Document:

EX-10.1

 Exhibit 10.1 

ZIOPHARM ONCOLOGY, INC. 

2020 EQUITY INCENTIVE PLAN 

ADOPTED BY THE BOARD OF DIRECTORS:
MAY 4, 2020 
 APPROVED BY THE STOCKHOLDERS:
JUNE 29, 2020 

 TABLE OF CONTENTS 

 

							
	 	  	 	  	Page	 
	 1.
	  	General	  	 	1	 
			
	 2.
	  	Shares Subject to the Plan	  	 	1	 
			
	 3.
	  	Eligibility and Limitations	  	 	2	 
			
	 4.
	  	Options and Stock Appreciation Rights	  	 	3	 
			
	 5.
	  	Awards Other Than Options and Stock Appreciation Rights	  	 	6	 
			
	 6.
	  	Adjustments upon Changes in Common Stock; Other Corporate Events	  	 	7	 
			
	 7.
	  	Administration 	  	 	9	 
			
	 8.
	  	Tax Withholding	  	 	11	 
			
	 9.
	  	Miscellaneous	  	 	12	 
			
	 10.
	  	Covenants of the Company	  	 	14	 
			
	 11.
	  	Additional Rules for Awards Subject to Section 409A	  	 	15	 
			
	 12.
	  	Severability	  	 	17	 
			
	 13.
	  	Termination of the Plan	  	 	17	 
			
	 14.
	  	Definitions	  	 	18	 

  
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 1.    GENERAL. 

(a)    Successor to and Continuation of Prior Plan. The Plan is the successor to and continuation of the
Prior Plan. As of the Effective Date, (i) no additional awards may be granted under the Prior Plan; (ii) the Prior Plan’s Available Reserve plus any Returning Shares will become available for issuance pursuant to Awards granted under
this Plan in accordance with Section 2; and (iii) all outstanding awards granted under the Prior Plan will remain subject to the terms of the Prior Plan (except to the extent such outstanding awards result in Returning Shares that become
available for issuance pursuant to Awards granted under this Plan). All Awards granted under this Plan will be subject to the terms of this Plan. 

(b)    Plan Purpose. The Company, by means of the Plan, seeks to secure and retain the services of
Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and to provide a means by which such persons may be given an opportunity to benefit from increases
in value of the Common Stock through the granting of Awards. 
 (c)    Available Awards. The Plan provides
for the grant of the following Awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; and (vi) Performance Awards. 

(d)    Adoption Date. The Plan will come into existence on the Adoption Date. No Award may be granted under
the Plan prior to the Adoption Date. Any Award granted prior to the Effective Date is contingent upon timely receipt of stockholder approval to the extent required under applicable tax, securities and regulatory rules, and satisfaction of any other
compliance requirements. 
 2.    SHARES SUBJECT TO
THE PLAN. 
 (a)    Share Reserve. Subject to adjustment in accordance
with Section 2(c) and any adjustments as necessary to implement any Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Awards will not exceed (i) 22,066,275 shares (which includes
21,000,000 new shares and the Prior Plan’s Available Reserve as of March 31, 2020), less (A) one share of Common Stock for every one share that was subject to an Appreciation Award granted under the Prior Plan after
March 31, 2020, and prior to the Effective Date and (B) 1.5 shares of Common Stock for every one share that was subject to a Full Value Award granted under the Prior Plan after March 31, 2020, and prior to the Effective Date , plus (ii) the number of Returning Shares, if any, as such shares become available from time to time. 

(b)    Aggregate Incentive Stock Option Limit. Notwithstanding anything to the contrary in Section 2(a)
and subject to any adjustments as necessary to implement any Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options is 30,238,690 shares. 

(c)    Share Reserve Operation. 

(i)    Share Counting. Subject to subsection 3(c)(iv), the number of shares of Common Stock available for
issuance under the Plan shall be reduced by: (1) one share of Common Stock for each share of Common Stock issued pursuant to an Appreciation Award and (2) 1.5 shares of Common Stock for each share of Common Stock issued pursuant to a Full Value
Award. The number of shares of Common Stock available for issuance under the Plan will be increased by: (A) one share of Common Stock for each Returning Share subject to an Appreciation Award and (B) 1.5 shares of Common Stock for each
Returning Share subject to a Full Value Award. 
 (ii)    Limit Applies to Shares of Common Stock Issued
Pursuant to Awards. For clarity, the Share Reserve is a limit on the number of shares of Common Stock that may be issued pursuant to Awards and does not 

  
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limit the granting of Awards, except that the Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy its obligations to issue shares pursuant
to such Awards. Shares may be issued in connection with a merger or acquisition as permitted by, as applicable, Nasdaq Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08, NYSE American Company Guide Section 711 or other
applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan. 

(iii)    Actions that Do Not Constitute Issuance of Shares of Common Stock and Do Not Reduce Share Reserve.
The following actions do not result in an issuance of shares under the Plan and accordingly do not reduce the number of shares of Common Stock subject to the Share Reserve and available for issuance under the Plan: (1) the expiration or
termination of any portion of an Award without the shares covered by such portion of the Award having been issued; (2) the settlement of any portion of an Award in cash (i.e., the Participant receives cash rather than shares of Common
Stock); (3) the withholding of shares that would otherwise be issued by the Company to satisfy the exercise, strike or purchase price of a Full Value Award; and (4) the withholding of shares that would otherwise be issued by the Company to
satisfy a tax withholding obligation in connection with a Full Value Award. 
 (iv)    Reversion of Previously Issued
Shares of Common Stock to Share Reserve. 
 (1)    Shares Available for Subsequent Issuance. The
following shares of Common Stock previously issued pursuant to an Award and accordingly initially deducted from the Share Reserve will be added back to the Share Reserve and again become available for issuance under the Plan: (1) any shares
that are forfeited back to or redeemed or repurchased by the Company or any Affiliate (in accordance with applicable law) because of a failure to meet a contingency or condition required for the vesting of such shares; (2) any shares that are
reacquired by the Company to satisfy the exercise, strike or purchase price of a Full Value Award; and (3) any shares that are reacquired by the Company to satisfy a tax withholding obligation in connection with a Full Value Award. The number
of shares of Common Stock that shall revert to and again available for issuance under the Plan pursuant to the foregoing provision shall be: (A) one share of Common Stock for each forfeited, redeemed or repurchased share subject to an
Appreciation Award granted under the Plan and (B) 1.5 shares of Common Stock for each forfeited, redeemed or repurchased share subject to a Full Value Award granted under the Plan. 

(2)    Shares Not Available for Subsequent Issuance. The following shares of Common Stock will not become
available again for issuance under the Plan: (A) any shares of Common Stock that are reacquired or withheld (or not issued) by the Company to satisfy the exercise or strike price of an Appreciation Award (including any shares subject to such
Appreciation Award that are not delivered because such award is exercised through a reduction of shares subject to such Appreciation Award (i.e., “net exercised”)); (B) any shares that are reacquired or withheld (or not issued) by
the Company to satisfy a tax withholding obligation in connection with an Appreciation Award; (C) any shares repurchased by the Company on the open market with the proceeds of the exercise or strike price of an Appreciation Award; and
(D) in the event that a Stock Appreciation Right granted under the Plan or a stock appreciation right granted under the Prior Plan is settled in shares of Common Stock, the gross number of shares of Common Stock subject to such award. 

3.    ELIGIBILITY AND LIMITATIONS. 

(a)    Eligible Award Recipients. Subject to the terms of the Plan, Employees, Directors and Consultants are
eligible to receive Awards. 
 (b)    Specific Award Limitations. 

(i)    Limitations on Incentive Stock Option Recipients. Incentive Stock Options may be granted only to
Employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). 

  
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 (ii)    Incentive Stock Option $100,000 Limitation. To the
extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the
Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order
in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s). 

(iii)    Limitations on Incentive Stock Options Granted to Ten Percent Stockholders. A Ten Percent
Stockholder may not be granted an Incentive Stock Option unless (i) the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant of such Option and (ii) the Option is not exercisable after the expiration
of five years from the date of grant of such Option. 
 (iv)    Limitations on Nonstatutory Stock Options and
SARs. Nonstatutory Stock Options and SARs may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company (as such term is defined in Rule 405) unless the stock
underlying such Awards is treated as “service recipient stock” under Section 409A because the Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Awards otherwise comply with the
distribution requirements of Section 409A. 
 (c)    Aggregate Incentive Stock Option Limit. The
aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options is the number of shares specified in Section 2(b). 

4.    OPTIONS AND STOCK APPRECIATION
RIGHTS. 
 Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be
designated in writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provided, however, that if an Option is not so designated, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon
exercise of each type of Option will be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of separate Options and SARs need not be identical; provided, however, that each Option
Agreement and SAR Agreement will conform (through incorporation of provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions: 

(a)    Term. Subject to Section 3(b) regarding Ten Percent Stockholders, no Option or SAR will be
exercisable after the expiration of ten years from the date of grant of such Award or such shorter period specified in the Award Agreement. 

(b)    Exercise or Strike Price. Subject to Section 3(b) regarding Ten Percent Stockholders, the
exercise or strike price of each Option or SAR will not be less than 100% of the Fair Market Value on the date of grant of such Award. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of
the Fair Market Value on the date of grant of such Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Transaction and in a manner consistent with the provisions of
Sections 409A and, if applicable, 424(a) of the Code. 
 (c)    Exercise Procedure and Payment of Exercise
Price for Options. In order to exercise an Option, the Participant must provide notice of exercise to the Plan Administrator in accordance with the procedures specified in the Option Agreement or otherwise provided by the Company. The Board has
the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of
payment. 

  
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The exercise price of an Option may be paid, to the extent permitted by Applicable Law and as determined by the Board, by one or more of the following methods of payment to the extent set forth
in the Option Agreement: 
 (i)    by cash or check, bank draft or money order payable to the Company; 

(ii)    pursuant to a “cashless exercise” program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of the Common Stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the exercise price to the Company from the
sales proceeds; 
 (iii)    by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock that are already owned by the Participant free and clear of any liens, claims, encumbrances or security interests, with a Fair Market Value on the date of exercise that does not exceed the exercise price, provided that (1) at the
time of exercise the Common Stock is publicly traded, (2) any remaining balance of the exercise price not satisfied by such delivery is paid by the Participant in cash or other permitted form of payment, (3) such delivery would not violate
any Applicable Law or agreement restricting the redemption of the Common Stock, (4) any certificated shares are endorsed or accompanied by an executed assignment separate from certificate, and (5) such shares have been held by the
Participant for any minimum period necessary to avoid adverse accounting treatment as a result of such delivery; 

(iv)    if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which
the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value on the date of exercise that does not exceed the exercise price, provided that (1) such shares
used to pay the exercise price will not be exercisable thereafter and (2) any remaining balance of the exercise price not satisfied by such net exercise is paid by the Participant in cash or other permitted form of payment; or 

(v)    in any other form of consideration that may be acceptable to the Board and permissible under Applicable Law.

 (d)    Exercise Procedure and Payment of Appreciation Distribution for SARs. In order to
exercise any SAR, the Participant must provide notice of exercise to the Plan Administrator in accordance with the SAR Agreement. The appreciation distribution payable to a Participant upon the exercise of a SAR will not be greater than an amount
equal to the excess of (i) the aggregate Fair Market Value on the date of exercise of a number of shares of Common Stock equal to the number of Common Stock equivalents that are vested and being exercised under such SAR, over (ii) the
strike price of such SAR. Such appreciation distribution may be paid to the Participant in the form of Common Stock or cash (or any combination of Common Stock and cash) or in any other form of payment, as determined by the Board and specified in
the SAR Agreement. 
 (e)    Transferability. Options and SARs may not be transferred to third party
financial institutions for value. The Board may impose such additional limitations on the transferability of an Option or SAR as it determines. In the absence of any such determination by the Board, the following restrictions on the transferability
of Options and SARs will apply, provided that except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration and provided, further, that if an Option is an Incentive Stock Option, such Option may be
deemed to be a Nonstatutory Stock Option as a result of such transfer: 
 (i)    Restrictions on Transfer.
An Option or SAR will not be transferable, except by will or by the laws of descent and distribution, and will be exercisable during the lifetime of the Participant only by the Participant; provided, however, that the Board may permit transfer of an
Option or SAR in a manner that is not prohibited by applicable tax and securities laws upon the Participant’s request, including to a trust if the Participant is considered to be the sole beneficial owner of such trust (as determined under
Section 671 of the Code and applicable state law) while such Option or SAR is held in such trust, provided that the Participant and the trustee enter into a transfer and other agreements required by the Company. 

  
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 (ii)    Domestic Relations Orders. Notwithstanding the
foregoing, subject to the execution of transfer documentation in a format acceptable to the Company and subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to a domestic relations order.

 (f)    Vesting. The Board may impose such restrictions on or conditions to the vesting and/or
exercisability of an Option or SAR as determined by the Board. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiliate, vesting of Options and SARs will cease upon
termination of the Participant’s Continuous Service. 
 (g)    Termination of Continuous Service for
Cause. Except as explicitly otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiliate, if a Participant’s Continuous Service is terminated for Cause, the Participant’s
Options and SARs will terminate and be forfeited immediately upon such termination of Continuous Service, and the Participant will be prohibited from exercising any portion (including any vested portion) of such Awards on and after the date of such
termination of Continuous Service and the Participant will have no further right, title or interest in such forfeited Award, the shares of Common Stock subject to the forfeited Award, or any consideration in respect of the forfeited Award. 

(h)    Post-Termination Exercise Period Following Termination of Continuous Service for Reasons Other than
Cause. Except as otherwise provided in the Award Agreement or other written agreement between Participant and the Company or an Affiliate, subject to Section 4(i), if a Participant’s Continuous Service terminates for any reason other
than for Cause, the Participant may exercise his or her Option or SAR to the extent vested, but only within the following period of time or, if applicable, such other period of time provided in the Award Agreement or other written agreement between
a Participant and the Company or an Affiliate; provided, however, that in no event may such Award be exercised after the expiration of its maximum term (as set forth in Section 4(a)): 

(i)    three months following the date of such termination if such termination is a termination without Cause
(other than any termination due to the Participant’s Disability or death); 
 (ii)    12 months following
the date of such termination if such termination is due to the Participant’s Disability; 
 (iii)    18
months following the date of such termination if such termination is due to the Participant’s death; or 

(iv)    18 months following the date of the Participant’s death if such death occurs following the date of
such termination but during the period such Award is otherwise exercisable (as provided in (i) or (ii) above). 
 Following the date of such
termination, to the extent the Participant does not exercise such Award within the applicable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award), such unexercised portion of the Award will
terminate, and the Participant will have no further right, title or interest in the terminated Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award. 

(i)    Restrictions on Exercise; Extension of Exercisability. A Participant may not exercise an Option or
SAR at any time that the issuance of shares of Common Stock upon such exercise would violate Applicable Law. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiliate, if a
Participant’s Continuous Service terminates for any reason other than for Cause and, at any time during the last thirty days of the applicable Post-Termination Exercise Period: (i) the exercise of the Participant’s Option or SAR would
be prohibited solely because the issuance of shares of Common Stock upon such exercise would violate Applicable Law, or (ii) the immediate sale of any shares of Common Stock issued upon such exercise would violate the Company’s Trading
Policy, then the applicable Post-Termination 

  
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Exercise Period will be extended to the last day of the calendar month that commences following the date the Award would otherwise expire, with an additional extension of the exercise period to
the last day of the next calendar month to apply if any of the foregoing restrictions apply at any time during such extended exercise period, generally without limitation as to the maximum permitted number of extensions); provided, however,
that in no event may such Award be exercised after the expiration of its maximum term (as set forth in Section 4(a)). 

(j)    Non-Exempt Employees. No Option or SAR, whether or not
vested, granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, will be first exercisable for any shares of Common Stock until at least six months
following the date of grant of such Award. Notwithstanding the foregoing, in accordance with the provisions of the Worker Economic Opportunity Act, any vested portion of such Award may be exercised earlier than six months following the date of grant
of such Award in the event of (i) such Participant’s death or Disability, (ii) a Transaction in which such Award is not assumed, continued or substituted, (iii) a Change in Control, or (iv) such Participant’s retirement
(as such term may be defined in the Award Agreement or another applicable agreement or, in the absence of any such definition, in accordance with the Company’s then current employment policies and guidelines). This Section 4(j) is intended
to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. 

(k)    Whole Shares. Options and SARs may be exercised only with respect to whole shares of Common Stock or
their equivalents. 
 5.    AWARDS OTHER THAN
OPTIONS AND STOCK APPRECIATION RIGHTS. 

(a)    Restricted Stock Awards and RSU Awards. Each Restricted Stock Award and RSU Award will have such terms
and conditions as determined by the Board; provided, however, that each Restricted Stock Award Agreement and RSU Award Agreement will conform (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) to the
substance of each of the following provisions: 
 (i)    Form of Award. 

(1)    RSAs: To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of
Common Stock subject to a Restricted Stock Award may be (i) held in book entry form subject to the Company’s instructions until such shares become vested or any other restrictions lapse, or (ii) evidenced by a certificate, which
certificate will be held in such form and manner as determined by the Board. Unless otherwise determined by the Board, a Participant will have voting and other rights as a stockholder of the Company with respect to any shares subject to a Restricted
Stock Award. 
 (2)    RSUs: A RSU Award represents a Participant’s right to be issued on a future date the
number of shares of Common Stock that is equal to the number of restricted stock units subject to the RSU Award. As a holder of a RSU Award, a Participant is an unsecured creditor of the Company with respect to the Company’s unfunded
obligation, if any, to issue shares of Common Stock in settlement of such Award and nothing contained in the Plan or any RSU Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a
fiduciary relationship between a Participant and the Company or an Affiliate or any other person. A Participant will not have voting or any other rights as a stockholder of the Company with respect to any RSU Award (unless and until shares are
actually issued in settlement of a vested RSU Award). 
 (ii)    Consideration. 

(1)    RSA: A Restricted Stock Award may be granted in consideration for (A) cash or check, bank draft or
money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of consideration (including future services) as the Board may determine and permissible under Applicable Law. 

  
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 (2)    RSU: Unless otherwise determined by the Board at the time
of grant, a RSU Award will be granted in consideration for the Participant’s services to the Company or an Affiliate, such that the Participant will not be required to make any payment to the Company (other than such services) with respect to
the grant or vesting of the RSU Award, or the issuance of any shares of Common Stock pursuant to the RSU Award. If, at the time of grant, the Board determines that any consideration must be paid by the Participant (in a form other than the
Participant’s services to the Company or an Affiliate) upon the issuance of any shares of Common Stock in settlement of the RSU Award, such consideration may be paid in any form of consideration as the Board may determine and permissible under
Applicable Law. 
 (iii)    Vesting. The Board may impose such restrictions on or conditions to the
vesting of a Restricted Stock Award or RSU Award as determined by the Board. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiliate, vesting of Restricted Stock Awards and
RSU Awards will cease upon termination of the Participant’s Continuous Service. 
 (iv)    Termination of
Continuous Service. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company or an Affiliate, if a Participant’s Continuous Service terminates for any reason, (i) the Company
may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant under his or her Restricted Stock Award that have not vested as of the date of such termination as set forth in the
Restricted Stock Award Agreement and (ii) any portion of his or her RSU Award that has not vested will be forfeited upon such termination and the Participant will have no further right, title or interest in the RSU Award, the shares of Common
Stock issuable pursuant to the RSU Award, or any consideration in respect of the RSU Award. 

(v)    Settlement of RSU Awards. A RSU Award may be settled by the issuance of shares of Common Stock or
cash (or any combination thereof) or in any other form of payment, as determined by the Board and specified in the RSU Award Agreement. At the time of grant, the Board may determine to impose such restrictions or conditions that delay such delivery
to a date following the vesting of the RSU Award. 
 (b)    Performance Awards. With respect to any
Performance Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, the other terms and conditions of such Award, and the measure of whether and to what degree such Performance Goals have been
attained will be determined by the Board. 
 6.    ADJUSTMENTS UPON
CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS. 

(a)    Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately
and proportionately adjust: (i) the class(es) and maximum number of shares of Common Stock subject to the Plan pursuant to Section 2(a), (ii) the class(es) and maximum number of shares that may be issued pursuant to the exercise of
Incentive Stock Options pursuant to Section 2(b), and (iii) the class(es) and number of securities and exercise price, strike price or purchase price of Common Stock subject to outstanding Awards. The Board shall make such adjustments, and
its determination shall be final, binding and conclusive. Notwithstanding the foregoing, no fractional shares or rights for fractional shares of Common Stock shall be created in order to implement any Capitalization Adjustment. The Board shall
determine an appropriate equivalent benefit, if any, for any fractional shares or rights to fractional shares that might be created by the adjustments referred to in the preceding provisions of this Section. 

(b)    Dissolution or Liquidation. Except as otherwise provided in the Award Agreement or other written
agreement between the Participant and the Company or an Affiliate, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other than Awards consisting of vested and outstanding shares of Common Stock not subject to a
forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a
forfeiture condition may be repurchased or reacquired by the 

  
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Company notwithstanding the fact that the holder of such Award is providing Continuous Service, provided, however, that the Board may determine to cause some or all Awards to become fully vested,
exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. 

