Execution version

 

LOAN AND SECURITY AGREEMENT

 

AMONG

 

GERBER FINANCE INC.

as Lender

 

and

EDGEBUILDER, INC., a Delaware corporation

and GLENBROOK BUILDING SUPPLY, INC., a Delaware corporation

as Borrowers

 

STAR REAL ESTATE HOLDINGS USA, INC., a Delaware corporation,
300 PARK STREET, LLC, a Delaware limited liability company,
947 WATERFORD ROAD, LLC, a Delaware limited liability company,
56 MECHANIC FALLS ROAD, LLC, a Delaware limited liability company,
ATRM HOLDINGS, INC., a Minnesota corporation,
KBS BUILDERS, INC., a Delaware corporation,
and DIGIRAD CORPORATION, a Delaware corporation

as Corporate Credit Parties

 

Dated: January 31, 2020

 

 

Table of Contents

 

Page

 

I. DEFINITIONS 1         1.1 General Definitions 1           1.2 Accounting
Terms 17           1.3 Other Terms 17           1.4 Rules of Construction 18    
    II. LOANS 18         2.1 Revolving Credit Advances 18         III. REPAYMENT
19         3.1 Repayment of the Revolving Credit Advances 19         IV.
PROCEDURES 20         4.1 Procedure for Revolving Credit Advances 20         V.
INTEREST AND FEES 20         5.1 Interest and Fees 20         VI. CONDITIONS
PRECEDENT 22         6.1 Conditions Precedent to Initial Loans 22           6.2
Conditions Precedent to each Loan 22         VII. REPRESENTATIONS, WARRANTIES
AND COVENANTS 23         7.1 Corporate Existence; Compliance with Law 23        
  7.2 Names; Organizational Information; Collateral Locations 23           7.3
Power; Authorization; Enforceable Obligations 24           7.4 Financial
Statements and Projections; Books and Records 24           7.5 Material Adverse
Change 24           7.6 Real Estate; Property 25           7.7 Ventures,
Subsidiaries and Affiliates; Outstanding Stock and Indebtedness 25

 

i

 

  7.8 Government Regulation; Margin Regulations 25           7.9 Taxes; Charges
25           7.10 Payment of Obligations 26           7.11 ERISA 26          
7.12 Litigation 26           7.13 Intellectual Property 27           7.14 Full
Disclosure 27           7.15 Hazardous Materials 27           7.16 Insurance 27
          7.17 Deposit and Disbursement Accounts 28           7.18 Accounts 28  
        7.19 Conduct of Business 29           7.20 Further Assurances 29        
VIII. FINANCIAL REPORTS; FINANCIAL COVENANTS 29         8.1 Reports and Notices
29           8.2 Financial Covenants 30           8.3 Other Reports and
Information 30           8.4 Good Standing Certificates 31         IX. NEGATIVE
COVENANTS 31       X. SECURITY INTEREST 32         10.1 Grant of Security
Interest 33           10.2 Lender’s Rights 35           10.3 Lender’s
Appointment as Attorney-in-Fact 36           10.4 Grant of License to Use
Intellectual Property Collateral 36           10.5 Terminations; Amendments Not
Authorized 37

 

ii

 

  10.6 Inspections 37           10.7 Inapplicability 37         XI. TERM 37    
    11.1 Term of Agreement 37           11.2 [Intentionally Omitted] 38        
  11.3 Termination of Lien 38         XII. EVENTS OF DEFAULT 38         12.1
Events of Default 38           12.2 Lender Remedies 40           12.3 Waivers 41
          12.4 Proceeds 42         XIII. MISCELLANEOUS 42         13.1 No
Waiver; Cumulative Remedies 42           13.2 Amendments and Waivers 42        
  13.3 Expenses; Indemnity 42           13.4 Borrowing Agency Provisions.   43  
        13.5 Guaranty 44           13.6 Waivers 45           13.7 Benefit of
Guaranty 45           13.8 Subordination of Subrogation 45           13.9
Election of Remedies 45           13.10 Liability Cumulative 46           13.11
Waiver of Subrogation 46           13.12 Further Assurances 46           13.13
Successors and Assigns 46

 

iii

 

  13.14 Descriptive Headings 46           13.15 Rules of Construction 46        
  13.16 Notices 47           13.17 Severability 47           13.18 Entire
Agreement; Counterparts.   47           13.19 SUBMISSION TO JURISDICTION.   47  
        13.20 WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS.   48        
  13.21 GOVERNING LAW 48           13.22 Reinstatement 49

 

iv

 

INDEX OF EXHIBITS AND SCHEDULES

 

Schedule I - General Terms for Letter of Credit Schedule II - Conditions
Precedent Schedule III - Financial Covenants Schedule IV - Cash Management
Schedule V - Addresses for Notices Schedule VI   Borrowing Base Certificate
Reporting       Attachment A - Fees, Charges and Commissions       Exhibit A -
Form of Note Exhibit B - Form of Monthly Statement Report Exhibit C - Form of
Borrowing Base Certificate Exhibit D - Form of Certificate of Compliance Exhibit
E - Form of Power of Attorney Exhibit F - Form of Accountant’s Letter Exhibit G
- Form of Officer’s Certificate Exhibit H - Form of Account Debtor Notification
Letter Exhibit I - Form of Intellectual Property Security Agreement

 

Disclosure Schedule 7.2 - Perfection Certificate Disclosure Schedule 7.6 - Real
Estate Disclosure Schedule 7.7 - Ventures, Subsidiaries and Affiliates
Disclosure Schedule 7.9 - Taxes Disclosure Schedule 7.12 - Litigation Disclosure
Schedule 7.13 - Intellectual Property Disclosure Schedule 7.15 - Environmental
Matters Disclosure Schedule 7.16 - Insurance Disclosure Schedule 7.17 - Deposit
and Disbursement Accounts Disclosure Schedule 9(b) - Indebtedness Disclosure
Schedule 9(e) - Permitted Liens

 

v

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement is made as of January 31, 2020 by and among
GERBER FINANCE INC., a New York corporation (“Lender”) EdgeBuilder, Inc., a
Delaware Corporation and Glenbrook Building Supply, Inc., a Delaware corporation
(individually, “Initial Borrower”) and, collectively, if more than one, the
“Initial Borrowers”), and together with each other Person which, on or
subsequent to the Closing Date, agrees in writing to become a “Borrower”
hereunder, herein called, individually, a “Borrower” and, collectively, the
“Borrowers,” and pending the inclusion by written agreement of any other such
Person, besides each Initial Borrower, as a “Borrower” hereunder, all references
herein to “Borrowers,” “each Borrower,” the “applicable Borrower,” “such
Borrower” or any similar variations thereof (whether singular or plural) shall
all mean and refer to the Initial Borrower or each one of them collectively) and
any other Credit Party executing or becoming a party to this Agreement.

 

BACKGROUND

 

Borrowers have requested that Lender make loans and advances available to
Borrowers; and

 

Lender has agreed to make such loans and advances to Borrowers on the terms and
conditions set forth in this Agreement and any amendment thereto.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
undertakings and terms and conditions contained herein, the parties hereto agree
as follows:

 

I.DEFINITIONS

 

1.1                    General Definitions. When used in this Agreement, the
following terms shall have the following meanings:“Account Control Agreement”
has the meaning set forth in Schedule IV.

 

“Account Debtor” means any Person who is or may become obligated with respect
to, or on account of, an Account, Chattel Paper or General Intangibles
(including a Payment Intangible).

 

“Accounts” means all “accounts”, as such term is defined in the UCC, now owned
or hereafter acquired by any Person.

 

“Accounts Availability” means the amount of Revolving Credit Advances against
Eligible Accounts Lender may from time to time make available to a Borrower up
to Eighty percent (80%) of the net face amount of such Borrower’s Eligible
Accounts less the Dilution Reserve.

 

 

“Affiliate” means with respect to any Person (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power for the election of directors of such Person; (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person; or (iii) each of such Person’s
officers, directors, joint venturers and partners. For the purpose of this
definition, “control” of a Person means the possession, directly or indirectly,
of the power to direct or cause the direction of its management or policies,
whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Agreement including all appendices, exhibits or schedules
attached or otherwise identified thereto, restatements and modifications and
supplements thereto, and any appendices, exhibits or schedules to any of the
foregoing, each as in effect at the time such reference becomes operative;
provided, that except as specifically set forth in this Agreement, any reference
to the Disclosure Schedules to this Agreement shall be deemed a reference to the
Disclosure Schedules as in effect on the Closing Date or in a written amendment
thereto executed by Borrowers and Lender.

 

“AIA” means American Architectural Institute.

 

“Assignment of Leases” means collectively, any Assignment of Leases which is
executed in favor of Lender to secure the Obligations, including but not limited
to the Assignment of Leases on the Real Estate.

 

“Books and Records” means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to, or otherwise necessary or helpful in the collection of
or realization upon, the Collateral or any Borrower’s business.

 

“Borrower” has the meaning set forth in the preamble to this Agreement.

 

“Borrowing Base” means at any time with respect to any Borrower, an amount equal
to the sum at such time of:

 

(a)       Accounts Availability; plus

 

(b)       Inventory Availability; minus

 

(c)       the Reserves, including without limitation, the amount of Letter of
Credit Obligations.

 

“Borrowing Base Certificate” means a certificate in the form of Exhibit C.

 

“Borrowing Representative” means David J. Noble.

 

“Business Day” means a day on which Lender is open for business and that is not
a Saturday, a Sunday or other day on which banks are required or permitted to be
closed in the State of New York.

 

2

 

“Capital Expenditures” means all payments or accruals (including obligations
under capital leases) for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP.

 

“Cash Collateral Account” has the meaning assigned to it in Schedule I.

 

“Change of Control” means, with respect to any Person on or after the Closing
Date, any change in the composition of such Person’s Stockholders as of the
Closing Date shall occur which would result in any Stockholder or group
acquiring 49.9% or more of any class of Stock of such Person, or that any Person
(or group of Persons acting in concert) shall otherwise acquire, directly or
indirectly (including through Affiliates), the power to elect a majority of the
board of directors or managers of such Person or otherwise direct the management
or affairs of such Person by obtaining proxies, entering into voting agreements
or trusts, acquiring securities or otherwise.

 

“Charges” means all federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of a Credit Party, (iv) the ownership or use
of any assets by a Credit Party, or (v) any other aspect of a Credit Party’s
business.

 

“Chattel Paper” means all “chattel paper,” as such term is defined in the UCC,
now owned or hereafter acquired by any Person.

 

“Closing Date” means the Business Day on which the conditions precedent set
forth in Article VI have been satisfied or specifically waived in writing by
Lender, and the initial Loans has been made.

 

“Collateral” has the meaning assigned to it in Section 10.1.

 

“Collateral Account” means an account in Lender’s name under the dominion and
control of Lender maintained at a financial institution acceptable to Lender
into which all cash, checks, notes, drafts and other similar items relating to
or constituting Proceeds of or payments made in respect of any Collateral shall
be deposited.

 

“Contract Rate” means an interest rate per annum equal to the sum of (i) the
Prime Rate plus (ii) two and three/quarters percent (2.75%).

 

“Contracts” means all the contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Person may now or hereafter have any right, title or interest, including any
agreement relating to the terms of payment or the terms of performance of any
Account.

 

“Contractual Obligation” means as to any Person, any provision of any security
issued by such Person or of any agreement, instrument, or other undertaking to
which such Person is a party or by which it or any of its property is bound.

 

3

 

“Corporate Credit Party” means each Credit Party which is not a natural Person.

 

“Credit Documents” means this Agreement, each Pledge Agreement, the Note, each
Guaranty, each Power of Attorney, each Mortgage, each Life Insurance Assignment,
each Subordination Agreement, each Intellectual Property Security Agreement, and
all other documents, instruments and agreements now or hereafter executed and/or
delivered in connection herewith or therewith.

 

“Credit Parties” means each Borrower and each other Person (other than Lender)
that is or may become a party to this Agreement or any other Credit Document.

 

“Default” means any act or event which, with the giving of notice or passage of
time or both, would unless cured or waived would become an Event of Default.

 

“Default Rate” means the sum of (a) the interest rate or fee in effect from time
to time as respects each Loan and (b) five percent (5%)].

 

“Deposit Accounts” means all “deposit accounts” as such term is defined in the
UCC, now or hereafter held in the name of any Person.

 

“Dilution” means the reduction of Accounts for any reason other than cash
collections, including but not limited to credit memos, bad debt write offs,
discounts, allowances and returns.

 

“Dilution Reserve” means two times the amount of increase in Dilution which
shall be tested upon the earlier of (a) every 6 months or (b) each field
examination.

 

“Disbursement Accounts” has the meaning set forth in Schedule IV.

 

“Disclosure Schedules” means the Disclosure Schedules prepared by Borrowers and
denominated as Disclosure Schedules 7.2 through 9(e) in the Index of Exhibits
and Schedules to this Agreement.

 

“Documents” means all “documents,” as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located, including all bills of
lading, dock warrants, dock receipts, warehouse receipts, and other documents of
title, whether negotiable or non-negotiable.

 

4

 

“Eligible Accounts” means and includes each Account of each Borrower which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) merchandise or services shall not
have been repossessed, returned, rejected or disputed by the Account Debtor and
there shall not have been asserted any offset, defense or counterclaim; (c)
continues to be in full conformity with the representations and warranties made
by any Borrower to Lender with respect thereto; (d) Lender is, and continues to
be, satisfied with the credit standing of the Account Debtor in relation to the
amount of credit extended; (e) there are no facts existing or threatened which
are likely to result in any adverse change in an Account Debtor’s financial
condition; (f) is documented by an invoice in a form approved by Lender and
shall not be unpaid more than ninety (90) days from invoice date; (g) less than
thirty-three percent (33%) of the unpaid amount of invoices due from such
Account Debtor remain unpaid more than ninety (90) days from invoice date; (h)
is not evidenced by chattel paper or an instrument of any kind with respect to
or in payment of the Account unless such instrument is duly endorsed to and in
possession of Lender or represents a check in payment of an Account; (i) if the
Account Debtor is located outside of the United States, the goods which gave
rise to such Account were shipped after receipt by a Borrower from or on behalf
of the Account Debtor of an irrevocable letter of credit, assigned and delivered
to Lender and confirmed by a financial institution acceptable to Lender or
acceptable credit insurance and is in form and substance acceptable to Lender,
payable in the full amount of the Account in United States dollars at a place of
payment located within the United States; (j) Lender has a first priority
perfected Lien in such Account and such Account is not subject to any other Lien
other than Permitted Liens; (k) does not arise out of transactions with any
individual, employee, officer, agent, director, stockholder or Affiliate of a
Borrower; (l) is payable to a Borrower; (m) does not arise with respect to goods
which are delivered on a cash-on-delivery basis or placed on consignment,
guaranteed sale, credit card sale, or other terms by reason of which the payment
by the Account Debtor may be conditional; (n) is not an obligation of an Account
Debtor that has suspended business, made a general assignment for the benefit of
creditors, is unable to pay its debts as they become due or as to which a
petition has been filed (voluntary or involuntary) under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors; (o) does not arise
out of a bill and hold sale prior to shipment (p) does not arise out of a sale
to any Person to which any Borrower is indebted, unless the amount of such
indebtedness, and any anticipated indebtedness, is deducted in determining the
face amount of such Account; (q) is net of any returns, discounts, claims,
credits, retainage and allowances; (r) if the Account arises out of contracts
between a Borrower and the United States, any state, or any department, agency
or instrumentality of any of them, such Borrower has so notified Lender, in
writing, prior to the creation of such Account, and, if Lender so requests,
there has been compliance with any governmental notice or approval requirements,
including compliance with the Federal Assignment of Claims Act; (s) is a good
and valid unbonded account representing an undisputed bona fide indebtedness
incurred by the Account Debtor therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an unconditional sale and delivery
upon the stated terms of goods sold by a Borrower, or work, labor and/or
services rendered by a Borrower; (t) the total unpaid Accounts from such Account
Debtor does not exceed the “Concentration Limit” which means: (a) for any
Account Debtor selected by the Borrowers, thirty percent (30%) of all Eligible
Accounts provided that Accounts from any two (2) Account Debtors do not exceed
fifty percent (50%) of all Eligible Accounts; and (b) for all other Account
Debtors not selected by the Borrowers in subsection (a), twenty percent (20%)
but only the excess above the applicable percentage shall be excluded from
Eligible Accounts; (u) does not arise out of progress billings prior to
completion of the order which are not reported on the Borrowing Base
Certificate; (v) such Borrower’s right to payment is absolute and not contingent
upon the fulfillment of any condition whatsoever or any special order, terms or
conditions; (w) a Borrower is able to bring suit and enforce its remedies
against the Account Debtor through judicial process; (x) does not represent
interest payments, late or finance charges, service charges, taxes owing to or
payable by Borrower; and (y) is otherwise satisfactory to Lender as determined
in good faith by Lender in the reasonable exercise of its discretion.

 

5

 

“Eligible Inventory” means Inventory owned by a Borrower which Lender, in its
sole and absolute discretion, determines: (a) is subject to a first priority
perfected Lien in favor of Lender and is subject to no other Liens whatsoever
other than Permitted Liens; (b) is located on premises owned or operated by a
Borrower in the United States; (c) is located on premises with respect to which
Lender has received a landlord, mortgagee or warehouse agreement acceptable in
form and substance to Lender; (d) is not in transit; (e) is not covered by a
negotiable document of title, unless such document and evidence of acceptable
insurance covering such Inventory has been delivered to Lender; (f) is in good
condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory Governmental Authority over
such Inventory, its use or sale including the Federal Fair Labor Standards Act
of 1938 as amended, and all rules, regulations and orders thereunder; (g) is
currently either usable or saleable in the normal course of a Borrower’s
business; (h) is not placed by a Borrower on consignment or held by a Borrower
on consignment from another Person; (i) is in conformity with the
representations and warranties made by a Borrower to Lender with respect
thereto; (j) is not subject to any licensing, patent, royalty, trademark, trade
name or copyright agreement with any third parties; (k) does not require the
consent of any Person for the completion of manufacture, sale or other
disposition of such Inventory by Lender following an Event of Default and such
completion, manufacture or sale does not constitute a breach or default under
any contract or agreement to which a Borrower is a party or to which such
Inventory is or may be subject; (l) is not a special order, work-in-process or
raw materials or packaging, or sample inventory; (m) is covered by casualty
insurance acceptable to Lender; and (n) not to be ineligible for any other
reason.

