation earlier. In the event that Executive resigns
without Good Reason as defined above in Section 5(d), Executive will be entitled only to the Accrued Benefits through the
termination date. The Company will have no further obligation to pay any compensation of any kind (including without limitation
any bonus or portion of a bonus that otherwise may have become due and payable to Executive with respect to the year in which
such termination date occurs), or severance payments of any kind. Furthermore, Executive agrees that in the event that Executive
resigns without Good Reason within twelve (12) months of the Effective Date, Executive shall pay to the Company within thirty (30)
days after the Effective Date of such resignation an amount equal to any bonus that was paid to Executive upon acceptance of employment
(“Signing Bonus”).

 

    	-7-

    	 

    

 

6.           Proprietary
Information Obligations.

 

(a)          Proprietary
Information and Confidentiality. Both before and during the term of Executive’s employment, Executive will have access
to and become acquainted with certain confidential and/or proprietary information regarding the Company and its Business, including,
without limitation, all of the following materials and information (whether or not reduced to writing and whether or not patentable
or protected by copyright): trade secrets; inventions; processes; formulae; programs; technical data; products; sales and marketing
plans; financial information; Company-developed software; engineering designs and documentation; customer proposals, specifications
and requirements; identities, lists and confidential information about customers, prospects, suppliers, vendors and key employees;
personal information relating to the Company’s employees; mailing and e-mail lists (collectively, “Proprietary Information”).
Executive will not disclose any of the Proprietary Information directly or indirectly, or use it in any way, either during her
employment pursuant to this Agreement or at any time thereafter, except as reasonably required or specifically requested in the
course of her employment with the Company or as authorized in writing by the Company. Notwithstanding the foregoing, Proprietary
Information does not include information that is otherwise publicly known or available, provided it has not become public as a
result of a breach of this Agreement or any other agreement Executive has or may have to keep information confidential. It is
not a breach of this Agreement for Executive to disclose Proprietary Information pursuant to an order of a court or other governmental
or legal body.

 

(b)          Inventions
Agreement and Assignment.

 

(i)          Executive
hereby agrees to disclose promptly to the Company (or any persons designated by it) all developments, designs, creations, improvements,
original works of authorship, formulas, processes, know-how, techniques and/or inventions (collectively, the “Inventions”)
(A) which are made or conceived or reduced to practice by Executive, either alone or jointly with others, in performing her
duties during the period of Executive’s employment by the Company, that relate to or are useful in the business of the Company;
or (B) which result from tasks assigned to Executive by the Company, or from Executive’s use of the premises or other
resources owned, leased or contracted by the Company.

 

(ii)         Executive
agrees that all such Inventions which the Company in its discretion determines to be related to or useful in its business or its
research or development, or which result from work performed by Executive for the Company, will be the sole and exclusive property
of the Company and its assigns, and the Company and its assigns will have the right to use and/or to apply for patents, copyrights
or other statutory or common law protections for such Inventions in any and all countries. Executive further agrees to assist
the Company in every reasonable way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights
and other statutory or common law protections for such Inventions in any and all countries. To that end, Executive will execute
all documents for use in applying for and obtaining such patents, copyrights and other statutory or common law protections therefor
and enforcing the same, as the Company may desire, together with any assignments thereof to the Company or to persons or entities
designated by the Company. Should the Company be unable to secure Executive’s signature on any document necessary to apply
for, prosecute, obtain, or enforce any patent, copyright or other right or protection relating to any Invention, whether due to
her mental or physical incapacity or any other cause, Executive hereby irrevocably designates and appoints the Company and each
of its duly authorized officers and agents as Executive’s agent and attorney-in-fact, to act for and in her behalf and stead,
to execute and file any such document, and to do all other lawfully permitted acts to further the prosecution, issuance, and enforcement
of patents, copyrights or other rights or protections with the same force and effect as if executed and delivered by Executive.
Executive’s obligations under this Section 6(b)(ii) will continue beyond the termination of Executive’s
employment with the Company, but the Company will compensate Executive at a reasonable rate after such termination for time actually
spent by Executive at the Company’s request in providing such assistance.

    	-8-

    	 

    

  

(iii)        Executive
hereby acknowledges that all original works of authorship which are made by Executive (solely or jointly with others) within the
scope of Executive’s employment which are protectable by copyright are “works for hire,” as that term is defined
in the United States Copyright Act (17 U.S.C. section 101).

 

(iv)         Any
provision in this Agreement requiring Executive to assign Executive’s rights in any Invention to the Company will not apply
to any invention that is exempt under the provisions of California Labor Code section 2870, which provides:

 

“(a) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s
equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) relate at the time
of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated
research or development of the employer; or (2) result from any work performed by the employee for the employer. (b) To
the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

 

(c)          Non-Solicitation
of Customers and Other Business Partners. Executive recognizes that by virtue of her employment with the Company, she will
be introduced to and may be involved in the solicitation and servicing of existing customers and other business partners of the
Company and new customers and business partners obtained by the Company during her employment. Executive understands and agrees
that all efforts expended in soliciting and servicing such customers and business partners shall be for the benefit of the Company.
Executive further agrees that during her employment with the Company she will not engage in any conduct which could in any way
jeopardize or disturb any of the customer and business partner relationships of the Company. In addition, Executive agrees that,
for a period beginning on the Effective Date and ending twelve (12) months after termination of Executive’s employment with
the Company, regardless of the reason for such termination, Executive shall not use any Proprietary Information to, directly or
indirectly, solicit, direct, interfere with, or entice away from the Company any existing customer, licensee, licensor, vendor,
contractor or distributor of the Company or for the customer or other business partner to expand its business with a competitor,
without the prior written consent of the Board.