(c)    Transaction. The following provisions will apply to Awards in the event of a Transaction unless
otherwise provided in the instrument evidencing the Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Award. 

(i)    Awards May Be Assumed. In the event of a Transaction, any surviving corporation or acquiring
corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Awards outstanding under the Plan or may substitute similar awards for Awards outstanding under the Plan (including but not limited to,
awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Awards may be assigned by the
Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Transaction. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of an
Award or substitute a similar award for only a portion of an Award, or may choose to assume or continue the Awards held by some, but not all Participants. The terms of any assumption, continuation or substitution will be set by the Board. 

(ii)    Awards Held by Current Participants. In the event of a Transaction in which the surviving
corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Awards or substitute similar awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or
substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Transaction (referred to as the “Current Participants”), the vesting of such Awards (and, with
respect to Options and Stock Appreciation Rights, the time when such Awards may be exercised) will be accelerated in full to a date prior to the effective time of such Transaction (contingent upon the effectiveness of the Transaction) as the Board
determines (or, if the Board does not determine such a date, to the date that is five (5) days prior to the effective time of the Transaction), and such Awards will terminate if not exercised (if applicable) at or prior to the effective time of
the Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Awards will lapse (contingent upon the effectiveness of the Transaction). With respect to the vesting of Performance Awards that will accelerate
upon the occurrence of a Transaction pursuant to this subsection (ii) and that have multiple vesting levels depending on the level of performance, unless otherwise provided in the Award Agreement, the vesting of such Performance Awards will
accelerate at 100% of the target level upon the occurrence of the Transaction. With respect to the vesting of Awards that will accelerate upon the occurrence of a Transaction pursuant to this subsection (ii) and are settled in the form of a
cash payment, such cash payment will be made no later than 30 days following the occurrence of the Transaction. 

(iii)    Awards Held by Persons other than Current Participants. In the event of a Transaction in which the
surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Awards or substitute similar awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or
substituted and that are held by persons other than Current Participants, such Awards will terminate if not exercised (if applicable) prior to the occurrence of the Transaction; provided, however, that any reacquisition or repurchase rights held by
the Company with respect to such Awards will not terminate and may continue to be exercised notwithstanding the Transaction. 

(iv)    Payment for Awards in Lieu of Exercise. Notwithstanding the foregoing, in the event an Award will
terminate if not exercised prior to the effective time of a Transaction, the Board may provide, in its sole discretion, that the holder of such Award may not exercise such Award but will receive a payment, in such form as may be determined by the
Board, equal in value, at the effective time, to the excess, if any, of (1) the 

  
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value of the property the Participant would have received upon the exercise of the Award (including, at the discretion of the Board, any unvested portion of such Award), over (2) any
exercise price payable by such holder in connection with such exercise. 
 (d)    Appointment of Stockholder
Representative. As a condition to the receipt of an Award under this Plan, a Participant will be deemed to have agreed that the Award will be subject to the terms of any agreement governing a Transaction involving the Company, including, without
limitation, a provision for the appointment of a stockholder representative that is authorized to act on the Participant’s behalf with respect to any escrow, indemnities and any contingent consideration. 

(e)    No Restriction on Right to Undertake Transactions. The grant of any Award under the Plan and the
issuance of shares pursuant to any Award does not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the
Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, rights or options to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or otherwise. 

7.    ADMINISTRATION. 

(a)    Administration by Board. The Board will administer the Plan unless and until the Board delegates
administration of the Plan to a Committee or Committees, as provided in subsection (c) below. 

(b)    Powers of Board. The Board will have the power, subject to, and within the limitations of, the
express provisions of the Plan: 
 (i)    To determine from time to time (1) which of the persons eligible
under the Plan will be granted Awards; (2) when and how each Award will be granted; (3) what type or combination of types of Award will be granted; (4) the provisions of each Award granted (which need not be identical), including the
time or times when a person will be permitted to receive an issuance of Common Stock or other payment pursuant to an Award; (5) the number of shares of Common Stock or cash equivalent with respect to which an Award will be granted to each such
person; and (6) the Fair Market Value applicable to an Award. 
 (ii)    To construe and interpret the Plan
and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a
manner and to the extent it deems necessary or expedient to make the Plan or Award fully effective. 

(iii)    To settle all controversies regarding the Plan and Awards granted under it. 

(iv)    To accelerate the time at which an Award may first be exercised or the time during which an Award or any
part thereof will vest, notwithstanding the provisions in the Award Agreement stating the time at which it may first be exercised or the time during which it will vest. 

(v)    To prohibit the exercise of any Option, SAR or other exercisable Award during a period of up to 30 days
prior to the consummation of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting
the shares of Common Stock or the share price of the Common Stock including any Transaction, for reasons of administrative convenience. 

  
 9 

 (vi)    To suspend or terminate the Plan at any time. Suspension
or termination of the Plan will not Materially Impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant. 

(vii)    To amend the Plan in any respect the Board deems necessary or advisable; provided, however, that
stockholder approval will be required for any amendment to the extent required by Applicable Law. Except as provided above, rights under any Award granted before amendment of the Plan will not be Materially Impaired by any amendment of the Plan
unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing. 

(viii)    To submit any amendment to the Plan for stockholder approval. 

(ix)    To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more
Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided
however, that, a Participant’s rights under any Award will not be Materially Impaired by any such amendment unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing.

 (x)    Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient
to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards. 

(xi)    To adopt such procedures and sub-plans as are necessary or
appropriate to permit and facilitate participation in the Plan by, or take advantage of specific tax treatment for Awards granted to, Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that
Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement to ensure or facilitate compliance with the laws of the relevant foreign jurisdiction). 

(c)    Delegation to Committee. 

(i)    General. The Board may delegate some or all of the administration of the Plan to a Committee or
Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the
power to delegate to another Committee or a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Each Committee may retain the authority to concurrently administer the Plan with Committee or subcommittee to
which it has delegated its authority hereunder and may, at any time, revest in such Committee some or all of the powers previously delegated. The Board may retain the authority to concurrently administer the Plan with any Committee and may, at any
time, revest in the Board some or all of the powers previously delegated. 
 (ii)    Rule 16b-3 Compliance. To the extent an Award is intended to qualify for the exemption from Section 16(b) of the Exchange Act that is available under Rule 16b-3 of the
Exchange Act, the Award will be granted by the Board or a Committee that consists solely of two or more Non-Employee Directors, as determined under Rule 16b-3(b)(3) of
the Exchange Act and thereafter any action establishing or modifying the terms of the Award will be approved by the Board or a Committee meeting such requirements to the extent necessary for such exemption to remain available. 

(d)    Effect of Board’s Decision. All determinations, interpretations and constructions
made by the Board or any Committee in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons. 

  
 10 

 (e)    Cancellation and
Re-Grant of Awards. Neither the Board nor any Committee will have the authority to: (i) reduce the exercise price or strike price of any outstanding Options or SARs under the Plan, (ii) cancel
any outstanding Options or SARs that have an exercise price or strike price greater than the current Fair Market Value in exchange for cash or other Awards under the Plan (other than in connection with a Transaction), or (iii) take any other
action with respect to an Option or SAR that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Common Stock is listed, in each case unless the stockholders of the Company
have approved such an action within twelve months prior to such an event. 
 (f)     Delegation to an
Officer. The Board or any Committee may delegate to one or more Officers the authority to do one or both of the following (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by
Applicable Law, other types of Awards) and, to the extent permitted by Applicable Law, the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Awards granted to such Employees; provided, however, that
the resolutions or charter adopted by the Board or any Committee evidencing such delegation will specify the total number of shares of Common Stock that may be subject to the Awards granted by such Officer and that such Officer may not grant an
Award to himself or herself. Any such Awards will be granted on the applicable form of Award Agreement most recently approved for use by the Board or the Committee, unless otherwise provided in the resolutions approving the delegation authority.
Notwithstanding anything to the contrary herein, neither the Board nor any Committee may delegate to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) the authority to determine the Fair Market Value. 

8.    TAX WITHHOLDING 

(a)    Withholding Authorization. As a condition to acceptance of any Award under the Plan, a Participant
authorizes withholding from payroll and any other amounts payable to such Participant, and otherwise agrees to make adequate provision for (including), any sums required to satisfy any U.S. federal, state, local and/or foreign tax or social
insurance contribution withholding obligations of the Company or an Affiliate, if any, which arise in connection with the grant, exercise, vesting or settlement of such Award, as applicable. Accordingly, a Participant may not be able to exercise an
Award even though the Award is vested, and the Company shall have no obligation to issue shares of Common Stock subject to an Award, unless and until such obligations are satisfied. 

(b)    Satisfaction of Withholding Obligation. To the extent permitted by the terms of an Award Agreement,
the Company may, in its sole discretion, satisfy any U.S. federal, state, local and/or foreign tax or social insurance withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; (iii) withholding cash from an Award settled in
cash; (iv) withholding payment from any amounts otherwise payable to the Participant; (v) by allowing a Participant to effectuate a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board, or (vi) by such other method as may be set forth in the Award Agreement. 

(c)    No Obligation to Notify or Minimize Taxes; No Liability to Claims. Except as required by Applicable
Law the Company has no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Award. Furthermore, the Company has no duty or obligation to warn or otherwise advise such holder of a pending termination
or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award and will not be liable to any holder of an Award
for any adverse tax consequences to such holder in connection with an Award. As a condition to accepting an Award under the Plan, each Participant (i) agrees to not make any claim against the Company, or any of its Officers, Directors,
Employees or Affiliates related to tax liabilities arising from such Award or other Company compensation and (ii) acknowledges that such Participant was advised to consult with his or her own personal tax, financial and other legal advisors

  
 11 

 
regarding the tax consequences of the Award and has either done so or knowingly and voluntarily declined to do so. Additionally, each Participant acknowledges any Option or SAR granted under the
Plan is exempt from Section 409A only if the exercise or strike price is at least equal to the “fair market value” of the Common Stock on the date of grant as determined by the Internal Revenue Service and there is no other
impermissible deferral of compensation associated with the Award. Additionally, as a condition to accepting an Option or SAR granted under the Plan, each Participant agrees not make any claim against the Company, or any of its Officers, Directors,
Employees or Affiliates in the event that the Internal Revenue Service asserts that such exercise price or strike price is less than the “fair market value” of the Common Stock on the date of grant as subsequently determined by the
Internal Revenue Service. 
 (d)    Withholding Indemnification. As a condition to accepting an Award
under the Plan, in the event that the amount of the Company’s and/or its Affiliate’s withholding obligation in connection with such Award was greater than the amount actually withheld by the Company and/or its Affiliates, each Participant
agrees to indemnify and hold the Company and/or its Affiliates harmless from any failure by the Company and/or its Affiliates to withhold the proper amount. 

9.    MISCELLANEOUS. 

(a)    Dividends and Dividend Equivalents. Dividends or dividend equivalents may be paid or credited, as
applicable, with respect to any shares of Common Stock subject to an Award other than an Option or Stock Appreciation Right, as determined by the Board and contained in the applicable Award Agreement; provided, however, that (i) no
dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested under the terms of such Award Agreement, (ii) any dividends or dividend equivalents that are credited with respect to any such
shares will be subject to all of the terms and conditions applicable to such shares under the terms of such Award Agreement (including, but not limited to, any vesting conditions), and (iii) any dividends or dividend equivalents that are
credited with respect to any such shares will be forfeited to the Company on the date, if any, such shares are forfeited to or repurchased by the Company due to a failure to meet any vesting conditions under the terms of such Award Agreement. 

(b)    Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise. 

(c)    Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant
to Awards will constitute general funds of the Company. 
 (d)    Corporate Action Constituting Grant of
Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action approving
the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the Award Agreement or related grant
documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or related grant documents. 

(e)    Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of Common Stock subject to such Award unless and until (i) such Participant has satisfied all requirements for exercise of the Award pursuant to its terms, if applicable, and (ii) the issuance of the
Common Stock subject to such Award is reflected in the records of the Company. 
 (f)    No Employment or
Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the 

  
 12 

 
Award was granted or affect the right of the Company or an Affiliate to terminate at will and without regard to any future vesting opportunity that a Participant may have with respect to any
Award (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the
service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state or foreign jurisdiction in which the Company or the Affiliate is incorporated, as the case may be. Further,
nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award will constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future
work assignments, future compensation or any other term or condition of employment or service or confer any right or benefit under the Award or the Plan unless such right or benefit has specifically accrued under the terms of the Award Agreement
and/or Plan. 
 (g)    Change in Time Commitment. In the event a Participant’s regular level of time
commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time
Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board may determine, to the extent permitted by Applicable Law, to (i) make a corresponding reduction in the
number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting
or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended. 

(h)    Execution of Additional Documents. As a condition to accepting an Award under the Plan, the
Participant agrees to execute any additional documents or instruments necessary or desirable, as determined in the Plan Administrator’s sole discretion, to carry out the purposes or intent of the Award, or facilitate compliance with securities
and/or other regulatory requirements, in each case at the Plan Administrator’s request. 

(i)    Electronic Delivery and Participation. Any reference herein or in an Award Agreement to a
“written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium
controlled by the Company to which the Participant has access). By accepting any Award the Participant consents to receive documents by electronic delivery and to participate in the Plan through any on-line
electronic system established and maintained by the Plan Administrator or another third party selected by the Plan Administrator. The form of delivery of any Common Stock (e.g., a stock certificate or electronic entry evidencing such shares) shall
be determined by the Company. 
 (j)    Clawback/Recovery. All Awards granted under the Plan will be
subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is
otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other Applicable Law and any clawback policy that the Company otherwise adopts, to the extent applicable and permissible under Applicable Law. In addition, the
Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common
Stock or other cash or property upon the occurrence of Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a Participant’s right to voluntary terminate employment upon a “resignation for good
reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company. 

(k)    Securities Law Compliance. A Participant will not be issued any shares in respect of an Award unless
either (i) the shares are registered under the Securities Act; or (ii) the Company has determined that such issuance 

  
 13 

 
would be exempt from the registration requirements of the Securities Act. Each Award also must comply with other Applicable Law governing the Award, and a Participant will not receive such shares
if the Company determines that such receipt would not be in material compliance with Applicable Law. 

(l)    Transfer or Assignment of Awards; Issued Shares. Except as expressly provided in the Plan or the form
of Award Agreement, Awards granted under the Plan may not be transferred or assigned by the Participant. After the vested shares subject to an Award have been issued, or in the case of Restricted Stock and similar awards, after the issued shares
have vested, the holder of such shares is free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein, the terms of the Trading Policy
and Applicable Law. 
 (m)    Effect on Other Employee Benefit Plans. The value of any Award granted under
the Plan, as determined upon grant, vesting or settlement, shall not be included as compensation, earnings, salaries, or other similar terms used when calculating any Participant’s benefits under any employee benefit plan sponsored by the
Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans. 

(n)    Deferrals. To the extent permitted by Applicable Law, the Board, in its sole discretion, may
determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may also establish programs and procedures for deferral elections to be made by
Participants. Deferrals by will be made in accordance with the requirements of Section 409A. 

(o)    Section 409A. Unless otherwise expressly provided for in an Award Agreement, the Plan and Award
Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A, and, to the extent not so exempt, in compliance with the requirements of
Section 409A. If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the
consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to
the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under
Section 409A is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A without regard to
alternative definitions thereunder) will be issued or paid before the date that is six months and one day following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death,
unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original
schedule. 
 (p)    Choice of Law. This Plan and any controversy arising out of or relating to this
Plan shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to conflict of law principles that would result in any application of any law other than the law of the State of Delaware. 

10.    COVENANTS OF THE COMPANY. 

(a)    Compliance with Law. The Company will seek to obtain from each regulatory commission or agency, as may
be deemed to be necessary, having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise or vesting of the Awards; provided, however, that this undertaking will not
require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the Company deems necessary or advisable for the lawful issuance and sale of Common Stock 

  
 14 

 
under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise or vesting of such Awards unless and until such authority is obtained. A
Participant is not eligible for the grant of an Award or the subsequent issuance of Common Stock pursuant to the Award if such grant or issuance would be in violation of any Applicable Law. 

11.    ADDITIONAL RULES FOR AWARDS
SUBJECT TO SECTION 409A. 
 (a)    Application.
Unless the provisions of this Section of the Plan are expressly superseded by the provisions in the form of Award Agreement, the provisions of this Section shall apply and shall supersede anything to the contrary set forth in the Award Agreement
for a Non-Exempt Award. 

(b)    Non-Exempt Awards Subject to
Non-Exempt Severance Arrangements. To the extent a Non-Exempt Award is subject to Section 409A due to application of a
Non-Exempt Severance Arrangement, the following provisions of this subsection (b) apply. 

(i)    If the Non-Exempt Award vests in the ordinary course during the
Participant’s Continuous Service in accordance with the vesting schedule set forth in the Award Agreement, and does not accelerate vesting under the terms of a Non-Exempt Severance Arrangement, in no
event will the shares be issued in respect of such Non-Exempt Award any later than the later of: (i) December 31st of the calendar year that includes
the applicable vesting date, or (ii) the 60th day that follows the applicable vesting date. 

(ii)    If vesting of the Non-Exempt Award accelerates under the terms of a
Non-Exempt Severance Arrangement in connection with the Participant’s Separation from Service, and such vesting acceleration provisions were in effect as of the date of grant of the Non-Exempt Award and, therefore, are part of the terms of such Non-Exempt Award as of the date of grant, then the shares will be earlier issued in settlement of such Non-Exempt Award upon the Participant’s Separation from Service in accordance with the terms of the Non-Exempt Severance Arrangement, but in no event later than the 60th day that follows the date of the Participant’s Separation from Service. However, if at the time the shares would otherwise be issued the Participant is subject to the distribution limitations
contained in Section 409A applicable to “specified employees,” as defined in Section 409A(a)(2)(B)(i) of the Code, such shares shall not be issued before the date that is six months following the date of such Participant’s
Separation from Service, or, if earlier, the date of the Participant’s death that occurs within such six month period. 

(iii)    If vesting of a Non-Exempt Award accelerates under the terms of a Non-Exempt Severance Arrangement in connection with a Participant’s Separation from Service, and such vesting acceleration provisions were not in effect as of the date of grant of the Non-Exempt Award and, therefore, are not a part of the terms of such Non-Exempt Award on the date of grant, then such acceleration of vesting of the Non-Exempt Award shall not accelerate the issuance date of the shares, but the shares shall instead be issued on the same schedule as set forth in the Grant Notice as if they had vested in the ordinary course during
the Participant’s Continuous Service, notwithstanding the vesting acceleration of the Non-Exempt Award. Such issuance schedule is intended to satisfy the requirements of payment on a specified date or
pursuant to a fixed schedule, as provided under Treasury Regulations Section 1.409A-3(a)(4). 

(c)    Treatment of Non-Exempt Awards Upon a Transaction for Employees
and Consultants. The provisions of this subsection (c) shall apply and shall supersede anything to the contrary set forth in the Plan with respect to the permitted treatment of any Non-Exempt Award in
connection with a Transaction if the Participant was either an Employee or Consultant upon the applicable date of grant of the Non-Exempt Award. 

(i)    Vested Non-Exempt Awards. The following provisions shall
apply to any Vested Non-Exempt Award in connection with a Transaction: 

(1)    If the Transaction is also a Section 409A Change in Control then the Acquiring Entity may not assume,
continue or substitute the Vested Non-Exempt Award. Upon the Section 409A Change in Control the 

  
 15 

 
settlement of the Vested Non-Exempt Award will automatically be accelerated and the shares will be immediately issued in respect of the Vested Non-Exempt Award. Alternatively, the Company may instead provide that the Participant will receive a cash settlement equal to the Fair Market Value of the shares that would otherwise be issued to the Participant
upon the Section 409A Change in Control. 
 (2)    If the Transaction is not also a Section 409A
Change in Control, then the Acquiring Entity must either assume, continue or substitute each Vested Non-Exempt Award. The shares to be issued in respect of the Vested
Non-Exempt Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the Participant if the Transaction had not occurred. In the Acquiring
Entity’s discretion, in lieu of an issuance of shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant
on such issuance dates, with the determination of the Fair Market Value of the shares made on the date of the Transaction. 

(ii)    Unvested Non-Exempt Awards. The following provisions shall
apply to any Unvested Non-Exempt Award unless otherwise determined by the Board pursuant to subsection (e) of this Section. 

(1)    In the event of a Transaction, the Acquiring Entity shall assume, continue or substitute any Unvested Non-Exempt Award. Unless otherwise determined by the Board, any Unvested Non-Exempt Award will remain subject to the same vesting and forfeiture restrictions that were
applicable to the Award prior to the Transaction. The shares to be issued in respect of any Unvested Non-Exempt Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the
shares would have been issued to the Participant if the Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance
date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of Fair Market Value of the shares made on the date of the Transaction. 

(2)    If the Acquiring Entity will not assume, substitute or continue any Unvested
Non-Exempt Award in connection with a Transaction, then such Award shall automatically terminate and be forfeited upon the Transaction with no consideration payable to any Participant in respect of such
forfeited Unvested Non-Exempt Award. Notwithstanding the foregoing, to the extent permitted and in compliance with the requirements of Section 409A, the Board may in its discretion determine to elect to
accelerate the vesting and settlement of the Unvested Non-Exempt Award upon the Transaction, or instead substitute a cash payment equal to the Fair Market Value of such shares that would otherwise be issued to
the Participant, as further provided in subsection (e)(ii) below. In the absence of such discretionary election by the Board, any Unvested Non-Exempt Award shall be forfeited without payment of any
consideration to the affected Participants if the Acquiring Entity will not assume, substitute or continue the Unvested Non-Exempt Awards in connection with the Transaction. 