 

“Environmental Laws” means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).

 

“Environmental Liabilities” means all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person,
and which relate to any health or safety condition regulated under any
Environmental Law, environmental permits or in connection with any Release,
threatened Release, or the presence of a Hazardous Material.

 

“Equipment” means all “equipment” as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located.

 

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.

 

6

 

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party of any liability under Title IV of
ERISA with respect to the termination of any Plan; (e) the receipt by any Credit
Party from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or to appoint a trustee to administer any Plan;
(f) the incurrence by any Credit Party of any liability with respect to any
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Credit Party of any notice, or the receipt by any Multiemployer
Plan from any Credit Party of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

 

“Event of Default” has the meaning set forth in Section 12.1.

 

“Financial Statements” means income statement, balance sheet, and statement of
cash flows of each Borrower, internally prepared for each Fiscal Month, and
audited financial statements of Digirad Corporation for each Fiscal Year,
prepared in accordance with GAAP.

 

“Fiscal Month” means any of the monthly accounting periods of each Credit Party.

 

“Fiscal Year” means the 12 month period of each Credit Party ending December 31
of each year. Subsequent changes of the fiscal year of each Credit Party shall
not change the term “Fiscal Year” unless Lender shall consent in writing to such
change.

 

“Fixtures” means all “fixtures” as such term is defined in the UCC, now owned or
hereafter acquired by any Person.

 

“GAAP” means generally accepted accounting principles, practices and procedures
in effect from time to time in the United States of America.

 

“General Intangibles” means all “general intangibles” as such term is defined in
the UCC, now owned or hereafter acquired by any Person including all right,
title and interest which such Person may now or hereafter have in or under any
Contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, Software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash Instruments and other
property in respect of or in exchange for pledged Stock and Investment Property,
and rights of indemnification.

 

7

 

“Goods” means all “goods”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in “goods” as defined in the UCC.

 

“Goodwill” means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation (“primary
obligations”) of any other Person (the “primary obligor”) in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent): (i) to purchase or repurchase any such primary obligation;
(ii) to advance or supply funds (a) for the purchase or payment of any such
primary obligation or (b) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor; (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation; or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof.

 

“Guarantor” means each Person (in addition to a Corporate Credit Party as
provided herein) which executes a guaranty or a support, put or other similar
agreement in favor of Lender in connection with the transactions contemplated by
this Agreement.

 

“Guaranty” means any agreement to perform all or any portion of the Obligations
on behalf of any Borrower, in favor of, and in form and substance satisfactory
to, Lender, together with all amendments, modifications and supplements thereto,
and shall refer to such Guaranty as the same may be in effect at the time such
reference becomes operative, including but not limited to those provisions of
Sections 13.5, 13.6, 13.7, 13.8, 13.9, 13.10 and 13.11 hereof.

 

“Hazardous Material” means any substance, material or waste which is regulated
by or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance which is (a) defined as a “solid
waste,” “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or
any radioactive substance.

 

8

 

“Hazardous Waste” has the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.).

 

“Indebtedness” of any Person means: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers’ acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than 60 days past due); (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments; (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property); (iv) all obligations under capital
leases; (v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; (vii) the Obligations; and
(viii) all liabilities under Title III of ERISA.

 

“Indemnified Person” has the meaning given to such term in Section 13.3(b).

 

“Initial Borrowers” has the meaning set forth in the preamble to this Agreement.

 

“Instruments” means all “instruments”, as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.

 

“Intellectual Property” means any and all Licenses, patents, patent
registrations, copyrights, copyright registrations, trademarks, trademark
registrations, trade secrets, domain names, website addresses and customer
lists.

 

“Intellectual Property Security Agreement” means the Intellectual Property
Security Agreement in the form of Exhibit I made in favor of Lender by each
applicable Credit Party.

 

“Intercreditor Agreement” means any intercreditor and subordination agreement
accepted by Lender from time to time.

 

“Inventory” means all “inventory”, as such term is defined in the UCC, now or
hereafter owned or acquired by any Person, wherever located.

 

“Inventory Availability” means the amount of Revolving Credit Advances against
Eligible Inventory Lender may from time to time make available to Borrowers up
to the lesser of (a) $500,000, or (b) up to fifty percent (50%) of the value of
Borrowers’ Eligible Inventory (calculated on the basis of the lower of cost or
market, on a first-in first-out basis) or (c) the amount of Accounts
Availability.

 

9

 

“Investment Property” means all “investment property”, as such term is defined
in the UCC, now owned or hereafter acquired by any Person, wherever located.

 

“IRC” and “IRS” means respectively, the Internal Revenue Code of 1986 and the
Internal Revenue Service, and any successors thereto.

 

“ISP” means the International Standby Practices, International Chamber of
Commerce Publication No. 590, as the same may be amended from time to time.

 

“LC Issuer” shall mean a commercial bank or other financial institution selected
by Lender, in is discretion, to issue Letters of Credit pursuant to this
Agreement.

 

“Lender” has the meaning set forth in the preamble to this Agreement and if
Lender shall decide to assign or syndicate any of the Obligations such term
shall include such assignee or such other members of the syndicate.

 

“Letter of Credit” and “L/C” means a letter of credit issued by an LC Issuer for
Lender’s account, at the request of Borrowing Representative and on behalf of a
Borrower containing terms and conditions satisfactory to Lender, which letter of
credit may either be a commercial letter of credit or standby letter of credit.

 

“Letter of Credit Fee” has the meaning set forth in Schedule I.

 

“Letter of Credit Obligations” means all outstanding obligations (including all
duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or another, of
Letters of Credit or Letters of Guaranty, all as further set forth in Schedule
I.

 

“Letter-of-Credit Rights” has the meaning given to “letter-of-credit rights” as
such term is defined in the UCC, now owned or hereafter acquired by any Person,
including rights to payment or performance under a letter of credit, whether or
not such Person, as beneficiary, has demanded or is at the time entitled to
demand payment or performance.

 

“Letters of Guaranty” and “L/G” means a letter of guaranty issued by Lender for
the account of a Borrower guarantying payment of the purchase price of the goods
financed thereby, containing terms and conditions satisfactory to Lender.

 

“License” means any rights under any written agreement now or hereafter acquired
by any Person to use any trademark, trademark registration, copyright, copyright
registration or invention for which a patent is in existence or other license of
rights or interests now held or hereafter acquired by any Person.

 

“Lien” means any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, security interest, charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the UCC or comparable law of any
jurisdiction.

 

10

 

“Life Insurance Assignment” means an Assignment of Life Insurance Policy as
Collateral to be executed by the owner and the beneficiary thereof, in form and
substance satisfactory to Lender, granting Lender a Lien on the Life Insurance
Policy to secure payment of the Obligations, as may be requested by Lender from
time to time.

 

“Life Insurance Policy” means, the life insurance policy[ies] maintained by
Initial Borrower upon the life of Matthew Mosher with the death benefit[s]
thereunder of at least $2,000,000.

 

“Litigation” means any claim, lawsuit, litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority.

 

“Loans” means the Revolving Credit Advances and all extensions of credit
hereunder or under any Credit Document, including Letter of Credit Obligations.

 

“LSVM Purchase Agreement” means the Membership Interest Purchase Agreement,
dated as of April 1, 2019, by and among ATRM Holdings, Inc., Lone Star Value
Management, LLC and Jeffrey E. Eberwein.

 

“Margin Stock” has the meaning set forth in Section 7.8.

 

“Material Adverse Effect” means a material adverse effect on (a) the condition,
operations, assets or business of any Credit Party, (b) any Credit Party’s
ability to pay or perform the Obligations in accordance with the terms hereof or
any Credit Document, (c) the value of the Collateral, the Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Lender’s rights and remedies under this Agreement and the Credit
Documents.

 

“Maturity Date” means the earlier of (a) January 1, 2022 or (b) the termination,
maturity or repayment of the Star Credit Facility.

 

“Maximum Legal Rate” shall have the meaning given to such term in Section
5.1(a)(iv).

 

“Maximum Revolving Amount” means $3,000,000.

 

“Minimum Actionable Amount” means $10,000.

 

“Minimum Average Monthly Loan Amount” means 50% of the Maximum Revolving Amount.

 

“Mortgage” means collectively, any mortgage or deed of trust and assignment of
leases which is executed in favor of Lender to secure the Obligations, including
but not limited to the Mortgage and Assignment of Leases on the Real Estate.

 

11

 

“Multiemployer Plan” means a “multiemployer plan,” as defined in Section 4001(a)
(3) of ERISA, to which any Credit Party is making, is obligated to make, has
made or been obligated to make, contributions on behalf of participants who are
or were employed by any of them.

 

“Note” means the promissory note of Borrowers executed in favor of Lender
substantially in the form of Exhibit A.

 

“Obligations” means all obligations under any Guaranty and all Loans, all
advances, debts, liabilities, obligations, covenants and duties owing by any
Credit Party to Lender (or any corporation that directly or indirectly controls
or is controlled by or is under common control with Lender) of every kind and
description (whether or not evidenced by any note or other instrument and
whether or not for the payment of money or the performance or non-performance of
any act), direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, whether existing by
operation of law or otherwise now existing or hereafter arising including any
debt, liability or obligation owing from any Credit Party to others which Lender
may have obtained by assignment or otherwise and further including all interest
(including interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), charges or any other payments any Credit Party is
required to make by law or otherwise arising under or as a result of this
Agreement or any other Credit Document, together with all reasonable expenses
and reasonable attorneys’ fees chargeable to any Borrower’s account or incurred
by Lender in connection with any Borrower’s account whether provided for herein
or in any Credit Agreement. The term includes the definition of “Obligations” as
defined in any Credit Documents which evidence the Star Credit Facility. The
term also includes the definition of “Obligations” as defined in the Loan and
Security Agreement dated February 23, 2016, as amended executed by some of the
Credit Parties herein and Lender.

 

“Pass Thru Distributions” mean dividends declared and paid by a Credit Party to
its Stockholders, or which could have been declared and paid by a Credit Party,
in an amount not to exceed the Pass Thru Tax Liabilities.

 

“Pass Thru Tax Liabilities” means the amount of state and federal income tax
paid or to be paid by a Credit Party’s Stockholders on taxable income earned by
such Credit Party and attributable to the Stockholder as a result of such Credit
Party’s status as a disregarded entity for tax purposes, assuming the highest
marginal income tax rate for federal and state (for the state or states in which
any Stockholder is liable for income taxes with respect to such income) income
tax purposes, after taking into account any deduction for state income taxes in
calculating the federal income tax liability and all other deductions, credits,
deferrals and other reductions available to Stockholders from or through a
Credit Party.

 

“Payment Intangible” has the meaning give to the term “payment intangible” in
the UCC and in any event shall include, a General Intangible under which the
Account Debtor’s principal obligation is a monetary obligation.

 

12

 

“Payment Office” means 8 West 40th Street, 14th Floor, New York, New York 10018
or such other place as Lender may from time to time designate in writing.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Permitted Liens” means the following Liens: (i) Liens for taxes or assessments
or other governmental Charges or levies, either not yet due and payable or to
the extent that nonpayment thereof is permitted by the terms of Section 7.10;
(ii) pledges or deposits securing obligations under worker’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which any Credit Party is
a party as lessee made in the ordinary course of business; (iv) deposits
securing public or statutory obligations of any Credit Party; (v) inchoate and
unperfected workers’, mechanics’, or similar liens arising in the ordinary
course of business so long as such Liens attach only to Equipment, fixtures or
real estate; (vi) carriers’, warehousemen’s, suppliers’ or other similar
possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of the Minimum Actionable Amount at any time so long as such Liens attach
only to Inventory; (vii) deposits of money securing, or in lieu of, surety,
appeal or customs bonds in proceedings to which any Credit Party is a party;
(viii)  zoning restrictions, easements, licenses, or other restrictions on the
use of real property or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such real estate; (ix) Purchase Money Liens securing Purchase
Money Indebtedness (or rent) to the extent permitted under Article IX(b); (x)
Liens in existence on the Closing Date as disclosed on Disclosure Schedule 9(e)
provided that no such Lien is spread to cover additional property after the
Closing Date and the amount of Indebtedness secured thereby is not increased;
and (xi) Liens in favor of Lender securing the Obligations.

 

“Person” means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person’s successors and assigns.

 

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title III of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which a Credit Party is (or, if such
plan were terminated, would under Section 4069 of ERISA be deemed to be) an
“employer” as defined in Section 3(5) of ERISA.

 

“Pledge Agreement” means each pledge agreement in favor of Lender by any Credit
Party.

 

“Prime Rate” means the “prime rate” which from time to time published in the
“Money Rates” column of The Wall Street Journal (Eastern Edition, New York
Metro); provided, however, if the Money Rates column of The Wall Street Journal
(Eastern Edition, New York Metro) ceases to be published or otherwise does not
designate a “prime rate” as of a Business Day, Lender has the right to obtain
such information from a similar business publication of its selection. The Prime
Rate shall be increased or decreased as the case may be for each increase or
decrease in the Prime Rate in an amount equal to such increase or decrease in
the Prime Rate; each change to be effective as of the day of the change in such
rate.

 

13

 

“Proceeds” means “proceeds”, as such term is defined in the UCC and, in any
event, shall include: (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Credit Party or any other Person from time
to time with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to a Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any Collateral by any governmental body, governmental authority,
bureau or agency (or any person acting under color of governmental authority);
(c) any claim of a Credit Party against third parties (i) for past, present or
future infringement of any Intellectual Property or (ii) for past, present or
future infringement or dilution of any trademark or trademark license or for
injury to the goodwill associated with any trademark, trademark registration or
trademark licensed under any trademark License; (d) any recoveries by a Credit
Party against third parties with respect to any litigation or dispute concerning
any Collateral, including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral; (e) all amounts collected on, or distributed on account
of, other Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property and pledged Stock; (f) all
amounts related to equity investment or temporary indebtedness and (g) any and
all other amounts , rights to payment or other property acquired upon the sale,
lease, license, exchange or other disposition of Collateral and all rights
arising out of Collateral.

 

“Projections” means as of any date the balance sheet, statements of income and
cash flow for Credit Parties and Subsidiaries (including forecasted Capital
Expenditures) (a) by month for the next Fiscal Year, and (b) by year for the
following three Fiscal Years, in each case prepared in a manner consistent with
GAAP and accompanied by senior management’s discussion and analysis of such
plan.

 

“Purchase Money Indebtedness” means (a) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (b) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
any part of the purchase price of any fixed asset, and (c) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).

 

“Purchase Money Lien” means any Lien upon any fixed assets which secures the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.

 

“Real Estate” means the real property and the improvements thereon located at
(a) 300 Park Street. South Paris, Maine 04281, (b) 947 Waterford Road,
Waterford, Maine 04088 , and (c) 56 Mechanic Falls Road, Oxford, Maine 04270.

 

14

 

“Real Property” has the meaning assigned to it in Section 7.6.

 

“Release” means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.

 

“Requirement of Law” means as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.

 

“Reserves” means reserves including the Dilution Reserve, established by Lender
from time to time in its good faith credit judgment, including to protect
Lender’s interest in the Collateral, to protect Lender against possible
non-payment of Accounts for any reason by Account Debtors, to protect against
the diminution in value of any Collateral, to protect Lender against the
possible non-payment of any Obligations, to protect Lender for any unpaid taxes,
to protect Lender in respect of any state of facts that could constitute a
Default or Event of Default and to protect Lender for any Letter of Credit
Obligations.

 

“Restricted Payment” means: (i) the declaration or payment of any dividend or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of Credit Party’s Stock; (ii)
any payment or distribution made in respect of any Subordinated Debt of any
Credit Party in violation of any Subordination Agreement or other agreement made
in favor of Lender; (iii) any payment on account of the purchase, redemption,
defeasance or other retirement of any Credit Party’s Stock or Indebtedness or
any other payment or distribution made in respect of any thereof, either
directly or indirectly, other than payment of Indebtedness to trade creditors
incurred in the ordinary course of business consistent with past practice; or
(iv) any payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person which is not expressly and
specifically permitted in this Agreement or in a Credit Document; provided, that
no payment to Lender shall constitute a Restricted Payment and no payments to
Jeffrey E. Eberwein pursuant to the LSVM Purchase Agreement shall constitute a
Restricted Payment following compliance with the subordination provisions in
Paragraph 3 of the Tenth Agreement of Amendment to Loan and Security Agreement
dated April 1, 2019 by and among KBS Builders, Inc., ATRM Holdings, Inc., and
Lender provided that such payments to Jeffrey E. Eberwein are made by Digirad
Corporation.

 

“Revolving Credit Advances” shall have the meaning given to such term in Section
2.1(a).

 

“Software” means all “software” as such term is defined in the UCC, including
all computer programs and all supporting information provided in connection with
a transaction related to any program.

 

15

 

“Star Credit Facility” means the credit facility granted by Lender to Star Real
Estate Holdings USA, Inc., a Delaware corporation, 300 Park Street, LLC, a
Delaware limited liability company, 947 Waterford Road, LLC, a Delaware limited
liability company and 56 Mechanic Falls Road, LLC, a Delaware limited liability
company in a certain Loan and Security Agreement dated of even date executed by
the Corporate Credit Parties hereto as it may be subsequently amended.

 

“Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

 

“Stockholder” means each holder of Stock of Borrower.

 

“Subordinated Debt” means any note, document, instrument or agreement now or any
time hereafter executed and/or delivered by any Credit Party with or in favor of
any Subordinated Lender which evidences the principal, interest and other
amounts owed by a Credit Party to such Subordinated Lender.

