Document:

ex10_11314.htm

THIS LOAN AGREEMENT is made, entered into and effective as of the 31st day of January 2014, by Energy Services of America Corporation, a Delaware corporation, C. J. Hughes Construction Company, Inc., a West Virginia corporation, Nitro Electric Company, Inc., a West Virginia corporation, Contractors Rental Corporation, a West Virginia corporation, and S T Pipeline, Inc., a West Virginia corporation, ( collectively “Borrower”), United Bank, Inc., a West Virginia banking corporation (“Lender”), Doug Reynolds and Marshall Reynolds, (collectively “Guarantor”).

WHEREAS, Borrower has applied to Lender for a term loan in the principal amount of Eight Million Eight Hundred Thirteen Thousand Two Hundred Seventy Four Dollars and Sixty-Four Cents ($8,813,274.64) for the purpose of refinancing existing indebtedness owed to Lender; and

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

WHEREAS, Guarantor has agreed to partially guarantee the repayment of the term loan for the purpose of inducing Lender to lend the funds to Borrower;

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

ARTICLE I

DEFINITIONS, TERMS AND REFERENCES

1.01   Certain Definitions.  In addition to such other terms as elsewhere

defined herein, as used in this Agreement and in any Exhibits, the following terms shall have the following meanings, unless the context requires otherwise.

“Actual Knowledge” means, (a) with respect to any Person who is an individual, the actual knowledge, after a Good Faith inquiry, of such Person, or of any employee of such partnership, or limited partnership, the actual knowledge, after a Good Faith inquiry, of such Person, or of any employee of such Person, (b) with respect to any Person which is a corporation, limited liability company, partnership, or limited partnership, the actual knowledge, after a Good Faith inquiry, of (i)  any officer, director, shareholder, member, manager or general partner of such Person or (ii)  any employee of such Person, with management
responsibilities.

“Advance” shall mean a disbursement of the Term Loan.

  

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“Affiliate(s)” of Borrower or Guarantor shall mean, (a) any Person who is now or who may hereafter be a partner, member, shareholder or principal of Borrower or to a partner, principal or member of Borrower by blood or marriage; (b) any Person, including, but not limited to, a principal or family member related by blood or marriage, who, directly or indirectly, at any time is in control of, is controlled by, or is under common control with, Borrower; (c) any officer, manager, director or stockholder of any Person described in clause (b) above; (d) any constituent Persons now or hereafter directly or indirectly comprising Borrower; (e) all
principals of all of the foregoing, (f) Borrower with respect to Guarantor, or (g) Guarantor with respect to Borrower.  For purposes hereof, control of a Person shall mean the power, direct or indirect, (a) to vote twenty percent (20%) or more of the securities or units having ordinary voting power for the election of directors or managers of such Person; or (b) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise, and either alone or in conjunction with others.  Notwithstanding the foregoing, however, Lender shall not constitute an Affiliate of Borrower or Guarantor for the purposes of this Agreement.

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

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

"Appraisal" shall mean a current appraisal of the Equipment pledged as collateral from an appraiser acceptable to Lender.

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

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

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

  

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

“Claims”  means any and all (a) damages, claims, liabilities, causes of action, contracts or controversies or any type, kind, nature, description or character;  (b) debts, accounts, sums of money, compensation, losses, costs, or expenses;  (c) breaches of contract, duty, or any other type of relationship;  (d) acts of omission, misfeasance, or malfeasance;  and (e) commitments or promises of any type made prior to the date of this Agreement.

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

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

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

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

(a) Copy of the Articles of Incorporation of such corporation,

and all amendments thereto, certified as complete and correct by the Secretary of State (or other appropriate officer) of the state of incorporation;

(b)           A current certificate of corporate existence and good standing of such corporation, issued by the appropriate officer or department of the state of incorporation, and, if the corporation is doing business in other states, either (i)  evidence that the activities of such corporation do not require that such corporation qualify to do business in said states, or (ii) a current certificate issued by the Secretary of State of such states evidencing the continuing authority of such corporation to do business in the said states, or (iii)  a current certificate issued by the Secretary of State of said states evidencing the
continuing authority of such corporation issued by the applicable authority of the state, confirming the filling of all required franchise tax reports and the payment of all franchise taxes due;

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

  

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

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

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

“Dividends” means, with respect to any Person (a) the payment of any dividends or distributions (whether by cash, property, securities, partnership interest or profits interest in such Person); or (b) the redemption or acquisition of securities of or any other ownership interest in such Person unless made contemporaneously from the net proceeds of the sale of such securities or ownership interest.

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

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

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

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

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

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

  

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

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

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

“Guarantor” shall mean, both jointly and severally, Marshall Reynolds and Doug Reynolds, each of whom is a direct or indirect beneficiary of the Loan.

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

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

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

  

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

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

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

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

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

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

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

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

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

 

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

 

“Maturity” or “Maturity Date” shall mean February 1, 2019.

“Note or Term Note” shall mean that certain note made by Borrower to the order of Lender in the principal amount of Eight Million Eight Hundred Thirteen Thousand Two Hundred Seventy Four Dollars and Sixty-Four Cents ($8,813,274.64) and delivered by Borrower pursuant to paragraph 2.01.

  

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“Obligations” means all present and future indebtedness, obligations, and liabilities of Borrower or any Guarantor to Lender, and all renewals and extensions thereof, or any part thereof, arising (a) pursuant to this Loan Agreement or represented by the Note, and all interest accruing thereon and fees and charges thereunder, and attorneys’ fees incurred in the drafting, negotiation, enforcement or collection thereof, regardless of whether such indebtedness, obligations, and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several; together with all indebtedness, obligations and liabilities of Borrower
evidenced or arising pursuant to any of the other Loan Documents, and all renewals, modifications, increases and extensions thereof, or any part thereof, (b) pursuant to any other loan or advances which Lender may hereafter make to Borrower in connection with this Loan Agreement or the Collateral, (c) pursuant to any and all “Rate Management Obligations”, and (d) pursuant to all other and additional debts, obligations and liabilities of every kind and character of Borrower now or hereafter existing in favor of Lender in connection with the Note or the Collateral, regardless of whether such debts, obligations and liabilities be direct or indirect, primary or secondary, joint, several or joint and several, fixed or contingent, and regardless of whether such present or future debt, obligations and liabilities may, prior to their acquisition by Lender, be or have been payable to
or in favor of some other person or entity or have been acquired by Lender in a transaction with one other than Borrower.

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

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

“Permitted Encumbrances” shall mean, without duplication, (a) liens for taxes not yet due and payable, and (b) such other liens as are set forth in Schedule 1.01(a) attached hereto.

 

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

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

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

  

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"Term Loan" shall mean the loan of Eight Million Eight Hundred Thirteen Thousand Two Hundred Seventy Four Dollars and Sixty-Four Cents ($8,813,274.64) made by Lender to Borrower pursuant to 2.01.

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

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

1.02           Rules of Construction.  The following rules of construction shall

apply:

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

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

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

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

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

  

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ARTICLE II

FINANCING/FEES

2.01.  Term Loan.  Upon the execution of this Agreement and compliance with its terms and conditions by Borrower, and so long as there is not in existence any Potential Default or Event of Default, Lender agrees to make a Term Loan to Borrower as follows:

(a)           Amount of Term Loan.  The princi­pal amount of the Term Loan is Eight Million Eight Hundred Thirteen Thousand Two Hundred Seventy Four Dollars and Sixty-Four Cents ($8,813,274.64). The Term Loan is evidenced by and shall be payable and otherwise be made on the terms set forth in the Term Note made by Borrower to the Lender and on the terms established in this Loan Agreement.

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

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

(d)           Payment.  Repayment of the principal and interest on the Term Loan shall be due and payable as follows:

(1)  Repayment.  The indebtedness shall be paid in fifty-nine (59) consecutive monthly installments of One Hundred Seventy Two Thousand Four Hundred Seventy Two Dollars and Ninety-Seven Cents ($172,472.97) each with all indebtedness due and payable to Lender on the sixtieth (60th) and final installment.