(3)    The foregoing treatment shall apply with respect to all Unvested
Non-Exempt Awards upon any Transaction, and regardless of whether or not such Transaction is also a Section 409A Change in Control. 

(d)    Treatment of Non-Exempt Awards Upon a Transaction for Non-Employee Directors. The following provisions of this subsection (d) shall apply and shall supersede anything to the contrary that may be set forth in the Plan with respect to the permitted treatment of
a Non-Exempt Director Award in connection with a Transaction. 

(i)    If the Transaction is also a Section 409A Change in Control then the Acquiring Entity may not assume,
continue or substitute the Non-Exempt Director Award. Upon the Section 409A Change in Control the vesting and settlement of any Non-Exempt Director Award will
automatically be accelerated and the shares will be immediately issued to the Participant in respect of the Non-Exempt Director Award. Alternatively, the Company may provide that the Participant will instead
receive a cash settlement equal to the Fair Market Value of the shares that would otherwise be issued to the Participant upon the Section 409A Change in Control pursuant to the preceding provision. 

  
 16 

 (ii)    If the Transaction is not also a Section 409A Change
in Control, then the Acquiring Entity must either assume, continue or substitute the Non-Exempt Director Award. Unless otherwise determined by the Board, the Non-Exempt
Director Award will remain subject to the same vesting and forfeiture restrictions that were applicable to the Award prior to the Transaction. The shares to be issued in respect of the Non-Exempt Director
Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the Participant if the Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of
shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of
Fair Market Value made on the date of the Transaction. 
 (e)    If the RSU Award is a Non-Exempt Award, then the provisions in this Section 11(e) shall apply and supersede anything to the contrary that may be set forth in the Plan or the Award Agreement with respect to the permitted treatment of
such Non-Exempt Award: 
 (i)    Any exercise by the Board of discretion
to accelerate the vesting of a Non-Exempt Award shall not result in any acceleration of the scheduled issuance dates for the shares in respect of the Non-Exempt Award
unless earlier issuance of the shares upon the applicable vesting dates would be in compliance with the requirements of Section 409A. 

(ii)    The Company explicitly reserves the right to earlier settle any
Non-Exempt Award to the extent permitted and in compliance with the requirements of Section 409A, including pursuant to any of the exemptions available in Treasury Regulations Section 1.409A-3(j)(4)(ix). 
 (iii)    To the extent the terms of any Non-Exempt Award provide that it will be settled upon a Transaction, to the extent it is required for compliance with the requirements of Section 409A, the Transaction event triggering settlement must also
constitute a Section 409A Change in Control. To the extent the terms of a Non-Exempt Award provides that it will be settled upon a termination of employment or termination of Continuous Service, to the
extent it is required for compliance with the requirements of Section 409A, the termination event triggering settlement must also constitute a Separation From Service. However, if at the time the shares would otherwise be issued to a
Participant in connection with a “separation from service” such Participant is subject to the distribution limitations contained in Section 409A applicable to “specified employees,” as defined in
Section 409A(a)(2)(B)(i) of the Code, such shares shall not be issued before the date that is six months following the date of the Participant’s Separation From Service, or, if earlier, the date of the Participant’s death that occurs
within such six month period. 
 (iv)    The provisions in this subsection (e) for delivery of the shares in
respect of the settlement of a RSU Award that is a Non-Exempt Award are intended to comply with the requirements of Section 409A so that the delivery of the shares to the Participant in respect of such Non-Exempt Award will not trigger the additional tax imposed under Section 409A, and any ambiguities herein will be so interpreted. 

12.    SEVERABILITY. 

If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not invalidate any portion of the Plan or such Award Agreement not declared to be unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid
shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 

13.    TERMINATION OF THE PLAN. 

The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier
of: (i) the Adoption Date, or (ii) the Effective Date. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 

  
 17 

 14.    DEFINITIONS. 

As used in the Plan, the following definitions apply to the capitalized terms indicated below: 

(a)     “Acquiring Entity” means the surviving or acquiring corporation (or its parent
company) in connection with a Transaction. 
 (b)    “Adoption Date” means the date the
Plan is first approved by the Board or Compensation Committee. 
 (c)    “Affiliate”
means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board may determine the time or times at which “parent” or
“subsidiary” status is determined within the foregoing definition. 
 (d)    “Applicable
Law” means any applicable securities, federal, state, foreign, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, listing rule, regulation,
judicial decision, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (including under the authority of any applicable self-regulating organization
such as the Nasdaq Stock Market, New York Stock Exchange, or the Financial Industry Regulatory Authority). 

(e)    “Appreciation Award” means (i) a stock option or stock appreciation right
granted under the Prior Plan or (ii) an Option or SAR granted under the Plan, in each case with respect to which the exercise or strike price is at least 100% of the Fair Market Value of the Common Stock subject to the stock option or stock
appreciation right, or Option or SAR, as applicable, on the date of grant. 

(f)    “Award” means any right to receive Common Stock, cash or other property granted
under the Plan (including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a RSU Award, a SAR or a Performance Award). 

(g)    “Award Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of an Award. The Award Agreement generally consists of the Grant Notice and the agreement containing the written summary of the general terms and conditions applicable to the Award and which is provided to a
Participant along with the Grant Notice. 
 (h)    “Board” means the Board of Directors
of the Company (or its designee). Any decision or determination made by the Board shall be a decision or determination that is made in the sole discretion of the Board (or its designee), and such decision or determination shall be final and binding
on all Participants. 
 (i)    “Capitalization Adjustment” means any change that
is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate
structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the
conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment. 

(j)     “Cause” will have the meaning ascribed to such term in any written agreement
between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) the willful misconduct, failure, disregard or
refusal by such Participant to perform any of the material duties of his or her material duties of employment; provided, however, that such Participant will have one opportunity to cure any breach within five (5) business days

  
 18 

 
(“Cure Period”) of written notice to the Participant; (ii) any willful, intentional or grossly negligent act by such Participant having the effect of
injuring, in a material way the business or reputation of the Company or an Affiliate; (iii) such Participant’s conviction of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea); (iv)
the determination by the Company, after a reasonable and good-faith investigation by the Company following a written allegation by another employee of the Company, that such Participant engaged in some form of harassment prohibited by law
(including, without limitation, harassment that constitutes age, sex or race discrimination); (v) any misappropriation or embezzlement of the property of the Company or an Affiliate; or (vi) breach by such Participant of any agreement between
the Participant and the Company or an Affiliate which is not cured by the Participant within thirty (30) days after notice thereof is given by the Company or an Affiliate. Any determination by the Company that the Continuous Service of a
Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose. 

(k)    “Change in Control” or “Change of Control” means the
occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events; provided, however, to the extent necessary to avoid adverse personal income tax consequences to the Participant in connection
with an Award, also constitutes a Section 409A Change in Control: 
 (i)    any Exchange Act Person becomes
the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an
investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance
of equity securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting
securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur; 

(ii)    there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the
Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities
representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity
in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; 

(iii)    there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of
the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the
combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease,
license or other disposition; or 
 (iv)    individuals who, on the date the Plan is adopted by the Board, are
members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; 

  
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provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board
then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. 

(l)    Notwithstanding the foregoing or any other provision of this Plan, (A) the term Change in Control shall
not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement
between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that (1) if no definition of Change in Control (or any analogous term) is set
forth in such an individual written agreement, the foregoing definition shall apply and (2) no Change in Control (or any analogous term) will be deemed to occur with respect to Awards subject to such an individual written agreement without a
requirement that the Change in Control (or any analogous term) actually occur.“Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder. 

(m)     “Committee” means the Compensation Committee and any other committee of Directors
to whom authority has been delegated by the Board or Compensation Committee in accordance with the Plan. 

(n)     “Common Stock” means the common stock of the Company. 

(o)    “Company” means ZIOPHARM Oncology, Inc., a Delaware corporation. 

(p)    “Compensation Committee” means the Compensation Committee of the Board. 

(q)    “Consultant” means any person, including an advisor, who is (i) engaged by the
Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a
Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a
Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person. 

(r)    “Continuous Service” means that the Participant’s service with the Company or
an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director or Consultant or a change in
the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service;
provided, however, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, such Participant’s Continuous Service will be considered to have terminated on the
date such Entity ceases to qualify as an Affiliate. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. To the extent permitted
by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or
chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous
Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise
required by law. In addition, to the extent required for exemption from or compliance with Section 409A, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner
that is consistent with the definition of “separation from service” as defined under Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder). 

  
 20 

 (s)    “Corporate Transaction” means the
consummation, in a single transaction or in a series of related transactions, of any one or more of the following events: 

(i)    a sale or other disposition of all or substantially all, as determined by the Board, of the
consolidated assets of the Company and its Subsidiaries; 
 (ii)    a sale or other disposition of at least 50%
of the outstanding securities of the Company; 
 (iii)    a merger, consolidation or similar transaction
following which the Company is not the surviving corporation; or 
 (iv)    a merger, consolidation or similar
transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation
or similar transaction into other property, whether in the form of securities, cash or otherwise. 

(t)    “determine” or “determined”
means as determined by the Board or the Committee (or its designee) in its sole discretion. 

(u)    “Director” means a member of the Board. 

(v)    “Disability” means, with respect to a Participant, such Participant is unable to
engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12
months, as provided in Section 22(e)(3) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. 

(w)     “Effective Date” means the date of the annual meeting of stockholders of the
Company held in 2020 provided this Plan is approved by the Company’s stockholders at such meeting. 

(x)    “Employee” means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan. 

(y)    “Employer” means the Company or the Affiliate of the Company that employs the
Participant. 
 (z)    “Entity” means a corporation, partnership, limited liability
company or other entity. 
 (aa)    “Exchange Act” means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder. 
 (bb)    “Exchange Act
Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or
any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company,
(iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of
securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities. 

  
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 (cc)    “Fair Market Value” means, as of
any date, unless otherwise determined by the Board, the value of the Common Stock (as determined on a per share or aggregate basis, as applicable) determined as follows: 

(i)    If the Common Stock is listed on any established stock exchange or traded on any established market, the
Fair Market Value will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board
deems reliable. 
 (ii)    If there is no closing sales price for the Common Stock on the date of determination,
then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists. 

(iii)    In the absence of such markets for the Common Stock, or if otherwise determined by the Board, the Fair
Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code. 

(dd)    “Full Value Award” means an Award granted under the Plan or an award granted under
the Prior Plan in each case that is not an Appreciation Award. 
 (ee)    “Governmental
Body” means any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government;
(c) governmental or regulatory body, or quasi-governmental body of any nature (including any governmental division, department, administrative agency or bureau, commission, authority, instrumentality, official, ministry, fund, foundation,
center, organization, unit, body or Entity and any court or other tribunal, and for the avoidance of doubt, any Tax authority) or other body exercising similar powers or authority; or (d) self-regulatory organization (including the Nasdaq Stock
Market, New York Stock Exchange, and the Financial Industry Regulatory Authority). 
 (ff)     “Grant
Notice” means the notice provided to a Participant that he or she has been granted an Award under the Plan and which includes the name of the Participant, the type of Award, the date of grant of the Award, number of shares of Common
Stock subject to the Award or potential cash payment right, (if any), the vesting schedule for the Award (if any) and other key terms applicable to the Award. 

(gg)    “Incentive Stock Option” means an option granted pursuant to Section 4 of the
Plan that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code. 

(hh)     “Materially Impair” means that a Participant’s rights under an
Award will be materially adversely affected by a suspension or termination of the Plan, an amendment of the Plan, or an amendment to the terms of the Award, as applicable. For purposes of the Plan, a Participant’s rights under an Award will not
be deemed to have been Materially Impaired by any of the foregoing actions if the Board, in its sole discretion, determines that such action, taken as a whole, does not materially impair the Participant’s rights under the Award. For example, an
amendment to the terms of an Award in order to do any of the following, or that results in any of the following, will not be deemed to Materially Impair the Participant’s rights under the Award: (i) an imposition of reasonable restrictions
on the minimum number of shares subject to an Option that may be exercised; (ii) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (iii) a change in the terms of an Incentive
Stock Option in a manner that disqualifies, impairs or otherwise affects the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (iv) to clarify the manner of exemption from, or to bring the Award into
compliance with or qualify it for an exemption from, Section 409A; or (v) to comply with other Applicable Laws. 

(ii)    “Non-Employee Director” means a
Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as 

  
 22 

 
to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee
director” for purposes of Rule 16b-3. 
 (jj)    “Non-Exempt Award” means any Award that is subject to, and not exempt from, Section 409A, including as the result of (i) a deferral of the issuance of the shares subject to the
Award which is elected by the Participant or imposed by the Company, or (ii) the terms of any Non-Exempt Severance Agreement. 

(kk)    “Non-Exempt Director Award” means a Non-Exempt Award granted to a Participant who was a Director but not an Employee on the applicable grant date. 

(ll)    “Non-Exempt Severance Arrangement” means a
severance arrangement or other agreement between the Participant and the Company that provides for acceleration of vesting of an Award and issuance of the shares in respect of such Award upon the Participant’s termination of employment or
separation from service (as such term is defined in Section 409A(a)(2)(A)(i) of the Code (and without regard to any alternative definition thereunder) (“Separation from Service”) and such severance benefit does not
satisfy the requirements for an exemption from application of Section 409A provided under Treasury Regulations Section 1.409A-1(b)(4), 1.409A-1(b)(9) or
otherwise. 
 (mm)    “Nonstatutory Stock Option” means any option granted pursuant to
Section 4 of the Plan that does not qualify as an Incentive Stock Option. 

(nn)    “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act. 
 (oo)    “Option” means an Incentive Stock Option
or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan. 

(pp)    “Option Agreement” means a written agreement between the Company and the
Optionholder evidencing the terms and conditions of the Option grant. The Option Agreement includes the Grant Notice for the Option and the agreement containing the written summary of the general terms and conditions applicable to the Option and
which is provided to a Participant along with the Grant Notice. Each Option Agreement will be subject to the terms and conditions of the Plan. 

(qq)    “Optionholder” means a person to whom an Option is granted pursuant to the Plan or,
if applicable, such other person who holds an outstanding Option. 
 (rr)    
“Own,” “Owned,” “Owner,” “Ownership” means that a person or Entity will be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or
shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. 

(ss)    “Participant” means an Employee, Director or Consultant to whom an Award is granted
pursuant to the Plan or, if applicable, such other person who holds an outstanding Award. 

(tt)    “Performance Award” means an Award that may vest or may be exercised or a cash
award that may vest or become earned and paid contingent upon the attainment during a Performance Period of certain Performance Goals and which is granted under the terms and conditions of Section 5(b) pursuant to such terms as are approved by
the Board. In addition, to the extent permitted by Applicable Law and set forth in the applicable Award Agreement, the Board may determine that cash or other property may be used in payment of Performance Awards. Performance Awards that are settled
in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, the Common Stock. 

  
 23 

 (uu)     “Performance Criteria” means the
one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any measure of performance
selected by the Board. 
 (vv)     “Performance Goals” means, for a Performance Period,
the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business
segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board (i) in the Award Agreement at the time the
Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance
Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles;
(4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting
principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period
following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based
compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to expensed under generally accepted accounting principles;
(11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effects of the timing of acceptance for review and/or approval of
submissions to the U.S. Food and Drug Administration or any other regulatory body. In addition, the Board retains the discretion to reduce, increase or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to
define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in
the Award Agreement or the written terms of a Performance Award. 
 (ww)    “Performance
Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to vesting or exercise of an Award. Performance
Periods may be of varying and overlapping duration, at the sole discretion of the Board. 

(xx)    “Plan” means this ZIOPHARM Oncology, Inc. 2020 Equity Incentive Plan. 

(yy)    “Plan Administrator” means the person, persons, and/or third-party administrator
designated by the Company to administer the day to day operations of the Plan and the Company’s other equity incentive programs. 

(zz)    “Post-Termination Exercise Period” means the period following termination of a
Participant’s Continuous Service within which an Option or SAR is exercisable, as specified in Section 4(h). 

(aaa)    “Prior Plan’s Available Reserve” means the number of shares available for the
grant of new awards under the Prior Plan. 
 (bbb)    “Prior Plan” means the ZIOPHARM
Oncology, Inc. 2012 Equity Incentive Plan. 
 (ccc)    “Prospectus” means the document
containing the Plan information specified in Section 10(a) of the Securities Act. 

  
 24 

 (ddd)    “Restricted Stock Award” or
“RSA” means an Award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 5(a). 

(eee)    “Restricted Stock Award Agreement” means a written agreement between the Company
and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. The Restricted Stock Award Agreement includes the Grant Notice for the Restricted Stock Award and the agreement containing the written
summary of the general terms and conditions applicable to the Restricted Stock Award and which is provided to a Participant along with the Grant Notice. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.

 (fff)    “Returning Shares” means shares subject to outstanding stock awards granted
under the Prior Plan and that after March 31, 2020: (A) are not issued because such stock award or any portion thereof expires or otherwise terminates without all of the shares covered by such stock award having been issued; (B) are
not issued because such stock award or any portion thereof is settled in cash; (C) are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares;
(D) are withheld or reacquired to satisfy the exercise, strike or purchase price of a Full Value Award; or (E) are withheld or reacquired to satisfy a tax withholding obligation in connection with a Full Value Award. 

(ggg)    “RSU Award” or “RSU” means an Award of
restricted stock units representing the right to receive an issuance of shares of Common Stock which is granted pursuant to the terms and conditions of Section 5(a). 

(hhh)    “RSU Award Agreement” means a written agreement between the Company
and a holder of a RSU Award evidencing the terms and conditions of a RSU Award grant. The RSU Award Agreement includes the Grant Notice for the RSU Award and the agreement containing the written summary of the general terms and conditions applicable
to the RSU Award and which is provided to a Participant along with the Grant Notice. Each RSU Award Agreement will be subject to the terms and conditions of the Plan. 

(iii)    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. 

(jjj)    “Rule 405” means Rule 405 promulgated under the Securities Act. 

(kkk)    “Section 409A” means Section 409A of the
Code and the regulations and other guidance thereunder. 

(lll)    “Section 409A Change in Control” means a change
in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets, as provided in Section 409A(a)(2)(A)(v) of the Code and Treasury Regulations
Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). 

(mmm)    “Securities Act” means the Securities Act of 1933, as amended. 

(nnn)    “Share Reserve” means the number of shares available for issuance under the Plan
as set forth in Section 2(a). 
 (ooo)    “Stock Appreciation Right” or
“SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 4. 

(ppp)    “SAR Agreement” means a written agreement between the Company and a holder of a
SAR evidencing the terms and conditions of a SAR grant. The SAR Agreement includes the Grant Notice for the SAR and the agreement containing the written summary of the general terms and conditions applicable to the SAR and which is provided to a
Participant along with the Grant Notice. Each SAR Agreement will be subject to the terms and conditions of the Plan. 

  
 25 

 (qqq)    “Subsidiary” means, with respect
to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other
entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 

(rrr)    “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate. 

(sss)    “Trading Policy” means the Company’s policy permitting certain individuals to
sell Company shares only during certain “window” periods and/or otherwise restricts the ability of certain individuals to transfer or encumber Company shares, as in effect from time to time. 

(ttt)    “Transaction” means a Corporate Transaction or Change in Control. 

(uuu)    “Unvested Non-Exempt Award” means the
portion of any Non-Exempt Award that had not vested in accordance with its terms upon or prior to the date of any Transaction. 

(vvv)    “Vested Non-Exempt Award” means the
portion of any Non-Exempt Award that had vested in accordance with its terms upon or prior to the date of a Transaction. 

  
 26ex_192395.htm

Exhibit 10.1

  

TD BANK, N.A.

 

AMENDED AND RESTATED 

LOAN AND SECURITY AGREEMENT

(ALL ASSETS)

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (ALL ASSETS) (the "Agreement") originally dated as of June 29, 2009 and amended and restated as of June 25, 2020, by and among The L. S. Starrett Company, a Massachusetts corporation having a principal place of business located at 121 Crescent Street, Athol, Massachusetts 01331 ("Starrett"), Tru-Stone Technologies, Inc., a Delaware corporation having a principal place of business located at 1101 Prosper Drive, P.O. Box 430, Waite Park, MN 56387 ("Tru-Stone"), Starrett Kinemetric Engineering, Inc., a Delaware corporation having a principal place of business located at 26052 Merit Circle, Suite 103, Laguna Hills, CA 92653 ("Kinemetric") and Starrett Bytewise Development, Inc., a Delaware corporation with offices located at 1150 Brookstone Center Parkway, Columbus, Georgia 31904 ("Starrett Bytewise", collectively with Kinemetric, Starrett and Tru-Stone, each a "Borrower" and together the "Borrower") and T.D. Bank, N.A., a national banking association organized and existing under the laws of the United States of America, the secured party hereunder having a place of business located at 370 Main Street, Worcester, Massachusetts 01608 (the "Bank"). The parties hereto hereby agree as follows:

 

	
			1.