 

“Subordinated Lender” means collectively, any Person who enters into a
Subordination Agreement with Lender with respect to amounts owed by any Credit
Party to such Subordinated Lender, including but not limited to Lone Star Value
Co-Invest I, LP, Lone Star Value Management, Inc., Star Procurement, Inc.,
Digirad Corporation, ATRM Holdings, Inc., and Premier Bank.

 

“Subordination Agreement” means collectively, all intercreditor and
subordination agreements accepted by Lender from time to time with respect to
Indebtedness of any Credit Party, including but not limited to those from a
Subordinated Lender.

 

“Subsidiary” means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
has or might have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, owned legally or beneficially by such
Person and/or one or more Subsidiaries of such Person, or with respect to which
any such Person has the right to vote or designate the vote of 50% or more of
such Stock whether by proxy, agreement, operation of law or otherwise, and
(ii) any partnership or limited liability company in which such Person or one or
more Subsidiaries of such Person has an equity interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or manager or may exercise the
powers of a general partner or manager.

 

“Supporting Obligations” means all “supporting obligations” as such term is
defined in the UCC, including Letter-of-Credit Rights or secondary obligations
that supports the payment or performance of Accounts, Chattel Paper, Documents,
General Intangibles, Instruments, or Investment Property.

 

16

 

“Tangible Net Worth” shall mean, with respect to any Person, at any date, the
total assets (excluding any assets attributable to any issuances by such Person
of any Stock after the Closing Date and excluding any intangible assets and
loans made to any officer, director, shareholder or employee of such Person)
minus the total liabilities (excluding Subordinated Debt), in each case, of such
Person at such date determined in accordance with GAAP, except as otherwise
defined for purposes of the Financial Covenants set forth on Schedule III.

 

“Term” means the Closing Date through the Maturity Date subject to acceleration
upon the occurrence of an Event of Default hereunder or other termination
hereunder.

 

“Termination Date” means the date on which all Obligations under this Agreement
are indefeasibly paid in full, in cash (other than amounts in respect of Letter
of Credit Obligations if any, then outstanding, provided that a Borrower has
funded such amounts in cash in full into the Cash Collateral Account), and no
Borrower shall have any further right to borrow any moneys or obtain other Loans
or financial accommodations under this Agreement.

 

“UCC” means the Uniform Commercial Code as the same may, from time be in effect
in the State of New York; provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term “UCC” shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions; provided further, that
to the extent that UCC is used to define any term herein or in any Credit
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern.

 

“Uniform Customs” means with respect to a documentary Letter of Credit the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, as the same may be
amended from time to time and with respect to a standby Letter of Credit, the
International Standby Practices, ISP.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title III of ERISA.

 

1.2                    Accounting Terms. Any accounting terms used in this
Agreement which are not specifically defined shall have the meanings customarily
given them in accordance with GAAP and all financial computations shall be
computed, unless specifically provided herein, in accordance with GAAP
consistently applied.

 

1.3                    Other Terms. All other terms used in this Agreement and
defined in the UCC, shall have the meaning given therein unless otherwise
defined herein.

 

17

 

1.4                    Rules of Construction. All Schedules, Addenda and
Exhibits hereto or expressly identified to this Agreement are incorporated
herein by reference and taken together with this Agreement constitute but a
single agreement. The words “herein”, hereof” and “hereunder” or other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules thereto, as the same may be from time to time amended, modified,
restated or supplemented, and not to any particular section, subsection or
clause contained in this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter. The term
“or” is not exclusive. The term “including” (or any form thereof) shall not be
limiting or exclusive. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations. All
references in this Agreement or in the Schedules to this Agreement to sections,
schedules, disclosure schedules, exhibits, and attachments shall refer to the
corresponding sections, schedules, disclosure schedules, exhibits, and
attachments of or to this Agreement. All references to any instruments or
agreements, including references to any of this Agreement or any of the other
Credit Documents shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.

 

II.LOANS

 

2.1                    Revolving Credit Advances.

 

(a)               Subject to the terms and conditions set forth herein and in
the Credit Documents, Lender may, in its sole discretion, make revolving credit
advances (the “Revolving Credit Advances”) to Borrowers from time to time during
the Term which, in the aggregate at any time outstanding together with all
outstanding Letter of Credit Obligations, will not exceed the lesser of (x) the
Maximum Revolving Amount or (y) an amount equal to the Borrowing Base.

 

(b)               Notwithstanding the limitations set forth above, Lender
retains the right to lend Borrowers from time to time such amounts in excess of
such limitations as Lender may determine in its sole discretion.

 

(c)               Each Borrower acknowledges that the exercise of Lender’s
discretionary rights hereunder may result during the term of this Agreement in
one or more increases or decreases in the advance percentages used in
determining Accounts Availability, and Inventory Availability and each Borrower
hereby consents to any such increases or decreases which may limit or restrict
advances requested by Borrower.

 

(d)               If any Borrower does not pay any interest, fees, costs or
charges to Lender when due, Borrowers shall thereby be deemed to have requested,
and Lender is hereby authorized at its discretion to make and charge to any
Borrower’s account, a Revolving Credit Advance as of such date in an amount
equal to such unpaid interest, fees, costs or charges.

 

(e)               If any Credit Party at any time fails to perform or observe
any of the covenants contained in this Agreement or any other Credit Document,
Lender may, but need not, perform or observe such covenant on behalf and in the
name, place and stead of such Credit Party (or, at Lender’s option, in Lender’s
name) and may, but need not, take any and all other actions which Lender may
deem necessary to cure or correct such failure (including the payment of taxes,
the satisfaction of Liens, the performance of obligations owed to Account
Debtors, lessors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments). The amount of all monies
expended and all costs and expenses (including attorneys’ fees and legal
expenses) incurred by Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by
Lender shall be charged to any Borrower’s account as a Revolving Credit Advance
and added to the Obligations. To facilitate Lender’s performance or observance
of such covenants of Credit Parties, each Credit Party hereby irrevocably
appoints Lender, or Lender’s delegate, acting alone, as such Credit Party’s
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of such Credit Party any and
all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed delivered or endorsed by such Credit Party.

 

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(f)                Lender is authorized by Borrowers to record on its books or
records the date, principal amount, amount and date of all payments of principal
of and interest on each Loan, and the outstanding principal balance of the Loans
and such recordation shall constitute prima facie evidence as to all such
information contained therein. Lender shall provide Borrowing Representative on
a monthly basis with a statement and accounting of such recordations but any
failure on the part of Lender to keep such recordation (or any errors therein)
or to send a statement thereof to Borrowing Representative shall not limit or
otherwise affect the obligation of any Borrower to repay (with applicable
interest) any Loans. Except to the extent that Borrowing Representative shall,
within thirty (30) days after such statement and accounting is sent, notify
Lender in writing of any objection any Borrower may have thereto (stating with
particularity the basis for such objection), such statement and accounting shall
be deemed final, binding and conclusive upon Borrowers, absent manifest error.
The Loans made by Lender will be evidenced by a Note. Each Borrower will execute
the Note simultaneously with the execution of this Agreement.

 

(g)               During the Term, each Borrower may borrow, prepay and reborrow
Revolving Credit Advances, all in accordance with the terms and conditions
hereof.

 

(h)               Subject to the terms and conditions of this Agreement
including Schedule I, Borrowing Representative on behalf of each Borrower may
request and Lender may agree to incur Letter of Credit Obligations.

 

III.REPAYMENT

 

3.1                    Repayment of the Revolving Credit Advances. Borrowers
shall be required to (a) make a mandatory repayment hereunder at any time that
the aggregate outstanding principal balance of the Revolving Credit Advances
made by Lender to Borrowers hereunder is in excess of the Borrowing Base and/or
Maximum Revolving Amount, in an amount equal to such excess, and (b) repay on
the expiration of the Term (i) the then aggregate outstanding principal balance
of Revolving Credit Advances made by Lender to Borrowers hereunder together with
accrued and unpaid interest, fees and charges and (ii) all other amounts owed
Lender under this Agreement and the Credit Documents. Any payments of principal,
interest, fees or any other amounts payable hereunder or under any Credit
Document shall be made prior to 12:00 noon (New York time) on the due date
thereof in immediately available funds.

 

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IV.PROCEDURES

 

4.1                    Procedure for Revolving Credit Advances. Borrowing
Representative on behalf of each Borrower may by written or telephonic notice
request a borrowing of Revolving Credit Advances prior to 11:00 a.m. (New York
time) on the Business Day of its request to incur, on that day, a Revolving
Credit Advance. All Revolving Credit Advances shall be disbursed from whichever
office or other place Lender may designate from time to time and, together with
any and all other Obligations of Borrowers to Lender, shall be charged to
Borrowers’ account on Lender’s books. The proceeds of each Revolving Credit
Advance made by Lender shall be made available to Borrowers on the Business Day
so requested by way of credit to the applicable Borrower’s operating account
maintained with such bank as Borrowing Representative designated to Lender. Any
and all Obligations due and owing hereunder may be charged to Borrowers’ account
and shall constitute Revolving Credit Advances.

 

V.INTEREST AND FEES

 

5.1                    Interest and Fees.

 

(a)               Interest.

 

(i)                 Except as modified by Section 5.1(a)(iii) below, Borrowers
shall pay interest on the unpaid principal balance of the Loans for each day
they are outstanding at the Contract Rate.

 

(ii)              Interest and fees shall be computed on the basis of actual
days elapsed in a year of 360 days. Interest shall be payable in arrears on the
last day of each month and upon termination of this Agreement, or, at Lender’s
option, Lender may charge Borrowers’ account for said interest.

 

(iii)            Effective upon the occurrence of any Event of Default and for
so long as any Event of Default shall be continuing, the Contract Rate and the
Letter of Credit Fee shall automatically be increased to the Default Rate, and
all outstanding Obligations, including unpaid interest and Letter of Credit
Fees, shall continue to accrue interest from the date of such Event of Default
at the Default Rate applicable to such Obligations.

 

(iv)             Notwithstanding the foregoing, in no event shall the aggregate
interest exceed the maximum rate permitted under any applicable law or
regulation, as in effect from time to time (the “Maximum Legal Rate”) and if any
provision of this Agreement or Credit Document is in contravention of any such
law or regulation, interest payable under this Agreement and each Credit
Document shall be computed on the basis of the Maximum Legal Rate (so that such
interest will not exceed the Maximum Legal Rate) and once the amount of interest
payable hereunder or under the Credit Documents is less than the Maximum Legal
Rate, Lender shall not reduce interest payable hereunder or any Credit Document
below the amount computed based upon the Maximum Legal Rate until the aggregate
amount of interest paid equals the amount of interest which would have been
payable if the Maximum Legal Rate had not been imposed.

 

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(v)               Borrowers shall pay principal, interest and all other amounts
payable hereunder, or under any Credit Document, without any deduction
whatsoever, including any deduction for any set-off or counterclaim.

 

(b)Fees.

 

(i)                 Minimum Loan Fee. In the event the average closing daily
unpaid balances of all Loans hereunder during any calendar month is less than
the Minimum Average Monthly Loan Amount, Borrowers shall pay to Lender a minimum
loan fee at a rate per annum equal to the Contract Rate on the amount by which
the Minimum Average Monthly Loan Amount exceeds such average closing daily
unpaid balances. Such fee shall be charged to Borrower’s account on the first
day of each month with respect to the prior month.

 

(ii)              Facility Fee. Borrowers hereby agree to pay Lender a facility
fee in an amount equal to one and one-half percent (1.5%) of the Maximum
Revolving Amount on the Closing Date and on each anniversary of the Closing Date
which occurs prior to the Maturity Date. The facility fee for the period ending
on the Maturity Date shall be deemed fully earned on the Closing Date and shall
be payable by a charge to Borrower’s account upon the earlier of each
anniversary of the Closing Date or the termination of this Agreement for any
reason.

 

(iii)            Collateral Monitoring Fee. Borrowers shall pay Lender a monthly
collateral monitoring fee in an amount equal to one tenth of one percent (0.10%)
of the Maximum Revolving Amount per month, payable on the Closing Date and on
the first day of each month thereafter until the Maturity Date. The Collateral
Monitoring Fee for each month ending prior to the Maturity Date shall be deemed
fully earned on the Closing Date and shall be payable by a charge to Borrower’s
account upon the earlier of the first day of each month during the Term or the
termination of this Agreement for any reason.

 

(iv)             Field Examination Fee. Upon Lender’s performance of any
collateral monitoring and/or verification including any field examination,
collateral analysis or other business analysis, the need for which is to be
determined by Lender and which monitoring is undertaken by Lender or for
Lender’s benefit, an amount equal to the established rate by Lender from time to
time which rate on the Closing Date is $1,250 per day for each person employed
to perform such monitoring together with all costs, disbursements and expenses
incurred by Lender and the person performing such collateral monitoring and/or
verification shall be charged to Borrowers’ account.]

 

(v)               Collection Fees. For purposes of determining the balance of
the Loans outstanding, Lender will credit (conditional upon final collection)
all such payments to Borrowers’ account upon receipt by Lender of good funds in
dollars of the United States of America in Lender’s account, provided, however,
for purposes of computing interest on the Obligations, Lender will credit
(conditional upon final collection) all such payments to Borrowers’ account
three (3) Business Days after receipt by Lender of good funds in dollars of the
United States of America in Lender’s account. Any amount received by Lender
after 12:00 noon (New York time) on any Business Day shall be deemed received on
the next Business Day.

 

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(vi)             Overline/Overadvance Fees. Under circumstances where any
Borrower requests Revolving Credit Advances which would exceed the Maximum
Revolving Amount and/or the Borrowing Base, Lender may impose fees in connection
therewith. Such fees shall include (i) a monthly fee in the amount of two and
one-half percent (2.50%) of the greater of (A) the highest amount by which the
amount Revolving Credit Advances during such month exceeds the Borrowing Base
and (B) if any, the amount approved by Lender for such Revolving Credit Advance
in excess of the Borrowing Base for such month and (ii) two and one-half percent
(2.50%) of the greater of (A) the highest amount by which the Revolving Credit
Advances during such month exceeds the Maximum Revolving Amount and (B) if any,
the amount approved by Lender for such Revolving Credit Advances in excess of
the Maximum Revolving Amount for such month. Such fees shall be payable on the
first day of each month with respect to the preceding calendar month.

 

(vii)          Wire/Check Fee. For each wire transfer or check issued by Lender,
on behalf of a Borrower, Borrowers shall pay Lender Lender’s standard fee for
such service which fee is $45 as of the Closing Date.

 

VI.CONDITIONS PRECEDENT

 

6.1                    Conditions Precedent to Initial Loans. Without limitation
of the discretionary nature of each Loan hereunder, the initial Loan to be made
by Lender shall be subject to the fulfillment (to the satisfaction of Lender) of
each of the conditions precedent set forth on Schedule II.

 

6.2                    Conditions Precedent to each Loan. Without limitation of
the discretionary nature of each Loan hereunder, each of the Loans (including
the initial Loan) to be made by Lender shall be subject to the fulfillment (to
the satisfaction of Lender) of each of the following conditions as of the date
of each Loan:

 

(a)               Lender shall have received a Request for Loan for such Loan in
form and in substance satisfactory to Lender;

 

(b)               The representations and warranties set forth in this Agreement
and in the other Credit Documents, shall be true and correct in all material
respects on and as of the date of such Loan with the same effect as though made
on and as of such date, except to the extent that any such representation or
warranty is expressly stated to relate to a specific earlier date, in which
case, such representation and warranty shall be true and correct as of such
earlier date;

 

(c)               No Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Loan;

 

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(d)               Lender shall have received all fees due and payable on or
prior to such date; and

 

(e)               All legal matters incident to such Loan shall be satisfactory
to Lender and its counsel.

 

VII.REPRESENTATIONS, WARRANTIES AND COVENANTS

 

To induce Lender to enter into this Agreement and to make the Loans, each
Corporate Credit Party represents and warrants (each of which representations
and warranties shall survive the execution and delivery of this Agreement), and
promises to and agrees with Lender until the Termination Date as follows:

 

7.1                    Corporate Existence; Compliance with Law. Each Corporate
Credit Party: (a) is, as of the Closing Date, and will continue to be (i) a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation, (ii) duly qualified to do business and in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect,
and (iii) in compliance with all Requirements of Law and Contractual
Obligations, except to the extent failure to comply therewith could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (b) has and will continue to have (i) the requisite power
and authority and the legal right to execute, deliver and perform its
obligations under the Credit Documents, and to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore or proposed to be
conducted, and (ii) all licenses, permits, franchises, rights, powers, consents
or approvals from or by all Persons or Governmental Authorities having
jurisdiction over Borrowers which are necessary or appropriate for the conduct
of its business, except to the extent failure to have any such licenses,
permits, franchises, rights, powers, consents or approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

7.2                    Names; Organizational Information; Collateral Locations.
Disclosure Schedule 7.2 sets forth each Corporate Credit Party’s name as it
appears in official filing in the state of its incorporation or other
organization, the type of entity of each Corporate Credit Party, the state of
each Corporate Credit Party’s incorporation or organization and organizational
identification number issued by each Corporate Credit Party’s state of
incorporation or organization or a statement that no such number has been
issued. The location of each Corporate Credit Party’s chief executive office,
corporate offices, warehouses, other locations of Collateral and locations where
records with respect to Collateral are kept (including in each case the county
of such locations) are as set forth in Disclosure Schedule 7.2 and the
Perfection Certificate submitted to Lender as attached hereto and, except as set
forth in such Disclosure Schedule, such locations have not changed during the
preceding twelve months. With respect to each of the premises identified in
Disclosure Schedule 7.2 and the Perfection Certificate submitted to Lender as
attached hereto, on or prior to the Closing Date a bailee, landlord or mortgagee
agreement acceptable to Lender has been obtained. As of the Closing Date, during
the prior five years, except as set forth in Disclosure Schedule 7.2, and the
Perfection Certificate submitted to Lender as attached hereto, no Corporate
Credit Party shall have been known as or conducted business in any other name
(including trade names).