The first in­stallment shall com­mence March 1, 2014 with a like installment due and payable on the first day of each succeeding month thereafter until paid in full.  Lender may, at its option, apply said installment payments first to interest and then to payment of principal.

If the due date of any payment under this Note shall be a day that is not a Banking Day (as defined herein), the due date shall be extended to the next succeeding Banking Day; provided, however, that if such next succeeding Banking Day occurs in the following calendar month, then the due date shall be the immediately preceding Banking Day.

 

Borrower shall cause all payments to be made to Lender at the address set forth in the Note, or such other address as Lender may from time to time designate in accordance with this Agreement.  After the Maturity of the Term Loan, the obligations of Borrower and the rights and privi­leges of Lender under the Loan Documents shall continue in full force and effect until the Loan has been paid and performed in full.

 

 

  

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(2)  Additional Principal Payments.  If at any time the outstanding balance of the Term Loan exceeds Seventy Five Percent (75%) of the appraised value of the equipment pledged as collateral, Borrower shall make a principal payment equal to the amount of said difference or pledge such additional collateral satisfactory to the Lender so that the appraised value of the equipment exceeds Seventy Five Percent (75%) of the outstanding balance of the Term Loan.

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

(f)           Prepayment of Term Loan.  Subject to the terms of the Term Note, Borrower may at any time and may from time to time prepay the principal of the Term Note then outstanding, in whole or in part, without premium or penalty.  All such prepayments shall be applied to principal on the last maturing principal installment due under the Term Loan, in the inverse order of maturity.

(g)           Proceeds.  Borrower covenants and agrees that the proceeds from the Term Loan shall be used solely for the purpose of refinancing existing debt.

(h)           Disbursement. Disbursement shall occur contemporaneously with the execu­tion of this Loan Agreement and the fulfillment of all conditions precedent to the disbursement of the proceeds of the Term Loan, or otherwise upon the agreement of Lender and Borrower.

  

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2.02  Application Fee. On the date hereof, unless sooner paid, there shall be due and owing to Lender from Borrower a non-refundable application fee of Ninety Thousand Dollars ($90,000.00) to compensate Lender for its expenses incurred in underwrit­ing this transaction, separate and apart from any interest charge.

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

ARTICLE III

SECURITY INTEREST - COLLATERAL

3.01.           Security for the Obligations. Borrower or Guarantor shall provide the following security for the Loan[s]:

 

 

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

3.02           Guarantor.  The Loan[s] shall be guaranteed by the Guarantor in accordance with the terms of the Guaranty Agreement.  The Guaranty Agreement shall be (i) an absolute, irrevocable, and unconditional guarantee, joint and several, and (ii) upon such other terms and provisions as are set forth in the Guaranty Agreement.

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

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

  

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3.05.   Priority of Liens.  The liens on the Collateral in favor of Lender given to secure the Term Loan established by Lender in favor of Borrower shall be a first lien.

ARTICLE IV

CONDITIONS OF LENDING

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

4.01.           Documents to be Delivered Prior to Loan Closing.  The following documents shall be delivered at least three (3) days prior to the Closing:

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

(b)           Evidence of Authority.  Lender shall have received, (a) evidence of Borrower’s actions taken and authority to enter into the Loan Documents and carry out their terms, and (b) evidence of the authority of the representative of Borrower who has executed, is executing, or will execute this Agreement and the other Loan Documents to act on behalf of Borrower.

(c)           Financial Statements.  Borrower and Guarantor shall deliver to Lender a copy of annual Financial Statements, such statements to include (i) the balance sheet as of the end of each Fiscal Year requested by Lender and (ii) the related income statement, statement of retained earnings and statement of changes in the financial position for each Fiscal Year, prepared by such certified public accountants as may be reasonably satisfactory to Lender.  Borrower also agrees and to deliver to Lender, a copy of income tax returns and also such other finan­cial
information with respect to Borrower, or any Guarantor, as Lender may request.

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

  

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4.02.           Conditions Precedent to be satisfied at Closing.

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

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

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

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

(e)           No Adverse Material Change.   On the Closing Date, Borrower and Guarantor shall submit to Lender such evidence and information to enable Lender to determine to Lender’s satisfaction (a) that there shall have been no material deterioration in the financial condition of Borrower or Guarantor; (b) that Borrower has the financial capacity and is otherwise able to repay all amounts owing or to be owed hereunder in accordance with the terms hereof; and (c) that all conditions precedent to the Loan has been fulfilled.

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

(g)           Opinions of Counsel.  At closing Lender shall have received an opinion letter or letters from counsel to Borrower and counsel to Guarantor, acceptable to Lender (a) regarding the existence, standing, power and authority of Borrower and Guarantor to execute and deliver the Loan Documents and to perform thereunder, (b) that the Loan Documents are valid, binding, and enforceable against all parties thereto (exclusive of Lender) in accordance with their terms, (c) that neither the execution, delivery or performance of the Loan Documents, nor the consummation of the
transactions contemplated by Lender, Borrower and Guarantor will violate any Laws to which Borrower or Guarantor are subject to create a default under any Material Agreement to which Borrower or Guarantor are a party, (d) that there is no litigation threatened or pending affecting Borrower, Guarantor, or their respective assets that would adversely affect the obligations of Borrower or Guarantor under the Loan Documents, (e) the loan transactions entered into pursuant to this Agreement are not usurious, (f) that, to the extent that Article 9 of the UCC is applicable, Lender shall hold a valid, perfected and enforceable Lien on all Collateral, and (g) any such other matters as Lender may reasonably require.

  

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

4.03.           Additional General Conditions Precedent.

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

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

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

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

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

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

  

14

  

	
  

	
(1)

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

	
  

	
(2)

	
there occurs an Adverse Material Change in Borrower’s financial condition or in the value of the Collateral;

	
  

	
(3)

	
an Event of Default occurs or Potential Default exists, including, without limitation, the unauthorized use of loan proceeds;

	
  

	
(4)

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

	
  

	
(5)

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

	
  

	
(6)

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

ARTICLE V

GENERAL REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants the following to Lender, and such representations and warranties (i) are an inducement to Lender to enter into this Agreement and the other Loan Documents and to disburse funds as provided herein, (ii) shall be true, complete and correct as of the Closing Date, and (iii) shall survive the closing of these Loans.

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

  

15

  

5.02.                  Power and Authority.   Borrower and Guarantor are duly authorized to execute, deliver and perform this Agreement and each of the other Loan Documents to which each is a party, without obtaining the consent of any other Person and Borrower or Guarantor is duly authorized to borrow hereunder.  This Agreement and the other Loan Documents have been duly authorized by all requisite action of Borrower and Guarantor.  Borrower has good, indefeasible and marketable title to the Collateral and no Person other than
Borrower has any beneficial or equitable right, title or interest in or to the Collateral (other than Permitted Encumbrances).  The execution, delivery and performance by Borrower and Guarantor of the Loan Documents to which each is a party will not: (a) require additional consent or approval of any Person; (b) violate Borrower’s Organizational Documents or agreements pertaining to Borrower’s operations; (c) violate any provision of any law presently in effect having applicability to Borrower or Guarantor; (d) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower or Guarantor is a party or by which Borrower or Guarantor or their properties may be bound or affected; (e) result in, or require, the creation or imposition of any Lien upon or with respect to the
Collateral now owned or hereafter acquired by Borrower, except that of Lender; or (f) cause Borrower or Guarantor to be in default or breach under any law or any indenture, agreement, contract, lease or instrument to which Borrower or Guarantor, as applicable, is a party or by which their property is bound.

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

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

  

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

5.06.              Pending Litigation.  Except as previously disclosed to Lender, there are no proceedings pending, or to Borrower's knowledge, threatened, against or affecting Borrower, Guaran­tor or the Collateral in any court or before any Governmental Authority or arbitration board or tribunal which involve the possibility of materially and adversely affecting (a) the assets, business, prospects, profits or condition (financial or other­wise) of such Person or the ability of any such Person to perform its respective obligations under the Loan Documents, or (b) the
Collateral, which call into question the validity, enforceability or performance of any of the Loan Documents.  Neither Borrower nor Guarantor is in default with respect to any order of any Governmental Authority or arbitration board or tribunal.