				
			DEFINITIONS AND ACCOUNTING TERMS.

			

 

Section 1.01. As used in this Agreement, the following terms have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):

 

“Affiliate” shall mean any Person (a) which directly or indirectly Controls, or is Controlled by or is under common Control with the Borrower or a subsidiary, (b) which directly or indirectly beneficially holds or owns five (5%) percent or more of any class of voting stock of the Borrower or any subsidiary, or (c) five (5%) percent or more of the voting stock of which is directly or indirectly beneficially owned or held by the Borrower or a subsidiary.

 

“Bankruptcy Code” as used herein shall mean Title 11 of the United States Code entitled “Bankruptcy”.

 

 

“Borrowing Base” as used herein shall mean the sum of the following:

 

	 	
			(a)

				
			eighty (80%) percent of the unpaid face amount of Qualified Accounts (as defined below), PLUS

			

 

	 	
			(b)

				
			fifty (50%) percent of the cost or market value, whichever is lower, of all Eligible Inventory (as defined below).

			

  

 

 

 

“Brazilian Banks” shall mean certain Brazilian Banking institutions with which Borrower’s Brazilian subsidiary transacts business from time to time.

 

“Capital Assets” shall mean assets that, in accordance with GAAP, are required or permitted to be depreciated or amortized on the Borrower’s balance sheet.

 

“Capital Expenditures” shall mean but not be limited to amounts paid during such year for Capital Assets or Capital Leases and shall include, in the case of a purchase, the entire purchase price and, in the case of a Capital Lease (but not an operating lease), the entire rental for the term.

 

“Capital Leases” shall mean Capital Leases, conditional sales contracts and other title retention agreements relating to the purchase or acquisition of Capital Assets.

 

“Charge” shall mean any fee, loss, charge, expense, cost, accrual or reserve of any kind.

 

“CMLTD” shall mean the current maturity of long term indebtedness other than Revolving Loans to be paid during the next twelve-month period, including but not limited to, amounts required to be paid during such period under Capital Leases.

 

“Collateral” shall have the meaning assigned to such term in Section 5.

 

“Commercial Letters of Credit” shall mean a letter of credit issued to support the purchase by Borrower of Inventory prior to its transport to one of Borrower’s places of business that provides that all draws thereunder must require presentation of customary documentation including, if applicable, commercial invoices, packing lists, certificate of origin, bill of lading, an airway bill, customs clearance documents, quota statement, certificate, beneficiaries statement and bill of exchange, bills of lading, dock warrants, dock receipts, warehouse receipts or other documents of title, in form and substance satisfactory to Bank and reflecting passage to Borrower of title to first quality Inventory conforming to Borrower’s contract with the seller thereof.

 

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Credit Limit” means an amount equal to Twenty-Five Million ($25,000,000.00) Dollars.

 

"Current Liabilities" shall mean total current Debt as determined in accordance with GAAP.

 

“Debt” means (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under Capital Leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under Letters of Credit; (g) obligations under acceptance facilities; (h) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss; and (i) obligations secured by any Liens, whether or not the obligations have been assumed.

 

2

 

 

“Distributions” shall mean all payment or distributions to Owners in cash or in property other than reasonable salaries, bonuses and expense reimbursements.

 

“EBITDA” shall mean, for the applicable period, income from continuing operations before the payment of interest and taxes plus depreciation, depletion, amortization and non-cash pension and retirement benefit expense, determined in accordance with GAAP for Starrett and its subsidiaries on a consolidated basis, plus or minus non-cash foreign exchange with Borrower’s subsidiaries.

 

“Eligible Inventory” means Borrower’s raw materials and finished goods which are initially and at all times until sold: new and unused or refurbished (except, with Bank’s written approval, used equipment held for sale or lease), in first−class condition, merchantable and saleable through normal trade channels; at a location which is in the United States; subject to a perfected security interest in favor of Bank; owned by Borrower free and clear of any lien except in favor of Bank and/or Permitted Liens; not obsolete; not scrap, waste, defective goods and the like; have been produced by Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders promulgated thereunder; not stored with a bailee, warehouseman or similar party unless Bank has given its prior written consent thereto; and have not been designated by Bank, in accordance with its normal credit policies, as unacceptable for any reason by notice to Borrower.

 

“Environmental Law” means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the protection of human health and the environment.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“Event of Default” shall have the meaning assigned to such term in Section 14.01.

 

“Extraordinary Gains/Losses” shall mean, during the applicable period, a gain or loss related to the sale of a Capital Asset, income of a subsidiary Borrower under a concept of pooling or accounting, income from minority interest under the equity method of accounting, the write-up or impairment of assets, the forgiveness of Debt income, litigation gain or loss, casualty loss and income or loss from discontinued operations or the sale of a business.

 

“Fixed Charges” shall mean Interest plus CMLTD for the next 12 months.

 

3

 

 

"Fixed Charge Coverage Ratio" shall mean, during the applicable period, that quotient equal to (a) net income, plus income tax expense, plus interest expense, plus depreciation expense, plus amortization expense, plus non-cash pension and post-retirement benefit expense, plus non-cash stock compensation expense, plus or minus gains/losses from the sale of assets, plus Bank approved one-time restructuring expenses, minus dividends and distributions, minus unfunded Capital Expenditures, minus required cash pension payments, minus cash taxes, plus or minus non-cash foreign exchange with Borrower’s subsidiaries, divided by (b) required principal payments on all term debt, excluding short-term loans from the Brazilian Banks to finance export accounts receivable from Borrower's Brazilian subsidiary, plus interest expense. Principal payments made in the fiscal year ending December 31, 2019, with respect to the term note from Borrower to Bank dated November 22, 2011 in the original principal amount of Fifteen Million Five Hundred Thousand ($15,500,000.00) Dollars shall be excluded from the calculation of the Fixed Charge Coverage Ratio for the twelve (12) month periods ending on December 31, 2019, March 31, 2020, June 30, 2020 and September 30, 2020.

 

“Funded Debt” shall mean, for each quarterly period of Starrett and its consolidated subsidiaries, all outstanding liabilities for borrowed money, the outstanding principal balance of Capital Leases, and other liabilities represented by bonds, debentures, notes or other similar instruments; provided that, for the avoidance of doubt, the issued and undrawn face amount of Letters of Credit of Starrett and its consolidated subsidiaries shall not constitute Funded Debt.

 

“GAAP” shall mean generally accepted accounting principles as in effect from time to time; provided, however, that for purposes of calculating the financial covenants contained in Section 13 GAAP shall mean generally accepted accounting principles as in effect on the date of this Agreement. 

 

“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed in, regulated by or identified in any Environmental Law.

 

“Interest” shall mean, for the applicable period, all interest paid or payable, including, but not limited to, interest paid or payable on indebtedness and on Capital Leases of Starrett and its consolidated subsidiaries, determined in accordance with GAAP.

 

“Letters of Credit” shall have the meaning assigned to such term in Section 2.05.

 

“LIBOR” (London Interbank Offered Rate) shall mean the rate of interest in U.S. Dollars (rounded upwards, at the Bank's option, to the next 100th of one percent) equal to the British Bankers' Association LIBOR ("BBA LIBOR") for one (1) month as published by Bloomberg (or such other commercially available source providing quotations of BBA LIBOR as designated by Bank form time to time) at approximately 11:00 a.m. (London time) two (2) London Banking Days prior the Reset Date; provided however, if more than one BBA LIBOR is specified, the applicable rate shall be the arithmetic mean of all such rates. London Banking Days means any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, England. If, for any reason, such rate is not available, the term LIBOR shall mean, with respect to any one (1) month period, the rate of interest per annum determined by Bank to be the average rate per annum at which deposits in dollars are offered for such Interest Period by major banks in London, England at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the Reset Date.

 

4

 

 

“Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing).

 

"Liquid Investments" shall mean investments which are considered cash equivalents or are readily convertible into cash."

 

“Leverage Ratio” shall mean the ratio of Funded Debt to EBITDA for the twelve (12) month period ending on the last day of each fiscal quarter of Starrett and its consolidated subsidiaries.

 

“Margin” shall mean, during the applicable period, the percentages set forth below, as determined by the Borrower’s Leverage Ratio (as defined herein):

 

	
			Level

				
			Leverage Ratio

				
			Margin

			
	
			1

				
			Less than 1.00

				
			1.50%

			
	
			2

				
			1.00 to 2.00

				
			1.75%

			
	
			3

				
			Greater than 2.00 and up to and including 2.50

				
			2.00%

			
	
			4

				
			Greater than 2.50

				
			2.25%

			

 

Prior to the Bank's receipt of the Borrower's management prepared quarterly financial statements for the period ending June 30, 2009, the Margin shall mean 1.75%. Upon the Bank’s receipt of a Margin Certificate in the form of Exhibit 1 attached hereto and the financial statements of Starrett and its consolidated subsidiaries in accordance with Section 11 of this Agreement (the "Required Documents") the Margin shall be determined and be effective as of the first day of the following month, which Margin shall remain in effect until the first day of the calendar month following the Bank’s receipt of the subsequent Margin Certificate and shall be adjusted, if at all, as at the end of each quarterly period thereafter based on the applicable accurate Margin Certificate. In the event that the Borrower fails to timely furnish the Bank with the Required Documents in accordance with Section 11 of this Agreement then the Margin shall be determined as if Level 4 was applicable, from the first day after the date that such Required Documents were due until the first day of the calendar month following the Bank’s receipt of the Required Documents.

 

“Modification Agreement” shall mean that certain Modification Agreement, dated as of June 25, 2020, among the Borrower and the Bank.

 

“Note(s)” shall have the meaning assigned to such term in Section 2.02.

 

5

 

 

“Obligations” shall have the meaning assigned to such term in Section 6.

 

“Organizational Documents” means (a) with respect to a corporation, its certificate or articles of incorporation and by-laws; (b) with respect to a partnership, its partnership certificate and partnership agreement; (c) with respect to a limited liability company, its articles or certificate of formation and its operating or management agreement; and (d) with respect to a trust, the declaration of trust; and, with respect to any of them, any other document required to be filed with public authorities to evidence or establish authority to conduct business.

 

“Owner” means with respect to Starrett and its subsidiaries, any Person having legal or beneficial title to an ownership interest in Starrett and its subsidiaries or a right to acquire such an interest.

 

“Permitted Liens” shall have the meaning assigned to such term in Section 13.08.

 

“Permitted Protests” means the right of the Borrower to protest any Lien (other than a Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a federal or state tax lien) or rental payment, provided that (x) a reserve with respect to such liability is established on the books of the Borrower, (y) any such protest is instituted and diligently prosecuted by the Borrower in good faith, and (z) the Bank is satisfied that, while such protest is pending, there will be no impairment of the enforceability, validity or priority of any of the Liens of the Bank in and to the Collateral.

 

“Person” means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.

 

“Plan” means any employee plan subject to Title IV of ERISA maintained for employees of Borrower, any subsidiary of Borrower or any other trade or business under common control with Borrower within the meaning of Section 414(c) of the Internal Revenue Code of 1986 or any regulations thereunder.

 

“Qualified Account”, as used herein, means an Account owing to Borrower which met the following specifications at the time it came into existence and continues to meet the same until it is collected in full:

 

	 	
			(a)

				
			The Account is not more than ninety (90) days from the date of the invoice thereof.

			

 

	 	
			(b)

				
			The Account arose from the performance of services or an outright sale of goods by Borrower, such goods have been shipped to the account debtor, and Borrower has possession of, or has delivered to Bank, shipping and delivery receipts evidencing such shipment.

			

 

	 	
			(c)

				
			The Account is not subject to any prior assignment, claim, lien, or security interest, and Borrower will not make any further assignment thereof or create any further security interest therein, nor permit Borrower’s rights therein to be reached by attachment, levy, garnishment or other judicial process.

			

 

6

 

 

	 	
			(d)

				
			No set−off, credit, allowance or adjustment has been asserted by the account debtor, except discount allowed for prompt payment and the account debtor has not complained as to his liability thereon and has not returned any of the goods from the sale of which the Account arose.

			

 

	 	
			(e)

				
			The Account arose in the ordinary course of Borrower’s business and did not arise from the performance of services or a sale of goods to a supplier or employee of the Borrower.

			

 

	 	
			(f)

				
			No notice of bankruptcy or insolvency of the account debtor has been received by or is known to the Borrower.

			

 

	 	
			(g)

				
			The Account is not owed by an account debtor whose principal place of business is outside the United States of America.

			

 

	 	
			(h)

				
			The Account is not owed by an entity which is a parent, brother/sister, subsidiary or Affiliate of Borrower.

			

 

	 	
			(i)

				
			The account debtor is not located in the State of New Jersey or in the State of Minnesota, unless Borrower has filed and shall file all legally required Notice of Business Activities Reports with the New Jersey Division of Taxation or the Minnesota Department of Revenue, as the case may be.

			

 

	 	
			(j)

				
			The Account when aggregated with all of the Accounts of that account debtor does not exceed fifty (50%) percent of the then aggregate of Qualified Accounts.

			

 

	 	
			(k)

				
			The Account is not evidenced by a promissory note.

			

 

	 	
			(l)

				
			The Account did not arise out of any sale made on a bill and hold, dating or delayed shipment basis.

			

 

	 	
			(m)

				
			The Account did not arise as a result of a progress billing or from a project on which the Account Debtor has a payment or performance bond.

			

 

	 	
			(n)

				
			The Account is not for retainage.

			

 

	 	
			(o)

				
			Bank has not deemed the Account to be unacceptable for any reason in accordance with its normal credit policies by notice to Borrower.

			

 

7

 

 

PROVIDED THAT if at any time fifty (50%) percent or more of the aggregate amount of the Accounts due from any account debtor are unpaid in whole or in part more than ninety (90) days from the respective dates of invoice, from and after such time none of the Accounts (then existing or hereafter arising) due from such account debtor shall be deemed to be Qualified Accounts until such time as all Accounts due from such account debtor are (as a result of actual payments received thereon) no more than ninety (90) days from the date of invoice; Accounts payable by Borrower to an account debtor shall be netted against Accounts due from such account debtor and the difference (if positive) shall constitute Qualified Accounts from such account debtor for purposes of determining the Borrowing Base (notwithstanding paragraph (d) above); characterization of any Account due from an account debtor as a Qualified Account shall not be deemed a determination by Bank as to its actual value nor in any way obligate Bank to accept any Account subsequently arising from such account debtor to be, or to continue to deem such Account to be, a Qualified Account; it is Borrower’s responsibility to determine the creditworthiness of account debtors and all risks concerning the same and collection of Accounts are with Borrower; and all Accounts whether or not Qualified Accounts constitute Collateral.

 

“Receivables” shall have the meaning assigned to such term in Section 5.

 

“Revolving Loan(s)” shall mean all loans, including all Letters of Credit, advanced by Bank to Borrower or for the account of Borrower hereunder.

 

“Senior Debt” shall mean any Debt which is not Subordinated Debt.

 

“Subordinated Debt” shall mean Debt which is expressly stated to be subordinated or junior in right of payment to Borrower’s Debt to Bank.

 

"Term Loan" shall mean the deferred draw loan in the maximum principal amount of Ten Million ($10,000,000.00) Dollars from Bank to Borrower as evidenced by and repayable in accordance with the Term Note draw to the order of the Bank.

 

"Term Note" shall mean the Deferred Draw Term Note in the form of Exhibit 2A attached hereto.

 

"Total Liabilities" means Total Liabilities as expressed on the Borrower's balance sheet, prepared in accordance with GAAP consistently applied

 

“UCC” shall mean the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts.

 

Section 1.02. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 8.05, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.

 

Section 1.03. Unless otherwise defined in this Agreement, capitalized words shall have the meanings set forth in the UCC as of the date of this Agreement.

 

	
			2.

				
			REVOLVING LOANS AND OTHER FINANCIAL ACCOMMODATIONS.

			

 

Section 2.01. From time to time upon Borrower’s request, so long as the sum of the aggregate principal amount of all Revolving Loans outstanding, and the requested Revolving Loan does not exceed the lesser of (a) the Borrowing Base, or (b) the Credit Limit, Bank shall make such requested Revolving Loan, provided that there has not occurred an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default.

 

8

 

 

Section 2.02. All Revolving Loans shall bear interest and at the option of the Bank shall be evidenced by and repayable in accordance with a revolving note draw to the order of Bank substantially in the form of Exhibit 2 hereto (the "Revolving Note" and together with the Term Note, each a "Note" and together, the "Notes"), as the same may hereafter be amended, supplemented or restated from time to time and any note or notes issued in substitution therefor, but in the absence of the Revolving Note shall be conclusively evidenced by Bank's records of Revolving Loans and repayments.

 

Section 2.03.A. Borrower may request advances under the Term Loan until December 31, 2020 (the "Conversion Date"). On the Conversion Date, the outstanding principal balance of the Term Note shall be amortized over a term of five (5) years in sixty (60) level payments of principal commencing on the first (1st) day of the first (1st) month following the Conversion Date and on the first (1st) day of each month thereafter until December 31, 2025 (the "Maturity Date") when the outstanding principal balance plus all accrued and unpaid interest shall be due and payable in full. Interest only shall be payable monthly on the first (1st) day of each month until the Conversion Date and thereafter, principal and interest shall be payable as set forth above. Interest shall be charged at the fixed rate of four (4%) percent per annum on the unpaid principal balance of the Term Note. Any principal repaid under the Term Note shall not be readvanced by Bank to Borrower. The Term Note may be prepaid subject to the Yield Maintenance provisions contained therein.

 

Section 2.03.B. Interest will be charged to Borrower at a fluctuating rate which is the monthly equivalent to a per annum rate equal to the aggregate of: (x) LIBOR, and (y) the Margin, or at such other rate agreed on from time to time by the parties, upon any balance owing to Bank at the close of each day and shall be payable (a) on the first day of each month in arrears; (b) on termination of this Agreement; (c) on acceleration of the time for payment of the Obligations; and (d) on the date the Obligations are paid in full. The rate of interest payable by Borrower shall be changed if at all, effective as of the first day of each month (the "Reset Date"). The Bank shall not be required to notify the Borrower of any adjustments to the interest rate. Interest shall be computed on the basis of the actual number of days elapsed over a year of three hundred sixty (360) days. Interest shall be payable in lawful money of the United States of America to Bank, or as Bank shall direct, without set-off, deduction or counterclaim monthly, in arrears, on the first day of each month, commencing on the first day of the month next succeeding the date hereof.

 

Section 2.04. Borrower hereby authorizes and directs Bank, in Bank’s sole discretion (provided, however, Bank shall have no obligation to do so): (a) to pay accrued interest as the same becomes due and payable pursuant to this Agreement or pursuant to any note or other agreement between Borrower and Bank, including without limitation the Term Note, and to treat the same as a Revolving Loan to Borrower, which shall be added to Borrower’s Revolving Loan balance pursuant to this Agreement; (b) to charge any of Borrower’s accounts under the control of Bank; or (c) apply the proceeds of Collateral, including, without limitation, payments on Accounts and other payments from sales or lease of Inventory and any other funds to the payment of such items. Bank shall promptly notify Borrower of any such charges or applications.

 

9

 

 

Section 2.05. At the request of any Borrower, and upon the execution of letter of credit documentation satisfactory to Bank, Bank, within the limits of the Borrowing Base, as then computed and also within the limits of the Credit Limit as then computed, shall issue letters of credit from time to time by Bank for the account of any Borrower (collectively “Letters of Credit”). The Letters of Credit shall be on terms mutually acceptable to Bank, Bank and any Borrower, and no Letter of Credit shall have an expiration date later than the sooner to occur of (a) twelve (12) months from the date of issuance of the subject Letter of Credit, or (b) the termination date of this Agreement. A Revolving Loan in an amount equal to any amount paid by Bank under a Letter of Credit shall be deemed made to any Borrower, without request therefor, immediately upon any payment by Bank on such Letter of Credit. In connection with the issuance of any Letter of Credit, such Borrower shall pay to Bank a percentage of the face amount of such Letter of Credit according to the fee schedule then in effect at Bank plus transaction fees at the customary rates charged by Bank and all other normal and customary fees charged by Bank. Borrower hereby authorizes and directs Bank, in Bank’s sole discretion (provided, however, Bank shall have no obligation to do so) to pay all such fees and costs as the same become due and payable and to treat the same as a Revolving Loan to such Borrower, which shall be added to the Borrower’s Revolving Loan balance pursuant to this Agreement. For purposes of computing the Credit Limit, all Letters of Credit and acceptances shall be deemed to be Revolving Loans.

 

Section 2.06. The Borrowing Base formula set forth above is intended solely for monitoring purposes. The making of Revolving Loans by Bank to the Borrower in excess of the above described Borrowing Base formula is for the benefit of the Borrower and does not affect the obligations of Borrower hereunder; all such Revolving Loans constitute Obligations and must be repaid by Borrower in accordance with the terms of this Agreement.

 

Section 2.07. Borrower shall pay to Bank the principal amount of all Revolving Loans as follows:

 

(a)     Credit Limit or Borrowing Base Exceeded. Whenever the outstanding principal balance of all Revolving Loans exceed the lesser of the Credit Limit or the Borrowing Base, Borrower shall immediately pay to Bank the excess of the outstanding principal balance of the Revolving Loans over the Credit Limit or the Borrowing Base.