 

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7.3                    Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Credit Documents
to which it is a party, and the creation of all Liens provided for herein and
therein: (a) are and will continue to be within such Credit Party’s power and
authority; (b) have been and will continue to be duly authorized by all
necessary or proper action; (c) are not and will not be in violation of any
Requirement of Law or Contractual Obligation of such Credit Party; (d) do not
and will not result in the creation or imposition of any Lien (other than
Permitted Liens) upon any of the Collateral; and (e) do not and will not require
the consent or approval of any Governmental Authority or any other Person. As of
the Closing Date, each Credit Document shall have been duly executed and
delivered on behalf of each Credit Party, and each such Credit Document upon
such execution and delivery shall be and will continue to be a legal, valid and
binding obligation of each Credit Party, enforceable against it in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting creditors’ rights generally.

 

7.4                    Financial Statements and Projections; Books and Records.

 

(a)               The Financial Statements delivered by each Corporate Credit
Party to Lender for its most recently ended Fiscal Year and Fiscal Quarter, are
true, correct and complete and reflect fairly and accurately the financial
condition of such Corporate Credit Party as of the date of each such Financial
Statement in accordance with GAAP. Except as reflected in the Financial
Statements and/or on Disclosure Schedule 9(b), no Corporate Credit Party has
obligations for borrowed funds or long term capital leases or other liabilities
for the payment of money except nominal accruals for operating expenses not
exceeding $50,000 in the aggregate. The Projections most recently delivered by
each Corporate Credit Party to Lender have been prepared in good faith, with
care and diligence and use assumptions that are reasonable under the
circumstances at the time such Projections were prepared and as of the date
delivered to Lender and all such assumptions are disclosed in the Projections.

 

(b)               Each Corporate Credit Party shall keep adequate Books and
Records with respect to the Collateral and its business activities in which
proper entries, reflecting all financial transactions, and payments and credits
received on, and all other dealings with, the Collateral, will be made in
accordance with GAAP and all Requirements of Law and on a basis consistent with
the Financial Statements.

 

7.5                    Material Adverse Change. Between the date of each
Corporate Credit Party’s most recent Financial Statements delivered to Lender
and the Closing Date: (a) no Corporate Credit Party has incurred any
obligations, contingent or non-contingent liabilities, or liabilities for
Charges, long-term leases or unusual forward or long-term commitments which are
not reflected in the Projections delivered on the Closing Date and which could,
alone or in the aggregate, reasonably be expected to have a Material Adverse
Effect; (b) there has been no material deviation from such Projections; and (c)
no events have occurred which alone or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect. No Requirement of Law
or Contractual Obligation of any Corporate Credit Party has or have had or could
reasonably be expected to have a Material Adverse Effect. No Corporate Credit
Party is in default, and to each Corporate Credit Party’s knowledge no third
party is in default, under or with respect to any of its Contractual
Obligations, which alone or in the aggregate has had or could reasonably be
expected to have a Material Adverse Effect.

 

24

 

7.6                    Real Estate; Property. The real estate listed in
Disclosure Schedule 7.6 constitutes all of the real property owned, leased, or
used by each Corporate Credit Party in its business (the “Real Property”), and
no Corporate Credit Party will execute any material agreement or contract in
respect of such real estate after the date of this Agreement without giving
Lender prompt prior written notice thereof. Each Corporate Credit Party holds
and will continue to hold good and marketable fee simple title to all of its
owned real estate, and good and marketable title to all of its other properties
and assets, and valid and insurable leasehold interests in all of its leases
(both as lessor and lessee, sublessee or assignee), and none of the properties
and assets of any Corporate Credit Party are or will be subject to any Liens,
except Permitted Liens.

 

7.7                    Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness. Except as set forth in Disclosure Schedule 7.7, as of the
Closing Date, no Corporate Credit Party has any Subsidiaries, is not engaged in
any joint venture or partnership with any other Person, or is an Affiliate of
any other Person. All of the issued and outstanding Stock of each Corporate
Credit Party (including all rights to purchase, options, warrants or similar
rights or agreements pursuant to which any Corporate Credit Party may be
required to issue, sell, repurchase or redeem any of its Stock) as of the
Closing Date is owned by each of the Stockholders (and in the amounts) set forth
on Disclosure Schedule 7.7 or is disclosed on such Disclosure Schedule 7.7 as
issued by a public company. All outstanding Indebtedness of each Corporate
Credit Party as of the Closing Date is described in Disclosure Schedule 9(b).

 

7.8                    Government Regulation; Margin Regulations. No Corporate
Credit Party is subject to or regulated under or any federal or state statute,
rule or regulation that restricts or limits any Corporate Credit Party’s ability
to incur Indebtedness, pledge its assets, or to perform its obligations under
the Credit Documents. The making of a Loan, the application of the proceeds and
repayment thereof, and the consummation of the transactions contemplated by the
Credit Documents do not and will not violate any Requirement of Law. No
Corporate Credit Party is engaged, nor will it engage in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
security” as such terms are defined in Regulation U of the Federal Reserve Board
as now and hereafter in effect (such securities being referred to herein as
“Margin Stock”). No Corporate Credit Party owns Margin Stock, and none of the
proceeds of any Loan or other extensions of credit under any Credit Document
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock or reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any Margin Stock. No Corporate Credit Party will
take or permit to be taken any action which might cause any Credit Document to
violate any regulation of the Federal Reserve Board.

 

7.9                    Taxes; Charges. Except as disclosed on Disclosure
Schedule 7.9 all tax returns, reports and statements required by any
Governmental Authority to be filed by each Corporate Credit Party have, as of
the Closing Date, been filed and will, until the Termination Date, be filed with
the appropriate Governmental Authority and no tax Lien has been filed against
each Corporate Credit Party or any of each Corporate Credit Party’s property.
Proper and accurate amounts have been and will be withheld by each Corporate
Credit Party from its employees for all periods in complete compliance with all
Requirements of Law and such withholdings have and will be timely paid to the
appropriate Governmental Authorities. Disclosure Schedule 7.9 sets forth as of
the Closing Date those taxable years for which each Corporate Credit Party’s tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described on Disclosure Schedule 7.9, no Corporate Credit Party nor its
respective predecessors are liable for any Charges: (a) under any agreement
(including any tax sharing agreements or agreement extending the period of
assessment of any Charges) or (b) to any Corporate Credit Party’s knowledge, as
a transferee. As of the Closing Date, no Corporate Credit Party has agreed or
been requested to make any adjustment under IRC Section 481(a), by reason of a
change in accounting method or otherwise, which could reasonably be expected to
have a Material Adverse Effect.

 

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7.10                Payment of Obligations. Each Credit Party will pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of its Charges and other obligations of
whatever nature, except payments to vendors or suppliers in the ordinary course
of business consistent with past practice or where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of such Credit Party and none of the Collateral is or could reasonably
be expected to become subject to any Lien or forfeiture or loss as a result of
such contest.

 

7.11                ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other existing ERISA Events, could
reasonably be expected to result in a liability of any Corporate Credit Party of
more than the Minimum Actionable Amount. The present value of all accumulated
benefit obligations of any Corporate Credit Party under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent Financial Statements reflecting
such amounts, exceed the fair market value of the assets of such Plan by more
than the Minimum Actionable Amount, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Account Standards No. 87) did not, as of the
date of the most recent Financial Statements reflecting such amounts, exceed the
fair market value of the assets of such underfunded Plans by more than the
Minimum Actionable Amount. No Corporate Credit Party has incurred or reasonably
expects to incur any Withdrawal Liability in excess of the Minimum Actionable
Amount.

 

7.12                Litigation. No Litigation is pending or, to the knowledge of
any Corporate Credit Party, threatened by or against any Corporate Credit Party
or against any Corporate Credit Party’s properties or revenues (a) with respect
to any of the Credit Documents or any of the transactions contemplated hereby or
thereby, or (b) which could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule 7.12, as of the Closing Date
there is no Litigation pending or, to the knowledge of any Corporate Credit
Party, threatened against any Corporate Credit Party which seeks damages in
excess of the Minimum Actionable Amount or injunctive relief or alleges criminal
misconduct of any Corporate Credit Party. Each Corporate Credit Party shall
notify Lender in writing within five (5) Business Days of learning of the
existence, threat or commencement of any Litigation against any Corporate Credit
Party or any Plan or any allegation of criminal misconduct against any Corporate
Credit Party.

 

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7.13                Intellectual Property. As of the Closing Date, all material
Intellectual Property owned or used by each Corporate Credit Party is listed,
together with application or registration numbers, where applicable, in
Disclosure Schedule 7.13. Each Corporate Credit Party is the sole legal and
beneficial owner, or is licensed on commercial terms to use, all Intellectual
Property necessary to conduct its business as currently conducted except for
such Intellectual Property the failure of which to own or license could not
reasonably be expected to have a Material Adverse Effect. Each Corporate Credit
Party will maintain the patenting and registration of all Intellectual Property
with the United States Patent and Trademark Office, the United States Copyright
Office, or other appropriate Governmental Authority and each Corporate Credit
Party will promptly patent or register, as the case may be, all new Intellectual
Property material to the operation of their respective businesses where
applicable and notify Lender in writing five (5) Business Days prior to filing
any such new patent or registration. With respect to Intellectual Property
licensed by each Corporate Credit Party, an agreement acceptable to Lender from
the licensor of such Intellectual Property will be obtained permitting Lender to
use such Intellectual Property or sell the Goods containing such Intellectual
Property following the occurrence of a Default. No Corporate Credit Party is
aware of any infringement on the Intellectual Property of any third party in the
carrying on of its business in the normal course.

 

7.14                Full Disclosure. No information contained in any Credit
Document, the Financial Statements or any written statement furnished by or on
behalf of any Corporate Credit Party under any Credit Document, or to induce
Lender to execute the Credit Documents, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.

 

7.15                Hazardous Materials. Except as set forth on Disclosure
Schedule 7.15, as of the Closing Date, (a) each Real Property is maintained free
of contamination from any Hazardous Material, (b) no Corporate Credit Party is
subject to any Environmental Liabilities or, to any Corporate Credit Party’s
knowledge, potential Environmental Liabilities, in excess of the Minimum
Actionable Amount in the aggregate, (c) no notice has been received by any
Corporate Credit Party identifying it as a “potentially responsible party” or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of any Corporate Credit Party, there are no facts, circumstances or
conditions that may result in such Corporate Credit Party being identified as a
“potentially responsible party” under CERCLA or analogous state statutes; and
(d) each Corporate Credit Party has provided to Lender copies of all existing
environmental reports, reviews and audits and all written information pertaining
to actual or potential Environmental Liabilities, in each case relating to any
Corporate Credit Party. Each Corporate Credit Party: (i) shall comply in all
material respects with all applicable Environmental Laws and environmental
permits; (ii) shall notify Lender in writing within seven days if and when it
becomes aware of any Release, on, at, in, under, above, to, from or about any of
its Real Property; and (iii) shall promptly forward to Lender a copy of any
order, notice, permit, application, or any communication or report received by
it or any Corporate Credit Party in connection with any such Release.

 

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7.16                Insurance. As of the Closing Date, Disclosure Schedule 7.16
lists all insurance of any nature maintained for current occurrences by
Borrowers, as well as a summary of the terms of such insurance. Each Corporate
Credit Party other than Digirad Corporation shall deliver to Lender certified
copies and endorsements to all of its (a) “All Risk” and business interruption
insurance policies naming Lender as loss payee, and (b) general liability and
other liability policies naming Lender as an additional insured. All policies of
insurance on real and personal property will contain an endorsement, in form and
substance acceptable to Lender, showing loss payable to Lender (Form 438 BFU or
equivalent) and extra expense, replacement value for all occupied Real Estate
locations and business interruption endorsements. Such endorsement, or an
independent instrument furnished to Lender, will provide that the insurance
companies will give Lender at least thirty (30) days prior written notice before
any such policy or policies of insurance shall be altered or canceled and that
no act or default of any Corporate Credit Party or any other Person shall affect
the right of Lender to recover under such policy or policies of insurance in
case of loss or damage. Each Borrower shall direct all present and future
insurers under its “All Risk” policies of insurance to pay all proceeds payable
thereunder directly to Lender. If any insurance proceeds are paid by check,
draft or other instrument payable to any Corporate Credit Party and Lender
jointly, Lender may endorse each Corporate Credit Party’s name thereon and do
such other things as Lender may deem advisable to reduce the same to cash.
Lender reserves the right at any time, upon review of any Corporate Credit
Party’s risk profile, to require additional forms and limits of insurance. Each
Corporate Credit Party shall, on each anniversary of the Closing Date and from
time to time at Lender’s request, deliver to Lender a report by a reputable
insurance broker, satisfactory to Lender, with respect to such Person’s
insurance policies.

 

7.17                Deposit and Disbursement Accounts. Disclosure Schedule 7.17
lists all banks and other financial institutions at which each Corporate Credit
Party, maintains deposits and/or other accounts and correctly identifies the
name, address and telephone number of each such depository, the name in which
the account is held, a description of the purpose of the account, and the
complete account number.

 

7.18          Accounts. No Borrower has made, nor will any Borrower make, any
agreement with any Account Debtor for any extension of time for the payment of
any Account, any compromise or settlement for less than the full amount thereof,
any release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance for prompt or early payment allowed by
a Borrower and such other compromises or settlements in the ordinary course of
its business consistent with historical practice and as previously disclosed to
Lender in writing. With respect to the Accounts pledged as collateral pursuant
to any Credit Document (a) the amounts shown on all invoices, statements and
reports which may be delivered to the Lender with respect thereto are actually
and absolutely owing to a Borrower as indicated thereon and are not in any way
contingent; (b) no payments have been or shall be made thereon except payments
immediately delivered to Lender as required hereunder; and (c) to each Corporate
Credit Party’s knowledge all Account Debtors have the capacity to contract. As
of the date of each Borrowing Base Certificate delivered to Lender, each Account
listed thereon as an Eligible Account shall be an Eligible Account and all
Inventory listed thereon as Eligible Inventory shall be Eligible Inventory. Each
Borrower shall notify Lender promptly and in any event within two (2) Business
Days after obtaining knowledge thereof (i) of any event or circumstance that to
any Borrower’s knowledge would cause Lender to consider any then existing
Account or Inventory as no longer constituting an Eligible Account or Eligible
Inventory, as the case may be; (ii) of any material delay in any Borrower’s
performance of any of its obligations to any Account Debtor; (iii) of any
assertion by an Account Debtor of any material claims, offsets or counterclaims;
(iv) of any allowances, credits and/or monies granted by any Borrower to any
Account Debtor; (v) of all material adverse information relating to the
financial condition of an Account Debtor; (vi) of any material return of goods;
and (vii) of any loss, damage or destruction of any of the Collateral.

 

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7.19                Conduct of Business. Each Corporate Credit Party (a) shall
conduct its business substantially as now conducted or as otherwise permitted
hereunder, and (b) shall at all times maintain, preserve and protect all of the
Collateral where applicable and each Corporate Credit Party’s other property,
used or useful in the conduct of its business and keep the same in good repair,
working order and condition and make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices.

 

7.20                Further Assurances. At any time and from time to time, upon
the written request of Lender and at the sole expense of Credit Parties, each
Credit Party shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable (a) to obtain the full benefits of this Agreement and
the other Credit Documents, (b) to protect, preserve and maintain Lender’s
rights in any Collateral, or (c) to enable Lender to exercise all or any of the
rights and powers herein granted.

 

VIII.FINANCIAL REPORTS; FINANCIAL COVENANTS

 

8.1                    Reports and Notices. From the Closing Date until the
Termination Date, each Borrower shall deliver to Lender:

 

(a)               within twenty (20) days following the end of each Fiscal
Month, a Monthly Statement Report of such Borrower in the form of Exhibit B as
of the last day of the previous Fiscal Month;

 

(b)               within twenty (20) days following the end of each Fiscal
Month, the Financial Statements for such Fiscal Month of such Borrower, which
shall provide comparisons to budget and actual results for the corresponding
period during the prior Fiscal Year, both on a monthly and year-to-date basis,
and accompanied by a certification in the form of Exhibit D by the Chief
Executive Officer or Chief Financial Officer of Borrowing Representative that
such Financial Statements are complete and correct, that there was no Default
(or specifying those Defaults of which he or she was aware), showing in
reasonable detail the calculations used in determining compliance with the
financial covenants hereunder; and containing such reporting information
required and as set forth on Schedule VI certified as true and correct by the
President or Chief Financial Officer of each Borrower;

 

(c)               within ninety (90) days following the close of each Fiscal
Year, the Financial Statements of Digirad Corporation for such Fiscal Year
prepared in accordance with GAAP and audited and certified by an independent
certified accounting firm acceptable to Lender (as of the Closing Date, BDO USA,
LLP shall be deemed acceptable to Lender) which shall provide comparisons to the
prior Fiscal Year, and shall be accompanied by (i) a statement in reasonable
detail showing the calculations used in determining compliance with the
financial covenants hereunder, (ii) a report from Digirad Corporation’s
accountants to the effect that in connection with their audit examination
nothing has come to their attention to cause them to believe that a Default has
occurred or specifying those Defaults of which they are aware, and (iii) any
management letter that may be issued;

 

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(d)               at least thirty (30) days before the beginning of each Fiscal
Year of each Borrower, the Projections, each in reasonable detail, representing
such Borrower’s good faith Projections and certified by such Borrower’s
President or Chief Financial Officer (or officers having corresponding functions
and responsibilities) as being the most accurate Projections available and
identical to the Projections used by such Borrower for internal planning
purposes, together with such supporting schedules and information as Lender may
in its discretion require;

 

(e)               together with each request for a Loan (but in no event later
than the third day of each month) and at such intervals as Lender may request a
Borrowing Base Certificate as of the last day of the immediately preceding
Fiscal Month detailing eligible and ineligible Accounts, and Inventory of
adjustment to the Formula Amount, and containing such reporting information
required and as set forth on Schedule VI, certified as true and correct by the
President or Chief Financial Officer of each Borrower;

 

(f)                together with each request for a Loan and accompanying each
Borrowing Base Certificate (but in no event later than the third day of each
month) and at such other intervals as Lender may require: (i) copies of all
entries to the sales journal and the cash receipt journal; (ii) copies of all
credit memos; (iii) copies of invoices randomly selected by Lender, together
with information on balances, payments, and proof of delivery; and containing
such reporting information required and as set forth on Schedule VI certified as
true and correct by the President or Chief Financial Officer of each Borrower;

 

(g)               promptly following Lender’s request, receivable schedules,
copies of invoices to Account Debtors, shipping documents, delivery receipts and
such other material, reports, records or information as Lender may request;

 

(h)               promptly upon their distribution, copies of all financial
statements, reports and proxy statements which any Borrower shall have sent to
its stockholders, promptly after the sending or filing thereof, copies of all
regular and periodic reports which any Credit Party shall file with the
Securities and Exchange Commission or any national securities exchange; and

 

(i)                 each Borrower will cause each Guarantor to comply with the
financial reporting requirements set forth in their respective Guaranties.