    	-9-

    	 

    

  

(d)          Non-Solicitation
of Employees. Executive recognizes the substantial expenditure of time and effort which the Company devotes to the recruitment,
hiring, orientation, training and retention of its employees. Accordingly, Executive agrees that, for a period beginning on the
Effective Date and ending twelve (12) months after termination of Executive’s employment with the Company, regardless of
the reason for such termination, Executive shall not use any Proprietary Information, directly or indirectly, for herself or on
behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the
Company in a position classified as exempt from overtime pay requirements. For purposes of the foregoing, “employee of the
Company” shall include any person who was an employee of the Company at any time within six (6) months prior to
the prohibited conduct.

 

(e)          Company
Property and Materials.

 

(i)          All
files, records, documents, computer-recorded or electronic information, drawings, specifications, equipment, and similar items
relating to Company business, whether prepared by Executive or otherwise coming into her possession, will remain the Company’s
exclusive property and will not be removed from Company premises under any circumstances whatsoever without the Company’s
prior written consent, except when, and only for the period, necessary to carry out Executive’s duties hereunder

 

(ii)         In
the event of termination of Executive’s employment for any reason, Executive will promptly deliver to the Company all Company
equipment (including, without limitation, any laptop and/or tablet computers, cellular phones or other devices, and computer hardware
and software) and all originals and electronic or physical copies of all documents, including without limitation, all books, customer
lists, forms, documents supplied by customers, records, product lists, writings, manuals, reports, financial documents and other
documents or property in Executive’s possession or control, which relate to the Company’s business in any way whatsoever,
and in particular to customers of the Company, or which may be considered to constitute or contain Proprietary Information as
defined above, and Executive will neither retain, reproduce, nor distribute copies thereof (other than a copy, prepared or reviewed
and approved by the Company, of Executive’s contacts in Outlook or similar electronic or physical copy address and telephone
directory).

 

    	-10-

    	 

    

(f)          Remedies
for Breach. Executive acknowledges that any breach by Executive of this Section 6 would cause the Company irreparable
injury and damage for which monetary damages are inadequate. Accordingly, in the event of a breach or a threatened breach of this
Section 6, the Company will be entitled to an injunction restraining such breach. In addition, in the event of a breach
of this Section 6, the Company’s obligation to pay any unpaid portion of the Severance Payment or other benefits
as set forth in Sections 5(a), (d) and (e) of this Agreement will be extinguished. Nothing contained herein will be construed
as prohibiting the Company from pursuing any other remedy available to the Company for such breach or such threatened breach.
Executive has carefully read and considered these restrictions and agrees they are fair and reasonable restrictions on Executive
and are reasonably required for the protection of the interests of the Company. Executive agrees not to circumvent the spirit
of these restrictions by attempting to accomplish indirectly what Executive is otherwise restricted from doing directly. Executive
agrees that the restrictions in this Section 6 are reasonable and necessary to protect the Company’s Proprietary
Information, and they do not prevent Executive from working in the medical device industry. To the extent that any of the provisions
in this Section 6 are held to be overly broad or otherwise unenforceable at the time enforcement is sought, Executive agrees
that the provision shall be reformed and enforced to the greatest extent permissible by law. Executive further agrees that if
any portion of this Section 6 is held to be unenforceable, the remaining provisions of this Section 6 shall be enforced
as written.

 

7.          Interpretation,
Governing Law and Exclusive Forum. The validity, interpretation, construction, and performance
of this Agreement shall be governed by the laws of the State of California (excluding any that mandate the use of another jurisdiction’s
laws). Any arbitration (unless otherwise mutually agreed), litigation or similar proceeding with respect to such matters only
may be brought within California, and all parties to this Agreement consent to California’s jurisdiction.

 

8.          Entire
Agreement. All oral or written agreements or representations, express or implied, with respect
to the subject matter of this Agreement are set forth in this Agreement.

 

9.          Severability.
In the event that one or more of the provisions contained in this Agreement are held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction, such holding shall not impair the validity, legality
or enforceability of the remaining provisions herein.

 

10.         Successors
and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, Executive
and her estate, but Executive may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted
under the terms of the benefit plans in which she participates. No rights or obligations of the Company under this Agreement may
be assigned or transferred except that the Company shall require any successor (whether direct or indirect, by purchase, merger,
reorganization, sale, transfer of stock, consideration or otherwise) to all or substantially all of the business and/or assets
of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company
as hereinbefore defined and any successor to its business and/or assets (by merger, purchase or otherwise as provided in this
Section 10) which executes and delivers the agreement provided for in this Section 10 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law. In the event that any successor refuses to assume
the obligations hereunder, the Company as hereinbefore defined shall remain fully responsible for all obligations hereunder.

    	-11-

    	 

    

 

11.         Notices.
All notices, requests, demands and other communications hereunder shall be in writing and shall
be given by hand delivery, electronic mail, facsimile, telecopy, overnight courier service, or by United States certified or registered
mail, return receipt requested. Each such notice, request, demand or other communication shall be effective (i) if delivered
by hand or by overnight courier service, when delivered at the address specified in this Section 11; (ii) if
given by electronic mail, facsimile or telecopy, when such electronic mail, facsimile or telecopy is transmitted to the electronic
mail address or facsimile or telecopy number specified in this Section 11 and confirmation is received if during normal
business hours on a business day, and otherwise, on the next business day; and (iii) if given by certified or registered
mail, three (3) days after the mailing thereof. Notices shall be addressed to the parties as follows (or at such other
address, email address or fax number as either party may from time to time specify in writing by giving notice as provided herein):

 

If to the Company:              STAAR
Surgical Company

1911 Walker Ave.

Monrovia, California 91016

Attn: Board of Directors

 

If to Executive:                   Caren
Mason

 

12.         Indemnification.
The Company will indemnify Executive to the fullest extent permitted by the laws of the State of California. 