 

(b)     Payment in Full on Termination. On termination of this Agreement or upon acceleration of the Obligations, Borrower shall pay to Bank the entire outstanding principal balance of all Revolving Loans and the Term Loan and shall deliver to Bank cash collateral in an amount equal to the aggregate of (A) amounts then undrawn on all outstanding Letters of Credit issued pursuant to this Agreement for the account of the Borrower, and (B) the amount of all outstanding acceptances issued pursuant to this Agreement.

 

10

 

 

Section 2.08. It is the intention of the parties hereto to comply strictly with applicable usury laws, if any; accordingly, notwithstanding any provisions to the contrary in this Agreement or any other documents or instruments executed in connection herewith, in no event shall this Agreement or such documents or instruments require or permit the payment, taking, reserving, receiving, collecting or charging of any sums constituting interest under applicable laws which exceed the maximum amount permitted by such laws. If any such excess interest is called for, contracted for, charged, paid, taken, reserved, collected or received in connection with the Obligations or in any communication by Bank or any other Person to the Borrower or any other Person, or in the event all or part of the principal of the Obligations or interest thereon shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, collected, reserved, or received on the amount of principal actually outstanding from time to time under this Agreement shall exceed the maximum amount of interest permitted by applicable usury laws, if any, then in any such event it is agreed as follows: (a) the provisions of this paragraph shall govern and control, (b) neither the Borrower nor any other Person now or hereafter liable for the payment of the Obligations shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws, if any, (c) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance hereof or, if the Obligations have been or would be paid in full by such credit, refunded to the Borrower, and (d) the provisions of this Agreement and the other documents or instruments executed in connection herewith, and any communication to the Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof. Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, collected, reserved, or received in connection herewith which are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Obligations, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved or received. The terms of this paragraph shall be deemed to be incorporated in every loan document and communication relating to the Obligations.

 

Section 2.09. In order to facilitate the requesting and making of advances hereunder and the delivery of certain certificates, Tru-Stone, Kinemetric and Starrett Bytewise do hereby appoint Starrett as their authorized agent to request, receive and distribute all Revolving Loans and the Term Loan made hereunder, to communicate with the Bank with respect to the Revolving Loans and the Term Loan, and to execute and furnish the Bank with all Margin, Covenant Compliance and Borrowing Base certificates, and Starrett hereby accepts such appointment.

 

Section 2.10. In addition to all other sums payable hereunder, the Borrower shall pay the Bank a fee equal to one-quarter of one (0.25%) percent of the difference between: (i) the Credit Limit, and (ii) the average amount of the principal balance of all Revolving Loans outstanding hereunder for each quarterly period this Agreement is in effect (the "Unused Fee"). Such Unused Fee shall be payable quarterly in arrears. On any date which an Unused Fee is due hereunder, the Bank may charge the Borrower's demand deposit account(s) with the amount thereof. The failure of the Bank to charge such account shall not relieve the Borrower of its obligations to pay the Unused Fee.

 

11

 

 

	
			3.

				
			BANK’S REPORTS.

			

 

After the end of each month, Bank will render to Borrower a statement of Borrower’s Revolving Loan account with Bank hereunder, showing all applicable credits and debits. Each statement shall be considered correct and to have been accepted by Borrower and shall be conclusively binding upon Borrower in respect of all charges, debits and credits of whatsoever nature contained therein under or pursuant to this Agreement, and the closing balance shown therein, unless Borrower notifies Bank in writing of any discrepancy within twenty (20) days from the mailing by Bank to Borrower of any such monthly statement.

 

	
			4.

				
			CAPITAL ADEQUACY.

			

 

If after the date hereof, Bank determines that (a) the adoption of any applicable law, rule, or regulation regarding capital requirements for banks or bank holding companies or the subsidiaries thereof, (b) any change in the interpretation or administration of any such law, rule or regulation by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or (c) compliance by Bank or its holding company with any request or directive of any such governmental authority, central bank or comparable agency regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Bank’s capital to a level below that which Bank could have achieved (taking into consideration Bank’s and its holding company’s policies with respect to capital adequacy immediately before such adoption, change, or compliance and assuming that Bank’s capital was fully utilized prior to such adoption, change, or compliance) but for such adoption, change, or compliance as a consequence of Bank’s commitment to make advances pursuant hereto by any amount deemed by Bank to be material:

 

	 	
			(a)

				
			Bank shall promptly, after Bank’s determination of such occurrence, give notice thereof to Borrower; and

			

 

	 	
			(b)

				
			Borrower shall pay to Bank as an additional fee from time to time, on demand, such amount as Bank certified to be the amount that will compensate Bank for such reduction.

			

 

A certificate of Bank claiming entitlement to compensation as set forth above will be conclusive in the absence of manifest error. Such certificate will set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to Bank and the method by which such amounts were determined. In determining such amount, Bank may use any reasonable averaging and attribution method.

 

 

	
			5.

				
			SECURITY INTEREST.

			

 

Borrower, for valuable consideration, receipt whereof is hereby acknowledged, hereby grants to Bank a continuing security interest in and to, and assigns to Bank, the following property of the Borrower, wherever located and whether now owned or hereafter acquired:

 

(a)     All Inventory, including all goods, merchandise, raw materials, goods and work in process, finished goods, and other tangible personal property now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in Borrower’s business;

 

12

 

 

(b)     All Accounts, contracts, contract rights, notes, bills, drafts, acceptances, General Intangibles (including without limitation registered and unregistered tradenames, copyrights, customer lists, goodwill, computer programs, computer records, computer software, computer data, trade secrets, trademarks, patents, ledger sheets, files, records, data processing records relating to any Accounts and all tax refunds of every kind and nature to which Borrower is now or hereafter may become entitled to, no matter how arising), Instruments, Documents, Chattel Paper (whether tangible or electronic), Deposit Accounts, Letter or Credit Rights (whether or not the Letter of Credit is evidenced by a writing), securities, Security Entitlements, Security Accounts, Investment Property, Supporting Obligations, choses in action, Commercial Tort Claims and all other debts, obligations and liabilities in whatever form, owing to Borrower from any Person, whether now existing or hereafter arising, now or hereafter received by or belonging or owing to Borrower, for goods sold by it or for services rendered by it, or however otherwise same may have been established or created, all guarantees and securities therefor, all right, title and interest of Borrower in the merchandise or services which gave rise thereto, including the rights of reclamation and stoppage in transit, all rights to replevy goods, and all rights of an unpaid seller of merchandise or services (all hereinafter called the “Receivables”);

 

(c)     All machinery, Equipment, Fixtures and other Goods whether now owned or hereafter acquired by the Borrower and wherever located, all replacements and substitutions therefor or accessions thereto and all proceeds thereof (all hereinafter, collectively, called the “Equipment”); and

 

(d)     All proceeds and products of all of the foregoing in any form, including, without limitation, all proceeds of credit, fire or other insurance, and also including, without limitation, rents and profits resulting from the temporary use of any of the foregoing (which, with Inventory, Receivables and Equipment are all hereinafter called “Collateral”).

 

(e)     [Reserved.]

 

(f)     Notwithstanding anything contained herein to the contrary, the Borrower shall furnish the Bank with Landlord's Consents and Waiver of Lien for each leased location of the Borrower and/or a Warehousemen's Letter for each location of the Borrower that any Inventory is stored hereunder if so requested by the Bank in its sole discretion. Such Landlord's Consents and Waiver of Lien and Warehousemen's Letters shall be delivered to the Bank in form and substance satisfactory to the Bank in its sole discretion within thirty (30) days of such request, or such additional time as may be reasonably necessary while Borrower uses commercially reasonable efforts to obtain such waiver or letter.

 

13

 

 

	
			6.

				
			OBLIGATIONS SECURED.

			

 

Section 6.     OBLIGATIONS SECURED. The security interest granted hereby is to secure payment and performance of all Revolving Loans and the Term Loan, debts, liabilities and obligations of Borrower to Bank hereunder and also any and all other debts, liabilities and obligations of Borrower to Bank of every kind and description, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, including without limitation those obligations under the Notes, i.e, that certain Revolving Note in the maximum principal amount of Twenty-Five Million ($25,000,000.00) Dollars from Borrower to Bank, and that certain Deferred Draw Term Note in the maximum principal amount of Ten Million ($10,000,000.00) Dollars from the Borrower to Bank, both being dated December 31, 2019, whether or not such obligations are related to the transactions described in this Agreement, by class, or kind, or whether or not contemplated by the parties at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, fees, charges, expenses and overdrafts, and also including, without limitation, all obligations and liabilities which Bank may incur or become liable for, on account of, or as a result of, any transactions between Bank and Borrower including any which may arise out of any Letter of Credit, acceptance or similar instrument or obligation issued for the account of Borrower and also including obligations arising out of any foreign exchange contracts, interest rate swap, cap, floor or hedging agreements and all obligations of Borrower to Bank arising out of or in connection with any Automated Clearing House ("ACH") agreements relating to the processing of ACH transactions, together with the fees, expenses, charges and other amounts owing or chargeable to Borrower under the ACH agreements (all hereinafter called "Obligations").

 

	
			7.

				
			BORROWER’S PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS POLICY.

			

 

Section 7.01. Borrower warrants that Borrower has no places of business other than that shown at the end of this Agreement, unless other places of business are listed on Schedule “A”, annexed hereto, in which event Borrower represents that it has additional places of business at those locations set forth on Schedule “A”.

 

Section 7.02. Borrower’s principal executive office and the office where Borrower keeps its records concerning its accounts, contract rights and other property, is that shown at the end of this Agreement. All Inventory presently owned by Borrower is stored at the locations (in excess of $50,000.00 per location) set forth on Schedule “A”.

 

Section 7.03. Borrower will promptly notify Bank in writing of any change in the location of any principal place of business or the location of any Inventory (in excess of $50,000.00) or the establishment of any new place of business or location of Inventory (in excess of $50,000.00) or office where its records are kept which would be shown in this Agreement if it were executed after such change.

 

Section 7.04. Borrower represents and warrants that it has described its returns policy in writing to Bank and that it does now, and will continue to, apply such policy consistently in the conduct of its business and agrees that it shall notify Bank in writing before changing its policy or the application thereof.

 

14

 

 

	
			8.

				
			BORROWER’S ADDITIONAL REPRESENTATIONS AND WARRANTIES.

			

 

Borrower represents and warrants that:

 

Section 8.01. Starrett is duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts as a corporation. Tru-Stone, Kinemetric and Starrett Bytewise are duly organized, validly existing and in good standing under the laws of the State of Delaware as a corporation. Each Borrower shall hereafter remain in good standing in that state, and is duly qualified and in good standing in every other state in which it is required to be qualified, and shall hereafter remain duly qualified and in good standing in every other state in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of the Borrower.

 

Section 8.02. Borrower’s exact legal name is as set forth in this Agreement and Borrower will not undertake or commit to undertake any act which will result in a change of Borrower’s legal name, without giving Bank at least thirty (30) days’ prior written notice of the same.

 

Section 8.03. The execution, delivery and performance of this Agreement, and any other document executed in connection herewith, are within the Borrower’s powers, have been duly authorized, are not in contravention of law or the terms of the Borrower’s Organizational Documents, or of any indenture, agreement or undertaking to which the Borrower is a party or by which it or any of its properties may be bound.

 

Section 8.04. All Organization Documents and all amendments thereto of Borrower have been duly filed and are in proper order. All ownership interest of Borrower outstanding was and is properly issued and all books and records of Borrower, including but not limited to its minute books, Organization Documents and books of account, are accurate and up to date and will be so maintained.

 

Section 8.05. The balance sheet of the Borrower as at June 28, 2008, and the related statements of income and retained earnings of the Borrower for the fiscal year then ended, and the accompanying footnotes, together with the opinion thereon, dated September 11, 2008, of the independent certified public accountants of the Borrower, and the interim balance sheet of the Borrower as at March 29, 2009, and the related statement of income and retained earnings for the nine (9) month period then ended, copies of which have been furnished to the Bank, are complete and correct and fairly present the financial condition of the Borrower as at such dates and the results of the operations of the Borrower for the periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end adjustments in the case of the interim financial statements), and since March 29, 2009, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrower. There are no liabilities of the Borrower, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since March 29, 2009. No information, exhibit, or report furnished by the Borrower to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading.

 

Section 8.06. Borrower owns all of the assets reflected in the most recent of Borrower’s financial statements provided to Bank, except assets sold or otherwise disposed of in the ordinary course of business since the date thereof, and such assets together with any assets acquired since such date, including without limitation the Collateral, are free and clear of any Lien, except (a) the security interests and other encumbrances (if any) listed on Schedule “B” annexed hereto, (b) those leases set forth on Schedule “C” annexed hereto, (c) those liens permitted pursuant to Section 13.05 of this Agreement, (d) liens and security interests in favor of Bank, or (e) Permitted Liens.

 

15

 

 

Section 8.07. Borrower has made or filed all tax returns, reports and declarations relating to any material tax liability required by any jurisdiction to which it is subject (any tax liability which may result in a lien on any Collateral being hereby deemed material); has paid all taxes shown or determined to be due thereon except those being contested in good faith and which Borrower has, prior to the date of such contest, identified in writing to Bank as being contested; and has made adequate provision for the payment of all taxes so contested, so that no lien will encumber any Collateral, and in respect of subsequent periods.

 

Section 8.08. Borrower (a) is not subject to any restrictions in its Organization Documents or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction which could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with its Organization Documents, all contractual requirements by which it or any of its properties may be bound and all applicable laws, rules and regulations (including without limitation those relating to environmental protection) other than laws, rules or regulations the validity or applicability of which it is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect its financial condition, business or prospects or the value of any Collateral.

 

Section 8.09. There is no action, suit, proceeding or investigation pending or, to Borrower’s knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on its financial condition, business or prospects or the value of any Collateral.

 

Section 8.10. Borrower is in compliance with ERISA; no Reportable Event has occurred and is continuing with respect to any Plan; and it has no unfunded vested liability under any Plan.

 

Section 8.11. Neither Borrower nor, to the knowledge of Borrower, any of its Owners or Affiliates, is in violation of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

 

Section 8.12. Neither Borrower nor, to the knowledge of Borrower, any of its Owners or Affiliates or other agent of Borrower acting or benefitting in any capacity in connection with the transactions contemplated hereunder, is any of the following: (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a Person with which Bank is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (e) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list.

 

16

 

 

Section 8.13. Neither Borrower nor, to the knowledge of Borrower, any agent of any of its Owners or Affiliates acting in any capacity in connection with the transactions contemplated hereunder (a) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 8.12 above, (b) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order, or (c) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

	
			9.

				
			SALES OF INVENTORY.

			

 

So long as Borrower is not in default hereunder, Borrower shall have the right, in the regular course of business, to process and sell Borrower’s Inventory. A sale in the ordinary course of business shall not include a transfer in total or partial satisfaction of a debt.

 

	
			10.

				
			FINANCING STATEMENTS.

			

 

Borrower hereby irrevocably authorizes Bank to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Borrower is an organization, the type of organization and any organization identification number issued to Borrower, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted Collateral or timber to be cut, a sufficient description of real property to which the Collateral relates.

 

	
			11.

				
			BORROWER’S REPORTS.

			

 

Section 11.01. By the last business day of each calendar month, with respect to the prior month then-ended, Borrower shall submit to Bank (i) an aging report in form satisfactory to Bank showing the amounts owing on all domestically-located Accounts; and (ii) an aging report in form satisfactory to Bank showing the amount of all domestic accounts payable, according to Borrower’s records as of the close of such month, together with such other information as Bank may require, all on a consolidating and consolidated basis. If Borrower’s monthly aging reports are prepared by an accounting service or other agent, Borrower hereby authorizes such service or agent to deliver such aging reports and any other related documents to Bank.

 

17

 

 

Section 11.02.  By the last business day of each calendar month, with respect to the prior month then-ended,, Borrower shall furnish to Bank a certificate describing all of Borrower’s domestically-located Inventory by value based on the lower of cost or market value, listing all Inventory by nature, quantity and location, together with such other information as Bank may require, all on a consolidating and consolidated basis.

 

Section 11.03.  Borrower shall deliver to Bank all documents, as frequently as indicated below, or at such other times as Bank may request, and all other documents and information requested by Bank:

 

	
			 

				
			 

			DOCUMENT

				
			 

			FREQUENCY DUE

			
	
			 

			(a)

				
			 

			A Borrowing Base Certificate, including cash receipts, credit memos, sales, debit memos, the unpaid loan balance, new borrowing requests and the adjusted loan balance

				
			 

			Monthly, by the last business day of each calendar month, with respect to the prior month then-ended

			
	
			 

			(b)

				
			 

			Notice of noncompliance with the provisions of this Agreement

			 

				
			 

			Immediately upon learning of such noncompliance, or if any representation or warranty contained herein is no longer true or accurate

			
	
			 

			(c)

				
			 

			Compliance Certificate in the form annexed hereto as Exhibit 3

			 

				
			 

			As soon as available and in any event within forty-five (45) days after the close of each quarterly period of Borrower’s fiscal year

			
	
			 

			(d)

				
			 

			Management prepared interim consolidated and consolidating financial statements including profit and loss, balance sheet and cash flow statements

			 

				
			 

			On or before the last business day of each following month commencing with the month of June 2020 to be received by July 31, 2020

			

 

Section 11.04. Borrower will furnish Bank as soon as available, and in any event within forty-five (45) days after the close of each quarterly period of its fiscal year, a balance sheet as of the end of such period, and a statement of income and retained earnings for the period commencing at the end of the previous fiscal year and ending with the end of such period, and a statement of cash flows of Starrett and its consolidated subsidiaries for the portion of the fiscal year ended with the last day of such period, including the Securities and Exchange Commission Form 10-Q, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, and all prepared in accordance with GAAP, certified by the chief financial officer of the Borrower (subject to year end adjustment), said financials shall be on a consolidating and consolidated basis.

 

18

 

 

Section 11.05. Borrower will furnish Bank, annually, as soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of Starrett and its consolidated subsidiaries, audited financial statements including a balance sheet as of the end of such fiscal year, and a statement of income and retained earnings for such fiscal year, and a statement of cash flows for such fiscal year, including the Securities and Exchange Commission Form 10-K, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, and all prepared in accordance with GAAP, all on a consolidating and consolidated basis and accompanied by an unqualified opinion prepared by independent public accountants selected by the Borrower and acceptable to Bank.

 

Section 11.06. Borrower will promptly, upon receipt thereof, deliver to Bank, copies of any reports submitted to the Borrower by Borrower’s independent public accountants in connection with the examination of the financial statements of Starrett and its consolidated subsidiaries made by such accountants (the so-called “Management Letter”).

 

Section 11.07. Borrower will furnish Bank as soon as possible, and in any event within sixty (60) days after close of each fiscal year, a management-prepared budget for the next twelve (12) months of Starrett and its consolidated subsidiaries in form and content satisfactory to the Bank on a consolidating and consolidated basis (the "Projections").

 

Section 11.08. In addition to the foregoing, the Borrower promptly shall provide Bank with such other and additional information concerning the Borrower, the Collateral, the operation of the Borrower’s business, and the Borrower’s financial condition, including financial reports and statements, as Bank may from time to time reasonably request from the Borrower. All financial information provided Bank by the Borrower shall be prepared in accordance with GAAP or generally accepted auditing principles (as applicable) applied consistently in the preparation thereof and with prior periods to fairly reflect the financial conditions of Starrett and its consolidated subsidiaries at the close of, and its results of operations for, the periods in question.

 

	
			12.

				
			GENERAL AGREEMENTS OF BORROWER.

			

 

Section 12.01. Borrower agrees to keep all the Collateral insured with coverage and in amounts not less than that usually carried by one engaged in a like business (including business interruption insurance) with loss payable to Bank and Borrower, as their interests may appear, hereby appointing Bank as attorney for Borrower in obtaining, adjusting, settling and canceling such insurance and endorsing any drafts. As further assurance for the payment and performance of the Obligations, Borrower hereby assigns to Bank all sums, including returns of unearned premiums, which may become payable under any policy of insurance on the Collateral and Borrower hereby directs each insurance company issuing any such policy to make payment of such sums directly to Bank.

 

Section 12.02. Bank or its agents have the right to inspect the Collateral and all records pertaining thereto at reasonable intervals to be determined by Bank and without hindrance or delay.

 

19

 

 

Section 12.03. Although, as above set forth, Bank has a continuing security interest in all of Borrower’s Collateral and in the proceeds thereof, Borrower will at all times maintain as the minimum security hereunder a Borrowing Base not less than the aggregate unpaid principal of all Revolving Loans made hereunder including the aggregate amount undrawn on all Letters of Credit issued hereunder and if Borrower fails to do so, Borrower will immediately make the necessary reduction in the unpaid principal amount of said Revolving Loans so that the sum of the Revolving Loans outstanding hereunder plus the amount undrawn on Letters of Credit outstanding hereunder does not in the aggregate exceed the Borrowing Base.