 

8.2                    Financial Covenants. No Borrower or Corporate Credit
Party shall breach any of the financial covenants set forth in Schedule III.

 

8.3                    Other Reports and Information. Borrower Representative
shall advise Lender promptly, in reasonable detail, of: (a) any Lien, other than
Permitted Liens, attaching to or asserted against any of the Collateral or any
occurrence causing a material loss or decline in value of any Collateral and the
estimated (or actual, if available) amount of such loss or decline; (b) any
material change in the composition of the Collateral; and (c) the occurrence of
any Default, Event of Default or other event which has had or could reasonably
be expected to have a Material Adverse Effect. Each Corporate Credit Party
shall, upon request of Lender, furnish to Lender such other reports and
information in connection with the affairs, business, financial condition,
operations, prospects or management of such Corporate Credit Party or the
Collateral as Lender may request, all in reasonable detail. If any internally
prepared financial information, including that required under Section 8.1 is
unsatisfactory in any manner to Lender, Lender may request that the Borrower’s
independent certified accountants review the same.

 

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8.4                    Good Standing Certificates. Together with the delivery of
the Financial Statements referred to in Section 8.1(c), each Corporate Credit
Party shall provide to Lender a certificate of good standing from its state of
incorporation or organization.

 

IX.NEGATIVE COVENANTS

 

Each Corporate Credit Party, (other than Digirad Corporation, Lone Star Value
Management, LLC and Lone Star Value Co-Invest I, LP) covenants and agrees that,
without Lender’s prior written consent, from the Closing Date until the
Termination Date, such Credit Party shall not, directly or indirectly, by
operation of law or otherwise:

 

(a)               form any Subsidiary or merge with, consolidate with, acquire
all or substantially all of the assets or capital stock of, or otherwise combine
with or make any investment in or divide, or, except as provided in clause 9(c)
below, loan or advance to, any Person;

 

(b)               cancel any debt owing to it or create, incur, assume,
guaranty, or permit to exist any Indebtedness without the prior written consent
of Lender, except: (i) the Obligations, (ii) Indebtedness existing as of the
Closing Date set forth on Disclosure Schedule 9(b); provided, however, that
payments to Lone Star Value Co-Invest I, LP, Lone Star Value Management, LLC and
Jeffrey E. Eberwein set forth therein are otherwise restricted by the terms of
their respective Subordination Agreement or by the terms of this Agreement and
shall otherwise not be paid using the proceeds of the Loans, (iii) deferred
taxes, (iv) by endorsement of instruments or items of payment for deposit to the
general account of Borrower, (v) for Guaranteed Indebtedness incurred for the
benefit of a Borrower if the primary obligation is permitted by this Agreement;
(vi) Purchase Money Indebtedness; and (vii) Indebtedness to trade creditors and
operating expense accruals in the normal course of business;

 

(c)               enter into any lending, borrowing or other commercial
transaction with any of its employees, directors or Affiliates (including
upstreaming and downstreaming of cash and intercompany loan and advances) other
than (i) loans or advances to employees in the ordinary course of business in an
aggregate outstanding amount not exceeding the Minimum Actionable Amount, or
(ii) Subordinated Debt, (provided, however, that notwithstanding anything to the
contrary in the preceding clauses (i) and (ii), or elsewhere herein, Digirad
Corporation is not restricted in paying any obligations of its direct and
indirect subsidiaries and, in particular, Digirad Corporation may pay these
obligations by making either a (i) equity contribution to ATRM Holdings, Inc. or
(ii) loan to ATRM Holdings, Inc. subject to the applicable Subordination
Agreement to enable ATRM Holdings, Inc. to pay up to $300,000 of the expenses of
each of KBS Builders, Inc. and EdgeBuilder, Inc./Glenbrook Building Supply, Inc.
provided that: (x) prior notice together with copies of applicable
invoice/statement is given to Lender; (y) there then exists no Event of Default
at the time of such payment or as a result thereof; and (z) an overadvance is
not created as a result of such payment);

 

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(d)               make any changes in any of its business objectives, purposes,
or operations which could reasonably be expected to adversely affect repayment
of the Obligations or could reasonably be expected to have a Material Adverse
Effect or engage in any business other than that presently engaged in or
proposed to be engaged in the Projections delivered to Lender on the Closing
Date or amend its charter or by-laws or other organizational documents;

 

(e)               create or permit any Lien on any of its properties or assets,
except for Permitted Liens;

 

(f)                sell, transfer, issue, convey, assign or otherwise dispose of
any of its assets or properties, including its Accounts or any shares of its
Stock (which restriction shall not apply to public sale of stock of Digirad
Corporation) or engage in any sale-leaseback, synthetic lease or similar
transaction (provided, that the foregoing shall not prohibit the sale of
Inventory or obsolete or unnecessary Equipment in the ordinary course of its
business);

 

(g)               change its name, state of incorporation or organization, chief
executive office, corporate offices, warehouses or other Collateral locations,
or location of its records concerning the Collateral, or acquire, lease or use
any real estate after the Closing Date without such Corporate Credit Party, in
each instance, giving thirty (30) days prior written notice thereof to Lender
and taking all actions deemed necessary or appropriate by Lender to continuously
protect and perfect Lender’s Liens upon the Collateral or store or hold any
assets of another Person;

 

(h)               establish any depository or other bank account of any kind
with any financial institution (other than the accounts set forth on Disclosure
Schedule 7.17) without Lender’s prior written consent and then only after such
Corporate Credit Party has implemented agreements with such bank or other
institution and Lender acceptable to Lender; or

 

(i)                 make or permit any Restricted Payment other than (i)
interest and principal, when due without acceleration or modification of the
amortization as in effect on the Closing Date, under Indebtedness (not including
Subordinated Debt, payments of which shall be permitted only in accordance with
the terms of the relevant Subordination Agreement made in favor of Lender)
described in Disclosure Schedule (9(b)) or otherwise permitted under Article
IX(b)(vi) and (ii) so long as (x) the tax status of such Corporate Credit Party
is a pass thru or disregarded entity within the meaning of the Internal Revenue
Code of 1986, as amended, (y) no Default or Event of Default shall have occurred
and be continuing and (z) after first providing such supporting documentation as
Lender may request (including the personal state and federal tax returns of each
Stockholder), such Credit Party may pay Pass Thru Distributions not exceeding
Pass Thru Tax Liabilities. Payments to Stockholders shall be made so as to be
available when the tax is due, including in respect of estimated tax payments.

 

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X.SECURITY INTEREST

 

10.1                Grant of Security Interest.

 

(a)               As collateral security for the prompt and complete payment and
performance of all of the Obligations, each Corporate Credit Party executing
this Agreement hereby grants to the Lender a security interest in and Lien upon
all of its property and assets, whether real or personal, tangible or
intangible, and whether now owned or hereafter acquired, or in which it now has
or at any time in the future may acquire any right, title, or interest,
including all of the following property in which it now has or at any time in
the future may acquire any right, title or interest: all Accounts; all Deposit
Accounts and all funds on deposit therein; all cash and cash equivalents; all
commodity contracts; all investments, Stock and Investment Property; all
Inventory; all Equipment; all Goods; all Chattel Paper, all Documents; all
Instruments; all Books and Records; all General Intangibles; each Life Insurance
Policy; all Supporting Obligations; all Letter-of-Credit Rights; and to the
extent not otherwise included, all Proceeds and products of all and any of the
foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing, but excluding in all events Hazardous Waste
(all of the foregoing, together with any other collateral pledged to the Lender
pursuant to any other Credit Document, collectively, the “Collateral”).

 

(b)               Each Corporate Credit Party executing this Agreement and
Lender agree that this Agreement creates, and is intended to create, valid and
continuing Liens upon the Collateral in favor of Lender. Each such Corporate
Credit Party represents, warrants and promises to Lender that: (i) such
Corporate Credit Party is the sole owner of each item of the Collateral upon
which it purports to grant a Lien pursuant to the Credit Documents, and has good
and marketable title thereto free and clear of any and all Liens or claims of
others, other than Permitted Liens; (ii) the security interests granted pursuant
to this Agreement will constitute valid perfected security interests in all of
the Collateral in favor of Lender as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from such Corporate
Credit Party (other than purchasers of Inventory in the ordinary course of
business) and such security interests are prior to all other Liens on the
Collateral in existence on the date hereof except for Permitted Liens which have
priority by operation of law; and (iii) no effective security agreement,
financing statement, equivalent security or Lien instrument or continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those relating to Permitted Liens. Each
Corporate Credit Party executing this Agreement promises to defend the right,
title and interest of Lender in and to the Collateral against the claims and
demands of all Persons whomsoever, and each Corporate Credit Party shall take
such actions, including (x) upon request by Lender, the prompt delivery of all
negotiable Documents, original Instruments, Chattel Paper and certificated Stock
owned by such Corporate Credit Party to Lender, (y) notification of Lender’s
interest in Collateral at Lender’s request, and (z) the institution of
litigation against third parties as shall be prudent in order to protect and
preserve such Credit Party’s and Lender’s respective and several interests in
the Collateral. Each Corporate Credit Party executing this Agreement shall mark
its Books and Records pertaining to the Collateral to evidence the Credit
Documents and the Liens granted under the Credit Documents. All Chattel Paper
shall be marked with the following legend: “This writing and the obligations
evidenced or secured hereby are subject to the security interest of Gerber
Finance Inc.”

 

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(c)               Each Corporate Credit Party executing this Agreement shall
obtain or use its best efforts to obtain waivers or subordinations of Liens from
landlords and mortgagees, and each Corporate Credit Party shall in all instances
obtain signed acknowledgments of Lender’s Liens from bailees having possession
of such Corporate Credit Party’s Goods that they hold for the benefit of Lender.

 

(d)               Each Corporate Credit Party executing this Agreement shall
obtain authenticated control letters from each issuer of uncertificated
securities, securities intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for such Credit Party.

 

(e)               Each Corporate Credit Party executing this Agreement shall
establish and maintain the cash management system described in Schedule IV. All
payments on account of the Obligations required by Sections 3.1 and 10.2 hereof
shall be made to or deposited in the blocked account described in Schedule IV in
accordance with the terms thereof.

 

(f)                Each Corporate Credit Party executing this Agreement shall
promptly, and in any event within two (2) Business Days after becoming a
beneficiary under a letter of credit, notify Lender thereof and enter into a
tri-party agreement with Lender and the issuer and/or confirmation bank with
respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to
Lender and directing all payments thereunder to Lender, all in form and
substance reasonably satisfactory to Lender.

 

(g)               Each Corporate Credit Party executing this Agreement shall
take all steps necessary to grant Lender control of all electronic chattel paper
in accordance with the UCC and all “transferable records” as defined in each of
the Uniform Electronic Transactions Act and the Electronic Signatures in Global
and National Commerce Act.

 

(h)               Each Corporate Credit Party executing this Agreement hereby
irrevocably authorizes Lender at any time and from time to time to file in any
filing office in any Uniform Commercial UCC jurisdiction any initial financing
statements and amendments thereto that (i) indicate the Collateral (x) as all
assets of such Corporate Credit Party or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within the scope
of Article 9 of the UCC or such jurisdiction, or (y) as being of an equal or
lesser scope or with greater detail, and (ii) contain any other information
required by Part 5 of Article 9 of the UCC or the filing office for acceptance
of any financing statement or amendment, including whether each Corporate Credit
Party is an organization, the type of organization and any organization
identification number issued to each Corporate Credit Party, and in the case of
a financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. Each Corporate Credit Party agrees to
furnish any such information to Lender promptly upon request. Each Corporate
Credit Party also ratifies its authorization for Lender to have filed any
initial financing statements or amendments thereto if filed prior to the date
hereof.

 

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(i)                 Each Corporate Credit Party shall promptly, and in any event
within two (2) Business Days after the same is acquired by it, notify Lender of
any commercial tort claim (as defined in the UCC) acquired by it and unless
otherwise consented by Lender, each Corporate Credit Party shall enter into a
supplement to this Agreement, granting to Lender a Lien in such commercial tort
claim.

 

(j)                 It is the intent of each Corporate Credit Party and Lender
that none of the Collateral other than as set forth in the Mortgage, is or shall
be regarded as Fixtures and each Corporate Credit Party represents and warrants
that it has not made and is not bound by any lease or other agreement that is
inconsistent with such intent. Nevertheless, if the Collateral or any part
thereof is or is to become attached or affixed to any real estate, each
Corporate Credit Party will, upon request, furnish Lender with a disclaimer or
subordination in form satisfactory to Lender of their interests in the
Collateral from all Persons having an interest in the real estate to which the
Collateral is attached or affixed, together with the names and addresses of the
record owners of, and all other persons having interest in, and a general
description of, such real estate.

 

10.2                Lender’s Rights.

 

(a)               Lender may, (i) at any time in Lender’s own name or in the
name of each Corporate Credit Party, communicate with Account Debtors, parties
to Contracts, and obligors in respect of Instruments, Chattel Paper or other
Collateral to verify to Lender’s satisfaction, the existence, amount and terms
of any such Accounts, Contracts, Instruments or Chattel Paper or other
Collateral, and (ii) at any time and without prior notice to any Corporate
Credit Party notify Account Debtors, parties to Contracts, and obligors in
respect of Chattel Paper, Instruments, or other Collateral that the Collateral
has been assigned to Lender and that payments shall be made directly to Lender.
Upon the request of Lender, each Corporate Credit Party shall so notify such
Account Debtors, parties to Contracts, and obligors in respect of Instruments,
Chattel Paper or other Collateral. Each Corporate Credit Party hereby
constitutes Lender or Lender’s designee such Corporate Credit Party’s attorney
with power to endorse such Corporate Credit Party’s name upon any notes,
acceptance drafts, money orders or other evidences of payment or Collateral. The
provisions of this Section as relate to KBS Builders, Inc. supplement those in
Loan and Security Agreement dated February 23, 2016, as amended.

 

(b)               Each Corporate Credit Party shall remain liable under each
Contract, Instrument and License to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, and Lender shall have
no obligation or liability whatsoever to any Person under any Contract,
Instrument or License (between any Borrower and any Person other than Lender) by
reason of or arising out of the execution, delivery or performance of this
Agreement, and Lender shall not be required or obligated in any manner (i) to
perform or fulfill any of the obligations of Borrower, (ii) to make any payment
or inquiry, or (iii) to take any action of any kind to collect, compromise or
enforce any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times under or
pursuant to any Contract, Instrument or License.

 

(c)               Each Corporate Credit Party shall, with respect to each owned,
leased, or controlled property (including public warehouses), during normal
business hours and upon reasonable advance notice (unless a Default or Event of
Default shall have occurred and be continuing, in which event no notice shall be
required and Lender shall have access at any and all times): (i) provide access
to such property to Lender and any of its officers, employees and agents, as
frequently as Lender determines to be appropriate; (ii) permit Lender and any of
its officers, employees and agents to inspect, audit and make extracts and
copies from all of such Corporate Credit Party’s Books and Records; and (iii)
permit Lender to inspect, review, evaluate and make physical verifications and
appraisals of the Inventory and other Collateral in any manner and through any
medium that Lender considers advisable, and each Corporate Credit Party agrees
to render to Lender, at Borrowers’ cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.

 

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(d)               After the occurrence and during the continuance of a Default
or Event of Default, each Corporate Credit Party at its own expense, shall cause
the certified public accountant then engaged by any Borrower to prepare and
deliver to Lender at any time and from time to time, promptly upon Lender’s
request, the following reports: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) test verifications of such
Accounts as Lender may request. Each Corporate Credit Party at its own expense,
shall cause its certified independent public accountants to deliver to Lender
the results of any physical verifications of all or any portion of the Inventory
made or observed by such accountants when and if such verification is conducted.
Lender shall be permitted to observe and consult with such Corporate Credit
Party’s accountants in the performance of these tasks.

 

10.3          Lender’s Appointment as Attorney-in-Fact. On the Closing Date,
each Corporate Credit Party shall execute and deliver a Power of Attorney in the
form attached as Exhibit E. The power of attorney granted pursuant to the Power
of Attorney and all powers granted under any Credit Document are powers coupled
with an interest and shall be irrevocable until the Termination Date. The powers
conferred on Lender under the Power of Attorney are solely to protect Lender’s
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. Lender agrees, except for the powers granted in clause (h) of
the Power of Attorney, not to exercise any power or authority granted under the
Power of Attorney unless an Event of Default has occurred and is continuing.
Each Corporate Credit Party authorizes Lender to file any financing or
continuation statement without the signature of Borrowers to the extent
permitted by applicable law. NONE OF LENDER OR ITS AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY
GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE,
EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

 

10.4          Grant of License to Use Intellectual Property Collateral. Each
Corporate Credit Party hereby grants to Lender an irrevocable, non-exclusive
license (exercisable upon the occurrence and during the continuance of an Event
of Default) without payment of royalty or other compensation to any Corporate
Credit Party to use, transfer, license or sublicense any Intellectual Property
now owned, licensed to, or hereafter acquired by any Corporate Credit Party, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof, and
represents, promises and agrees that any such license or sublicense is not and
will not be in conflict with the contractual or commercial rights of any third
Person; provided, that such license will terminate on the Termination Date.

