Exhibit 10.6

 

Execution Version

 

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LOAN AND SECURITY AGREEMENT

by and among

DIGIRAD HEALTH, INC.

DIGIRAD IMAGING SOLUTIONS, INC.,

MD OFFICE SOLUTIONS,

DMS HEALTH TECHNOLOGIES, INC.,

DMS IMAGING, INC.,

DMS HEALTH TECHNOLOGIES-CANADA, INC.,

PROJECT RENDEZVOUS HOLDING CORPORATION, and

PROJECT RENDEZVOUS ACQUISITION CORPORATION,

as Borrowers,

DIGIRAD CORPORATION,

as Guarantor,

and

STERLING NATIONAL BANK,

as Lender

 

 

Dated as of March 29, 2019

 

 

Table of Contents

ARTICLE I DEFINITIONS 1 Section 1.1.   Definitions 1 Section 1.2.   Types of
Loans and Borrowings 25 Section 1.3.   Interpretive Provisions 25 ARTICLE II
LOANS 26 Section 2.1.   Loans 26 Section 2.2.   Request for and Making of
Revolving Loans. 26 Section 2.3.   Deemed Request for Revolving Loans 27 Section
2.4.   Protective Advances 27 Section 2.5.   Interest Elections. 28 Section
2.6.   Letters of Credit 28 Section 2.7.   Requesting Letters of Credit 29
Section 2.8.   Reimbursement 30 Section 2.9.   No Duty to Inquire 30 Section
2.10.   LC Collateral 31 Section 2.11.   Third Party Beneficiary 32 Section
2.12.   Cross Guaranty 32 ARTICLE III INTEREST, FEES, REIMBURSEMENTS 34 Section
3.1.   Interest 34 Section 3.2.   Fees 34 Section 3.3.   Increased Costs 35
Section 3.4.   Illegality 36 Section 3.5.   Break Funding Payments 36 Section
3.6.   Taxes 36 Section 3.7.   Maximum Interest; Controlling Limitation 37
ARTICLE IV payment 38 Section 4.1.   Interest 38 Section 4.2.   Prepayment;
Mandatory Payment of Deficiencies 38 Section 4.3.   Mandatory Payments; Payment
on the Termination Date 39 Section 4.4.   Mandatory Prepayment in Respect of
Certain Events 39 Section 4.5.   Early Termination; Prepayment Penalty 39
Section 4.6.   General Payment Provisions 39 Section 4.7.   Application 40
Section 4.8.   Reinstatement 40 Section 4.9.   Account Stated 40 ARTICLE V
COLLATERAL 40 Section 5.1.   Security Interest 40 Section 5.2.   Perfection and
Protection of Lender’s Security Interest 41 Section 5.3.   Collateral Proceeds
Management 41

i

 

Section 5.4.   Examinations; Inspections; Verifications 43 Section
5.5.   Appraisal 43 Section 5.6.   Right to Cure 43 Section 5.7.   Power of
Attorney 44 Section 5.8.   Preservation of Lender’s Rights 45 Section
5.9.   Deficiency 45 Section 5.10.   Rolling Stock and other Vehicles 45 ARTICLE
VI CONDITIONS 45 Section 6.1.   Conditions Precedent to Initial Loan 45 Section
6.2.   Conditions Precedent to all Loans 48 ARTICLE VII REPRESENTATIONS AND
WARRANTIES 49 Section 7.1.   Fundamental Information 49 Section 7.2.   Prior
Transactions 49 Section 7.3.   Subsidiaries 49 Section 7.4.   Authorization,
Validity and Enforceability 49 Section 7.5.   Noncontravention 49 Section
7.6.   Financial Statements 50 Section 7.7.   Litigation 50 Section 7.8.   ERISA
and Employee Benefit Plans 50 Section 7.9.   Compliance with Laws 51 Section
7.10.   Taxes 51 Section 7.11.   Location of Collateral and Books and Records 51
Section 7.12.   Accounts 51 Section 7.13.   Inventory 51 Section
7.14.   Documents, Instruments, and Chattel Paper 51 Section 7.15.   Proprietary
Rights 51 Section 7.16.   Investment Property 52 Section 7.17.   Real Property
and Leases 52 Section 7.18.   Material Agreements 52 Section 7.19.   Bank
Accounts 52 Section 7.20.   Title to Property 53 Section 7.21.   Debt 53 Section
7.22.   Liens 53 Section 7.23.   Solvency 53 Section 7.24.   Non-Regulated
Entities 53 Section 7.25.   Governmental Authorization 53 Section
7.26.   Investment Banking or Finder’s Fees 53 Section 7.27.   Full Disclosure
53 Section 7.28.   Other Obligations and Restrictions 54 Section 7.29.   Acts of
God and Labor Matters 54 Section 7.30.   Environmental and Other Laws 54 Section
7.31.   Security Interests 55 Section 7.32.   Commercial Tort Claims 55 Section
7.33.   Common Enterprise 55 Section 7.34.   Anti-Terrorism Laws 56

ii

 