 

Section 12.04. Borrower will at all times keep accurate and complete records of Borrower’s Inventory, Accounts and other Collateral, and Bank, or any of its agents, shall have the right to call at Borrower’s place or places of business at intervals to be determined by Bank, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence which relate to Borrower’s Accounts, and other Collateral or other transactions, between the parties thereto and the general financial condition of Borrower and Bank may remove any of such records temporarily for the purpose of having copies made thereof. Borrower shall pay to Bank all reasonable audit fees, plus all travel and other expenses incurred in connection with any such audit.

 

Section 12.05. Borrower will maintain a standard and modern system of accounting which enables Borrower to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time may be requested by Bank.

 

Section 12.06. Starrett and its subsidiaries will maintain its corporate existence in good standing and comply with all laws and regulations of the United States or of any state or states thereof or of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business except where the failure to comply with which cannot reasonably be expected to materially adversely effect its financial condition, business or prospects or the value of any Collateral.

 

Section 12.07. Starrett and its subsidiaries will pay all real and personal property taxes, assessments and charges and all franchises, income, unemployment, old age benefits, withholding, sales and other taxes assessed against it, or payable by it at such times and in such manner as to prevent any penalty from accruing or any lien or charge from attaching to its property.

 

Section 12.08. Bank’s auditors may in the name of others communicate with account debtors in order to verify with them to Bank’s satisfaction the existence, amount and terms of any Accounts, and upon the occurrence of an Event of Default the Bank may in its own name communicate with account debtors in order to verify with them to Bank’s satisfaction the existence, amount and terms of any Accounts.

 

Section 12.09. This Agreement may but need not be supplemented by separate assignments of Accounts and if such assignments are given the rights and security interests given thereby shall be in addition to and not in limitation of the rights and security interests given by this Agreement.

 

20

 

 

Section 12.10. If any of Borrower’s Accounts arise out of contracts with the United States or any department, agency, or instrumentality thereof when Bank has perfected its security interest in the Collateral, Borrower will immediately notify Bank thereof in writing and execute any instruments and take any steps required by Bank in order that all monies due and to become due under such contracts shall be assigned to Bank and notice thereof given to the Government under the Federal Assignment of Claims Act.

 

Section 12.11. If any of Borrower’s Accounts should be evidenced by promissory notes, trade acceptances, or other instruments for the payment of money when Bank has perfected its security interest in the Collateral, Borrower will immediately deliver same to Bank, appropriately endorsed to Bank’s order and, regardless of the form of such endorsement, Borrower hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto.

 

Section 12.12. If any material goods are at any time in the possession of a bailee when Bank has perfected its security interest in the Collateral, Borrower shall promptly notify Bank thereof and, if requested by Bank, shall, promptly obtain an acknowledgment from the bailee, in form and substance satisfactory to Bank, that the bailee holds such Collateral for the benefit of Bank and shall act upon the instructions of Bank, without the further consent of Borrower.

 

Section 12.13. If Borrower is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Borrower, Borrower shall promptly notify Bank thereof and, at the request and option of Bank, Borrower shall, pursuant to an agreement in form and substance satisfactory to Bank, either (a) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Bank of the proceeds of any drawing under the letter of credit, or (b) arrange for Bank to become the transferee beneficiary of the letter of credit, with Bank agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be applied in the same manner as any other payment on an Account.

 

Section 12.14.  If Borrower shall at any time hold or acquire a commercial tort claim when Bank has perfected its security interest in the Collateral, Borrower shall immediately notify Bank in a writing signed by Borrower of the brief details thereof and grant to Bank in such writing a security interest therein, and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank.

 

Section 12.15. Borrower will promptly pay when due all taxes and assessments upon the Collateral or for its use or operation or upon this Agreement, or upon any note or notes evidencing the Obligations, including without limitation the Notes, and will, at the request of Bank, promptly furnish Bank the receipted bills therefor. At its option, Bank may at any time discharge taxes, liens or security interests or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Borrower agrees to reimburse Bank on demand for any payments made, or any expenses incurred by Bank pursuant to the foregoing authorization, and upon failure of the Borrower so to reimburse Bank, any such sums paid or advanced by Bank shall be deemed secured by the Collateral and constitute part of the Obligations.

 

Section 12.16. Borrower will immediately notify Bank upon receipt of notification of any potential or known release or threat of release of Hazardous Substance from any site operated by Starrett and its subsidiaries of the incurrence of any expense or loss in connection therewith or with the Borrower’s obtaining knowledge of any investigation, action or the incurrence of any expense or loss by any governmental authority in connection with the assessment, containment or removal of any Hazardous Substance for which expense or loss the Borrower may be liable.

 

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Section 12.17. Except for Bank’s gross negligence or willful misconduct, Borrower will indemnify and save Bank harmless from all loss, costs, damage, liability or expenses (including, without limitation, court costs and reasonable attorneys’ fees) that Bank may sustain or incur by reason of defending or protecting this security interest or the priority thereof or enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations and/or the Collateral. This indemnity shall survive the repayment of the Obligations and the termination of Bank’s agreement to make Revolving Loans available to Borrower and the termination of this Agreement.

 

Section 12.18. At the option of Bank, Borrower will furnish to Bank, from time to time, within five (5) days after the accrual in accordance with applicable law of Starrett and its subsidiaries’ obligation to make deposits for F.I.C.A. and withholding taxes and/or sales taxes, proof satisfactory to Bank that such deposits have been made as required.

 

Section 12.19. Should Borrower fail to make any of such deposits or furnish such proof then Bank may, in its sole and absolute discretion, (a) make any of such deposits or any part thereof, (b) pay such taxes, or any part thereof, or (c) set up such reserves as Bank, in its judgment, shall deem necessary to satisfy the liability for such taxes. Each amount so deposited or paid shall constitute an advance under the terms hereof, repayable on demand with interest, as provided herein, and secured by all Collateral and any other property at any time pledged by Borrower with Bank. Nothing herein shall be deemed to obligate Bank to make any such deposit or payment or set up such reserve and the making of one or more of such deposits or payments or the setting up of such reserve shall not constitute (a) an agreement on Bank’s part to take any further or similar action, or (b) a waiver of any default by Borrower under the terms hereof.

 

Section 12.20. All advances by Bank to Borrower under this Agreement and under any other agreement constitute one general revolving fluctuating loan, and all indebtedness of Borrower to Bank under this and under any other agreement constitute one general Obligation. Each advance to Borrower hereunder or otherwise shall be made upon the security of all of the Collateral held and to be held by Bank. It is distinctly understood and agreed that all of the rights of Bank contained in this Agreement shall likewise apply, insofar as applicable, to any modification of or supplement to this Agreement and to any other agreements between Bank and Borrower. The entire Obligation of Borrower to Bank shall become due and payable when payments become due and payable hereunder upon termination of this Agreement.

 

Section 12.21. Borrower will, at its expense, upon request of Bank promptly and duly execute and deliver such documents and assurances and take such actions as may be necessary or desirable or as Bank may request in order to correct any defect, error or omission which may at any time be discovered or to more effectively carry out the intent and purpose of this Agreement and to establish, perfect and protect Bank’s security interest, rights and remedies created or intended to be created hereunder, other than deposit accounts maintained with banks or other depositary institutions other than Bank. Without limiting the generality of the above, Borrower will, at all times when Bank has perfected its security interest in the Collateral, join with Bank in executing financing and continuation statements pursuant to the UCC or other notices appropriate under applicable Federal or state law in form satisfactory to Bank and filing the same in all public offices and jurisdictions wherever and whenever requested by Bank.

 

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Section 12.22. Borrower shall perform any and all further steps requested by Bank to perfect Bank’s security interest in Inventory,

 

Section 12.23. [Reserved.]

 

Section 12.24. Bank shall be Borrower’s main bank of deposit. For each other deposit account that Borrower at any time opens or maintains, Borrower shall, at Bank’s request and option in connection with a future amendment or modification to this Agreement, pursuant to an agreement in form and substance satisfactory to Bank, either (a) cause the depositary bank to agree to comply at any time with instructions from Bank to such depositary bank directing the disposition of funds from time to time credited to such deposit account, without further consent of Borrower, or (b) arrange for Bank to become the customer of the depositary bank with respect to the deposit account, with Borrower being permitted, only with the consent of Bank, to exercise rights to withdraw funds from such deposit account. Bank agrees with Borrower that Bank shall not give any such instructions or withhold any withdrawal rights from Borrower, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal not otherwise permitted by this Agreement would occur. The provisions of this paragraph shall not apply to (a) any deposit account for which Borrower, the depositary bank and Bank have entered into a cash collateral agreement specially negotiated among Borrower, the depositary bank and Bank for the specific purpose set forth therein, (b) deposit accounts specially and exclusively used for sales taxes and other trust fund taxes, payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s salaried employees.

 

Section 12.25.  Borrower hereby grants to Bank for a term to commence on the date of this Agreement and continuing thereafter until all debts and Obligations of any kind or character owing from Borrower to Bank are fully paid and discharged, the right to use all premises or places of business which Borrower presently has or may hereafter have and where any of the Collateral may be located, at a total rental for the entire period of $1.00. Bank agrees not to exercise the rights granted in this paragraph unless and until Bank determines to exercise its rights against the Collateral. In connection with the Bank’s exercise of the Bank’s rights after the occurrence of an Event of Default, the Bank may enter upon, occupy and use any premises owned or occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Bank. The Bank shall not be required to remove any of the Collateral from any such premises upon the Bank’s taking possession thereof, and may render any Collateral unusable to the Borrower. In no event shall the Bank be liable to the Borrower beyond the rental specified above for use or occupancy by the Bank of any premises pursuant to this Agreement.

 

Section 12.26. Borrower hereby grants to Bank for a term to commence on the date of this Agreement and continuing thereafter until all debts and Obligations of any kind or character owed to Bank are fully paid and discharged, a non−exclusive irrevocable royalty−free license in connection with Bank’s exercise of its rights hereunder, to use, apply or affix any trademark, trade name logo or the like and to use any patents, in which the Borrower now or hereafter has rights, which license may be used by Bank upon and after the occurrence of any one or more of the Events of Default, provided, however, that such use by Bank shall be suspended if such Events of Default are cured. This license shall be in addition to, and not in lieu of, the inclusion of all of Borrower’s trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and licenses in the Collateral; in addition to the right to use said Collateral as provided in this paragraph, Bank shall have full right to exercise any and all of its other rights regarding Collateral with respect to such trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and licenses.

 

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Section 12.27. Any and all deposits (whether demand or time deposits) or other sums at any time credited by or due from Bank to Borrower shall at all times constitute additional security for the Obligations, and may be set−off against any Obligations at any time following the occurrence of an Event of Default or an event which with notice or the lapse of time, or both, would constitute an Event of Default whether or not they are then due or other security held by Bank is considered by Bank to be adequate. Any and all instruments, documents, policies and certificates of insurance, securities, goods, accounts, choses in action, general intangibles, chattel papers, cash, property and the proceeds thereof (whether or not the same are Collateral or proceeds thereof hereunder) owned by Borrower or in which Borrower has an interest, which now or hereafter are at any time in possession or control of Bank or in transit by mail or carrier to or from Bank or in the possession of any third party acting in Bank’s behalf, without regard to whether Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether Bank had conditionally released the same, shall constitute additional security for the Obligations and may be applied at any time following the occurrence of an Event of Default or an event which with notice or the lapse of time, or both, would constitute an Event of Default, to any Obligations which are then owing, whether due or not due. Bank shall be entitled to presume, in the absence of clear and specific written notice to the contrary hereinafter provided by Borrower to Bank, that any and all deposits maintained by Borrower with Bank are general accounts as to which no Person other than Borrower has any legal or equitable interest whatsoever.

 

Section 12.28. Borrower shall pay to Bank on demand any and all reasonable counsel fees and other expenses incurred by Bank in connection with the preparation, interpretation, enforcement, administration or amendment of this Agreement, or of any documents relating thereto, and any and all expenses, including, but not limited to, a collection charge on all Accounts collected, all attorneys’ fees and expenses, and all other expenses of like or unlike nature which may be expended by Bank to obtain or enforce payment of any Account either as against the account debtor, Borrower, or any guarantor or surety of Borrower or in the prosecution or defense of any action or concerning any matter growing out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Bank’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any counsel fees or expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses incurred or paid by Bank in connection with the administration, supervision, protection or realization on any security held by Bank for the debt secured hereby, whether such security was granted by Borrower or by any other Person primarily or secondarily liable (with or without recourse) with respect to such debt, and all costs and expenses incurred by Bank in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Bank in connection with the debt secured hereby, all of which amounts shall be considered advances to protect Bank’s security, and shall be secured hereby. At its option, and without limiting any other rights or remedies, Bank may at any time pay or discharge any taxes, liens, security interests or other encumbrances at any time levied against or placed on any of the Collateral, and may procure and pay any premiums on any insurance required to be carried by Borrower, and provide for the maintenance and preservation of any of the Collateral, and otherwise take any action reasonably deemed necessary to Bank to protect its security, and all amounts expended by Bank in connection with any of the foregoing matters, including reasonable attorneys’ fees, shall be considered obligations of Borrower and shall be secured hereby.

 

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Section 12.29. Borrower does hereby make, constitute and appoint any officer or agent of Bank as Borrower’s true and lawful attorney−in−fact, with power to endorse the name of Borrower or any of Borrower’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under any policy of insurance on the Collateral) or Collateral that may come into possession of Bank in full or part payment of any amounts owing to Bank; to sign and endorse the name of Borrower or any of Borrower’s officers or agents upon any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts, and any instrument or documents relating thereto or to Borrower’s rights therein; to give written notice to such office and officials of the United States Post Office to effect such change or changes of address so that all mail addressed to Borrower may be delivered directly to Bank; granting upon Borrower’s said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as Borrower might or could do, and hereby ratifying all that said attorney shall lawfully do or cause to be done by virtue hereof. Neither Bank nor the attorney shall be liable for any acts or omissions nor for any error of judgment or mistake, except for their gross negligence or willful misconduct. This power of attorney shall be irrevocable for the term of this Agreement and all transactions hereunder and thereafter as long as Borrower may be indebted to Bank.

 

Section 12.30. Borrower covenants and agrees that during the term of this Agreement, neither Borrower nor any of its Owners or Affiliates shall, directly or indirectly, by operation of law or otherwise, knowingly cause or permit (a) any of the funds or properties of Borrower or any of its Owners or Affiliates that are used to repay the Revolving Loans to constitute property of, or be beneficially owned directly or indirectly by, any Person subject to sanctions or trade restrictions under United States law (“Embargoed Person” or “Embargoed Persons”) that is identified on (i) the “List of Specially Designated Nationals and Blocked Persons” (the “SDN List”) maintained by OFAC and/or on any other similar list (“Other List”) maintained by OFAC pursuant to any authorizing statutes including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment in Borrower (whether directly or indirectly) is prohibited by law, or the Revolving Loans made by Bank would be in violation of law, or (ii) the Executive Order, any related enabling legislation or any other similar Executive Orders, or (b) any Embargoed Person to have any direct or indirect interest, or any nature whatsoever in Borrower or any of its Owners or Affiliates, with the result that the investment in Borrower (whether directly or indirectly) is prohibited by law or any of the transactions contemplated hereunder is in violation of law.

 

Section 12.31. Borrower will maintain its primary deposit account at the Bank which will be swept on a daily basis by the Bank and applied to the Borrower’s Obligations to the Bank with respect to principal and interest on the Revolving Loans. Bank will credit (conditional upon final collection) all such payments against the principal or interest of any Revolving Loans secured hereby; provided, however, for the purpose of computing interest, any items requiring clearance or payment shall not be considered to have been credited against any Revolving Loans secured hereby until two (2) business days after receipt by Bank of any such items. The order and method of such application shall be in the sole discretion of Bank and any portion of such funds which Bank elects not to so apply shall be paid over from time to time by Bank to Borrower.

 

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			13.

				
			BORROWER’S NEGATIVE COVENANTS. Borrower will not at any time:

			

 

Section 13.01. Permit, for the twelve-month period ending on the last day of any fiscal quarter of the Borrower commencing with the twelve month period ending September 30, 2020, its Fixed Charge Coverage Ratio to be less than 1.15 to 1, such covenant to be measured on a consolidated basis;

 

Section 13.02. Permit, for Starrett’s fiscal year ending June 30, 2020, the aggregate amount of funded and unfunded Capital Expenditures for Starrett and its consolidated subsidiaries to exceed $10,125,000;

 

Section 13.03. [Reserved];

 

Section 13.04. [Reserved];

 

Section 13.05. Issue evidence of Debt or suffer to exist Debt in addition to the Obligations, except, subject to documentation on commercially reasonable terms (a) Debt for money borrowed from the Brazilian Banks which in the aggregate shall not exceed the sum of Fifteen Million ($15,000,000) Dollars, or (b) Debt or liabilities of Borrower other than for money borrowed, incurred or arising in the ordinary course of business;

 

Section 13.06. Use such proceeds of the Revolving Loans made hereunder in excess of Two Million ($2,000,000) Dollars in the aggregate for acquisitions;

 

Section 13.07. Sell, assign, exchange or otherwise dispose of any of the Collateral, other than Inventory consisting of (a) scrap, waste, defective goods and the like; (b) obsolete goods; (c) finished goods sold in the ordinary course of business or any interest therein to any individual, partnership, trust or other corporation; and (d) Equipment which is no longer required or deemed necessary for the conduct of Borrower’s business, so long as Borrower receives therefor a sum substantially equal to such Equipment’s fair value;

 

Section 13.08. Create, permit to be created or suffer to exist any Lien upon any of the Collateral or any other property of Borrower, now owned or hereafter acquired, except: (a) landlords’, carriers’, warehousemen’s, mechanics’ and other similar liens arising by operation of law in the ordinary course of Borrower’s business; (b) arising out of pledge or deposits under worker’s compensation, unemployment insurance, old age pension, social security, retirement benefits or other similar legislation; (c) purchase money Liens arising in the ordinary course of business (so long as the Debt 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); (d) Liens for unpaid taxes that are either (i) not yet due and payable, or (ii) the subject of Permitted Protests; (e) Liens which are the subject of Permitted Protests; (f) those Liens and encumbrances set forth on Schedule “B” or Schedule “C” annexed hereto; and (g) in favor of Bank (hereinafter, collectively, “Permitted Liens”);

 

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Section 13.09. Pay or make any distributions on account of any class of ownership interest in Borrower in cash or in property (other than additional ownership interests) if at the time of any proposed distribution there exists an Event of Default under Borrower's Fixed Charge Coverage Ratio (as defined and calculated in accordance with Section 13.01 hereof) or if the making of such distribution would cause an Event of Default under the Borrower's Fixed Charge Coverage Ratio, or redeem, purchase or otherwise acquire, directly or indirectly, any of the ownership interests in Borrower;

 

Section 13.10. Make any loans or advances to any Person, including, without limitation, Borrower’s directors, officers and employees, in an aggregate amount exceeding $500,000.00 at any time, except advances to officers or employees with respect to expenses incurred by them in the ordinary course of their duties which are properly reimbursable by Borrower and intercompany loans between each of the entities constituting the Borrower;

 

Section 13.11. 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 indebtedness (except as set forth on Exhibit 13.11 and guarantees by endorsement of instruments for deposit or collection in the ordinary course of business and guarantees in favor of Bank) of any individual, partnership, trust or other corporation;

 

Section 13.12. (a) Use any Revolving Loan proceeds to purchase or carry any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or (b) invest in or purchase any stock or securities of any individual, partnership, trust or other corporation except (x) readily marketable direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof or (y) time deposits with or certificates of deposit issued by the Bank;

 

Section 13.13. Enter into any lease or other transaction with any Owner, officer or Affiliate on terms any less favorable than those which might be obtained at the time from Persons who are not such a Owner, officer or Affiliate;

 

Section 13.14. Sell, transfer or otherwise dispose of any stock of any subsidiary of Borrower; or

 

Section 13.15. (a) Merge or consolidate with or into any Person, (b) enter into any joint venture or partnership with any Person; (c) convey, lease or sell all or any material portion of its property or assets or business to any other Person, except for the sale of Inventory in the ordinary course of its business; or (d) convey, lease or sell any of its assets to any Person for less than the fair market value thereof.

 

Section 13.16. Permit the sum of Borrower's: (i) consolidated cash plus (ii) Liquid Investments plus (iii) Borrower's availability under the Borrowing Base for the Revolving Loan to be less than Seven Million Five Hundred Thousand ($7,500,000.00) Dollars at any time, such covenant to be measured on a consolidated basis.

 

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			14.

				
			DEFAULT.

			

 

Section 14.01. Upon the occurrence of any one or more of the following events (herein, “Events of Default”), Bank may decline to make any or all further Revolving Loans hereunder or under any other agreements with Borrower, any and all Obligations of the Borrower to Bank shall become immediately due and payable, at the option of Bank and without notice or demand. The occurrence of any such Event of Default shall also constitute, without notice or demand, a default under all other agreements between Bank and the Borrower and instruments and papers given Bank by the Borrower, whether such agreements, instruments, or papers now exist or hereafter arise, namely:

 

(a)     The failure by the Borrower to pay when due any principal or interest due pursuant to the Notes or this Agreement.