 

13.         Dispute
Resolution. The parties agree that all disputes, claims or controversies between them and between
Executive and the Company and its successor, including any dispute, claim or controversy arising from or otherwise in connection
with this Agreement and/or Executive’s employment with the Company, will be resolved as follows:

 

(a)          Prior
to initiating any other proceeding, the complaining party will provide the other party with a written statement of the claim identifying
any supporting witnesses or documents and the requested relief. The responding party shall within forty-five (45) days furnish
a statement of the relief, if any, that it is willing to provide, and identify supporting witnesses or documents.

 

    	-12-

    	 

    

 

(b)          If
the matter is not resolved by the exchange of statements of claim and statements of response as provided herein, the parties shall
submit the dispute to non-binding mediation, the cost of the mediator to be paid by the Company, before a mediator and/or service
to be jointly selected by the parties. Each party will bear his or its own attorney’s fees and witness fees.

 

(c)          If
the parties cannot agree on a mediator and/or if the matter is not otherwise resolved by mediation, any controversy or claim between
Executive and the Company and any of its current or former directors, officers and employees, including any arising out of or
relating to this Agreement or breach thereof, shall be settled by final and binding arbitration in
the county in which Executive last worked, or elsewhere as mutually agreed by the parties, by a single arbitrator pursuant
to the Employment Dispute Rules of Judicial Arbitration and Mediation Services, Inc. (“JAMS”), unless the parties
to the dispute agree to another arbitration service or independent arbitrator. The parties may conduct discovery to the extent
permitted in a court of law; the arbitrator will render an award together with a written opinion indicating the bases for such
opinion; and the arbitrator will have full authority to award all remedies that would be available in court. Judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each party shall bear its own attorney’s
fees and costs, unless the claim is based on a statute that provides otherwise. The Company will pay the arbitrator’s fees
and any administrative charges of the arbitration service, except that if Executive initiates the claim, she will pay a portion
of the administrative charges equal to the amount he would have paid to initiate the claim in a court of general jurisdiction.

 

(d)          EXECUTIVE
AND THE COMPANY AGREE THAT THIS ARBITRATION PROCEDURE IS SUBJECT TO AND ENFORCEABLE UNDER THE FEDERAL ARBITRATION ACT (9 U.S.C.
SECTIONS 1 ET SEQ.), AND WILL BE THE EXCLUSIVE MEANS OF REDRESS FOR ANY DISPUTES RELATING TO OR ARISING FROM EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY OR TERMINATION THEREFROM, INCLUDING DISPUTES OVER UNPAID WAGES, BREACH OF CONTRACT OR TORT, VIOLATION
OF PUBLIC POLICY, RIGHTS PROVIDED BY FEDERAL, STATE OR LOCAL STATUTES, REGULATIONS, ORDINANCES, AND COMMON LAW, LAWS THAT PROHIBIT
DISCRIMINATION BASED ON ANY PROTECTED CLASSIFICATION, AND ANY OTHER STATUTES OR LAWS RELATING TO AN EXECUTIVE’S RELATIONSHIP
WITH THE COMPANY. THE FOREGOING NOTWITHSTANDING, CLAIMS FOR WORKERS’ COMPENSATION BENEFITS OR UNEMPLOYMENT INSURANCE, OR
ANY OTHER CLAIMS WHERE MANDATORY ARBITRATION IS PROHIBITED BY LAW, ARE NOT COVERED BY THIS ARBITRATION PROVISION. THE PARTIES
EXPRESSLY WAIVE THE RIGHT TO A JURY TRIAL, AND AGREE THAT THE ARBITRATOR’S AWARD SHALL BE FINAL AND BINDING ON BOTH PARTIES.
THIS ARBITRATION PROVISION IS TO BE CONSTRUED AS BROADLY AS IS PERMISSIBLE UNDER APPLICABLE LAW.

 

14.         Representations.
Each person executing this Agreement hereby represents and warrants on behalf of herself and
of the entity/individual on whose behalf she is executing the Agreement that she is authorized to represent and bind the entity/individual
on whose behalf she is executing the Agreement. Executive specifically represents and warrants to the Company that she reasonably
believes (a) she is not under any contractual or other obligations that would prevent, limit or impair Executive’s
performance of her obligations under this Agreement and (b) that entering into this Agreement will not result in a breach
of any other agreement to which she is a party.

 

    	-13-

    	 

    

 

15.         Amendments
and Waivers. No provisions of this Agreement may be modified, waived, or discharged except by
a written document signed by Executive and a duly authorized Company officer. Thus, for example, promotions, commendations, and/or
bonuses shall not, by themselves, modify, amend, or extend this Agreement. A waiver of any conditions or provisions of this Agreement
in a given instance shall not be deemed a waiver of such conditions or provisions at any other time.

 

16.         Taxes.

 

(a)          Withholdings.
The Company may withhold from any compensation and benefits payable under this Agreement all federal, state, city and other taxes
or amounts as shall be determined by the Company to be required to be withheld pursuant to applicable laws, or governmental regulations
or rulings. Executive shall be solely responsible for the satisfaction of any taxes (including employment taxes imposed on employees
and penalty taxes on nonqualified deferred compensation).

 

(b)          Section
280G.

 

In the event that any payment or benefit
received or to be received by Executive pursuant to this Agreement or under any other agreement, contract, award, arrangement,
etc. (collectively, the “Payments”) would result in a “parachute payment”
as described in Section 280G of the Internal Revenue Code of 1986, as amended (or any successor provision), notwithstanding the
other provisions of this Agreement, or any other agreement, contract, award, arrangement, etc., such Payments shall not, in the
aggregate, exceed the maximum amount that may be paid to Executive without triggering golden parachute penalties under Section
280G and related provisions of the Internal Revenue Code, as determined in good faith by the Company’s independent auditors.
If any benefits must be cut back to avoid triggering such penalties, they shall be cut back in the following order: (A) cash payments;
(B) cancellation of accelerated vesting of equity awards other than stock options (with the latest vesting reduced first), and
(C) cancellation of accelerated vesting of stock options (with the latest vesting reduced first). If an amount in excess of the
limit set forth in this subsection (b) is paid to Executive, she shall repay the excess amount to the Company on demand, with
interest at the rate provided for in Internal Revenue Code Section 1274(b)(2)(B) (or any successor provision). The Company and
Executive agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence
or amount of golden parachute penalties. The foregoing reduction, however, shall only apply if it increases the net amount Executive
would realize from Payments, after payment of income and excise taxes on such Payments.