 

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10.5          Terminations; Amendments Not Authorized. Each Corporate Credit
Party executing this Agreement acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with respect to
any financing statement without the prior written consent of Lender and agrees
that it will not do so without the prior written consent of Lender, subject to
Borrower’s rights under Section 9-509(d)(2) of the UCC.

 

10.6          Inspections. At all times during normal business hours and absent
the occurrence of a Default or an Event of Default upon reasonable notice to
Borrowing Representative, Lender shall have the right to (a) have access to,
visit, inspect, review, evaluate and make physical verification and appraisals
of each Borrower’s properties and the Collateral, (b) inspect, examine and copy
(or take originals if necessary) and make extracts from such Borrower’s Books
and Records, including management letters prepared by independent accountants,
and (c) discuss with each Borrower’s principal officers, and independent
accountants, each Borrower’s business, assets, liabilities, financial condition,
results of operations and business prospects. Each Borrower will deliver to
Lender any instrument necessary for Lender to obtain records from any service
bureau maintaining records for such Borrower.

 

10.7          Inapplicability. The provisions of this Article (except Sections
10.5 and 10.6) do not apply to Digirad Corporation, Lone Star Value Management,
LLC or Lone Star Value Co-Invest I, LP.

 

XI.TERM

 

11.1          Term of Agreement. Any obligation of Lender to make Loans and
extend their financial accommodations under this Agreement or any Credit
Document shall continue in full force and effect until the expiration of the
Term. The termination of the Agreement shall not affect any of Lender’s rights
hereunder or any Credit Document and the provisions hereof and thereof shall
continue to be fully operative until all transactions entered into, rights or
interests created and the Obligations have been disposed of, concluded or
liquidated. The Maturity Date shall be automatically extended for successive
periods of one (1) year each unless (a) Borrowing Representative shall have
provided Lender with a written notice of termination, at least sixty (60) days
prior to the expiration of the Maturity Date or any renewal of the Maturity Date
or (b) Lender provides written notice of termination to Borrowing Representative
at least sixty (60) days prior to the expiration of the Maturity Date or any
renewal of the Maturity Date. Notwithstanding the foregoing, Lender shall
release its security interests at any time after thirty (30) days notice upon
payment to it of all Obligations if each Credit Party shall have (i) provided
Lender with an executed release of any and all claims which Credit Parties may
have or thereafter have under this Agreement and/or any Credit Document and (ii)
paid to Lender an amount equal to (A) the monthly interest on the Minimum
Average Monthly Loan Amount calculated based on the interest rate in effect on
the date of such payment multiplied by (B) the difference between (I) the number
of full months from the Closing Date until the Maturity Date and (II) the number
of full months which have elapsed from the Closing Date until the payment of the
fee hereunder. In addition, Borrower shall pay to Lender the Collateral
Monitoring Fee for each month from the date of repayment until the Maturity
Date. These fees shall also be due and payable to Lender upon termination of
this Agreement by Lender after the occurrence of an Event of Default.

 

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11.2          [Intentionally Omitted]

 

11.3          Termination of Lien. The Liens and rights granted to Lender
hereunder and any Credit Documents and the financing statements filed in
connection herewith or therewith shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers’
account may from time to time be temporarily in a zero or credit position, until
(a) all of the Obligations have been paid or performed in full after the
termination of this Agreement or each Credit Party has furnished Lender with an
indemnification satisfactory to Lender with respect thereto and (b) each Credit
Party has an executed release of any and all claims which such Credit Party may
have or thereafter have under this Agreement or any other Credit Document.
Accordingly, each Credit Party waives any rights which it may have under the UCC
to demand the filing of termination statements with respect to the Collateral,
and Lender shall not be required to send such termination statements to any
Credit Party, or to file them with any filing office, unless and until this
Agreement and the Credit Documents shall have been terminated in accordance with
their terms and all Obligations paid in full in immediately available funds.

 

XII.EVENTS OF DEFAULT

 

12.1          Events of Default. If any one or more of the following events
(each, an “Event of Default”) shall occur and be continuing:

 

(a)               any Borrower shall fail to pay the principal of or interest on
any Loan or any fees or other Obligations when and as the same shall become due
and payable (whether at maturity, by acceleration or otherwise); or

 

(b)               any representation or warranty made or deemed made in or in
connection with this Agreement or any other Credit Document or as an inducement
to enter into this Agreement or any other Credit Document or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument or agreement furnished in connection
with or pursuant to this Agreement or any other Credit Document shall prove to
have been false or misleading in any material respect when made, deemed to be
made or furnished; or

 

(c)               (i) Borrower or any other Corporate Credit Party shall fail or
neglect to perform, keep or observe any of the covenants, promises, agreements,
requirements, conditions or other terms or provisions contained in Article II,
Sections 7.1, 7.3, 7.16, 7.17, 7.18, 7.19, 8.2 and Article IX of this Agreement;
or (ii) Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the other covenants, promises, agreements, requirements,
conditions or other terms or provisions contained in this Agreement (other than
those set forth in the Sections referred to in clause (i) immediately above) or
any of the other Loan Documents, regardless of whether such breach involves a
covenant, promise, agreement, condition, requirement, term or provision with
respect to a Credit Party that has not signed this Agreement, and such breach is
not remediable or, if remediable, continues unremedied for a period of five (5)
Business Days after the earlier to occur of (x) the date on which such breach is
known or reasonably should have become known to any officer of any Borrower or
such Credit Party and (y) the date on which Lender shall have notified any
Borrower or such other Credit Party of such breach; or

 

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(d)               this Agreement or any other Credit Document shall not be for
any reason, or shall be asserted by any Credit Party not to be, in full force
and effect in all material respects in accordance with its terms or the Lien
granted or intended to be granted to Lender pursuant to this Agreement or any
other Credit Document shall cease to be a valid and perfected Lien having the
first priority (or a lesser priority if expressly permitted in this Agreement or
another Credit Document); or

 

(e)               any judgment shall be rendered against any Credit Party or
there shall be any attachment or execution against any of the assets or
properties of any Credit Party, and such judgment, attachment or execution
remains unpaid, unstayed or undismissed for a period of fourteen (14) days from
the date of such judgment; or

 

(f)                any Credit Party shall be dissolved or shall generally not
pay, or shall be generally unable to pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted or a petition shall be filed by or against any Credit Party seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property; or any Credit Party shall take any
action to authorize any of the actions set forth above in this clause (f); or

 

(g)               any Credit Party shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of Indebtedness when and as the
same shall become due and payable or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreements or
instruments evidencing or governing any Indebtedness if the effect of any
failure referred to in this clause (ii) is to cause, or to permit the holder or
holders of such indebtedness or a trustee on its or their behalf to cause, such
indebtedness to become due prior to its stated maturity; or

 

(h)               the occurrence of a Change of Control in or with respect to
any Corporate Credit Party; or

 

(i)                 there shall be commenced against any Credit Party any
Litigation seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which remains unstayed or
undismissed for thirty (30) consecutive days; or any Credit Party shall have
concealed, removed or permitted to be concealed or removed, any part of its
property with intent to hinder, delay or defraud any of its creditors or made or
suffered a transfer of any of its property or the incurring of an obligation
which may be fraudulent under any bankruptcy, fraudulent transfer or other
similar law; or

 

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(j)                 any other event shall have occurred which has had or could
reasonably be expected to have a Material Adverse Effect; or

 

 

(k)               an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with all other ERISA Events that have occurred and
are then continuing, could reasonably be expected to result in liability of any
Credit Party in an aggregate amount exceeding the Minimum Actionable Amount; the
indictment or threatened indictment of any Corporate Credit Party, any officer
of any Corporate Credit Party or any Guarantor under any criminal statute, or
commencement or threatened commencement of criminal or civil proceeding against
any Corporate Credit Party, any officer of any Corporate Credit Party or any
Guarantor pursuant to which statute or proceeding penalties or remedies sought
or available include forfeiture of any of the property of any Corporate Credit
Party; or

 

(l)                 any Credit Party shall take or participate in any action
which would be prohibited under the provisions of any Subordination Agreement or
Intercreditor Agreement, or make any payment on the Subordinated Debt that any
Person was not entitled to receive under the provisions of the applicable
Subordination Agreement or Intercreditor Agreement or an Event of Default shall
have occurred as defined under any Subordinated Debt; or

 

(m)             the Life Insurance Policy shall be terminated, by any Credit
Party or otherwise; or the Life Insurance Policy shall be scheduled to terminate
within thirty (30) days and such Credit Party shall not have delivered a
satisfactory renewal thereof to Lender; or any Credit Party shall fail to pay
any premium on the Life Insurance Policy when due; or shall take any other
action that impairs the value of the Life Insurance Policy; or

 

(n)               an Event of Default shall have occurred as defined under any
of the other Obligations;

 

then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing, Lender in its sole discretion may
declare any or all of the Obligations to be due and payable, and the same shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived; provided, however,
that if there shall occur an Event of Default under paragraph (f) above, then
any and all of the Obligations shall be immediately due and payable without any
necessary action or notice by Lender.

 

12.2           Lender Remedies.

 

(a)               In addition to the rights and remedies set forth in Section
12.1, if any Event of Default shall have occurred and be continuing, Lender may,
without notice, take any one or more of the following actions: (i) require that
all Letter of Credit Obligations be fully cash collateralized pursuant to
Schedule I; or (ii) exercise any rights and remedies provided to Lender under
the Credit Documents or at law or equity, including all remedies provided under
the UCC.

 

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(b)               Without limiting the generality of the foregoing, each
Corporate Credit Party expressly agrees that upon the occurrence of any Event of
Default, Lender may take any action necessary to collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, or
appoint a third party to do so and may forthwith sell, lease, assign, give an
option or options to purchase or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. Lender shall have the right upon any such public sale, to the
extent permitted by law, to purchase for the benefit of Lender the whole or any
part of said Collateral so sold, free of any right of equity of redemption,
which right each Credit Party hereby releases. Such sales may be adjourned or
continued from time to time with or without notice. Lender shall have the right
to conduct such sales on any Corporate Credit Party’s premises or elsewhere and
shall have the right to use any Corporate Credit Party’s premises without rent
or other charge for such sales or other action with respect to the Collateral
for such time as Lender deems necessary or advisable.

 

(c)               Upon the occurrence and during the continuance of an Event of
Default and at Lender’s request, each Credit Party further agrees to assemble
the Collateral and make it available to Lender at places which Lender shall
reasonably select, whether at its premises or elsewhere. Until Lender is able to
effect a sale, lease, or other disposition of the Collateral, Lender shall have
the right to complete, assemble, use or operate the Collateral or any part
thereof, to the extent that Lender deems appropriate, for the purpose of
preserving such Collateral or its value or for any other purpose. Lender shall
have no obligation to any Credit Party to maintain or preserve the rights of any
Credit Party as against third parties with respect to any Collateral while such
Collateral is in the possession of Lender. Lender may, if it so elects, seek the
appointment of a receiver or keeper to take possession of any Collateral and to
enforce any of Lender’s remedies with respect thereto without prior notice or
hearing. To the maximum extent permitted by applicable law, each Credit Party
waives all claims, damages, and demands against Lender, its Affiliates, agents,
and the officers and employees of any of them arising out of the repossession,
retention or sale of any Collateral except such as are determined in a final
judgment by a court of competent jurisdiction to have arisen solely out of the
gross negligence or willful misconduct of such Person. Each Credit Party agrees
that ten (10) days prior notice by Lender to each Credit Party of the time and
place of any public sale or of the time after which a private sale may take
place is reasonable notification of such matters. Each Credit Party shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Lender is entitled.

 

(d)               Lender’s rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which Lender may
have under any other Credit Document or at law or in equity or as provided under
any Obligation. Recourse to the Collateral shall not be required. All provisions
of this Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited, to the extent
necessary, so that they do not render this Agreement invalid or unenforceable,
in whole or in part.

 

12.3          Waivers. Except as otherwise provided for in this Agreement and to
the fullest extent permitted by applicable law, each Credit Party waives: (a)
presentment, demand and protest, and notice of presentment, dishonor, intent to
accelerate, acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all Credit Documents, the
Notes or any other notes, commercial paper, Accounts, Contracts, Documents,
Instruments, Chattel Paper and guaranties at any time held by Lender on which
any Credit Party may in any way be liable, and hereby ratifies and confirms
whatever Lender may do in this regard; (b) all rights to notice and a hearing
prior to Lender’s taking possession or control of, or to Lender’s replevy,
attachment or levy upon, any Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of its remedies;
and (c) the benefit of all valuation, appraisal and exemption laws. Each Credit
Party acknowledges that it has been advised by counsel of its choices and
decisions with respect to this Agreement, the other Credit Documents and the
transactions evidenced hereby and thereby.

 

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12.4          Proceeds. The Proceeds of any sale, disposition or other
realization upon any Collateral shall be applied by Lender upon receipt to the
Obligations in such order as Lender may deem advisable in its sole discretion
(including the cash collateralization of any Letter of Credit Obligations), and
after the indefeasible payment and satisfaction in full in cash of all of the
Obligations, and after the payment by Lender of any other amount required by any
provision of law, including the UCC (but only after Lender has received what
Lender considers reasonable proof of a subordinate party’s security interest),
the surplus, if any, shall be paid to Borrowers or their representatives or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.

 

XIII.MISCELLANEOUS

 

13.1          No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Lender, any right, remedy, power or
privilege under this Agreement or any other Credit Documents shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
No notice to or demand on any Credit Party in any case shall, of itself, entitle
it to any other or further notice or demand in similar or other circumstances.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

 

13.2          Amendments and Waivers. No amendment, modification or waiver of or
with respect to any provision of this Agreement or any other Credit Document
shall in any event be effective unless it shall be in writing and signed by
Lender and each Credit Party, and then such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

 

13.3          Expenses; Indemnity.

 

(a)               Each Credit Party agrees to, jointly and severally, pay or
reimburse Lender for all costs and expenses (including, without limitation, the
fees and expenses of all counsel, advisors, consultants and auditors) incurred
by Lender in connection with: (i) the preparation, negotiation, execution,
delivery, performance and enforcement of this Agreement and the other Credit
Documents, any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions contemplated shall be consummated);
(ii) the enforcement or protection of Lender’s rights in connection with this
Agreement and the other Credit Documents or in connection with the Loans; (iii)
any advice in connection with the administration of the Loans or the rights
under this Agreement or the other Credit Documents; (iv) any litigation,
dispute, suit, proceeding or action (whether instituted by or between any
combination of Lender, any Credit Party or any other Person), and an appeal or
review thereof, in any way relating to the Collateral, this Agreement, any other
Credit Document, or any action taken or any other agreements to be executed or
delivered in connection therewith, whether as a party, witness or otherwise; and
(v) any effort (x) to monitor the Loans, (y) to evaluate, observe or assess any
Borrower or any other Credit Party or the affairs of such Person, and (z) to
verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of the Collateral. In addition to the foregoing, each Credit
Party agrees to pay Lender a fee of $1,000 for each amendment, modification,
supplement or restatement of any Credit Document entered into by Lender and any
Borrower. Each Corporate Credit Party further agrees, jointly and severally, to
indemnify Lender from and agrees to hold it harmless against any documentary
taxes, assessments or charges made by any governmental authority by reason of
the execution and delivery of this Agreement or any of the other Credit
Documents.

 

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(b)               Each Corporate Credit Party agrees to, jointly and severally,
indemnify Lender, its correspondents and each of its respective directors,
shareholders, officers, employees and agents (each, an “Indemnified Person”)
against, and agrees to hold each Indemnified Person harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, charges and disbursements, incurred by or asserted against any
Indemnified Person arising out of, in any way connected with or as a result of
(i) the use of any of the proceeds of any Loan or the use of any Loan, (ii) the
goods or transactions financed by the Loans, (iii) this Agreement, any other
Credit Document or any other document contemplated hereby or thereby, the
performance by the parties hereto or thereto of their respective obligations
hereunder and thereunder or the consummation of the transactions contemplated
hereby and thereby, or (iv) any claim, litigation, investigation or proceedings
relating to any of the foregoing, whether or not any Indemnified Person
Indemnity is a party thereto; provided, however, that such indemnity shall not,
as to any Indemnified Person, apply to any such losses, claims, damages,
liabilities or related expenses to the extent that they result from the gross
negligence or willful misconduct of Lender.

 

(c)               The provisions of this Section 13.3 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement and the repayment of the Loans. All amounts due under this Section
13.3 shall be payable on written demand therefor.

 

13.4          Borrowing Agency Provisions. If and to the extent that at any time
or from time to time there are multiple Borrowers, then.

 

(a)               Each Borrower acknowledges that, together with each other
Borrower, it is part of an affiliated common enterprise in which any loans or
other financial accommodations extended to any one Borrower will result in
direct and substantial economic benefit to each other Borrower, and each
Borrower will likewise benefit from the economies of scale associated with the
Borrowers, as a group, applying for credit or other financial accommodations on
a collective basis.

 

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(b)               Each Borrower hereby irrevocably designates Borrowing
Representative to be its attorney and agent and, in such capacity, to borrow,
sign and endorse notes, and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required hereunder, on behalf
of such Borrower or Borrowers, and hereby authorizes Lender to pay over or
credit all loan proceeds hereunder in accordance with the request of Borrowing
Representative.

 

(c)               The handling of this credit facility as a co-borrowing
facility with a Borrowing Representative in the manner set forth in this
Agreement is solely as an accommodation to Borrowers and at their request.
Lender shall not incur liability to Borrowers as a result thereof. To induce
Lender to do so and in consideration thereof, each Borrower, jointly and
severally, hereby indemnifies Lender and holds Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Lender or any issuer by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Lender on any request or instruction from Borrowing
Representative or any other action taken by Lender with respect to this
Section except due to willful misconduct or gross negligence by the indemnified
party.