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

 

 

5.08.                  No Other Names.   Borrower has not used any corporate, trade or fictitious name, other than the names set forth in Schedule 5.08, including with respect to any agreement under which a security interest or Lien upon any of its or his assets was granted or existed within the last five (5) years.  Until this Agreement is terminated,  Borrower shall not change its name from those set forth in Schedule 5.08 without giving at least thirty (30) days’ prior written notice of such change to the Lender.

5.09.                  Operation of Business.   As of the Closing Date, Borrower has good and marketable title to the Collateral, free and clear of all Liens (other than Permitted Encumbrances), and has the unconditional right and authority to grant Lender a Lien on such Collateral, (c) is the sole and exclusive owner of the Collateral and no other Person has nay or has asserted any right, title or interest in or to any of the Collateral (other than Permitted Encumbrances), and (d) has not received notice that any injunction has been obtained restraining,
delaying or prohibiting, or that there is any suit, action or other legal proceeding is pending before any Governmental Authority seeking to restrain, delay or prohibit any of the transactions contemplated by this Agreement.

  

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5.10.                  Financial Statements and Financial Condition.  The Initial

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

 

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

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

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

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

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

  

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

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

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

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

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

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

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

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

  

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

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

ARTICLE VI

AFFIRMATIVE COVENANTS

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

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

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

(a)           Weekly Reports.  On each Thursday Borrower shall submit to Lender the following projections and reports, (both individually and combined) which projections and reports shall be certified by Borrower as being accurate and reasonable to the best of its knowledge:  i) cash flow projections for Borrower for the upcoming thirteen week period; ii) reports showing the actual cash flow results for Borrower for the prior week; iii) reports showing the status of Borrower’s accounts payable at the end of the prior week; iv) reports showing the status of the Borrower’s
accounts receivable at the end of the prior week.

  

20

  

Borrower on each weekly report shall certify that all wages, taxes and fringe benefits are paid current and sufficient funds are available to pay any accrued liabilities.

(b)           Monthly Financial Information.  As soon as practicable, and in any event within thirty (30) days after the end of each calendar month Borrower  shall deliver Unaudited Financial Statements of Borrower for such period certified by a responsible and authorized officer of Borrower.

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

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

(e)           Reappraisal.     On or before December 31 of each calendar year (but no earlier than October 1) Borrower at its expense will have its Equipment appraised by a qualified appraiser acceptable to Lender and Borrower shall deliver a copy of the Appraisal to Lender.

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

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

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

  

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6.05.           Notice; Correction of Errors.   Borrower and each Guarantor shall promptly notify Lender of (i) any inaccuracy or breach of any representation or warranty made by either Borrower or Guarantor, (ii) if discovered, any material factual errors or, (iii) if discovered, any material factual defects or omissions in the contents of this Agreement or the other Loan Documents or in the execution or acknowledgment thereof, and promptly and with all due diligence take steps to, and in fact, correct and remedy same.

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

6.07.           Material Adverse Changes, Litigation.  Borrower shall promptly inform Lender in writing of (a) all Material Adverse Changes in Borrower's financial condition, and (b) all claims and all threatened litigation and claims affecting Borrower which could materially affect Borrower's financial condition.

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

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

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

  

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

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

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

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

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

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

  

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

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

6.21           Escrow Account.  Borrowers shall maintain an escrow account equal to Five Hundred Seventeen Thousand Four Hundred Nine Dollars and Twenty-Five Cents ($517,409.25) as additional collateral and security for the repayment of the Obligations.  The Escrow Account shall be funded by five monthly payments in the amount of Ninety Five Thousand Eight Hundred Seventy Dollars and Sixty-Six Cents ($95,870.66) with a sixth monthly payment of Thirty Eight Thousand Fifty Five Dollar and Ninety-Eight Cents ($38,055.98) to be paid by Borrower with each payment to be made herein until
such time as the amount of the Escrow Account reaches the above amount.  At the discretion of Lender and in an Event of Default Lender may apply the Escrow Account towards the Obligations.

6.22.           Payment of Fees.   Borrower shall pay to or for the account of Lender from time to time upon demand, (i) all of the reasonable out-of-pocket costs, fees and expenses suffered or incurred by Lender in connection with or relating to the Loan(s), or any portion thereof, and the administration and enforcement thereof, including, without limitation, all appraisals, surveys, inspections and such other information reasonably requested by Lender associated with the Collateral, and (ii) if an Event of Default under this Agreement or any of the other Loan Documents occurs, all
out-of-pocket costs, fees and expenses suffered or incurred by Lender, including without limitation, the fees, expenses and disbursements of any attorneys, in connection with such Event of Default, and any related collection, bankruptcy, insolvency and other enforcement or creditors rights proceedings.

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

  

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

ARTICLE VII

FINANCIAL COVENANTS

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

7.01.               Debt Service Coverage.  Borrower shall maintain a minimum Debt Service Coverage Ratio of no less than 1.50 to 1.0 tested quarterly, as of the end of each fiscal quarter, based upon the preceding four quarters.  Debt service coverage shall be defined as the ratio of (i) earnings before interest, tax, depreciation and amortization less cash taxes, less un-financed capital expenditures, less distributions or dividends, less non-cash gains, plus non-cash losses, plus or minus changes in amounts due from or due to stockholders (Members, Partners) all
divided by (ii) cash interest expense plus the greater of actual or scheduled principal payments on term debt and capitalized leases for the corresponding period.  Notwithstanding the foregoing, the denominator set forth in (ii) shall not include voluntary unscheduled principal payments made to Lender.  Borrower’s failure to maintain its Debt Service Coverage Ratio at or above the required minimum as of each testing date shall constitute an Event of Default that is not curable.

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

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

 

  

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Date

	
Debt to TNW

	
6/30/2014

	
2.5x

	
12/31/2014

	
2.35x

	
6/30/2015

	
2x

	
12/31/2015

	
1.75x

	
6/30/2016

	
1.5x

	
Thereafter

	
1.5x

 

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

7.05.           Determination Date.  Each ratio described in paragraphs § 7.01, 7.02, 7.03 and  shall be measured and determined as of each calendar quarter beginning June 30, 2014.

ARTICLE VIII

NEGATIVE COVENANTS

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

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

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

  

26

  

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

8.04           Dividends.  Borrower shall not make or allow to be made any Dividends at any time there is an Event of Default or Potential Default, and in no event more than fifty percent (50%) of taxable income.

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

8.06            Salaries.  [Omitted]

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

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

	
  

	
(a)

	
debt to Lender;

	
  

	
(b)

	
First Guaranty Bank;

	
  

	
(c)

	
debt presently outstanding and shown on the most recent financial statements submitted to Lender;

	
  

	
(d)

	
accounts payable to trade creditors incurred in the ordinary

	
  

	
course of business;

	
  

	
(e)

	
debt secured by purchase money liens as set forth herein;

	
  

	
(f)

	
additional debt not to exceed $250,000, in the aggregate at any time.

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

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

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

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

(d)           liens in favor of Lender.