 

    	-14-

    	 

    

 

(c)          Section
409A Compliance.

 

(i)          Section
409A Six-Month Delay Rule. If any amounts that become due under Section 5 of this Agreement constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (or any
successor provision), payment of such amounts shall not commence until  Executive incurs a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h). If, at the time of Executive’s separation from service,
Executive is a “specified employee” (under Section 409A), any benefit as to which Section 409A penalties
could be assessed that becomes payable to Executive on account of her “separation from service” (including any amounts
payable pursuant to the preceding sentence) will not be paid until after six months and one day after Executive’s separation
from service (the “409A Suspension Period”). Within fourteen (14) calendar days after the end of the
409A Suspension Period, Executive shall be paid a lump sum payment in cash equal to any payments delayed because of the preceding
sentence, together with interest on them for the period of delay at a rate not less than the average prime interest rate published
in the Wall Street Journal on any day chosen by the Company during that period. Thereafter, Executive shall receive
any remaining benefits as if there had not been an earlier delay.

 

(ii)         Interpretation.
This Agreement is intended to comply with or be exempt from Section 409A, and the Company shall have complete discretion to interpret
and construe this Agreement and any associated documents in any manner that establishes an exemption from (or otherwise conforms
them to) the requirements of Section 409A. To the extent that any regulations or other guidance issued under Section 409A (after
application of the previous sentence) would result Executive being subject to the payment of interest or any additional tax under
Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of
any such interest or additional tax under Section 409A, which such amendment shall have the minimum economic effect necessary
and be reasonably determined in good faith by Executive and the Company, provided it does not increase the overall expense to
the Company in providing the benefits.

 

17.         U.S.
Citizenship and Immigration Services. Executive agrees to timely file all documents required
by the Department of Homeland Security to verify her identity and lawful employment in the United States. 

 

18.         Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute the same instrument.

    	-15-

    	 

    

  

19.         Executive’s
Acknowledgement.

 

	EXECUTIVE ACKNOWLEDGES THAT ALL
        UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND SHE RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED
        IN IT (INCLUDING THE AGREEMENTS SET FORTH AS EXHIBITS) AND THAT SHE HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT
        IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

         

        Executive
        FURTHER ACKNOWLEDGES THAT SHE HAS CAREFULLY READ THIS AGREEMENT (INCLUDING THE AGREEMENTS SET FORTH AS EXHIBITS),
        THAT SHE UNDERSTANDS ALL OF SUCH AGREEMENTS, AND THAT SHE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS SUCH AGREEMENTS WITH
        HER PRIVATE LEGAL COUNSEL AND HAS AVAILED HERSELF OF THAT OPPORTUNITY TO THE EXTENT SHE WISHED TO DO SO. EXECUTIVE UNDERSTANDS
        THAT THE DISPUTE RESOLUTION PROVISIONS OF THIS AGREEMENT GIVE UP THE RIGHT TO A JURY TRIAL ON MATTERS COVERED BY THEM.

 

[SIGNATURES ON NEXT PAGE]

 

    	-16-

    	 

    

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as of the Effective Date.

 

	 	Caren Mason
	 	 	 
	 	/s/
	 	 	 
	 	STAAR Surgical Company
	 	 	 
	 	By:  	/s/
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 

    	-17-

    	 

    

 

Exhibit A

 

FORM OF SEPARATION
AGREEMENT AND GENERAL RELEASE 

 

SEPARATION AGREEMENT
AND GENERAL RELEASE

 

This Separation Agreement and General Release
(this “Agreement”) is hereby entered into by and between Caren Mason, an individual (“Executive”), and
STAAR Surgical Company, a Delaware corporation, on behalf of itself and any and all affiliated entities (collectively, the “Company”).

 

Recitals

A.           Executive
has been employed by the Company pursuant to an employment agreement by and between the Company and Executive effective as of
[date] (the “Employment Agreement”), and currently is serving as Chief Executive Officer;

 

B.           Executive’s
employment with the Company and any of its parents, direct or indirect subsidiaries, affiliates, divisions, or related entities
(collectively referred to herein as the “Company and its Related Entities”) will be ended on the terms and conditions
set forth in this Agreement.

 

Agreement

 

In consideration
of the mutual promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:

 

1.          Effective
Date. Except as otherwise provided herein, this Agreement shall be effective on the eighth
day after it has been executed by both of the parties (the “Effective Date”).

 

2.          End
of Employment. Executive’s employment with the Company and its Related Entities has
ended or will end, effective as of ___________ Pacific Time, on _________________ (the “Termination Date”). 

 

3.          Continuation
of Benefits After the Termination Date. Except as expressly provided in this Agreement or
in the plan documents governing the Company’s employee benefit plans, after the Termination Date, Executive will no longer
be eligible for, receive, accrue, or participate in any other benefits or benefit plans provided by the Company and its Related
Entities, including, without limitation, medical, dental and life insurance benefits, and the Company’s 401(k) retirement
plan; provided, however, that nothing in this Agreement shall waive Executive’s right to any vested benefits, including
vested amounts in the Company’s 401(k) retirement plan, which amounts shall be handled as provided in the plan.