 

(b)     The failure by the Borrower to pay within five (5) business days after

due any other Obligations, including without limitation any fees, costs, and expenses due pursuant to the Notes or this Agreement

 

(c)     Default by the Borrower in the observance or performance of any of the covenants or agreements of the Borrower contained in Sections 11 (excepting Sections 11.01, 11.02 and 11.03(d)), 13 and 15.08 of this Agreement.

 

(d)     The failure by the Borrower to promptly, punctually and faithfully perform, or observe any term, covenant or agreement on its part to be performed or observed pursuant to any of the provisions of this Agreement, other than those described in Sections 2, 11, 12.24, 13 or 15.08 as outlined above, or in any other agreement with Bank which is not remedied within (i) with respect to any covenant or agreement described in Sections 11.01, 11.02 and 11.03(d), and any covenant or agreement described in the Modification Agreement, five (5) business days or (ii) with respect to any other term, covenants or agreement, thirty (30) days after the earlier of (i) notice thereof by Bank to Borrower, or (ii) the date Borrower was required to give notice to Bank pursuant to Section 11.01(b).

 

(e)     The determination by Bank that any representation or warranty heretofore, now or hereafter made by the Borrower to Bank, in any documents, instrument, agreement, or paper was not true or accurate when given in any material respect.

 

(f)     The occurrence of any event such that any material indebtedness of the Borrower from any lender other than Bank has been accelerated.

 

(g)     The occurrence of any event which would cause a lien creditor, as that term is defined in Section 9−301 of the Code, to take priority over advances made by Bank at such time as the Bank has a perfected security interest in the Collateral.

 

(h)     A filing against or relating to the Borrower of (i) a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or (ii) a state tax lien in favor of any state of the United States of America or any political subdivision of any such state.

 

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(i)     Any act by, against, or relating to the Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other Person, pursuant to court action or otherwise, over all, or any part of the Borrower’s property.

 

(j)     The granting of any trust mortgage or execution of an assignment for the benefit of the creditors of the Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for the Borrower; the failure by the Borrower to generally pay the debts of the Borrower as they mature; adjudication of bankruptcy or insolvency relative to the Borrower; the entry of an order for relief or similar order with respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any other federal Bankruptcy law; the filing of any complaint, application, or petition by or against the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the calling or sufferance of a meeting of creditors of the Borrower; the meeting by the Borrower of a formal or informal creditor’s committee; the offering by or entering into by the Borrower of any composition, extension or any other arrangement seeking relief or extension for the debts of the Borrower, or the initiation of any other judicial or non−judicial proceeding or agreement by, against or including the Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors.

 

(k)     The entry of any uninsured judgment(s) against Borrower in excess of $1,000,000.00, which judgment(s) is not satisfied or appealed from (with execution or similar process stayed) within fifteen (15) days of its entry.

 

(l)     The entry of any court order which enjoins, restrains or in any way prevents the Borrower from conducting all or any part of its business affairs in the ordinary course of business.

 

(m)     The service of any process upon Bank seeking to attach by trustee process any funds of the Borrower on deposit with Bank.

 

(n)     The occurrence of any material uninsured loss, theft, damage or destruction to any material asset(s) of the Borrower.

 

(o)     Any act by or against, or relating to the Borrower or its assets pursuant to which any creditor of the Borrower seeks to reclaim or repossess or reclaims or repossesses all or a portion of the Borrower’s assets.

 

(p)     The termination of existence, dissolution, or liquidation of the Borrower, or the ceasing to carry on actively any substantial part of Borrower’s current business.

 

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(q)     This Agreement shall, at any time during which Bank has perfected its security interest in the Collateral and for any reason, cease (i) to create a valid and perfected first priority security interest in and to the property purported to be subject to this Agreement (other than deposit accounts maintained with banks or other depositary institutions other than Bank or Collateral perfected through filings in real estate filing offices); or (ii) to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by the Borrower or any guarantor of the Borrower denies it has any further liability or obligation hereunder.

 

(r)     Any of the following events occur or exist with respect to the Borrower or any ERISA affiliate: (i) any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code) involving any Plan; (ii) any “reportable event” (as defined in Section 4043 of ERISA and the regulations issued under such Section) shall occur with respect to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (iv) any event or circumstance exists which might constitute grounds entitling the Pension Benefit Guaranty Corporation (PBGC) to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan, or the institution by the PBGC of any such proceedings; (v) or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and in each case above, such event or condition, together with all other events or conditions, if any, could in the opinion of Bank subject the Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.

 

(s).   The occurrence of an event of default under the Term Loan.

 

Section 14.02. Upon the filing of any complaint, application, or petition by or against the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code, Bank’s obligation hereunder shall be canceled immediately, automatically, and without notice, and all Obligations of the Borrower then outstanding shall become immediately due and payable without presentation, demand, or notice of any kind to the Borrower.

 

	 SECTION 15.	
			RIGHTS AND REMEDIES UPON DEFAULT; SET-OFF; EXPENSES; POWER OF ATTORNEY.

			

 

Upon the occurrence of an Event of Default, the Bank shall have the following rights and remedies, certain of which are predicated upon the Bank having perfected its security interest in the Collateral.

 

Section 15.01. Bank may declare any obligation Bank may have hereunder to be cancelled, declare all Obligations of Borrower to be due and payable and proceed to enforce payment of the Obligations and to exercise any and all of the rights and remedies afforded to Bank by the UCC or under the terms of this Agreement or otherwise. In addition, upon the occurrence of an Event of Default, if Bank proceeds to enforce payment of the Obligations, Borrower shall be obligated to deliver to Bank cash collateral in an amount equal to the aggregate amounts then undrawn on all outstanding Letters of Credit or acceptances issued or guaranteed by Bank for the account of Borrower, and Bank may proceed to enforce payment of the same and to exercise all rights and remedies afforded to Bank by the UCC or under the terms of this Agreement or otherwise. Upon the occurrence of, and during the continuance of, an Event of Default, the Borrower, as additional compensation to the Bank for its increased credit risk, promises to pay interest on all Obligations (including, without limitation, principal, whether or not past due, past due interest and any other amounts past due under this Agreement) at a per annum rate of four (4%) percent greater than the rate of interest then specified in Section 2.03 of this Agreement.

 

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Section 15.02. In connection with the Bank’s exercise of the Bank’s rights under this Agreement, the Bank may enter upon, occupy and use any premises owned or occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Bank. The Bank shall not be required to remove any of the Collateral from any such premises upon the Bank’s taking possession thereof, and may render any Collateral unusable to the Borrower. In no event shall the Bank be liable to the Borrower for use or occupancy by the Bank of any premises pursuant to this Agreement.

 

Section 15.03. Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Bank deems advisable, having due regard to compliance with any statute or regulation which might affect, limit or apply to the Bank’s disposition of the Collateral. The Bank may conduct any such sale or other disposition of the Collateral upon the Borrower’s premises. Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Bank shall provide the Borrower with such notice as may be practicable under the circumstances), the Bank shall give the Borrower at least the greater of the minimum notice required by law or seven (7) days prior written notice of the date, time and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. The Bank may purchase the Collateral, or any portion of it at any such sale.

 

Section 15.04. If the Bank sells any of the Collateral on credit, the Borrower will be credited only with payments actually made by the purchaser of such Collateral and received by the Bank. If the purchaser fails to pay for the Collateral, the Bank may re-sell the Collateral and the Borrower shall be credited with the proceeds of the sale.

 

Section 15.05. The Bank may require the Borrower to assemble the Collateral and make it available to the Bank at the Borrower’s sole risk and expense at a place or places which are reasonably convenient to both the Bank and the Borrower.

 

Section 15.06. Borrower shall deliver to Bank, daily, a schedule in form and content satisfactory to Bank describing the invoices issued by Borrower since the last schedule submitted to Bank. The schedules to be provided under this subsection are solely for the convenience of Bank in administering this Agreement and maintaining records of the Collateral. Borrower’s failure to provide Bank with any such schedule shall not affect the security interest of Bank in such Accounts.

 

Section 15.07. [Reserved].

 

Section 15.08. [Reserved].

 

31

 

 

Section 15.09. Bank may at any time notify account debtors that Collateral has been assigned to Bank and that payments shall be made directly to or as directed by Bank. Upon request of Bank at any time, Borrower will so notify such account debtors and will indicate on all billings to such account debtors that their Accounts must be paid directly to or as directed by Bank. Bank shall have full power to collect, compromise, endorse, sell or otherwise deal with the Collateral or proceeds thereof in its own name or in the name of Borrower.

 

	
			16.

				
			WAIVER OF JURY TRIAL.

			

 

BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. Borrower hereby certifies that neither Bank nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Bank would not, in the event of any such suit, action or proceeding, seek to enforce this waiver of right to trial by jury. Borrower acknowledges that it has read the provisions of this Agreement and in particular, this section; has consulted legal counsel; understands the right it is granting in this Agreement and is waiving in this section in particular; and makes the above waiver knowingly, voluntarily and intentionally.

 

	
			17.

				
			CONSENT TO JURISDICTION.

			

 

Borrower and Bank agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in any court of the Commonwealth of Massachusetts sitting in the county of Suffolk, or in the District Court of the United States for the District of Massachusetts, and Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and confer personal jurisdiction if served by registered or certified mail to Borrower, or as otherwise provided by the laws of the Commonwealth of Massachusetts or the United States of America.

 

	
			18.

				
			TERMINATION.

			

 

(a)     Unless renewed in writing, this Agreement shall terminate on April 30, 2022 (the "Termination Date"), and all Obligations with the sole exception of the Term Loan shall be due and payable in full without presentation, demand, or further notice of any kind, whether or not all or any part of such Obligations are otherwise due and payable pursuant to the agreement or instrument evidencing same. Bank may terminate this Agreement immediately and without notice upon the occurrence of an Event of Default. Notwithstanding the foregoing or anything in this Agreement or elsewhere to the contrary, the security interest, Bank’s rights and remedies hereunder and all of the Borrower’s obligations and liabilities hereunder shall survive any termination of this Agreement and shall remain in full force and effect until all of the Obligations outstanding, or contracted or committed for (whether or not outstanding), including without limitation those obligations owing under the Term Loan, shall be finally and irrevocably paid in full. No Collateral shall be released or financing statement terminated (if applicable) until such final and irrevocable payment in full of the Obligations including, without limitation, the Term Loan.

 

32

 

 

(b) In the event that Bank continues to make Revolving Loans hereunder after the Termination Date without a written extension of the Termination Date or after the occurrence of an Event of Default, all such Revolving Loans: (i) shall be made in the sole and absolute discretion of Bank; and (ii) shall, together with all other Obligations, be payable thereafter ON DEMAND.

 

	
			19. 

				
			JOINT AND SEVERAL LIABILITY.

			

 

Section 19.01. Each Borrower is accepting joint and several liability under this Agreement in consideration of the financial accommodations to be provided by Bank under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of each other Borrower to accept joint and several liability for the Obligations of each Borrower to Bank.

 

Section 19.02. Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with each other Borrower, with respect to the payment and performance of all of the Obligations of each Borrower to Bank under this Agreement (including, without limitation, any Obligations arising under this section), it being the intention of the parties hereto that all the Obligations of each Borrower to Bank under this Agreement shall be the joint and several Obligations of each of the Borrowers without preferences or distinction among them.

 

Section 19.03. If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations of each Borrower to Bank under this Agreement, as and when due or to perform any of such Obligations in accordance with the terms thereof, then in each such event the other Borrower, under this Agreement will make such payment with respect to, or perform, such Obligation.

 

Section 19.04. The Obligations of each Borrower under the provisions of this section constitute full recourse Obligations of each Borrower enforceable against each such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstance whatsoever.

 

Section 19.05. Each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Revolving Loans made under this Agreement, notice of any action at any time taken or omitted by Bank under or in respect of any of the Obligations of each Borrower to Bank under this Agreement, and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations of each Borrower to Bank under this Agreement, the acceptance of any payment of any of such Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Bank at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Bank in respect of any of the Obligations of each Borrower to Bank under this Agreement, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations of each Borrower to Bank or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on Bank's part with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this section, afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this section, it being the intention of each Borrower that, so long as any of the Obligations under this Agreement remain unsatisfied, the Obligations of such Borrower under this section shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this section shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any other Borrower or Bank. The joint and several liability of each Borrower under this Agreement shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or Bank.

 

33

 

 

Section 19.06. The provisions of this section are made for the benefit of Bank and Bank's successors and assigns, and may be enforced by Bank in good faith from time to time against any or all of the Borrowers as often as occasion therefor may arise and without requirement on Bank's part first to marshal any of its claims or to exercise any of its rights against any Borrower or to exhaust any remedies available to Bank against any other Borrower or to resort to any other source or means of obtaining payment of any of the Obligations under this Agreement or to elect any other remedy. The provisions of this section shall remain in effect until all of the Obligations of each Borrower to Bank under this Agreement shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of such Obligations of each Borrower to Bank, is rescinded or must otherwise be restored or returned by Bank upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this section will forthwith be reinstated in effect, as though such payment had not been made.

 

Section 19.07. Each Borrower agrees that it shall not exercise, and hereby expressly waives until full and final payment of all Obligations to Bank: (a) any right to subrogation or indemnification, and any other right to payment from or reimbursement by any other Borrower, in connection with or as a consequence of any payment made by any Borrower to Bank, (b) any right to enforce any right or remedy which Bank may have or may hereafter have against any other Borrower, and (c) any benefit of, and any right to participate in (i) any collateral now or hereafter held by Bank, or (ii) any payment to Bank by, or collection by Bank from any other Borrower. The provisions of this paragraph are made for the express benefit of each Borrower as well as Bank, and may be enforced independently by each Borrower or any successor in interest to each Borrower.

 

	
			20.

				
			MISCELLANEOUS.

			

 

Section 20.01. No delay or omission on the part of Bank in exercising any rights shall operate as a waiver of such right or any other right. Waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All Bank’s rights and remedies, whether evidenced hereby or by any other agreement, instrument or paper, shall be cumulative and may be exercised singularly or concurrently.

 

34

 

 

Section 20.02. Bank is authorized to make Revolving Loans under the terms of this Agreement upon the request, either written or oral, in the name of Borrower or any authorized person whose name appears at the end of this Agreement or of any of the following named person, or persons, from time to time, holding the following offices of Borrower, President, Treasurer and such other officers and authorized signatories as may from time to time be set forth in separate banking and borrowing resolutions.

 

Section 20.03. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Bank’s prior written consent and any prohibited assignment shall be absolutely void. No consent to an assignment by Bank shall release Borrower from its Obligations. Bank may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower is required in connection with any such assignment. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Bank’s rights and benefits hereunder. In connection with any assignment or participation, Bank may disclose all documents and information which Bank now or hereafter may have relating to Borrower or Borrower’s business. To the extent that Bank assigns its rights and obligations hereunder to another party, Bank thereafter shall be released from such assigned obligations to Borrower and such assignment shall effect a novation between Borrower and such other party.

 

Section 20.04. Borrower agrees that any and all Revolving Loans made by Bank to Borrower or for its account under this Agreement shall be conclusively deemed to have been authorized by Borrower and to have been made pursuant to duly authorized requests therefor on its behalf.

 

Section 20.05. Paragraph and section headings used in this Agreement are for convenience only, and shall not effect the construction of this Agreement. If one or more provisions of this Agreement (or the application thereof) shall be invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not, invalidate or render illegal or unenforceable such provision (or its application) in any other jurisdiction or any other provision of this Agreement (or its application). This Agreement is the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto.

 

Section 20.06. Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other loan document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested ), overnight courier, or facsimile or email to Borrower or to Bank, as the case may be, at its address set forth below:

 

35

 

 

	If to Bank:	TD Bank, N.A.
	 	One Portland Square
	 	Portland, ME 01608
	 	Attn:     Katherine W. Brunelle, Vice President
	 	Telephone:     207.828.7012
	 	Telecopier:     207.761.8660
	 	Email: katherine.brunelle@td.com

     

	with a copy to:	Ruberto, Israel & Weiner, P.C.
	 	100 North Washington Street
	 	Boston, MA 02114
	 	Attn:     Brian T. Garrity, Esq.
	 	Telephone:     (617) 742-4200
	 	Telecopier:     (617) 742-2355
	 	Email: btg@riw.com

 

	If to Borrower:	The L. S. Starrett Company
	 	121 Crescent Street
	 	Athol, MA 01331
	 	Attn:     Douglas A. Starrett, President
	 	Telephone:_____________
	 	Telecopier:_____________
	 	Email: dstarrett@starrett.com

     

	with a copy to:	Ropes & Gray, LLP
	 	One International Place
	 	Boston, MA 02110
	 	Attn:     James M. Wilton, Esq.
	 	Telephone:     (617) 951-7000
	 	Telecopier:     (617) 951-7050
	 	James.wilton@ropesgray.com 

 

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. All notices or demand sent in accordance with this section shall be deemed received on the earlier of the date of actual receipt or three (3) days after the deposit thereof in the mail.

 

Section 20.07. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Bank or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

 

Section 20.08. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

Section 20.09. This Agreement, together with the other documents and instruments executed concurrently herewith represent the entire and final understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by evidence of any prior, contemporaneous or subsequent other agreement, oral or written, before the date hereof.

 

36

 

 

Section 20.10. This Agreement can only be amended by a writing signed by both Bank and Borrower.

 

Section 20.11. The laws of Massachusetts shall govern the construction of this Agreement and the rights and duties of the parties hereto. This Agreement shall take effect as a sealed instrument.

 

This Amended and Restated Loan and Security Agreement (All Assets) amends and restates that certain Loan and Security Agreement (All Assets) dated June 29, 2009 by and among The L. S. Starrett Company, Evans Rule Company, Inc., Level Industries, Inc., Tru-Stone Technologies, Inc., Starrett Kinemetric Engineering, Inc., and the Bank in the first instance, said Agreement previously amended by a First Amendment of Loan and Security Agreement (All Assets) dated December 18, 2009, a Second Amendment of Loan and Security Agreement (All Assets) dated November 9, 2010, a Third Amendment of Loan and Security Agreement (All Assets) dated November 22, 2011 by which Starrett Bytewise Development, Inc. was added as a Borrower, a Fourth Amendment of Loan and Security Agreement dated April 25, 2012, a Fifth Amendment of Loan and Security Agreement (All Assets) dated September 7, 2012, a Sixth Amendment of Loan and Security Agreement (All Assets) dated May 9, 2013, a Seventh Amendment of Loan and Security Agreement (All Assets) dated December 23, 2013, an Eighth Amendment of Loan and Security Agreement (All Assets) dated January 26, 2015 by which Evans Rule Company, Inc., and Level Industries, Inc. were both deleted as Borrower, a Ninth Amendment dated July 30, 2018, and a Tenth Amendment dated December 31, 2019.

 

<The remainder of this page is intentionally left blank.>

 

37

 

 

[SIGNATURE PAGE OF THE LOAN AND SECURITY AGREEMENT (ALL ASSETS)]

 

	 	 	BANK:
	 	 	 	 
	Witnessed by:	 	TD BANK, N.A.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Dana P. Wedge, Senior Vice President
	 	 	 	 
	 	 	 	 
	 	 	BORROWER:
	 	 	 	 
	WITNESS	 	THE L. S. STARRETT COMPANY
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	 	 
	 	 	TRU-STONE TECHNOLOGIES, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	 	 
	 	 	STARRETT KINEMETRIC ENGINEERING, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO

 

38

 

 

SCHEDULES

 

The following Schedules to the within Loan and Security Agreement (All Assets) are respectively described in the section indicated. Those Schedules in which no information has been inserted shall be deemed to read “None”.

 

SCHEDULE “A”

Borrower’s Places of Business (§7)

 

	Address	Property Located At Such Address

                   

SEE ATTACHED

 

 

 

 

SCHEDULE “B”

Other Encumbrances and Liens (§8.06(a))

 

	Secured Party or Mortgagee	Description of Collateral	Payment Terms and Dates of Maturity

          

NONE

 

 

SCHEDULE “C”

Leases (§8.06(b))

 

	Lessor	Description of Property 	Date of Lease and Term	Rental Payable

                        

SEE ATTACHED

 

39

 

 

EXHIBIT 1

 

TD BANK, N.A.

 

MARGIN CERTIFICATE

 

 

The L. S. Starrett Company, a Massachusetts corporation, and Tru-Stone Technologies, Inc., Starrett Kinemetric Engineering, Inc., and Starrett Bytewise Development, Inc., each a Delaware corporation (together, the "Borrower") certifies to TD Bank, N.A. (the "Bank"), pursuant to an Amended and Restated Loan and Security Agreement (All Assets) between the Borrower and the Bank dated June ____, 2020, as may be amended from time to time (the "Loan Agreement"), that, as of the date hereof or, for such period as may be designated below, the computations, ratio and calculations set forth below are true and correct as the related to Starrett and its consolidated subsidiaries:

 

	 	
			1.

				
			Leverage Ratio. Leverage Ratio of the Borrower for the preceding 12-month period was equal to ____:1.0, computed as follows:

			

 

	 	A.	
			Funded Debt $___________

			

 

	 	B.	
			EBITDA $___________

			

 

	 	
			C.

				
			Ratio of A to B = ____ to _____

			

 

IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Margin Certificate in the name and on behalf of the Borrower on _________________, 200___.