8.10.           Capital Expenditures. [Omitted]

  

27

  

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

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

ARTICLE IX

EVENTS OF DEFAULT

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

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

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

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

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

9.05.              Rate Management Agreement/Obligations. [Omitted]

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

  

28

  

9.07.              Creditor or Forfeiture Proceedings.  Borrower shall (a) execute a general assign­ment for the benefit of its creditors, or (b) become the sub­ject, voluntarily, of any bankruptcy, insolvency or reorgani­za­tion proceeding, or (c) become the subject, invol­untarily, of any bankruptcy, insolvency or reorganization pro­ceeding, and such proceeding is not dismissed within ninety (90) days following the date such proceeding was commenced; or (d) admit in writing that it is unable to pay its debts general­ly as they become due, or
(e) apply for or consent to the appointment of a custodian, receiver, trustee, or liquidator for itself or of all or a sub­stantial part of its assets, or an order, judgment, or decree shall be entered by any court of competent jurisdiction appointing a custodian, receiver, trustee, or liquidator of Borrower, or (f) file a voluntary petition seeking protection under any Debtor Relief Laws, or other insol­vency law, now or hereafter existing, or (g) file an answer admitting the material allegations of, or consenting to, or default in filing an answer to, a petition filed against it in any bankruptcy, reorganization, or other insolvency proceedings, or (h) insti­tute or voluntarily be or become a party to any other judicial pro­ceedings intended to effect a discharge of the debts of Borrower, in whole or in part, or a postpone­ment of the maturity or the
collection there­of, or a suspension of any of the rights or powers of Lender granted in this Loan Agreement or the other Loan Documents; or

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

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

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

 

 

9.11.              Death of Principal.  [Omitted]

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

  

29

  

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

9.14.              Condemnation.  Condemnation of all or any part of the Collateral which, in Lender's good faith judgment, (i) results or will result in the Collateral failing to comply with any Governmen­tal Requirement or restriction affecting the Collateral, or (ii) will adversely affect the operation or use of the Collateral including, without limitation, access or parking; or

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

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

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

ARTICLE X

REMEDIES

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

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

  

30

  

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

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

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

ARTICLE XI

MISCELLANEOUS PROVISIONS

The parties agree to the following miscella­neous provisions:

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

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

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

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

  

31

  

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

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

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

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

11.04.                      Notices.  Any notice, demand, request, consent, approval or other communication, which any party hereto may be required or may desire to give hereunder, shall be in writing (except where telephonic instructions or notices are expressly authorized herein to be given) and shall be deemed to be effective (a) if by hand delivery, telex, telecopy or other facsimile transmission, on the day and at the time on which delivered to such party at the address, telex or telecopier numbers specified in Schedule 5.18; (b) if by
mail, on the day three (3) Business Days after the date upon which it is deposited, postage prepaid, in the United States, registered or certified mail, return receipt requested, addressed to such party at the address specified in Schedule 5.18; or (c) if by Federal Express or other reputable express mail service, on the next Business Day following the delivery to such express mail service, addressed to such party at the address set forth in Schedule 5.18:

  

32

  

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

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

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

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

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

  

33

  

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

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

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

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

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

  

34

  

11.12.                      Assignment and Participation.  Borrower and Guarantor shall not be entitled to assign any of their rights, remedies or obligations described in this Agreement or the Loan Documents without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion.  Lender shall be entitled to grant participation in or assign some or all of its rights and remedies described in this Agreement and the Loan Documents without notice to or the prior consent of Borrower in any
manner.  Lender’s agreement to provide the Revolving Credit Facility is conditioned upon obtaining participation commitments of not less than sixty-six (66%) of the total credit facility.

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

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

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

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

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

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

  

35

  

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

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

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

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

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

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

	  	
Energy Services of America Corporation,

	  	
a Delaware corporation

	  	  
	  	
By

	  	
Its

	  	  
	  	  
	  	
United Bank, Inc.,

	  	
a West Virginia corporation

	  	  
	  	
By

	  	
Its

	  	  
	  	  
	  	
C. J. Hughes Construction Company, Inc.

	  	
a West Virginia corporation

	  	  
	  	
By

	  	
Its

	  	  

 

 

  

36

  

 

	  	
Nitro Electric Company, Inc.

	  	
a West Virginia corporation

	  	  
	  	
By

	  	
Its

	  	  
	  	  
	  	
Contractors Rental Corporation

	  	
a West Virginia corporation

	  	  
	  	
By

	  	
Its

	  	  
	  	  
	  	
S T Pipeline, Inc.

	  	
a West Virginia corporation

	  	  
	  	
By

	  	
Its

  

37

  

 

SCHEDULE 1.01(a)

TO

LOAN AGREEMENT BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL.

PERMITTED ENCUMBRANCES

1.  Those encumbrances appearing on Schedule 5.20 and the Certificate of titles

 

  

38

  

SCHEDULE 5.08

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

PRIOR OR EXISTING CORPORATION,

TRADE OR FICTITIOUS NAMES OF

BORROWER AND GUARANTOR

1.  Nitro Electric – NEC Acquisition Company, Inc.

  

39

  

SCHEDULE 5.17

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

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

	
Borrower/

	  
	
Guarantors:

	
75 West Third Avenue

	  	
Huntington, WV  25701

	  	  
	  	  
	
Lender:

	
United Bank, Inc.

	  	
Attn.: Vice President

	  	
2889 Third Avenue

	  	
Huntington, WV  25702

  

40

  

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

ENERGY SERVICES OF AMERICA CORPORATION

Directors:

Marshall Reynolds, Chairman

Neal Skaggs

Keith Monihan

Doug Reynolds

Jack Reynolds

Joe Williams

Samuel Kapourales

Nester S. Logan

Officers:

Doug Reynolds, President/CEO

Lane Ferguson, Vice President

Charles Crimmel, Secretary/Treasurer

  

41

  

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

C. J. HUGHES CONSTRUCTION COMPANY, INC.

Directors:

Marshall Reynolds

Charles Crimmel

Officers:

Doug Reynolds, President

Richard Phillips, Vice President

Charles Crimmel, Secretary/Treasurer

Tim Donahoe, Asst. Secretary

  

42

  

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

NITRO ELECTRIC COMPANY, INC.

Nitro Electric Company, Inc.

Directors:

Marshall Reynolds

Lane Ferguson

Charles Crimmel

Officers:

Lowell Ferguson, President/CEO

Bruce Ward, Executive Vice President

Gabe Holstein, Vice President Mechanical Division

Charles Crimmel, Secretary

Brenda Pauley, Asst. Secretary

Doug Reynolds, Treasurer

  

43

  

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

CONTRACTORS RENTAL CORPORATION

Directors:

Marshall Reynolds

Charles Crimmel

Officers:

Doug Reynolds, President

Charles Crimmel, Secretary/Treasurer

Tim Donahoe, Asst. Secretary

  

44

  

SCHEDULE 5.19

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

OFFICERS AND DIRECTORS OF

S T PIPELINE, INC.

Director:

Marshall Reynolds

Officers:

Doug Reynolds, President

Charles Crimmel, Secretary/Treasurer

  

45

  

SCHEDULE 5.20

TO

LOAN AGREEMENT

BY AND AMONG

UNITED BANK, INC.

AND

ENERGY SERVICES OF AMERICA CORPORATION, ET AL

Financing Statements of Record

1.  Energy Services of America Corporation

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

3.  Nitro Electric Company, Inc.

4.  Contractors Rental Corporation

5.  S T Pipeline, Inc.                                                                        SEE ATTACHED REPORTS

  

46ex102_13114.htm

PARTICIPATION AGREEMENT

BETWEEN

UNITED BANK, INC. (LENDER)

AND

SUMMIT COMMUNITY BANK (PARTICIPANT)

IN CONNECTION WITH

$8,813,274.64 TERM NOTE

DATED  JANUARY 31, 2014

 

 

PROVIDED TO

ENERGY SERVICES OF AMERICA CORPORATION

C.J. Hughes Construction Company, Inc.

Nitro Electric Company, Inc.

Contractors Rental Corporation

ST Pipeline, Inc.

(Makers)

  

  

  

THIS PARTICIPATION AGREEMENT (this “Agreement”) is made and entered into as of the 31st day of January, 2014 by and between Summit Community Bank (“Participant”) and United Bank, Inc., a West Virginia banking corporation (“Lender”).