 

    	 

    	 

    

4.          Payments
Upon Termination. Executive will be entitled to receive payment of the following: (i) all
earned but unpaid compensation (including accrued unpaid vacation) through the effective date of termination, payable on or before
the termination date; and (ii) reimbursement, made in accordance with Section 4(e) of the Employment Agreement,
of any monies advanced or incurred by Executive in connection with her employment for reasonable and necessary Company-related
expenses incurred on or before the Termination Date. The provisions of this Agreement shall not waive or terminate any rights
to compensation or vested benefits as required by law, or to indemnification Executive may have under the Company’s Certificate
of Incorporation, Bylaws or separate indemnification agreement, as applicable.

 

5.          Insurance.
Executive will be provided continued coverage under the Company’s medical, dental and
vision insurance benefit plans through the Termination Date, and thereafter, the Company shall reimburse Executive for the cost
of continuation of such group insurance coverage for herself and her eligible dependents under the provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1986 (“COBRA”) for eighteen (18) months after the Termination Date.

 

6.          Severance
Payment [and Change in Control Benefits]. In return for Executive’s promises in this
Agreement, the Company will provide Executive with a severance payment in an amount equal to the Base Salary Executive would have
earned over the next eighteen (18) months (less necessary withholdings and authorized deductions) at her then current Base Salary
rate (the “Severance Payment”) [for Change in Control resignation or termination, add:
plus an amount equal to Executive’s bonus, if any, for the year prior to the end of her employment and an amount equal to
Executive’s target bonus for the year in which her employment ends], which will be paid in equal monthly installments over
the eighteen (18) months following the Termination Date (the “Severance Period”) [OR, at the option of the
Board: in a lump sum within two business days after the Effective Date], subject to Section 22,
below.

 

7.            Effect
of Revocation or Subsequent Employment.

 

(a)          If
Executive properly revokes this Agreement in accordance with Section 14 below, Executive shall not be entitled to receive
the payments and benefits under Sections 5 and 6, above, except that Executive’s rights under COBRA will continue.

 

(b)          The
Company’s obligation to reimburse the premiums for Executive’s continuation insurance coverage will be extinguished
as of the date Executive’s coverage begins under the group health plan of any new employer. Executive shall promptly provide
written notice to the Company after she learns she will be eligible for such insurance coverage. If Executive violates the restrictions
in Section 18, below, the Company’s obligation to pay premiums for insurance under COBRA or otherwise will be immediately
extinguished, and the other remedies specified in Section 18, below, shall apply.

 

    	-2-

    	 

    

8.          Acknowledgement
of Total Compensation and Indebtedness. Executive acknowledges and agrees that the cash
payments under Sections 4, 5 and 6 of this Agreement extinguish any and all obligations for monies, or other compensation
or benefits that Executive claims or could claim to have earned or claims or could claim is owed to her as a result of her employment
by the Company and its Related Entities through the Termination Date, under the Employment Agreement or otherwise. Notwithstanding
the foregoing, the parties acknowledge and agree that the provisions of this Section 10 shall not terminate any rights
Executive has under Section 3 or to other payments Executive may have, and to any indemnification Executive may have under
the Company’s Certificate of Incorporation, Bylaws or separate indemnification agreement, as applicable.

 

9.            Status
of Related Agreements and Future Employment.

 

(a)          Agreements
Between Executive and the Company. [Agreements to be scheduled at time].

 

(b)          Employment
Agreement. The parties agree that the Employment Agreement shall be terminated as of the Termination Date. Notwithstanding
the termination of the Employment Agreement, the parties hereto acknowledge that certain rights and obligations set forth in the
Employment Agreement extend beyond the Termination Date. In the event that any provision of this Agreement conflicts with
Section 6 of the Employment Agreement, the terms and provisions of the section(s) providing the greatest protection to
the Company and its Related Entities shall control.

 

10.          Release
by Executive.

 

(a)          Except
for any obligations or covenants of the Company pursuant to this Agreement and as otherwise expressly provided in this Agreement,
Executive, for herself and her heirs, executors, administrators, assigns, successors and agents (collectively, the “Executive’s
Affiliates”) hereby fully and without limitation releases and forever discharges the Company and its Related Entities,
and each of their respective agents, representatives, shareholders, owners, officers, directors, employees, consultants, attorneys,
auditors, accountants, investigators, affiliates, successors and assigns (collectively, the “Company Releasees”),
both individually and collectively, from any and all rights, claims, demands, liabilities, actions, causes of action, damages,
losses, costs, expenses and compensation, of whatever nature whatsoever, known or unknown, fixed or contingent, which Executive
or any of Executive’s Affiliates has or may have or may claim to have against the Company Releasees by reason of any matter,
cause, or thing whatsoever, from the beginning of time to the Effective Date (“Claims”), arising out of, based
upon, or relating to his employment or the termination of her employment with the Company and its Related Entities and/or her
service as an officer of any of the Company Releasees, any agreement or compensation arrangement between Executive and any of
the Company Releasees, to the maximum extent permitted by law.

 

    	-3-

    	 

    

(b)          Executive
specifically and expressly releases any Claims arising out of or based on: the California Fair Employment and Housing Act, Title
VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the National Labor Relations Act and the Equal Pay Act,
as the same may be amended from time to time; the California common law on fraud, misrepresentation, negligence, defamation, infliction
of emotional distress or other tort, breach of contract or covenant, violation of public policy or wrongful termination; state
or federal wage and hour laws, and other provisions of the California Labor Code, to the extent these may be released herein as
a matter of law; or any other state or federal law, rule, or regulation dealing with the employment relationship.

 

(c)          Nothing
contained in this Section 10 or any other provision of this Agreement shall release or waive any right that Executive
has to indemnification and/or reimbursement of expenses by the Company and its Related Entities with respect to which Executive
may be eligible as provided in California Labor Code section 2802, the Company’s and its Related Entities’ Certificates
of Incorporation, Bylaws and any applicable directors and officers, errors & omissions, umbrella or general liability
insurance policies, any indemnification agreements, including the Employment Agreement; or any other applicable source, nor prevent
Executive from cooperating in an investigation of the Company by the Equal Employment Opportunity Commission (“EEOC”).