 

(d)               All Obligations shall be joint and several, and each Corporate
Credit Party shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of each
Corporate Credit Party shall in no way be affected by any extensions, renewals
and forbearance granted by Lender to any Corporate Credit Party, failure of
Lender to give any Borrower notice of borrowing or any other notice, any failure
of Lender to pursue or preserve its rights against any Corporate Credit Party,
the release by Lender of any Collateral now or thereafter acquired from any
Corporate Credit Party, and such agreement by each Corporate Credit Party to pay
upon any notice issued pursuant thereto is unconditional and unaffected by prior
recourse by Lender to the other Credit Parties or any Collateral for such
Corporate Credit Party’s Obligations or the lack thereof.

 

13.5                    Guaranty. Each Corporate Credit Party hereby absolutely,
unconditionally and jointly and severally guarantees to Lender and its
successors and assigns the full and prompt payment (whether at stated maturity,
by acceleration or otherwise) and performance of all Obligations owed or
hereafter owing to Lender by each Corporate Credit Party. Each Corporate Credit
Party agrees that its guaranty obligation hereunder is a joint and several
continuing guaranty of payment and performance and not of collection, and that
its obligations shall be absolute and unconditional, irrespective of, and
unaffected by:

 

(a)               the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Credit Documents;

 

(b)               the absence of any action to enforce this Agreement (including
this Section 13.5) or any other Credit Document or the waiver or consent by
Lender with respect to any of the provisions hereof or thereof;

 

(c)               the existence, value or condition of, or failure to perfect
its Lien against, any security for the Obligations or any action, or the absence
of any action, by Lender in respect thereof (including the release of any such
security);

 

44

 

(d)               the insolvency of any Credit Party; or

 

(e)               any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,

 

it being agreed by each Credit Party that its obligations shall not be
discharged until the payment and performance, in full, of the Obligations has
occurred. Each Credit Party shall be regarded, and shall be in the same
position, as principal debtor with respect to the Obligations guaranteed
hereunder.

 

13.6          Waivers. Each Corporate Credit Party expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel Lender to marshal assets or to proceed in
respect of the Obligations guaranteed hereunder against any other Corporate
Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Credit Party. It is agreed among each Credit Party and
Lender that the foregoing waivers are of the essence of the transactions
contemplated by this Agreement and the other Credit Documents and that, but for
the provisions of this Section 13.6 and such waivers, Lender would decline to
enter into this Agreement.

 

13.7          Benefit of Guaranty. Each Credit Party agrees that the provisions
of Section 13.5 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Credit Party and Lender, the obligations of such other Credit Party under
this Agreement or the other Credit Documents.

 

13.8          Subordination of Subrogation. Notwithstanding anything to the
contrary in this Agreement or in any other Credit Documents, each Credit Party
hereby expressly and irrevocably subordinates to payment of the Obligations any
and all rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off and any and all defenses available to a
surety, guarantor or accommodation co-obligor until the Obligations are
indefeasibly paid in full in cash. Each Credit Party acknowledges and agrees
that this waiver is intended to benefit Lender and shall not limit or otherwise
affect such Credit Party’s liability hereunder or the enforceability of Section
13.5.

 

13.9          Election of Remedies. If Lender may, under applicable law, proceed
to realize its benefits under this Agreement or any other Credit Document giving
Lender a Lien upon any Collateral, whether owned by any Borrower or by any other
Person, either by judicial foreclosure or by non-judicial sale or enforcement,
Lender may, at its sole option, determine which of its remedies or rights it may
pursue without affecting any of its rights and remedies under Section 13.5. If,
in the exercise of any of its rights and remedies, Lender shall forfeit any of
its rights or remedies, including its right to enter a deficiency judgment
against any Credit Party or any other Person, whether because of any applicable
laws pertaining to “election of remedies” or the like, each Credit Party hereby
consents to such action by Lender and waives any claim based upon such action,
even if such action by Lender shall result in a full or partial loss of any
rights of subrogation which such Credit Party might otherwise have had but for
such action by Lender. Any election of remedies that results in the denial or
impairment of the right of Lender to seek a deficiency judgment against any
Credit Party shall not impair any other Credit Party’s obligation to pay the
full amount of the Obligations. In the event Lender shall bid at any foreclosure
or trustee’s sale or at any private sale permitted by law, this Agreement or any
other Credit Document, Lender may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by Lender but may be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under Section 13.5 notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Lender might otherwise be entitled but for such bidding at any
such sale.

 

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13.10      Liability Cumulative. The liability of Credit Parties under Section
13.5 is in addition to and shall be cumulative with all liabilities of each
Credit Party to Lender under this Agreement and the other Credit Documents or in
respect of any Obligations or obligation of the other Credit Parties, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

13.11      Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers’ property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.

 

13.12      Further Assurances. Each Credit Party will take, or cause to be
taken, all such further actions and execute, or cause to be executed, all such
further documents and instruments as Lender may at any time reasonably request
or determine to be necessary or advisable to further carry out and consummate
the transactions contemplated by this Agreement and the other Credit Documents.

 

13.13      Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each Credit Party and its successors and to the benefit
of Lender and its successors and assigns. The rights and obligations of each
Credit Party under this Agreement shall not be assigned or delegated without the
prior written consent of Lender, and any purported assignment or delegation
without such consent shall be null and void. Lender reserves the right at any
time to create and sell participations in the Loans and the Credit Documents and
to sell, transfer or assign any or all of its rights in the Loans and under the
Credit Documents.

 

13.14      Descriptive Headings. The descriptive headings of the various
provisions of this Agreement are inserted for convenience of reference only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.

 

13.15      Rules of Construction. For purposes of this Agreement and the other
Credit Documents, the following additional rules of construction shall apply,
unless specifically indicated to the contrary: (a) wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural; (b) all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations; and (c) all references to any instruments or agreements, including
references to any of the Credit Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof. The words “including”, “includes” and “include” shall be deemed to be
followed by the words “without limitation” the word “or” is not exclusive;
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Credit Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statues and related regulations shall include any
amendments of the same and any successor statutes and regulations.

 

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13.16      Notices. Except as otherwise provided herein, whenever any notice,
demand, request or other communication shall or may be given to or served upon
any party by any other party, or whenever any party desires to give or serve
upon any other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 13.16, (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when hand-delivered, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Schedule V or to such other address (or facsimile number) as may be
substituted by notice given as herein provided. Failure or delay in delivering
copies of any such communication to any Person (other than Borrowing
Representative or Lender) designated in Schedule V to receive copies shall in no
way adversely affect the effectiveness of communication.

 

13.17      Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

13.18      Entire Agreement; Counterparts. This Agreement and the other Credit
Documents represent the agreement of Credit Parties and Lender with respect to
the subject matter hereof, and there are no promises, undertakings,
representations or warranties by any Borrower or Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents. Nothing in this Agreement or in the other Credit Documents,
express or implied, is intended to confer upon any party, other than the parties
hereto and thereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement or the other Credit Documents. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument. Any signature delivered by a
party via facsimile or electronic transmission shall be deemed to be an original
signature hereto.

 

47

 

13.19      SUBMISSION TO JURISDICTION. EACH CREDIT PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; (b) CONSENTS THAT
ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT
SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A
COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE V TO THIS
AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH LENDER SHALL HAVE BEEN NOTIFIED
PURSUANT TO SECTION 13.16; AND (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

 

13.20      WAIVER OF TRIAL BY JURY, CERTAIN DAMAGES AND SETOFFS. IN ANY LEGAL
ACTION OR PROCEEDING, DIRECTLY OR INDIRECTLY, RELATING TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT DELIVERED
PURSUANT HERETO OR THERETO, (A) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY
WAIVES THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUCH LEGAL ACTION OR
PROCEEDING, (B) EACH OF EACH CREDIT PARTY AND LENDER HEREBY, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LEGAL ACTION OR PROCEEDING ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
ACTUAL DAMAGES AND (C) EACH CREDIT PARTY HEREBY, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO INTERPOSE
ANY NON-COMPULSORY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION
WITH ANY SUCH LEGAL ACTION OR PROCEEDING. EACH BORROWER AGREES THAT THIS SECTION
13.20 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT
LENDER WOULD NOT EXTEND TO ANY BORROWER ANY LOANS HEREUNDER IF THIS SECTION
13.20 WERE NOT PART OF THIS AGREEMENT.

 

48

 

13.21      GOVERNING LAW. THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS (OTHER THAN
THE MORTGAGE) AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. ANY MORTGAGE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE IN WHICH THE MORTGAGED PROPERTY IS LOCATED.

 

13.22      Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Credit Party, or otherwise, all as though such payments had not been made.

 

[Signature Page Follows]

 

49

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

  EDGEBUILDER, INC.           By: /s/ David J. Noble     Name: David J. Noble  
  Title: Vice President           GLENBROOK BUILDING SUPPLY, INC.           By:
/s/ David J. Noble     Name:   David J. Noble     Title:      Vice President

 

 

[Borrowers’ signatures to Loan Agreement]

 

SIGNATURE PAGE TO

LOAN AGREEMENT

 

  STAR REAL ESTATE HOLDINGS USA, INC.           By: /s/ David J. Noble     Name:
David J. Noble     Title: President and Chief Executive Officer           300
PARK STREET, LLC           By: /s/ David J. Noble     Name: David J. Noble    
Title: President and Chief Executive Officer           947 WATERFORD ROAD, LLC  
        By: /s/ David J. Noble     Name: David J. Noble     Title: President and
Chief Executive Officer           56 MECHANIC FALLS ROAD, LLC           By: /s/
David J. Noble     Name: David J. Noble     Title: President and Chief Executive
Officer           ATRM HOLDINGS, INC.           By: /s/ David J. Noble     Name:
David J. Noble     Title: President           KBS BUILDERS, INC.           By:
/s/ Matthew Mosher     Name: Matthew Mosher     Title: General Manager          
DIGIRAD CORPORATION           By: /s/ Matthew G. Molchan     Name: Matthew G.
Molchan     Title: President and Chief Executive Officer

 

(Corporate Credit Parties’ signatures to Loan Agreement - continued on following
page)

 

SIGNATURE PAGE TO

LOAN AGREEMENT

 

(Signatures continued from previous page)

 

  GERBER FINANCE INC.             By: /s/ Jennifer Palmer     Name: Jennifer
Palmer     Title: Chief Executive Officer

 

[Lender’s signature page to Loan Agreement]

 

SIGNATURE PAGE TO

LOAN AGREEMENT

 

SCHEDULE I

 

GENERAL TERMS FOR LETTERS OF CREDIT

 

1.                  Lender may, subject to the terms and conditions hereinafter
set forth, incur Letter of Credit Obligations in respect of the issuance of
Letters of Credit issued on terms acceptable to Lender and supporting
obligations of a Borrower incurred in the ordinary course of such Borrower’s
business, in order to support the payment of such Borrower’s inventory purchase
obligations, insurance premiums, or utility or other operating expenses and
obligations, as Borrowing Representative, on behalf of such Borrower, shall
request by written notice to Lender that is received by Lender not less than
five (5) Business Days prior to the requested date of issuance of any such
Letter of Credit; provided, that: (a) that the aggregate amount of all Letter of
Credit Obligations at any one time outstanding (whether or not then due and
payable) shall not exceed -0- and (b) no Letter of Credit shall have an expiry
date which is later than the Termination Date or one year following the date of
issuance thereof. The applicable Borrower will enter into an application and
agreement for such Letter of Credit with the LC Issuer selected by Lender. The
LC Issuer shall be determined by Lender in its sole discretion.

 

2.                  The notice to be provided to Lender requesting that Lender
incur Letter of Credit Obligations shall be in the form of a Letter of Credit
application in the form customarily employed by the LC Issuer, together with a
written request by a Borrower and the LC Issuer that Lender approve such
Borrower’s application. Upon receipt of such notice Lender shall establish a
reserve against the Borrowing Base in the amount of 100% of the face amount of
the Letter of Credit Obligation to be incurred. Approval by Lender in the
written form agreed upon between Lender and the LC Issuer (a) will authorize the
LC Issuer to issue the requested Letter of Credit and (b) will conclusively
establish the existence of the Letter of Credit Obligation as of the date of
such approval.

 

3.                  Each Letter of Credit shall be subject to the Uniform
Commercial Customs and, to the extent not inconsistent therewith, the laws of
the State of New York.

 

4.                  Each payment by the LC Issuer or Lender pursuant to a Letter
of Credit shall be deemed to be a Revolving Credit Advance on the date of such
payment in a principal amount equal to the amount so paid. Each Borrower shall
be obligated to reimburse Lender for each payment made under or in respect of
any Letter of Credit (including, the payment of principal, fees and interest on
any Revolving Credit Advance made pursuant to the immediately preceding sentence
and any payment made by Lender in reimbursement of any payment made under a
Letter of Credit by an LC Issuer together with such other amounts that become
due pursuant to this Agreement or other instrument.

 

5.                  The obligations of each Borrower under this Schedule shall
be absolute, unconditional and irrevocable under any and all circumstances and
shall be paid strictly in accordance with this Agreement irrespective of: (a)
any lack of validity or enforceability of any Letter of Credit or of any demand,
application, reimbursement agreement or other agreement or instrument relating
thereto (collectively, the “Related Documents”); (b) the existence of any claim,
setoff, defense or other right that any Borrower or any other Person may at any
time have against the beneficiary under any Letter of Credit, Lender, the LC
Issuer, any of their correspondents or any other Person; (c) any improper or
erroneous or mistaken payment by any LC Issuer or Lender under any Letter of
Credit; (d) any supplement or waiver of or any consent to depart from the terms
of any Letter of Credit or Related Document; and (e) any other circumstance or
event whatsoever, whether or not similar to any of the foregoing.

 

 

6.                  In the event Lender or the LC Issuer receives some but not
all of the documents against which a drawing under a Letter of Credit may be
made and, at a Borrower’s request, Lender or the LC Issuer delivers such
documents to a Borrower, against trust receipt or otherwise, prior to the
presentation of the related draft, each Borrower agrees to pay to Lender on
demand the amount of any claim made against Lender or the LC Issuer by reason
thereof and authorizes Lender and the LC Issuer to pay or accept (as the case
may be) such draft when it is presented regardless of whether such draft or any
document which may accompany it complies with the terms of the relevant Letter
of Credit.

 

7.                  Except insofar as instructions may be given to Lender by
each Borrower in writing expressly to the contrary with regard to, and prior to
the opening of, any Letter of Credit, each Borrower agrees that Lender, the LC
Issuer and any of their correspondents may: (a) receive and accept as “bills of
lading” under any Letter of Credit any documents issued or purporting to be
issued by or on behalf of any carrier which acknowledges receipt of goods for
transportation or otherwise, whatever the specific provisions of such documents,
for which purpose the “on board” date of each such document shall be deemed the
date of shipment of the goods mentioned therein; (b) accept as documents of
insurance either insurance policies or insurance certificates; (c) receive and
accept as sufficient and controlling the description of the property contained
in the invoice, and receive and accept bills of lading, insurance and other
documents, however variant in description from that contained in the invoice;
(d) receive and accept bills of lading containing stamped, written or
typewritten provisions thereon, whether or not signed or initialed, and assume
conclusively that the same were placed with authority on any bill of lading at
the time of its signing and issuance by the steamship company or carrier or any
agent thereof; (e) honor drafts, instruments or demands related to part
shipments under any Letter of Credit; (f) accept or pay any draft dated on or
before the expiration of any time limit expressed in any Letter of Credit,
regardless of when drawn and whether or when negotiated, provided that the other
required documents are dated on or prior to the expiration date of such Letter
of Credit; and (g) accept documents of any character which comply with the
provisions, definitions, interpretations and practices contained in the Uniform
Customs or which comply with the laws or regulations in force in, or the customs
or usages of, the place of shipment or negotiation.

 

2

 

8.                  Neither Lender nor any LC Issuer nor any of their
correspondents shall be responsible for: (a) the use which may be made of any
Letter of Credit, or any acts or omissions in connection therewith; (b) the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by documents; (c) any difference in
character, quality, quantity, condition or value of the goods from that
expressed in the documents; (d) the validity, sufficiency or genuineness of
documents, or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
(e) the time, place, manner or order in which shipment is made; (f) any partial
or incomplete shipment or failure or omission to ship any or all of the goods
referred to in any Letter of Credit; (g) the character, adequacy, validity or
genuineness of any insurance, the solvency or responsibility of any insurer or
any other risk connected with insurance; (h) any deviation from instructions,
delay, default or fraud by the shipper or anyone else in connection with goods
or the shipping thereof; (i) the solvency, responsibility or relationship to the
goods of any party issuing any documents in connection with the goods; (j) any
delay in arrival or failure to arrive of either the goods or any of the
documents relating thereto; (k) any delay in giving or failure to give notice of
arrival or any other notice; (l) any breach of contract between the shippers or
vendors and the consignees or buyers; (m) compliance with or circumstances
resulting from any laws, customs and regulations which may be effective in
countries of negotiation or payment of any Letter of Credit; (n) any failure of
any draft, instrument or demand to bear any reference or adequate reference to
the related Letter of Credit, any failure of documents to accompany any draft,
instrument or demand at negotiation or any failure of any Person to note the
amount of any draft, instrument or demand on the reverse of the related Letter
of Credit or to surrender or take up such Letter of Credit or to send forward
documents apart from drafts, in each case as required by the terms of the
related Letter of Credit, any of which requirements, if contained in any Letter
of Credit, may be waived by Lender or the LC Issuer; (o) any errors, omissions,
interruptions or delays in transmission or delivery of any message, by mail,
telex, cable, telegraph, wireless or otherwise, whether or not they be in
cipher; (p) any failure of any document to conform to, or be presented under,
the Letter of Credit in any instance where any Borrower or its agent, upon
request, has received documents and/or goods represented thereby; or (q) any
refusal by Lender, the LC Issuer or any of their correspondents to pay or honor
drafts drawn or purportedly drawn under any Letter of Credit because of any
applicable law, decree or edict, legal or illegal, of any governmental agency
now or hereafter in force, or for any other matter beyond Lender’s control. Nor
shall Lender be responsible for any act, error, omission, neglect or default
under the terms of any Letter of Credit or any Related Documents or otherwise,
or for any insolvency or failure in business, of the LC Issuer or any of the
correspondents of Lender or the LC Issuer. None of the foregoing shall affect,
impair, or prevent the vesting of any of Lender’s rights or powers hereunder, or
any Borrower’s obligations hereunder. In furtherance of and extension of and not
in limitation of the specific provisions hereinabove set forth, each Borrower
agrees that any action taken, and any action or omission, by Lender, the LC
Issuer or any of their correspondents, in the absence of bad faith on its part,
under or in connection with any Letter of Credit or the related drafts,
instruments or demands, documents or goods shall be binding on such Borrower and
shall not put Lender, the LC Issuer or any of their correspondents under any
resulting liability to Lender.