1.           RECITALS.

WHEREAS, Lender has made financing (the “Credit”) available to  Energy Services of America Corporation, C.J. Hughes  Construction Company, Inc., Nitro Electric Company, Inc., Contractors Rental Corporation, and ST Pipeline, Inc. (collectively the “Obligor”) subject to the terms and conditions of that Term Loan Agreement dated January 31, 2014 and related loan documents (the “Credit Agreements) more fully described on Exhibit A attached hereto; and

WHEREAS, Participant desires to purchase from Lender an undivided pro-rata individual interest in the Credit in the amount and on the terms indicated in Exhibit B attached hereto (the “Participation Interest”); and

WHEREAS, Lender desires to sell such Participation Interest to Participant and may retain or sell to others the remaining Participation Interests in the Credit;

NOW, THEREFORE, in consideration of the mutual covenants, agreements, and provisions contained herein the parties hereto covenant and agree as follows:

2.           DEFINITIONS  For purposes of this Agreement:

“Advances”  means the principal of the Credit disbursed from time to time.

“Advisor” means any accountant, attorney, appraiser, evaluator, surveyor, engineer, architect, or other expert hired by Lender in connection with the administration of the Credit.

“Business Day” means a day other than Saturday or Sunday on which the Lender is open for business at its main office in Huntington, West Virginia.

“Collections” means all monies or other property hereafter received by Lender on account of the Credit Agreements including, without limitation, any and all late fees and other fees and interest paid at the default rate pursuant to the terms of such Credit Agreements, but excluding reimbursements of reasonable out of pocket expenses (other than Extraordinary Expenses) advanced solely by Lender.  All other payments, fees, and/or charges collected by Lender in connection with the Credit, including but not limited to any prepayment penalties or charges and any extension fees, shall be disbursed and paid to Participant in accordance with
Participant’s Participation Percentage.

“Credit Agreements” means all of the documents evidencing and securing the Credit including, without limitation, the Loan Agreement, and related loan documents discussed in Exhibit A all of which have been previously provided to Participant.

 

 

“Credit Providers” means Lender, Participant, and Other Participants.

“Extraordinary Expenses” means all reasonable third party and “out of pocket” costs and expenses which, in the good faith and reasonable opinion of Lender, are necessary or desirable at any time or from time to time hereafter, in connection with: (a) the collection or enforcement of the Credit; (b) the preservation of collateral; (c) the sale disposition, or other realization upon, or the recovery of possession of, the collateral; or (d) the filing and prosecution of a complaint with respect to any of the above matters or the defense of any claim, actual or threatened, by Obligor, a receiver or trustee in bankruptcy for, or other
representative of any Obligor or third party, for, on account of, or with respect to the Credit or the Credit Agreements and shall include the amount of any recovery from Lender in such litigation or proceeding, whether by settlement or pursuant to a judgment that is not attributed to the gross negligence or willful misconduct of the Lender.

“Institutional Investor” means any: (a) insurance company as defined in Section 2(13) of the Securities Act of 1933, as may be amended from time to time (the “Act”); (b) any employee benefit plan within the meaning of the Title 1 of the Employee Retirement Income Security Act of 1974 which has investment decisions made by a plan fiduciary, as defined in Section 3(21) of the Act, which is either a bank, savings and credit association, insurance company, or registered investment adviser, or has total assets in excess of $5,000,000; or (c) any bank as defined in Section 3(a)(2) of the Act or savings and credit association or institution
as defined in Section 3(a)(5)(A) of the Act or any real estate investment trust (REIT) as defined under the Internal Revenue Code of 1986, as amended.

  

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”Other Participants” means any entity other than the Participant that holds a Participation Interest.

“Participation Amount” means the amount so designated in Exhibit B.

“Participation Interests” means the individual interest of the Participants in the Credit.

“Participation Percentage” means the Participation Amount divided by the entire original committed principal amount of the Credit times 100.

"Representatives" means officers, directors, employees or agents of Lender.

3.           Representations and Warranties.

3.1           Representations and Warranties of Participant:  Participant hereby represents and warrants to Lender and Other Participants that as of the date of this Agreement:

	
a.

	
Except as otherwise required by law, non-public information regarding Obligor given by Lender to Participant, exclusive of information received by Participant from sources other than Lender, will be treated by Participant as confidential, will not be disclosed to any other party without Lender’s and Obligor’s prior written consent other than to such advisors, attorneys, directors, officers, agents and employees as necessary to enable Participant to effectively analyze the Credit or to any governmental or quasi-governmental agency involved in the regulation of Participant and will not be used by Participant or any of its affiliates for any purposes other than as contemplated by this Agreement;

	
b.

	
It has been granted access to, and received all of, the information it has requested or believes to be necessary to enable it to make an independent and informed judgment with respect to the creditworthiness of the Obligor including information provided to Participant by Lender;

	
c.

	
It has, without reliance on Lender, any other Credit Provider or Representatives of the Lender, and instead in reliance upon information supplied to it by or on behalf of the Obligor and upon such other information as Participant has deemed appropriate, made its own independent credit analysis and decision to purchase its Participation Interest in the Credit;

	
  

	
It agrees that it shall, independently and without reliance upon the Lender, any other Credit Provider or Representatives of the Lender, continue to make its own independent credit analysis and decisions in acting or not acting under this Agreement and the Credit Agreements; provided Lender shall provide to Participant on a timely basis, all information received by Lender from or on behalf of Obligor necessary to enable Participant to make such analysis and decision as well as continued reasonable access to inspect loan documents and information within forty-eight hours of request;

	
d.

	
It has received and made a complete examination of the Credit Agreements and approves of the form and content of such;

	
e.

	
It acknowledges that Lender has made no guaranty of repayment, it being understood that it shall look only to the Obligor and the collateral, if any, for repayment of the Credit;

	
f.

	
It is acquiring the Participation Interest in the Credit for its own account in respect of a commercial transaction made in the ordinary course of its commercial banking business with the present intention to hold the same and not for resale, subdivision, release or distribution thereof;

	
g.

	
It represents that it is an Institutional Investor and that its execution and delivery of this Agreement and its purchase of an Interest in the Credit does not constitute a violation of any agreement, law, statute, regulation, including legal lending limits, which is binding on it;

 

 

  

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h.

	
It does not consider acquisition of the Participation Interest hereunder to constitute the "purchase" or "sale" of a "security" within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934 or Rule 10b-5 promulgated thereunder, the Trust Indenture Act of 1939, the Securities Act of the State of West Virginia, any other applicable securities statute or law, or any rules or regulations under any of the foregoing and that such participation merely constitutes a commercial transaction by Participant with Lender regarding Participant's Pro Rata Part of the obligations of Borrower under the Credit Documents and does not represent an "investment" (as that term is commonly understood) in Lender or Borrower.

	
i.

	
It acknowledges that the interests of the Credit Providers shall be pari passu and no party shall have any priority over the other; and

	
j.

	
It shall not make any public announcement or employ any advertising, including without limitation, press releases or “tombstone advertisements”, with respect to the transactions contemplated hereby, or include Obligor’s name on any client lists, without Obligor’s and Lender’s prior written approval.

	
k.

	
It shall not contact the Borrower either via mail, telephone, fax or e-mail.