 

11.          Waiver
of Civil Code Section 1542.

 

(a)          Executive
understands and agrees that the release provided herein extends to all Claims released above whether known or unknown, suspected
or unsuspected, which may be released as a matter of law. Executive expressly waives and relinquishes any and all rights she may
have under California Civil Code section 1542, which provides as follows:

 

“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.”

 

(b)          Executive
expressly waives and releases any rights and benefits which she has or may have under any similar law or rule of any other jurisdiction.
It is the intention of each party through this Agreement to fully, finally and forever settle and release the Claims as set forth
above. In furtherance of such intention, the release herein given shall be and remain in effect as a full and complete release
of such matters notwithstanding the discovery of any additional Claims or facts relating thereto.

 

    	-4-

    	 

    

 

12.         [If
Executive is age 40 or over on Termination Date] Release of Federal Age Discrimination Claims by Executive. Executive
hereby knowingly and voluntarily waives and releases all rights and claims, known or unknown, arising under the Age Discrimination
In Employment Act of 1967, as amended, which she might otherwise have had against the Company or any of the Company Releasees
regarding any actions which occurred prior to the date that Executive signed this Agreement, except that Executive is not prevented
from cooperating in an investigation by the EEOC or from filing an EEOC charge other than for personal relief.

 

13.         Release
by Company and its Related Entities. The Company and its Related Entities hereby release
and forever discharge Executive, from any and all waivable actions, causes of action, covenants, contracts, claims and demands
of whatever character, nature and kind, whether known or unknown, which the Company and its Related Entities ever had, now have,
or any of them hereafter can, shall or may have by reason of Executive’s employment and/or her service as a director and/or
officer of the Company and/or its Related Entities; provided, however, that this general release shall not apply, or be deemed
or construed to apply, to (a) any of Executive’s continuing obligations pursuant to the Employment Agreement, or (b) any
criminal conduct or acts or omissions constituting willful misconduct or gross negligence by Executive.

 

14.          Review
and Revocation Rights. Executive hereby is advised of the following:

 

(a)          Executive
has the right to consult with an attorney before signing this Agreement and is encouraged by the Company to do so;

 

(b)          Executive
has twenty-one (21) days from her receipt of this Agreement to consider it; and

 

(c)          Executive
has seven (7) days after signing this Agreement to revoke this Agreement, and this Agreement will not be effective until
that revocation period has expired without revocation. Executive agrees that in order to exercise her right to revoke this Agreement
within such seven (7) day period, she must do so in a signed writing delivered to the Company’s Board of Directors
of the Company (“Board”) before the close of business on the seventh calendar day after she signs this Agreement.

 

15.         Confidentiality
of Agreement. After the execution of this Agreement by Executive, neither Executive, her
attorney, nor any person acting by, through, under or in concert with them, shall disclose any of the terms of or amount paid
under this Agreement (other than to state that the Company has filed this Agreement and/or agreements related thereto as public
documents) or the negotiation thereof to any individual or entity; provided, however, that the foregoing shall not prevent such
disclosures by Executive to his attorney, tax advisors and/or immediate family members, or as may be required by law.

 

16.         No
Filings. Executive represents that she has not filed any waivable lawsuits, claims, charges
or complaints, which are pending as of the date hereof, against the Company Releasees with any local, state or federal agency
or court from the beginning of time to the date of execution of this Agreement and that, if any such agency or court ever assumes
jurisdiction over any such lawsuit, claim, charge or complaint and/or purports to bring any legal proceeding, in whole or in part,
on behalf of Executive based upon events occurring prior to the execution of this Agreement, Executive will request such agency
or court to withdraw from and/or to dismiss the lawsuit, claim, charge or complaint with prejudice. 

 

    	-5-

    	 

    

 

17.         Confidential
and Proprietary Information. Executive acknowledges that certain information, observations
and data obtained by her during the course of or related to her employment with the Company and its Related Entities (including,
without limitation, projection programs, business plans, business matrix programs (i.e., measurement of business), strategic
financial projections, certain financial information, shareholder information, product design information, marketing plans or
proposals, personnel information, customer lists and other customer information) are the sole property of the Company and its
Related Entities and constitute Proprietary Information as defined in Section 6 of the Employment Agreement. Executive
represents and warrants that she has returned all files, customer lists, financial information and other property of the Company
and its Related Entities that were in Executive’s possession or control without retaining copies thereof. Executive further
represents and warrants that she does not have in her possession or control any files, customer lists, financial information or
other property of the Company and its Related Entities. In addition to her promises in Section 6 of the Employment Agreement,
Executive agrees that she will not disclose to any person or use any such information, observations or data without the written
consent of the Board. If Executive is served with a deposition subpoena or other legal process calling for the disclosure of such
information, or if she is contacted by any third person requesting such information, she will notify the Board as soon as is reasonably
practicable after receiving notice and will reasonably cooperate with the Company and its Related Entities in minimizing the disclosure
thereof; provided, that nothing in this Agreement will affect Executive’s obligations to testify truthfully in response
to any subpoena or other legally required discovery proceeding.

 

18.          Prohibited
Activities.

 

(a)          Non-Solicitation
of Customers and Other Business Partners. Executive recognizes that by virtue of her employment with the Company, she will
be introduced to and involved in the solicitation and servicing of existing customers and other business partners of the Company
and new customers and business partners obtained by the Company during her employment. Executive understands and agrees that all
efforts expended in soliciting and servicing such customers and business partners shall be for the benefit of the Company. Executive
further agrees that during her employment with the Company she will not engage in any conduct which could in any way jeopardize
or disturb any of the customer and business partner relationships of the Company. In addition, Executive agrees that, for a period
beginning on the Effective Date and ending twelve (12) months after termination of Executive’s employment with the Company,
regardless of the reason for such termination, Executive shall not use any Proprietary Information to, directly or indirectly,
solicit, direct, interfere with, or entice away from the Company any existing customer, licensee, licensor, vendor, contractor
or distributor of the Company or for the customer or other business partner to expand its business with a competitor, without
the prior written consent of the Board.