 

9.                  Each Borrower agrees to procure promptly any necessary
import and export and other licenses for the import or export or shipping of the
goods or payment therefor, to comply with all foreign and domestic governmental
regulations in regard to the shipment of the goods or the financing thereof, to
furnish such certificates in that respect as Lender may at any time require, to
keep the goods adequately covered by insurance satisfactory in all respects to
Lender, with companies satisfactory to Lender, and to assign the policies and/or
certificates of insurance to Lender, or to make the loss or adjustment, if any,
payable to Lender, at Lender’s option, and to furnish Lender promptly on demand
with evidence of acceptance by the insurers of such assignment.

 

3

 

10.              Each Borrower hereby certifies, covenants and agrees that no
shipments will be made or other transactions undertaken under any Letter of
Credit in violation of the laws of the United States, any applicable foreign law
or the applicable regulations of any United States or foreign governmental
agency or authority.

 

11.              In furtherance of and not in limitation of the provisions of
this Agreement, as security for the Obligations, each Borrower hereby grants to
Lender a security interest in, and recognizes and admits Lender’s ownership in
and unqualified right to the possession and disposal of, (a) all goods shipped
under, pursuant to or in connection with each Letter of Credit or related in any
way to any Letter of Credit, (b) any and all documents of title, bills of
lading, shipping documents, warehouse receipts, securities, chattel paper,
policies and/or certificates of insurance and other documents and instruments of
any kind and nature in any way accompanying, related to or arising out of any
credit and the goods related thereto and to any drafts, instruments, demands or
acceptances drawn or made or purportedly drawn or made thereunder (whether or
not such goods, documents or other items specified above be released to a
Borrower, or upon a Borrower’s order, on trust or bailee receipt or otherwise),
(c) any and all accounts, accounts receivable, contract rights, inventory,
general intangibles, claims, credits, monies, demands and patent and trademark
rights related to or arising out of any such Letter of Credit or the goods; (d)
all monies on account with Lender or any party acting on Lender’s behalf, and
(e) to the extent not otherwise included, all proceeds of any and all of the
foregoing. Each Borrower represents, warrants, covenants and agrees that upon
delivery of any goods financed by the Letter of Credits to a Borrower such goods
shall be the exclusive property of such Borrower, subject only to a Lien in
favor of Lender. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, any deposit or other sums at any time
properly credited by or due from Lender for the account of Borrowers may be
applied by Lender by way of set-off to the payment of any of the Obligations
without any notice to any Borrower.

 

12.              In the event that any Letter of Credit Obligations, whether or
not then due or payable, shall for any reason be outstanding on the Termination
Date, each Borrower will either (a) cause the underlying Letter of Credit to be
returned and canceled and each corresponding Letter of Credit Obligation to be
terminated, or (b) pay to Lender, in immediately available funds, an amount
equal to 105% of the maximum amount then available to be drawn under all Letters
of Credit in favor of Borrowers not so returned and canceled to be held by
Lender as cash collateral in an account under the exclusive dominion and control
of Lender (the “Cash Collateral Account”).

 

13.              In connection with all Letters of Credit, each Borrower, hereby
appoints Lender, or its designee, as its attorney, with full power and authority
(i) to sign and/or endorse such Borrower’s name upon any warehouse or other
receipts, letter of credit applications and acceptances; (ii) to sign such
Borrower’s name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department (“Customs”) in the name of such Borrower or
Lender or Lender’s designee, and to sign and deliver to Customs officials powers
of attorney in the name of such Borrower for such purpose; (iv) to complete in
the name of Lender, or Lender’s designee, any order, sale or transaction, obtain
the necessary documents in connection therewith, and collect the proceeds
thereof; (v) to clear and resolve any questions of non-compliance of documents;
(vi) to give any instructions as to acceptance or rejection of any documents or
goods; (vii) to execute any and all applications for steamship or airways
guarantees, indemnities or delivery orders; (viii) to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and (ix) to agree to any amendments, renewals,
extensions, modifications, changes or cancellation of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
all in Lender’s sole name, and the LC Issuer shall be entitled to comply with
and honor any and all such documents or instruments executed by or received
solely from Lender; all without notice to or consent from Borrower. Neither
Lender nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Lender’s or its
attorney’s gross (not mere) negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

 

4

 

14.              In the event Lender shall incur any Letter of Credit
Obligation, Borrowers agree to pay Lender the fees, charges and commissions set
for on Attachment A to this Schedule A and shall reimburse Lender for all fees
and charges paid by lender on account of any Letter of Credit or Letter of
Credit Obligations to the LC Issuer.

 

5

 

ATTACHMENT A

 

LETTERS OF CREDIT

 

FEES, CHARGES AND COMMISSIONS

 

LC Issuer - Bank Charges:   Wire Transfer $75 Issuance of Check $45 Letter of
Credit:   Issuance $125 Amendment/Discrepancy $150 Cable/Telex Notification $120
Courier $50 Air Freight Release:   Steamship Guarantee $50 Payment Commission
(Sight & Time) 0.3% or $150 min. Processing Fee $40 per invoice Cancellation Fee
$125 Acceptance Time Payment 2.5% per annum or $175 min. Stand-by Letter of
Credit:   Issuance $250 Commission Fee 1.5% per annum or $300 min.
Amendment/Discrepancy $175 Cable/Telex Notification $120 Courier $50 Lender
Charges (per billing):   Courier Service (if used) $50 for domestic / $75 min.
for overseas Petties $20 - $45 Telephone $17.50 - $35 Fax $25 - $50

 

 

SCHEDULE II

 

CONDITIONS PRECEDENT

 

The following items must be received by Lender in form and substance
satisfactory to Lender on or prior to the date of the initial Loan:

 

1.                  this Agreement duly executed by each Credit Party;

 

2.                  the Note duly executed by each Borrower;

 

3.                  the Credit Documents which evidence the Star Credit
Facility;

 

4.                  acknowledgement copies of proper financing statements (Form
UCC-l) duly filed under the UCC in all jurisdictions as may be necessary or, in
the opinion of Lender, desirable to perfect Lender’s Lien on the Collateral;

 

5.                  certified copies of UCC, tax lien and judgment searches, or
other evidence satisfactory to Lender, listing all effective financing
statements which name each Credit Party (under present name, any previous name
or any trade or doing business name) as debtor and covering all jurisdictions
requested by Lender, together with copies of such other financing statements;

 

6.                  duly executed Intellectual Property Security Agreement from
each Credit Party which owns Intellectual Property;

 

7.                  evidence of the completion of all other recordings and
filings (including UCC-3 termination statements and other Lien release
documentation) as may be necessary or, in the opinion of and at the request of
Lender, desirable to perfect Lender’s Lien on the Collateral and ensure such
Collateral is free and clear of other Liens;

 

8.                  Powers of Attorney duly executed by each Corporate Credit
Party other than Digirad Corporation;

 

9.                  control letters from (i) all issuers of uncertificated
securities and financial assets held by any Corporate Credit Party, (ii) all
securities intermediaries with respect to all securities accounts and securities
entitlements of each Corporate Credit Party, and (iii) all futures commission
agents and clearing houses with respect to all commodities contracts and
commodities accounts held by Borrower;

 

10.              copies of a duly executed payoff letter, in form and substance
reasonably satisfactory to Lender, by and between all parties to the loan
documents between any Borrower and Premier Bank (“Prior Lender”) evidencing
repayment of part of outstanding obligations to Prior Lender, together with (a)
UCC-3 or other appropriate amendment statements, manually signed by the Prior
Lender releasing all liens of Prior Lender upon any of the personal property of
each Credit Party except Equipment, and (b) termination of all blocked account
agreements, bank agency agreements or other similar agreements or arrangements
or arrangements in favor of Prior Lender or relating to the Obligations to Prior
Lender;

 

 

11.              duly executed originals of a Request for Loan, dated the
Closing Date, with respect to the initial Revolving Credit Advance to be
requested by Borrowing Representative on the Closing Date;

 

12.              duly executed originals of a letter of direction from Borrowing
Representative addressed to Lender, with respect to disbursement on the Closing
Date of the proceeds of the initial Loan;

 

13.              for each Corporate Credit Party, such Person’s (a) charter and
all amendments thereto, (b) good standing certificates (including verification
of tax status) in its state of incorporation and (c) good standing certificates
(including verification of tax status) and certificates of qualification to
conduct business in each jurisdiction where its ownership or lease of property
or the conduct of its business requires such qualification, each dated a recent
date prior to the Closing Date and certified by the applicable Secretary of
State or other authorized Governmental Authority;

 

14.              a certificate of an officer of each Corporate Credit Party in
the form of Exhibit G together with copies of: (a) such Person’s bylaws or
operating agreement, together with all amendments thereto and (b) resolutions of
such Person’s Board of Directors, Members, Managers, and stockholders, members,
approving and authorizing the execution, delivery and performance of the Credit
Documents to which such Person is a party and the transactions to be consummated
in connection therewith, each certified as of the Closing Date by such Person’s
corporate secretary or an assistant secretary as being in full force and effect
without any modification or amendment;

 

15.              for each Corporate Credit Party, signature and incumbency
certificates of the officers of each such Person executing any of the Credit
Documents, certified as of the Closing Date by such Person’s corporate secretary
or an assistant secretary as being true, accurate, correct and complete;

 

16.              evidence satisfactory to Lender that, as of the Closing Date,
Cash Management Systems complying with Schedule IV the Agreement have been
established and are currently being maintained in the manner set forth in such
Schedule IV, together with copies of a duly executed blocked account, reasonably
satisfactory to Lender, with the banks as required by Schedule IV

 

17.              [intentionally omitted];

 

18.              a letter from Digirad Corporation to their independent auditors
in the form of Exhibit F authorizing the independent certified public
accountants of the Credit Parties to communicate with Lender and a letter from
such auditors acknowledging Lender’s reliance on the auditor’s certification of
past and future Financial Statements;

 

19.              duly executed originals of account debtor notification letters
in the form of Exhibit H executed in blank by each Corporate Credit Party other
than Digirad Corporation;

 

2

 

20.              unless otherwise agreed to in writing by lender, warehouse
waivers, landlord waivers and consents, bailee letters and mortgagee agreements
of all Borrowers’ leased or owned locations where Collateral is held;

 

21.              Mortgages covering all of the Real Estate (the “Mortgaged
Properties”) together with: (a) title insurance policies, current as-built
surveys, zoning letters and certificates of occupancy; (b) evidence that
counterparts of the mortgages have been recorded in all places to the extent
necessary or desirable, in the judgment of Lender, to create a valid and
enforceable first priority lien (subject to Permitted Liens) on each Mortgaged
Property in favor of Lender (or in favor of such other trustee as may be
required or desired under local law); and (c) an opinion of counsel in each
state in which any Mortgaged Property is located;

 

22.              any and all Subordination Agreements and/or intercreditor
agreements as Lender shall have deemed necessary or appropriate with respect to
any Indebtedness of any Credit Party;

 

23.              Phase I Environmental Site Assessment Reports, consistent with
American Society of Testing and Materials (ASTM) Standard E 1527-94, and
applicable state requirements, on all of the Real Property, prepared by
environmental engineers reasonably satisfactory to Lender, all in form and
substance reasonably satisfactory to Lender, in its sole discretion; and Lender
shall have further received such environmental review and audit reports,
including Phase I reports, with respect to the Real Property of any Credit Party
as Lender shall have requested, and Lender shall be satisfied, in its sole
discretion, with the contents of all such environmental reports. Lender shall
have received letters executed by the environmental firms preparing such
environmental reports, in form and substance reasonably satisfactory to Lender
to rely on such reports;]

 

24.              Lender shall have received appraisals as to all Real Property
owned by each Credit Party, each of which shall be in form and substance
reasonably satisfactory to Lender;]

 

25.              the Financial Statements, Projections and other materials
requested by Lender certified by each Borrower’s Chief Financial Officer; and

 

26.              such other certificates, documents and agreements respecting
any Credit Party as Lender may, in its sole discretion, request.

 

3

 

SCHEDULE III

 

FINANCIAL COVENANTS

 

1.                  Minimum Tangible Net Worth. Borrowers shall not permit at
Fiscal Year End December 31, 2020 its Tangible Net Worth to be less than (a)
$1,250,000 (including (i) $1,000,000 of Indebtedness due on the effective date
hereof and as otherwise due Premier Bank as documented by Intercreditor
Agreement of even date and Extension and Modification Agreement of even date
executed by Borrowers and Premier Bank and (ii) $1,500,000 of suppressed
availability represented by the real estate owned or indirectly owned by Star
Real Estate Holdings USA, Inc.) and such amount as Borrowers and Lender shall
agree in each Fiscal Year thereafter, but in no event less than $1,250,000
unless specifically agreed to in writing.

 

2.                  Debt Service Coverage. Borrowers shall maintain for each
Borrower a Debt Service Coverage Ratio of greater than 1.1:1 for Fiscal Year End
December 31, 2020 and such Ratio as Borrowers and Lender shall agree in each
Fiscal Year thereafter but in no event less than 1.1:1 unless specifically
agreed to in writing. “Debt Service Coverage Ratio” is defined as each
Borrower’s Operating Cash Flow (its net income plus depreciation and
amortization, plus interest expense plus other non-cash items) divided by
principal, interest, lease payments, subordinated debt payments and Earn-out
payments due EdgeBuilder Wall Panels, Inc./Glenbrook Lumber and Supply, Inc.

 

3.                  Net Income: Borrowers shall earn and declare minimum net
income post tax of $650,000 as of Fiscal Year End December 31, 2020 and such
minimum net income post-tax of such amounts as Borrowers and Lender shall agree
in each Fiscal Year thereafter but in no event less than $650,000 unless
specifically agreed to in writing.

 

 

SCHEDULE IV

 

CASH MANAGEMENT

 

Each Borrower agrees to establish, and to maintain, until the Termination Date,
the cash management system described below:

 

1.                  Commencing on the Closing Date and until the Termination
Date, each Borrower will as required herein irrevocably direct all present and
future Account Debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to either the Collateral Account or to
Borrower at 8 West 40th Street, 14th Floor, New York, New York 10018. The
Collateral Account will be subject to an agreement which will afford Lender
exclusive control over the deposits therein within the meaning of the UCC
(“Account Control Agreement”). All of Borrower’s invoices, account statements
and other written or oral communications directing, instructing, demanding or
requesting payment of any Account of Borrower or any other amount constituting
Collateral shall conspicuously direct that all payments be made to the
Collateral Account or to Borrower at 8 West 40th Street, 14th Floor, New York,
New York 10018 and shall include the preceding address or the address for the
Collateral Account. If, notwithstanding the instructions to Account Debtors to
make payments to the Collateral Account or to Borrower at 8 West 40th Street,
14th Floor, New York, New York 10018, Borrower receives any payments, Borrower
shall immediately deposit such payments into the Collateral Account or
immediately forward to Lender. Until so deposited, Borrower shall hold all such
payments in trust for and as the property of Lender and shall not commingle such
payments with any of its other funds or property. In the event that Borrowers do
not comply with the conditions set forth herein, Lender may charge to Borrowers’
account a fee equal to fifteen percent (15%) of each payment that violates this
paragraph of this Agreement.

 

2.                  Each Borrower may maintain, in its name, accounts (the
“Disbursement Accounts”) at a bank or banks acceptable to Lender into which
Lender shall, from time to time, deposit proceeds of Loans for use solely in
accordance with the terms of this Agreement. All of the Disbursement Accounts
are listed on Disclosure Schedule 7.17.

 

 

SCHEDULE V

 

ADDRESSES FOR NOTICES

 

Lender’s Address:       Name: Gerber Finance Inc. Address: 8 West 40th Street  
14th Floor   New York, New York 10018 Attention: Gerald L. Joseph Telephone:
(212) 888-3833 Facsimile: (212) 888-1637     Each Corporate Credit Party c/o
Digirad Corporation   Address: 53 Forest Avenue Old Greenwich, CT 06870
Attention: Chief Financial Officer Telephone: (203) 489-9502

 

 

SCHEDULE VI

 

BORROWING BASE CERTIFICATE REPORTING

 

Additional Reporting Requirements

 

With Every Borrowing Base Certificate (Section 8.1(f)):

•AR Report for each Borrower (detailed and Summary)

•Inventory Stock Report for each Borrower (Detailed)

•Inventory G/L Report for each Borrower (should show inventory movement)

•Sales Journal

•Cash Receipts Journal

•Customer Deposit Report

•Cashiers Report (Invoice/Payments/Returns report) for each Borrower

•AP report for each Borrower

•Sales Tax Report

•Retainage Report

•Random Customer Invoice selection with bill of lading/proof of delivery as
backup

•Up to 10 Vendor invoices with bill of lading/proof of delivery as backup

 

With Monthly Reports (Section 8.1(b)):

•Monthly Statement

•Compliance Certificate

•Interim Financials

•Accounts payable schedule

•Cash Receipts

•Detailed and Summary A/R aging

•Sales Journal

•AIA Certificates

•Sales Tax report

•Bank Statements

•Cashiers Report (Invoice/Payments/Returns report)