	
3.2

	
Representations and Warranties of Lender:   Lender hereby represents and warrants to Participant that as of the date of this Agreement:

	
(a)

	
Lender is the legal and beneficial owner of the interest being sold by it hereunder, and upon funding by Participant such interest is owned by Lender free and clear of any and all liens and has not been pledged or encumbered,

	
(b)

	
Lender has full power, authority and legal right and has taken all actions necessary to execute and deliver this Agreement and perform its obligations hereunder,

	
(c)

	
This Agreement has been duly executed and delivered by a duly authorized officer of the Lender and constitutes a legal and binding obligation of the Lender enforceable against the Lender in accordance with its terms,

	
(d)

	
This Agreement and the Participation Certificate with respect to the Participation Amount, constitutes a valid sale and assignment of an undivided Pro Rata interest in the Credit, Credit Agreements and the collateral described in the Credit Agreements to the extent of the Participation Amount enforceable against all creditors of and purchasers from the Lender,

	
(e)

	
Its execution and delivery of this Agreement and its sale of the Participation Interest hereunder does not constitute a violation of any agreement, law, statute, regulation, including legal lending limits which is binding on it,

	
  

	 

	
(f)

	
It acknowledges that the interests of the Credit Providers shall be pari passu and no party shall have any priority over the other,

	
(g)

	
Lender has in its possession, or will have in its possession prior to Participant’s acquisition of the Participation Interest, executed and, where appropriate, acknowledged counterparts of the Credit Agreements, which are genuine and all copies of documents concerning the Credit are, to the best of Lender’s knowledge, accurate and complete copies of those documents within the Lender’s file

	
(h)

	
To the best of its knowledge, there is no default, event of default, breach, violation or event of acceleration of a material nature existing under the Credit Agreements,

	
 (i)

	
Lender has no knowledge of any pending litigation which would affect the title or interest of Lender in the Credit Agreements or the secured property or the marketability of the Credit,

	
 (j)

	
The relationship between Lender and the Obligor is and will continue to be during the term of this Agreement one of lender and borrower; Lender is not a partner or joint venture with the Obligor, nor is Lender an agent of the Obligor, or vice versa; and, except as set forth in the Credit Agreements, Lender has no interest whatsoever in the secured property, and

 

 

  

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 (k)

	
Lender has provided Participant with copies of all materials information currently in Lender's possession regarding the Obligor and the collateral, which was used by Lender in its decision to make the Loan to Obligor, including reports, appraisals, and due diligence conducted by Lender and other related and material information currently in the possession of Lender.

	
  

	
Lender further represents and warrants that it has in its possession all original Credit Agreements and that it shall maintain all records and documents evidencing the Credit and which accurately reflect Obligor’s performance regarding the Credit in accordance with standard operating procedure and in the ordinary course of business.  Subject to the direction of its Participants, Lender will use its best effort to enforce the terms and provisions of the Credit Agreements.  Lender has provided Participant with copies of the Credit Agreements that were executed or that are to be executed by Obligor as well as by other co-makers, guarantors and endorsers under the Credit, Credit Agreements or loan. Except as set forth in this Section 3.2 Lender makes no other
representations or warranties.   The provisions of this Section 3.2 shall survive any termination of this Agreement.

	
4.

	
AGREEMENTS.

	
4.1

	
Rights Reserved.  Lender hereby reserves the right:

	
a)

	
Subject to this Agreement, to offer and sell additional participations in the Credit to Institutional Investors.

	
(b)

	
To re-sell any Participation Interest re-purchased by it.

	
(c)

	
Upon thirty (30) days’ notice (unless waived by Participant) pay to Participant all principal, interest and fees then owing the Participant in respect to it Pro Rata Part, thereby terminating this Agreement.

	
(d)

	
To assign, pledge, grant a security interest in, or transfer its Participation Interest in the Credit and this Agreement to a third party as security for any Credit obtained by Lender from such third party, and in furtherance thereof, Lender may assign, pledge or grant a security interest in the Credit Agreements under such documentation as such third party may require (the “Third-Party Security Documents”), so long as the Third-Party Security Documents recognize the priority right of Participant hereunder.  Pursuant to any Third-Party Security Documents, the holder thereof may be entitled upon a default under the loan made to Lender to realize upon and exercise rights under the Third-Party Security Documents and succeed to the interest of Lender in any Credit
Documents and this Agreement and shall thereafter be substituted in place of Lender as lender under this Agreement.

	
4.2

	
Purchase and Sale; Appointment as Agent; Administrative Powers.

	
(a)

	
Lender hereby sells, and Participant hereby purchases, an undivided interest in and to the Credit and the Credit Agreements in an amount equal to Participant’s Participation Percentage.  It is intended the Participants’ interest be an equitable interest in the Credit, the Credit Agreements and the collateral described in the Credit Agreements as contemplated by Section 541(d) of the Bankruptcy Code.  Lender holds for its and Participant’s proportional benefit all collateral described in the Credit Agreements securing performance and payment of Obligor’s and any guarantor’s obligations and liabilities under the Credit Agreements. Except as expressly provided herein to the contrary the sale and purchase of the participation hereunder shall be
without recourse on or representation or warranty by Lender.  Lender shall have no obligation to repurchase the Participation sold under this Agreement upon any default by Borrower under any of its obligations or otherwise.

	
(b)

	
This Agreement creates a participation in the Credit and the Credit Agreements only and is not intended to form a partnership or joint venture between Lender and Participant.  Participant hereby appoints Lender as its nominal payee and agent under the Credit Agreements to take such action on behalf of Participant and to exercise such powers under this Agreement and the Credit Agreements as are delegated to the Lender by the terms thereof or are reasonably incidental, as determined by the Lender, thereto and Lender hereby agrees to act as such.

	
(c)

	
Without limiting rights to which Participant otherwise is or may be entitled, Participant shall have no interest, by virtue of this Agreement and Participant's rights hereunder, in (a) any present or future loans from, letters of credit issued by, or leasing or other financing transactions by Lender to, on behalf of, or with Borrower (collectively, the "other financings") other than the credit facilities provided for under the Credit Agreements, (b) any present or future guaranties by or for the account of Borrower which are not contemplated in the Loan Agreement (c) any present or future offset exercised by Lender in respect of such other financings, (d) any present or future property taken as security for any such other financings, or (e) any property now or hereafter in the possession or
control of Lender which may be or become security for the obligations of Borrower which may be or becomes security for the obligations of Borrower arising under any Loan Documents by reason of the general description of indebtedness secured or of property contained in any other agreements, documents, or instruments related to any such other financings; provided that, if payments in respect to such guaranties or such property or the proceeds thereof shall be applied to the obligations of the Borrower arising under the Credit Documents, then Participant shall be entitle to share in such application according to its Pro Rata Part Interest.

 

 

  

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(d)

	
Lender agrees to administer the Credit in a commercially reasonable manner consistent with the manner in which similar credits would be administered and shall exercise that degree of care that would ordinarily be exercised by lenders administering a revolving line of credit loan and otherwise in accordance with the usual practices and procedures employed by Lender on similar accounts in which it has no participants and Lender agrees to take such actions as it deems to be necessary or appropriate to monitor and maintain the Credit agreements on behalf of the Credit Providers in such manner. Neither Lender nor its Representatives shall be liable for any action taken or omitted to be taken by it or them under this Agreement or the Credit Agreements in good faith and believed by it or them to
be within the discretion or power conferred upon it or them by this Agreement or the Credit Agreements. Lender may, at any time, without the consent of Participants but subject in any event to Section 4.6 of this Agreement, amend, modify, supplement, or waive provisions of the Credit Agreements only for the purposes of curing an ambiguity, or curing, correcting or supplementing any defective or inconsistent provision contained in the Credit Agreements, correcting or amplifying the description of any property subject to lien under the Credit Agreements, or adding additional property as security for the Credit provided Lender shall promptly deliver to Participant copies of any documents (including without limitation, correspondence or other agreements) reflecting or memorializing the same.

	
(e)

	
To the extent not already available to Participant, Lender shall use its best efforts to provide available credit information on the Obligor to the Participant on a continuing basis as available.  Lender shall timely transfer all financial and non-financial information bearing on the quality of the Loan, which information shall be or is required to be furnished by Obligor from time to time under the Credit Agreements.  Lender shall promptly deliver to Participant by telecopier, overnight delivery or e-mail true and complete copies of the following: (1) all notices of default given or received under the Credit Agreements, (2) all compliance certificates executed by Obligor and received by Lender, (3) all financial statements and copies of other reports required to be
delivered under the Credit Agreements, and (4) any and all other documents or materials delivered by Obligor to Lender or by Lender to Obligor in connection with the Credit, including, without limitation, all draw package materials. Notwithstanding the above nothing contained in this paragraph shall impose any liability upon Lender for its failure to provide Participant any of such information or financial statements except for Lender's own bad faith, willful misconduct or gross negligence.

	
(f)

	
Lender shall maintain books and records reflecting all transactions relating to the Credit, which shall be available for inspection and copying by Participant and its agents during Lender’s office hours.  Lender shall segregate from its own funds Participant’s share of any Collections received.