 

    	-6-

    	 

    

(b)          Non-Solicitation
of Employees. Executive recognizes the substantial expenditure of time and effort which the Company devotes to the recruitment,
hiring, orientation, training and retention of its employees. Accordingly, Executive agrees that, for a period beginning on the
Effective Date and ending twelve (12) months after termination of Executive’s employment with the Company, regardless of
the reason for such termination, Executive shall not use any Proprietary Information, directly or indirectly, for herself or on
behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the
Company in a position classified as exempt from overtime pay requirements. For purposes of the foregoing, “employee of the
Company” shall include any person who was an employee of the Company at any time within six (6) months prior to
the prohibited conduct.

 

(c)          Scope
of Restrictions. Executive agrees that the restrictions in Sections 18 (a) and (b), above, are reasonable and necessary
to protect the Company’s trade secrets. To the extent that any of the provisions in this Section 18 are held to be
overly broad or otherwise unenforceable at the time enforcement is sought, Executive agrees that the provision shall be reformed
and enforced to the greatest extent permissible by law. Executive further agrees that if any portion of this Section 18
is held to be unenforceable, that the remaining provisions of it shall be enforced as written.

 

19.          Remedies.
Executive acknowledges that any misuse of Proprietary Information belonging to the Company and
its Related Entities, or any violation of Section 6 of the Employment Agreement, and any violation of Sections 15, 17
and 18 of this Agreement, will result in irreparable harm to the Company and its Related Entities, and therefore, the Company
and its Related Entities shall, in addition to any other remedies, be entitled to immediate injunctive relief. To the extent there
is any conflict between Section 6 of the Employment Agreement and this Section 19, the provision providing the greatest
protection to the Company and its Related Entities shall control. In addition, in the event of a breach of any provision of this
Agreement by Executive, including Sections 15, 17 and 18, Executive shall forfeit, and the Company and its Related Entities
may cease paying, any unpaid installments of the Severance Payment and providing any further medical insurance benefits under
Sections 5 and 6, above. 

 

20.          Cooperation
Clause.

 

(a)          To
facilitate the orderly conduct of the Company and its Related Entities’ businesses, for the Severance Period, Executive
agrees to cooperate, at no charge, with the Company and its Related Entities’ reasonable requests for information or assistance
related to the time of her employment.

 

    	-7-

    	 

    

(b)          For
the Severance Period, Executive agrees to cooperate, at no charge, with the Company’s and its Related Entities’ and
its or their counsel’s reasonable requests for information or assistance related to (i) any investigations (including
internal investigations) and audits of the Company’s and its Related Entities’ management’s current and past
conduct and business and accounting practices and (ii) the Company’s and its Related Entities’ defense of, or
other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which
has been or may be filed relating to the period during which Executive was employed by the Company and its Related Entities. The
Company will promptly reimburse Executive for her reasonable, customary and documented out-of-pocket business expenses in connection
with the performance of her duties under this Section 20. Except as required by law or authorized in advance by the Board
of Directors of the Company, Executive will not communicate, directly or indirectly, with any third party other than Executive’s
legal counsel, including any person or representative of any group of people or entity who is suing or has indicated that a legal
action against the Company and its Related Entities or any of their directors or officers is being contemplated, concerning the
management or governance of the Company and its Related Entities, the operations of the Company and its Related Entities, the
legal positions taken by the Company and its Related Entities, or the financial status of the Company and its Related Entities.
If asked about any such individuals or matters, Executive shall say: “I have no comment,” and shall direct the inquirer
to the Company. Executive acknowledges that any violation of this Section 20 will result in irreparable harm to the Company
and its Related Entities and will entitle the Company and its Related Entities to injunctive relief.

 

21.         No
Future Employment. Executive understands that her employment with the Company and its Related
Entities will irrevocably end as of the Termination Date and will not be resumed at any time in the future. Executive agrees that
she will not apply for, seek or accept employment by the Company and its Related Entities at any time, unless invited to do so
by the Company and its Related Entities.

 

22.         Tax
Issues. The parties agree that the payments and benefits provided under this Agreement,
and all other contracts, arrangements or programs that apply to her, shall be subject to Section 16 of the Employment
Agreement.

 

23.         Non-disparagement.
Executive agrees not to criticize, denigrate, or otherwise disparage the Company and its Related Entities, or any of their directors,
officers, products, processes, experiments, policies, practices, standards of business conduct, or areas or techniques of research.
The Company agrees not to authorize or condone denigrating or disparaging statements about Executive to any third party, including
by press release or other formally released announcement. Factually accurate statements in legal or public filings shall not violate
this provision. In addition, nothing in this Section 23 shall prohibit Executive or the Company or the Board, or any of
their employees or members from complying with any lawful subpoena or court order or taking any other actions affirmatively authorized
by law.

 

24.         Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to principles of conflict of laws.

 

25.         Dispute
Resolution. The parties hereby agree that all disputes, claims or controversies arising
from or otherwise in connection with this Agreement (except for injunctive relief sought by either party) between them and between
Executive and any of the Company’s affiliated entities and the successor of all such entities, and any director, shareholder
or employee of the Company will be resolved in accordance with Section 13 of the Employment Agreement, except for its attorneys’
fee provision. 

 

    	-8-

    	 

    

 

26.         Attorneys’
Fees. Except as otherwise provided herein, in any action, litigation or proceeding between
the parties arising out of or in relation to this Agreement, including any purported breach of this Agreement, the prevailing
party shall be entitled to an award of its costs and expenses, including reasonable attorneys’ fees.