 

	 	
			THE L. S. STARRETT COMPANY, as Agent

			 

			 

			By:_______________________________________

			Print Name:

			Print Title:

			

 

 

 

 

 

EXHIBIT 2

 

TD BANK, N.A.

 

 

REVOLVING NOTE

 

	$25,000,000.00	Boston, Massachusetts

			December __, 2019

                

For value received, the undersigned, The L. S. Starrett Company, a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, Starrett Kinemetric Engineering, Inc., a Delaware corporation and Starrett Bytewise Development, Inc., a Delaware corporation (together, the "Borrower"), jointly and severally hereby promises to pay to the order of TD Bank, N.A. (the "Bank"), at its offices in Worcester, Massachusetts, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Twenty-Five Million ($25,000,000.00) Dollars, or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Bank to the Borrower under the Loan Agreement (defined below) together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Loan and Security Agreement (All Assets) dated June 29, 2009, as amended from time to time (the "Loan Agreement") by and between the Bank and the Borrower. The principal hereof and interest accruing thereon shall be due and payable as provided in the Loan Agreement. This Note may be prepaid only in accordance with the Loan Agreement.

 

This Note is issued pursuant, and is subject, to the Loan Agreement, which provides, among other things, for acceleration hereof. This Note is the "Revolving Note" referred to in the Loan Agreement.

 

This Note is secured, among other things, pursuant to the Loan Agreement, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

 

The Borrower hereby agrees to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

 

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

 

 

 

[Signature Page to Follow]

 

41

 

 

 

All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.

 

	WITNESS	 	THE L. S. STARRETT COMPANY
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	TRU-STONE TECHNOLOGIES, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	STARRETT KINEMETRIC ENGINEERING, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	STARRETT BYTEWISE DEVELOPMENT, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

[Signature Page to $25,000,000 Revolving Note]

 

42

 

 

EXHIBIT 2A

 

DEFERRED DRAW TERM NOTE

 

                              

	$10,000,000.00	December__, 2019

			Boston, Massachusetts

 

 

For value received, the undersigned jointly and severally promises to pay to T.D. Bank, N.A., a national banking association organized and existing under the laws of the United States of America, and having a place of business located at 370 Main Street, Worcester, Massachusetts 01608 ("Bank"), or order, at its offices in Worcester, Massachusetts, or at such other place as may be designated in writing by the holder hereof, the principal sum of Ten Million ($10,000,000.00) Dollars, or such lesser amount as Bank shall have advanced hereunder which remains outstanding as of December 31, 2020 (the "Conversion Date"), together with interest thereon at a fixed rate of interest equal to four (4.0%) percent per annum, payable in twelve (12) monthly installments of interest only on the ____ day of each month commencing on February ____, 2020 and on the same day of each month thereafter until the Conversion Date. On the Conversion Date the outstanding principal balance of this Note shall be amortized and payable over a term of sixty (60) months commencing on the ____ day of the first month following the Conversion Date and on the same day of each month thereafter, together with interest as aforesaid until December ____, 2025 (the "Maturity Date") when the outstanding principal balance of this Note plus all accrued and unpaid interest thereon shall be due and payable in full. If any payment or installment to be made hereunder, whether interest, principal or both, shall not be paid within ten (10) days of the date when due, then, in addition to interest and without limiting the Bank's rights by reason of such default, there shall be paid, upon demand, a late charge equal to six (6%) percent of any such payment or installment. In no event, however, shall this Note bear interest at a rate in excess of the maximum interest permitted by applicable law. If this Note is not paid in full on the Maturity Date or upon the exercise by the holder of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at a fluctuating interest rate per annum equal to four (4%) percent greater than the rate of interest specified herein. Any principal repaid hereunder shall not be readvanced by the Bank to the undersigned.

 

If after the date hereof holder determines that (a) the adoption of any applicable law, rule, or regulation regarding capital requirements for banks or bank holding companies or the subsidiaries thereof, (b) any change in the interpretation or administration of any such law, rule, or regulation by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or (c) compliance by the holder or its holding company with any request or directive of any such governmental authority, central bank, or comparable agency regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on holder's capital to a level below that which holder could have achieved (taking into consideration holder's and its holding company's policies with respect to capital adequacy immediately before such adoption, change, or compliance and assuming that holder's capital was fully utilized prior to such adoption, change, or compliance) but for such adoption, change, or compliance as a consequence of holder's commitment to make the loans pursuant hereto by any amount deemed by holder to be material: (1) holder shall promptly, after holder's determination of such occurrence, give notice thereof to the undersigned; and (2) the undersigned shall pay to the holder as an additional fee from time to time, such amount as the holder certifies to be the amount that will compensate holder for such reduction, such fee shall be payable monthly, commencing on the first day of the month next succeeding the date that the holder certifies the amount to the undersigned.

 

 

 

 

A certificate of holder claiming entitlement to compensation as set forth above will be conclusive in the absence of manifest error. Such certificate will set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to holder, and the method by which such amounts were determined. In determining such amount, holder may use any reasonable averaging and attribution method.

 

The loan evidenced by this Note may be prepaid in whole or in part, upon at least five (5) days prior notice to the Bank, accompanied by the payment of a prepayment fee in an amount equal to the greater of the "Yield Maintenance Amount" as defined and described on Schedule A attached hereto, or one (1%) percent of the amount prepaid. This Yield Maintenance Amount shall only be due and payable upon acceleration of this Note (which for the purposes hereof shall be considered as a prepayment hereof) in addition to interest at the default rate set forth above, or if the loan is refinanced by another financial institution prior to maturity.

 

The undersigned hereby authorizes Bank to charge the amount of all monthly interest and principal payments, when due and payable hereunder, against the undersigned's operating account at the Bank.

 

At the option of the holder, this Note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) the failure to pay in full and when due any installment of principal or interest hereunder; or (ii) one or more Events of Default as defined in the Agreement defined below.

 

The undersigned and any guarantor hereby grants to Bank a lien, security interest and right of setoff as security for all liabilities and Obligations to Bank, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity in the control of Bank or in transit to Bank. At any time, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of the undersigned and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing this Note. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE UNDERSIGNED OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

The undersigned agrees to pay all costs of collection including reasonable fees of attorney.

 

No delay or omission on the part of the holder in exercising any right hereunder shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. Every one of the undersigned and every indorser or guarantor of this Note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the holder collateral for this Note, and to the additions or releases of any other parties or persons primarily or secondarily liable.

 

44

 

 

THE UNDERSIGNED AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE LOANS CONTEMPLATED HEREBY.

 

All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this Note shall be deemed to be under seal.

 

 

 

[Signature Page to Follow]

 

45

 

 

 

The obligations under this Note are secured pursuant to a Loan and Security Agreement (All Assets) being dated June 29, 2009, as amended (the "Agreement") by the among The L. S. Starrett Company, Tru-Stone Technologies, Inc., Starrett Kinemetric Engineering, Inc., Starrett Bytewise Development, Inc., and Bank.

 

	WITNESS	 	THE L. S. STARRETT COMPANY
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	TRU-STONE TECHNOLOGIES, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	STARRETT KINEMETRIC ENGINEERING, INC.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO
	 	 	 	 
	 	 	STARRETT BYTEWISE DEVELOPMENT, INC.
	 	 	 
	 	 	 	 
	 	 	By:	 
	Print Name:	 	 	Douglas A. Starrett, President and CEO

               

 

 

[Signature Page to $10,000,000 Deferred Draw Term Note]

 

46

 

 

SCHEDULE A

 

Discounted Yield Maintenance 

 

Yield Maintenance Amount

 

As used herein, "Yield Maintenance Amount" means the sum of the Present Value (as defined below) on the date of the prepayment of each Monthly Interest Shortfall (as defined below) for the remaining term of the Loan evidenced by this Note discounted at the monthly Replacement Treasury Yield (as defined below).

 

The Monthly Interest Shortfall is calculated for each monthly payment date as follows:

 

	 	
			(i)

				
			The positive difference, if any, of the interest rate set forth on, or as calculated as set forth on page 1 of this Note ("Contract Rate") less the Replacement Treasury Yield;

			

 

	 	
			(ii)

				
			Divided by 12;

			

 

	 	
			(iii)

				
			Multiplied by the outstanding principal balance of the Loan on the date of prepayment;

			

 

The Present Value is then determined by discounting each Monthly Interest Shortfall at the Replacement Treasury Yield divided by 12.

 

FOR EXAMPLE: If a loan with a Contract Rate of 9% were prepaid with 24 months remaining in the term, at the time when the two year Replacement Treasury Yield was 5%, and the outstanding loan balance was $1,000,000.00 then:

 

	Contract Rate	 	 	 	 	 	.0 900	 
	Less the Replacement Treasury Yield	 	-	 	 	 	. 0500	 
	Equals the rate difference	 	=	 	 	 	. 0400	 
	Divided by 12	 	÷	 	 	 	12	 
	Equals the monthly rate difference	 	=	 	 	 	.00333	 
	Times the principal balance	 	x	 	 	$	1,000,000	 
	 	 	 	 	 	 	 	 
	Equals the Monthly Interest Shortfall	 	=	 	 	$	3,333.33	 

 

The Present Value of each Monthly Interest Shortfall ($3,333.33) discounted at the monthly Replacement Treasury Yield (5% divided by 12 or .4167%) equals $75,979.59.

 

As used herein the term "Replacement Treasury Yield" shall mean the rate of interest equal to the closing price (yield to maturity) of the most recently issued U.S. Treasury security as quoted in The Wall Street Journal on the prepayment date. If the remaining term is less than one year, the Replacement Treasury Yield will equal the yield for 1-Year Treasury's. If the remaining term is 1-Year, 2-Year, etc., then the Replacement Treasury Yield will equal the yield for the Treasury's with a maturity equaling the remaining term. If the remaining term is longer than one year but does not equal one of the maturities being quoted, then the Replacement Treasury Yield will equal the yield for the Treasury's with a maturity closest to but not exceeding the remaining term. If The Wall Street Journal (i) quotes more than one such rate, the highest of such quotes shall apply, or (ii) ceases to publish such quotes, the U.S. Treasury security shall be determined from such financial reporting service or source as Bank shall determine.

 

47

 

 

EXHIBIT 3

 

COMPLIANCE CERTIFICATE

The L. S. Starrett Company, a Massachusetts corporation, Tru-Stone Technologies, Inc., a Delaware corporation, Starrett Kinemetric Engineering, Inc., a Delaware corporation, and Starrett Bytewise Development, Inc., a Delaware corporation ("Borrower"), hereby certifies to TD Bank, N.A. ("Bank") pursuant to the Loan and Security Agreement (All Assets) between Borrower and Bank dated June 29, 2009, as may be amended from time to time ("Loan Agreement"), that:

 

	
			A.

				
			General

			

 

1.     Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement.

 

2.     The Borrower has complied with all the terms, covenants and conditions to be performed or observed by the Borrower contained in the Loan Agreement and other documents required to be executed by the Borrower in connection with the Loan Agreement.

 

3.     Neither on the date hereof nor, if applicable, after giving effect to the loan made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default.

 

4.    The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date).

 

	
			B.

				
			Financial Covenants

			

 

As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Section 13 of the Loan Agreement are true and correct:

 

 

 

 

	 	
			1.

				
			Fixed Charge Coverage Ratio - Section 13.01

			

 

The cash flow of Starrett and its consolidated subsidiaries for the preceding twelve-month period was equal to ______ times the amount of Fixed Charges for such period, computed as follows:

 

	 	
			A.

				
			Net Income

				$___________
	 	 	 	 
	 	
			B.

				
			Income Tax Expense

				$___________
	 	 	 	 
	 	
			C.

				
			Interest Expense

				$___________
	 	 	 	 
	 	
			D.

				
			Depreciation Expense

				$___________
	 	 	 	 
	 	
			E.

				
			Amortization Expense

				$___________
	 	 	 	 
	 	
			F.

				
			Non-Cash Pension/Post-Retirement Benefit Expense

				$___________
	 	 	 	 
	 	
			G.

				
			Non-Cash Stock Compensation Expense

				$___________
	 	 	 	 
	 	
			H.

				
			Gains/Losses from the Sale of Assets

				$___________
	 	 	 	 
	 	
			I.

				
			Bank Approved One-Time Restructuring Expenses

				$___________
	 	 	 	 
	 	
			J.

				
			Dividends/Distributions

				$___________
	 	 	 	 
	 	
			K.

				
			Unfunded Capital Expenditures

				$___________
	 	 	 	 
	 	
			L.

				
			Required Cash Pension Payments

				$___________
	 	 	 	 
	 	
			M.

				
			Cash Taxes

				$___________
	 	 	 	 
	 	
			N.

				
			Cash Flow (A+B+C+D+E+F+G+or-H+I-J-K-L-M)

				$___________
	 	 	 	 
	 	
			O.

				
			Required Principal Payments on all Term Debt, excluding Short-Term Loans from the Brazilian Banks to Finance Export Accounts Receivable from Borrower's Brazilian Subsidiary

				$___________
	 	 	 	 
	 	
			P.

				
			Interest Expense

				$___________
	 	 	 	 
	 	
			Q.

				
			Fixed Charges (O+P)

				$___________
	 	 	 	 
	 	R.	Fixed Charge Coverage Ratio (N divided by Q)=	___: 1.0

 

	 	
			2.

				
			Minimum Liquidity – Section 13.16

			

 

The Liquid Assets of Starrett and its consolidated subsidiaries as at ___________, 20__ was ___________, computed as follows:

 

	 	A.	Cash	$___________
	 	 	 	 
	 	B.	Liquid Investments	$___________
	 	 	 	 
	 	C.	Availability under the Borrowing Base	  ___________
	 	 	 	 
	 	D.	Liquid Assets (A + B + C)	$___________

 

2

 

 

IN WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has executed and delivered this Certificate in the name and on behalf of the Borrower on ___________, 20__.

 

	 	
			THE L. S. STARRETT COMPANY, as Agent

			 

			 

			By:_______________________________________

			Name:

			Title:

			

 

3

 

 

EXHIBIT A: L.S. Starrett Company

Corporate Organization / Places of Business May 2020

 

	Company Name	 	
			Country of

			Incorporation

				 	
			State/Province

			of Incorporation

				 	
			Type of

			Entity

				 	
			Year

			Acquired

				 	
			Year of

			Incorporation

				 	Business	 	Address
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			The L.S. Starrett Company

				 	
			U.S.

				 	
			Massachusetts

				 	
			Corporation

				 	
			1880

				 	
			1929

				 	
			Manufacturing

				 	
			121 Crescent Street, Athol, MA 01331

			
	
			Tru-Stone Technologies, Inc.

				 	
			U.S.

				 	
			Delaware

				 	
			Corporation

				 	
			2006

				 	
			2006

				 	
			Manufacturing

				 	
			1101 Prosper Drive, PO Box 430, Waite Park, MN 56387

			
	
			Starrett Kinemetric Engineering, Inc.

				 	
			U.S.

				 	
			Delaware

				 	
			Corporation

				 	
			2007

				 	
			2007

				 	
			Manufacturing

				 	
			26052 Merit Circle, Suite 103, Laguna Hills, CA 92653

			
	
			Starrett Bytewise Development, Inc.

				 	
			U.S.

				 	
			Delaware

				 	
			Corporation

				 	
			2011

				 	
			2011

				 	
			Manufacturing

				 	
			1150 Brookstone Center Parkway, Columbus, Georgia 31904

			
	
			Starrett Worldwide, Inc.

				 	
			U.S.

				 	
			Delaware

				 	
			Corporation

				 	 	 	
			2014

				 	
			Hire Non-US Employees

				 	
			121 Crescent Street, Athol, MA 01331

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			The L.S. Starrett Co. of Canada Limited

				 	
			Canada

				 	
			Ontario

				 	
			Corporation

				 	
			1962

				 	
			1962

				 	
			Sales

				 	
			1244, Kamato Road, Mississauga, Ontario, L4W 1Y1

			
	
			The L.S. Starrett Company Limited

				 	
			U.K.

				 	
			Scotland

				 	
			Corporation

				 	
			1958

				 	
			1958

				 	
			Manufacturing

				 	
			Box 1, Oxnam Road, Jedburgh, TD8 6LR, Scotland

			
	
			Starrett Precision Optical Limited

				 	
			U.K.

				 	
			England

				 	
			Corporation

				 	
			1990

				 	
			1990

				 	
			Manufacturing

				 	
			Snaygill Industrial Estate, Skipton, North Yorkshire, BD23 2QR, England

			
	
			Starrett (Asia) Pte Ltd.

				 	
			Singapore

				 	 	 	
			Corporation

				 	
			2010

				 	
			2010

				 	
			Sales

				 	
			35, Marsiling Industrial State Road 3, #05-04 Singapore 739257

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			The L.S. Starrett Company Limited (Japan)

				 	
			U.K.

				 	
			Scotland

				 	
			Branch

				 	 	 	 	 	
			Sales

				 	
			661 -Chrome Taito, Taito-KU, Tokyo 110-0016

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			Starrett Industria E Commercio Ltda.

				 	
			Brazil

				 	 	 	
			Corporation

				 	
			1956

				 	
			1956

				 	
			Manufacturing

				 	
			Av. Laroy S. Starrett, 1880, Caxia Postal 171, 13300-000, Itu, Brasil

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			The L.S. Starrett Company of Mexico, S.deR.L.deC.V.

				 	
			Mexico

				 	 	 	
			Corporation

				 	
			2001

				 	
			2001

				 	
			Sales

				 	
			Prol. Irlanda N 901 Col Privada, Luxemburgo, Saltillo, Coahuila, 25240 Mexico

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			Starrett Tools (Suzhou) Co. Ltd.

				 	
			China

				 	 	 	
			Corporation

				 	
			1997

				 	
			1997

				 	
			Manufacturing

				 	
			Suzhou Industrial Park, N. 339 Su Hong Zhong Road, Suzhou, Jiangsu Province

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			Starrett Tools (Shanghai) Co. Ltd.

				 	
			China

				 	 	 	
			Corporation

				 	
			2000

				 	
			2000

				 	
			Dormant

				 	
			To be liquidated in Q4 fiscal 2016

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			The L.S. Starrett Co. of Australia Pty Ltd.

				 	
			Australia

				 	 	 	
			Corporation

				 	
			1998

				 	
			1998

				 	
			Sales

				 	
			Unit 2, 57 Prince William Drive, Seven Hills, N.S.W. 2147

			
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			Starrett (New Zealand) Limited

				 	
			New Zealand

				 	 	 	
			Corporation

				 	
			2006

				 	
			2006

				 	
			Sales

				 	
			28C Hugo Johnston Drive, Penrose, Aukland

			

 

4

 

 

SCHEDULE B: OTHER ECUMBRANCES AND LIENS

 

	Secured Party	 	Description of Collateral	 	Original Value	 	Payment Terms	 	Date of Maturity
	MAZAK CORP.	 	Horizontal Center Nexus 4000E Mazatrol Smoothing Control Machine	 	315,170	 	10% down, interest free for 9 equal monthly payments	 	Dec-20

                    

5

 

 

 

	
			SCHEDULE C : LS STARRETT COMPANY - SCHEDULE OF LEASES AS OF March 31, 2020

				 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	
			FY 20 Remaining

				 	 	
			FY 2021

				 	 	
			FY 2022

				 	 	
			FY 2023

				 	 	
			FY 2024

				 	 	
			FY 2025

				 	 	
			Thereafter

				 
	
			Enterprise Athol Fleet

				 	 	64,209	 	 	 	200,399	 	 	 	103,236	 	 	 	31,054	 	 	 	4,914	 	 	 	-	 	 	 	-	 
	
			Mt Airy La Nitro

				 	 	5,276	 	 	 	5,276	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
			Athol Send Pro P Mailrm

				 	 	6,195	 	 	 	24,780	 	 	 	24,780	 	 	 	24,780	 	 	 	10,325	 	 	 	-	 	 	 	-	 
	
			Bytewise Facility GA

				 	 	79,591	 	 	 	322,607	 	 	 	329,059	 	 	 	335,641	 	 	 	342,353	 	 	 	349,200	 	 	 	475,694	 
	
			Kinemetric Laguana Hills CA

				 	 	76,188	 	 	 	315,636	 	 	 	326,520	 	 	 	337,404	 	 	 	348,288	 	 	 	-	 	 	 	-	 
	
			Mexico Fac & Show Room

				 	 	7,264	 	 	 	29,058	 	 	 	43,587	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
			XYZ Company

				 	 	10,452	 	 	 	20,904	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
			Brazil

				 	 	22,343	 	 	 	88,020	 	 	 	36,385	 	 	 	5,177	 	 	 	1,127	 	 	 	 	 	 	 	 	 
	
			Austrialia

				 	 	15,261	 	 	 	61,043	 	 	 	61,043	 	 	 	5,087	 	 	 	-	 	 	 	 	 	 	 	 	 
	
			New Zealand

				 	 	9,999	 	 	 	6,666	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
			Suzhou

				 	 	279,421	 	 	 	1,072,592	 	 	 	1,845	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
			Starrett Asia

				 	 	36,364	 	 	 	105,544	 	 	 	-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	612,563	 	 	 	2,252,524	 	 	 	926,455	 	 	 	739,142	 	 	 	707,007	 	 	 	349,200	 	 	 	475,694

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