4.3           Disbursements.  Participant and Lender hereby agree that Lender shall make Advances of proceeds of the Credit in accordance with the terms and conditions of the Credit Agreements.  Each Advance shall be disbursed ratably for the account of all Participants in their respective Participation Percentage.

Participant shall pay its Pro Rata part of all Extraordinary Expenses and other expenses incurred by Lender (but not vice-versa) in connection with enforcement of all obligations of Borrower under the Credit Agreements and Participant shall be entitled to a Pro Rata part of any payments subsequently received by Lender with respect to such fees and expenses.

For each Advance, Lender shall give Participant, notice, to be confirmed in writing delivered by telecopier.  Such notice shall include a calculation of the amount due from Lender to Obligor, a calculation of the amount due from Participant to Lender, the date such funds are due (no earlier than two Business Days from the date of such notice), and appropriate electronic funds transfer instructions.

  

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Participant shall, on or before 2:00 p.m. Eastern Time on the day of a requested Advance, deposit in Lender’s specified settlement account, in federal funds or other funds current in Huntington, West Virginia, Participant’s share of  such Advance, subject to the conditions of the Credit Agreements. If the requested funds are deposited in Lender’s specified account or wired to Lender after 2:00 p.m. Eastern Time, the funds shall be credited the next business day.

In the event Participant fails to furnish Lender at the time called for an Advance with immediately available funds equal to its Participation Percentage of such Advance for Extraordinary Expenses, and if applicable, approved previously by a Simple Majority of Participants as described in Section 4.6(c), and provided that such failure is in no way through fault of or error by Lender, Lender shall have the right, but not the obligation, to advance such funds on behalf of Participant.  Any funds so advanced shall constitute a loan to Participant from Lender bearing interest at the rate in effect under the Credit Facility from the date advanced and shall be due and payable upon demand.

If Lender is required to refund to Obligor any amount in connection with this Agreement, then Participant shall pay to Lender its Participation Percentage of the refund.  Furthermore, Participant agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of any amount due with respect to the Credit, Participant shall pay the same over to Lender for distribution by Lender among Participants as Collections.

4.4           Collections.  Lender shall collect from Obligor any and all Collections on behalf of Participant and Other Participants.  The amount of the Participant’s payment from any Collections shall be that amount equal to its Participation Percentage thereof.  Lender shall promptly account for, and within two Business Days of Lenders’ receipt of such Collections pay to, Participant by electronic funds transfer Participant’s Participation Percentage of any and all such Collections in current funds.  Until remitted,
Lender will hold Participant’s Participation Percentage of Collections as agent.

Except as expressly provided herein to the contrary, all rights pursuant to the Credit Agreements held by Lender to secure payment of the obligations of Borrower under the Credit Agreements shall be so held (and such rights shall be exercised) for the ratable benefit of Lender and all Participants.  Under the Credit Agreements, each sum shall be shared in a manner so that Participant receives (or retains up to but not in excess of) its Pro Rata Part thereof.

4.5           Default and Enforcement of Remedies.  With respect to Events of Default and Enforcement of Remedies as those terms are defined under the Credit Agreements, Participant agrees and acknowledges:

	
(a)

	
Although nothing herein shall be construed as requiring Lender to advance its own funds other than as may be required if it is a Participant in the Credit, if Lender advances its own funds on behalf of Obligor and if,  Obligor has not repaid such advance in accordance with the terms of the Credit Agreement, Lender may declare such failure to constitute an Event of Default and may take action to collect and enforce payment and performance regardless of whether any Participant has consented to the same;

	
(b)

	
Lender may assume that no default or Event of Default has occurred and is continuing unless Lender has actual knowledge of a default or Event of Default;

	
(c)

	
In the event that Lender acquires actual knowledge of any default under the Credit Agreement, Lender shall, as soon as possible, give Participant notice of such default.  Further, Lender shall deliver to Participant any written notice of default sent to Obligor;

	
(d)

	
In the event that enforcement actions are instituted, Lender shall keep Participant informed as to the progress of the proceedings; and

	
(e)

	
If Lender is of the opinion that the services of an Advisor should be retained for the protection of the interests of the Credit Providers, Lender shall select and retain, in its reasonable sole discretion, such Advisor to represent the Credit Providers.  To the extent an Advisor will be engaged pursuant to this Section 4, Lender will notify in writing all Participants of the identity of such Advisor and to the extent practicable, provide a budget for the estimated costs in connection with the engagement.  Lender may act on the advice of, or on the basis of information obtained from, any Advisor; provided that Lender;

  

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(i)

	
Shall have used reasonable care in the selection of such person;

	
(ii)

	
Shall not be responsible for any gross negligence or willful misconduct on the part of any such Advisor;

	
(iii)

	
Shall not be responsible for any loss occasioned by acting on such advice or assistance unless such action constitutes gross negligence or willful misconduct on the part of Lender; and

	
(iv)

	
Shall be entitled to pay reasonable compensation for such advice or assistance, such compensation shall constitute an Extraordinary Expense and, upon demand of Lender, shall be paid by the Participant to the extent of its Participation Percentage.

Provided further that Lender may, in its reasonable sole discretion, require Participant to fund such Extraordinary Expenses in advance when based on a reasonable estimate from such Advisor.  Lender shall refund to Participant any unused portion of such advance in Extraordinary Expenses.

	
4.6

	
Participant Direction of Certain Acts by Lender.  For all actions not administrative in nature as contemplated in Section 4.2(c) hereof Lender will act at the direction of Participants.  To that end Lender shall obtain such direction as follows:

	
(a)

	
Lender agrees that it shall act only at the direction of all Credit Providers holding one hundred percent (100%) of the Credit if the proposed action would be tantamount to creating a loan fundamentally different from that in which Participants purchased a participation.  Such a fundamental alteration shall be deemed to originate in the following: (a) release or replacement of Obligor or Guarantor(s), (b) extension of the maturity date, (c) decrease in the interest rate, (d) increase in the principal amount of financing;

	
(b)

	
In addition, Lender agrees that it shall act at the direction of Participants holding a one hundred percent (100%) if the proposed action in effect constitutes a restructure within the existing Credit.  Such a restructure shall be deemed to originate in the following (a) acceleration of the maturity of the indebtedness, (b) a material revision to schedule for payment of any principal, interest or other payment under the Credit Agreements (provided that Lender may waive late fees in the ordinary course of administration of the Loan, in its discretion), (c) release of any collateral for the Credit except as may be provided in the Credit Agreement, (d) modification of financial covenants imposed on Obligor in the Credit Agreements; (e) commencement of foreclosure; (f) exercise of any
power of sale; and (g) acceptance of a deed in lieu of foreclosure; and

	
(c)

	
Lender agrees that it shall act at the direction of Participants holding a Simple Majority Interest (i.e., Participants holding a total prorate share of the Credit equal to or greater than 51%) with regard to any material modification, waiver, forbearance, or indulgence under the Credit Agreements that does not require the consent expressly established in 4.6(a) above.

For all actions that require Lender to obtain direction of Participants, Lender shall provide in writinginformation regarding the action requiring Participant consent (each such action, a “Proposed Action”) withina reasonable amount of time of its receipt of certain knowledge that action is required.

	
4.7

	
Priority in Proceeds from Collateral.  Proceeds from the liquidation and sale of Collateral shall be split prorate.

	
5.

	
SUBSTITUTION OF PARTIES.

	
5.1

	
Subparticipation by Participant.  Participant may assign its Participation Interest provided that:

	
(a)

	
Participant shall remain liable for its obligations under this Agreement and Lender and Other Participants shall have no obligations to any subparticipant of Participant (“Assignee of Participant”), but shall be entitled to continue to look solely to Participant for the performance of Participant’s obligations and the exercise of Participant’s rights under this Agreement.

	
(b)

	
The Subparticipant is an Institutional Investor that has made its own credit decision and has not relied on Lender in connection with its purchase of the subparticipation interest; and

	
(c)

	
Lender shall be notified in writing by the Participant of the name and address of the Subparticipant.