 

27.         Non-Admission
of Liability. The parties understand and agree that neither the payment of any sum of money
nor the execution of this Agreement by the parties will constitute or be construed as an admission of any wrongdoing or liability
whatsoever by any party.

 

28.         Severability.
If any one or more of the provisions contained herein (or parts thereof), or the application
thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity and enforceability
of any such provision in every other respect and of the remaining provisions hereof will not be in any way impaired or affected,
it being intended that all of the rights and privileges shall be enforceable to the fullest extent permitted by law.

 

29.         Entire
Agreement. This Agreement represents the sole and entire agreement among the parties and,
except as expressly stated herein, supersedes all prior agreements, negotiations and discussions among the parties with respect
to the subject matters contained herein.

 

30.         Waiver.
No waiver by any party hereto at any time of any breach of, or compliance with, any condition
or provision of this Agreement to be performed by any other party hereto may be deemed a waiver of similar or dissimilar provisions
or conditions at the same time or at any prior or subsequent time.

 

31.         Amendment.
This Agreement may be modified or amended only if such modification or amendment is agreed to
in writing and signed by duly authorized representatives of the parties hereto, which writing expressly states the intent of the
parties to modify this Agreement.

 

32.         Counterparts.
This Agreement may be executed in counterparts, each of which will be deemed to be an original
as against any party that has signed it, but both of which together will constitute one and the same instrument.

 

33.         Assignment.
This Agreement inures to the benefit of and is binding upon the Company and its successors and
assigns, but Executive’s rights under this Agreement are not assignable, except to his estate.

 

34.         Notice.
All notices, requests, demands, claims and other communications hereunder shall be in writing
and shall be deemed to have been duly given (a) if personally delivered or delivered by overnight courier; (b) if sent
by electronic mail, telecopy or facsimile (except for legal process); or (c) if mailed by overnight or by first class, United
States certified or registered mail, postage prepaid, return receipt requested, and properly addressed as follows:

    	-9-

    	 

    

 

	If to the Company:	STAAR Surgical Company
	 	1911 Walker Ave.
	 	Monrovia, California 91016
	 	Attn: Board of Directors
	 	 
	 	Fax No. [insert]
	 	 

 

	If to Executive:	[name]	 	 
	 	[address]	 	 
	 	 	 	 
	 	Email:	 	 
	 	Fax No:	 	 

 

Such addresses may be changed, from time
to time, by means of a notice given in the manner provided above. Notice will conclusively be deemed to have been given when personally
delivered (including, but not limited to, by messenger or courier); or if given by mail, on the third business day after being
sent by first class, United States certified or registered mail; or if given by Federal Express or other similar overnight service,
on the date of delivery; or if given by electronic mail, telecopy or facsimile machine during normal business hours on a business
day, when confirmation of transmission is indicated by the sender’s machine; or if given by electronic mail, telecopy or
facsimile machine at any time other than during normal business hours on a business day, the first business day following when
confirmation of transmission is indicated by the sender’s machine. Unless otherwise agreed, notices, requests, demands and
other communications delivered to legal counsel of any party hereto, whether or not such counsel shall consist of in-house or
outside counsel, shall not constitute duly given notice to any party hereto.

 

35.          Miscellaneous
Provisions.

 

(a)          The
parties represent that they have read this Agreement and fully understand all of its terms; that they have conferred with their
attorneys, or have knowingly and voluntarily chosen not to confer with their attorneys about this Agreement; that they have executed
this Agreement without coercion or duress of any kind; and that they understand any rights that they have or may have, and they
are signing this Agreement with full knowledge of any such rights.

 

(b)          Both
parties have participated in the drafting of this Agreement with the assistance of counsel to the extent they desired. The language
in all parts of this Agreement must be in all cases construed simply according to its fair meaning and not strictly for or against
any party. Whenever the context requires, all words used in the singular must be construed to have been used in the plural, and
vice versa, and each gender must include any other gender. The captions of the Sections of this Agreement are for convenience
only and must not affect the construction or interpretation of any of the provision herein.

 

    	-10-

    	 

    

(c)          Each
provision of this Agreement to be performed by a party hereto is both a covenant and condition, and is a material consideration
for the other party’s performance hereunder, and any breach thereof by the party will be a material default hereunder. All
rights, remedies, undertakings, obligations, options, covenants, conditions and agreements contained in this Agreement are cumulative
and no one of them is exclusive of any other. Time is of the essence in the performance of this Agreement.

 

(d)          Each
party acknowledges that no representation, statement or promise made by any other party, or by the agent or attorney of any other
party, except for those in this Agreement, has been relied on by her or it in entering into this Agreement.

 

(e)          Unless
expressly set forth otherwise, all references herein to a “day” are deemed to be a reference to a calendar day. All
references to “business day” mean any day of the year other than a Saturday, Sunday or a public or bank holiday in
Orange County, California. Unless expressly stated otherwise, cross-references herein refer to provisions within this Agreement
and are not references to any other document.

 

(f)          Each
party to this Agreement will cooperate fully in the execution of any and all other documents and in the completion of any additional
actions that may be necessary or appropriate to give full force and effect to the terms and intent of this Agreement.

 

EACH OF THE PARTIES ACKNOWLEDGES
THAT SHE/IT HAS READ THIS AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT, AND THAT IT INCLUDES A WAIVER OF THE
RIGHT TO A TRIAL BY JURY, AND, WITH RESPECT TO EXECUTIVE, SHE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN
AND UNKNOWN CLAIMS.

 

[SIGNATURES ON
NEXT PAGE]

 

    	-11-

    	 

    

IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed as of the day and year first above written.

 

	EXECUTIVE:	 	 
	 	 	Caren Mason
	 	 	 
	COMPANY:	 	STAAR Surgical Company
	 	 	 
	 	 	By:	 
	 	 	 	 
	 	 	Name:	 
	 	 	 	 
	 	 	Title:	 

 

    	-12-

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