  

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5.2

	
Sale of Participant’s Interest.  Notwithstanding anything contained in this Agreement, Participant shall have the right to sell, transfer or assign its Participation Interest to an affiliate of Participant, an entity owning or controlling Participant, or an entity that Participant merges with, is merged into, consolidates with, or is consolidated into (collectively referred to in this section as an “affiliate”), that meets the definition of Institutional Investor without the consent of Lender. Participant may not sell without the written consent of Lender, its Participation Interest to any Non-affiliated entity.

	
5.3

	
Assignment by Lender.  Lender may assign its rights and obligations under this Agreement:

(a)           An affiliate or subsidiary of the Lender;

(b)           An entity owning or controlling the Lender;

(c)           An entity that Lender merges with, is merged into, consolidates with, or its consolidated into,Lender; or

(d)           An entity that acquires the majority of the assets of Lender or a majority of whose assets areacquired by Lender.

Lender shall provide written notice of any such assignment provided in (a) through (d) above to all other Credit Providers within thirty (30) days after the date of such assignment.

6.           INDEMNIFICATION.  Participant hereby agrees to indemnify and hold harmless the Lender and its directors, officers, employees, and affiliates (each of the foregoing entities an “Indemnified Person”) from Participant’s Participation Percentage of any losses, claims, damages, liabilities, or other expenses to which such Indemnified Person may become subject, insofar as such losses, claims, damages, liabilities or other expenses (or actions or other proceedings commenced or threatened in respect thereof) that arise out of, or in any way
relate to, or result from, breach by Participant of this Agreement. Participant further agrees to reimburse each Indemnified Person from Participant’s Participation Percentage of any legal or other expenses incurred in connection with investigating, defending, or participating in any such loss, claim, damage, liability, or action or other proceeding (whether or not such Indemnified Person is a party to any action or proceeding out of which any such expenses arise).

Lender hereby agrees to indemnify and hold harmless Participant and its directors, officers, employees, and affiliates (each of the foregoing entities “Indemnified Person of Participant”) in connection with any losses, claims, damages, liabilities, or other expenses to which such Indemnified Persons of Participant may become subject, insofar as such losses, claims, damages, liabilities or other expenses (or actions or other proceedings commenced or threatened in respect thereof) arise out of, or in any way relate to, or result from breach by Lender of this Agreement or actions or omissions of Lender in servicing this Agreement. Lender further agrees to reimburse each Indemnified Person of Participant
for any legal or other expenses incurred in connection with investigating, defending, or participating in any such loss, claim, damage, liability, or action or other proceeding (whether or not such Indemnified Person of Participant is a party to any action or proceeding out of which any such expenses arise).  Notwithstanding anything to the contrary in this section or this Agreement, Participant shall have no obligation to indemnify and hold Lender harmless from and against any loss or liability with respect to any action taken or omitted by Lender that constitutes gross negligence or willful misconduct in the servicing of the Credit or account or in the carrying out of the terms of the Credit Agreements.

No party shall have an obligation hereunder to indemnify any indemnified person for any loss, claim, damage, liability, or expense which resulted from the gross negligence or willful misconduct of such indemnified person.  Nor shall either Lender or Participant be responsible or liable to the other for consequential damages which may be alleged as a result of this Agreement.

No Participant shall be required to provide Extraordinary Expenses in excess of the amount that is Pro Rata to its Participation Interest due to failure of any other Participant to provide required funding.

The provisions of these paragraphs shall survive any termination of this Agreement.

Each Participant agrees that all rights and remedies of the Lender shall be exercised by the Lender and no Participant may independently exercise any such rights or remedies of the Lender under the Credit Agreements.

  

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7.           TERMINATION.  This Agreement shall terminate upon payment in full of all amounts owed pursuant to the terms of the Credit Agreement, or if all such amounts cannot be paid, upon final resolution of pursuit of remedies.

8.           MISCELLANEOUS.

8.1           Notices.  All notices and other communications permitted or required by this Agreement (except telephonic or e-mail notices where expressly permitted) shall be given by facsimile, e-mail or by depositing such with a reputable private courier, addressed as provided in Exhibit B.  Each such notice shall be effective upon receipt (or in the case of facsimile notice, upon confirmation of transmission).

The time period within which a response to any such notice must be given, however, shall commence to run from the date of receipt of the notice by the addressee thereof.  Rejection, other refusal to accept, or the inability to deliver because of changed address of which no notice was given, shall be deemed to be receipt of the notice sent.

By giving the other party hereto at least ten (10) days’ notice thereof, either party hereto shall have the right from time to time and at any time during the term of this Agreement to change its address and shall have the right to specify as its address any other address within the United States of America.

Lender and Participant may act upon any written or oral notice reasonably believed by it to be genuine.

8.2           Successors.  This Agreement shall apply to, inure to the benefit of, and be binding upon and enforceable against the parties hereto, and to the extent permitted hereunder, their respective successors and assigns, to the same extent as if specified at length throughout this Agreement.

8.3           Time of the Essence. Time is of the essence of this Agreement and each and every date set forth herein.

8.4           Governing Law.  This Agreement shall be deemed to constitute a contract under and shall be construed and enforceable in accordance with the laws of the State of West Virginia and within the jurisdiction of the State of West Virginia.

8.5           Amendment.  Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge, or termination is sought.

8.6           Construction.  Headings in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

8.7           Entire Agreement.  This Agreement and the Certificate of Participation contain the entire understanding of the parties hereto with respect to the transaction contemplated hereby and supersedes all prior agreements and understandings between the parties with respect to such subject matter.

8.8           Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers.

	
LENDER:

	  
	
UNITED BANK, INC.

	
a West Virginia banking corporation

	  
	
By:

	  
	
Its:

	  
	
Date:

  

9

  

	
PARTICIPANT:

	  
	
Summit Community Bank

	
a West Virginia banking corporation

	  
	
By:

	  
	
Its:

	  
	
Date:

  

10

  

EXHIBIT A

Credit Agreements

	
1.

	
Loan Agreement

	
2.

	
$8,813,274.64 Note

	
3.

	
Security Agreement

	
4.

	
Guaranty

	
5.

	
UCC Financing Statements

	
6.

	
Landor Waiver and Consent

	
7.

	
Secretary Certificates

	
8.

	
Statement of Receipts and Disbursements

  

11

  

EXHIBIT B

Form of

Certificate of Participation

THIS IS TO CERTIFY that Summit Community Bank (“Participant”), pursuant to the provisions of that certain Participation Agreement dated January 31, 2014 (the “Agreement”) between Participant and United Bank, Inc. (“Lender”), has a participation in the following financing:

	
Obligor

	
Energy Services of America Corporation

	  	
C. J. Hughes Construction Company, Inc.

	  	
Nitro Electric Company, Inc.

	  	
Contractors Rental Corporation

	  	
ST Pipeline, Inc.

	
Name of Obligor’s obligation

	
Term Loan

	
Total committed amount

	
$8,813,274.64

	
Date of credit facility

	
January 31, 2014

	
Address for notices

	
United Bank, Inc.

	  	
2889 Third Avenue

	  	
Huntington, WV  25702

	
Participant

	  
	
Participation Amount

	
$4,052,451.74

	
Participation Percentage

	
45.98122%

	
Participation Interest Rate

	
6.5% fixed

	
Participation Fee

	
$41,383.09

	  	
45,981.22% of $90,000.00

	
Address for notices:

	
Summit Community Bank, Inc.

	  	
2402 Mountaineer Blvd.

	  	
Charleston, West Virginia 25309

	  	
Facsimile No.: (304) 530-0993

 

THIS CREDIT PARTICIPATION, INCLUDING TRANSFER HEREOF, IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PARTICIPATION AGREEMENT BETWEEN LENDER AND PARTICIPANT OF EVEN DATE HEREWITH.

	
UNITED BANK, INC.

	
Lender

	  
	  
	  
	
Name

	
Title

  

12

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