Section 7.35.   Trading with the Enemy 56 Section 7.36.   Anti-Corruption Laws
and Sanctions 56 Section 7.37.   Health Care Matters 57 Section
7.38.   Continuing Representations 59 ARTICLE VIII AFFIRMATIVE COVENANTS 59
Section 8.1.   Existence and Good Standing 59 Section 8.2.   Compliance with
Agreements and Laws 59 Section 8.3.   Books and Records 59 Section
8.4.   Financial Reporting 60 Section 8.5.   Collateral Reporting 61 Section
8.6.   Compliance Certificate 62 Section 8.7.   Notification to Lender 62
Section 8.8.   Accounts 63 Section 8.9.   Inventory 63 Section
8.10.   Equipment, Machinery 64 Section 8.11.   Insurance 64 Section
8.12.   Payment of Trade Liabilities, Taxes, Etc 64 Section 8.13.   Protective
Advances 65 Section 8.14.   Evidence of Compliance 65 Section
8.15.   Environmental Matters; Environmental Reviews 65 Section
8.16.   Subsidiaries; Fundamental Information 65 Section 8.17.   Further
Assurances 66 Section 8.18.   Maintenance of Properties 66 Section 8.19.   Lien
Law 66 Section 8.20.   Health Care Laws 66 Section 8.21.   Post-Closing
Requirements 67 ARTICLE IX NEGATIVE COVENANTS 68 Section 9.1.   Fundamental
Changes 68 Section 9.2.   Collateral Locations 69 Section 9.3.   Use of Proceeds
69 Section 9.4.   Business 69 Section 9.5.   Debt 69 Section 9.6.   Subordinated
Debt 70 Section 9.7.   Liens 70 Section 9.8.   Disposition of Property 70
Section 9.9.   Sale and Leaseback 71 Section 9.10.   Distributions; Capital
Contribution; Redemption 71 Section 9.11.   Investments 72 Section
9.12.   Transactions with Affiliates 72 Section 9.13.   New Subsidiaries 72
Section 9.14.   Financial Covenants 72 Section 9.15.   Fiscal Year; Accounting
Method 72 Section 9.16.   Impairment of Security Interest 72 Section
9.17.   Prohibited Contracts 72 Section 9.18.   Deposit Accounts and Securities
Accounts 73

iii

 

Section 9.19.   Compliance with ERISA 73 ARTICLE X EVENT OF DEFAULT 73 Section
10.1.   Event of Default 73 ARTICLE XI REMEDIES 75 Section 11.1.   Obligations
75 Section 11.2.   Collateral 75 Section 11.3.   Injunctive Relief 76 Section
11.4.   Setoff 76 ARTICLE XII TERMINATION 77 Section 12.1.   Term and
Termination 77 ARTICLE XIII MISCELLANEOUS 77 Section 13.1.   Waivers &
Amendments 77 Section 13.2.   Severability 77 Section 13.3.   Governing Law;
Venue 77 Section 13.4.   WAIVER OF JURY TRIAL 78 Section 13.5.   Fees and
Expenses 78 Section 13.6.   Notices 79 Section 13.7.   Waiver of Notices 79
Section 13.8.   Non-applicability of Chapter 346 of Texas Finance Code 80
Section 13.9.   Binding Effect 80 Section 13.10.   INDEMNITY BY CREDIT PARTIES
AND GUARANTOR 80 Section 13.11.   Limitation of Liability 80 Section
13.12.   Continuing Rights of Lender in Respect of Obligations 80 Section
13.13.   Assignments 80 Section 13.14.   Confidentiality 82 Section 13.15.   USA
Patriot Act Notice 82 Section 13.16.   Schedules 83 Section
13.17.   Counterparts 83 Section 13.18.   Captions 83

SCHEDULES

Schedule 7.1 - Fundamental Information; Equity Ownership Interests

Schedule 7.2 - Prior Transactions

Schedule 7.7 - Litigation

Schedule 7.8 - ERISA Benefit Plans

Schedule 7.11 - Location of Collateral

Schedule 7.15 - Proprietary Rights

Schedule 7.16 - Investment Property

Schedule 7.17 - Real Property and Leases

iv

 

Schedule 7.18 - Material Agreements

Schedule 7.19 - Bank Accounts

Schedule 7.21 - Debt

Schedule 7.22 - Liens

Schedule 7.30 - Release of Hazardous Materials

Schedule 7.32 - Commercial Tort Claims

v

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement is executed and entered into as of March 29,
2019, by and among (a) DIGIRAD HEALTH, INC., a Delaware corporation (“Digirad
Health”), DIGIRAD IMAGING SOLUTIONS, INC., a Delaware corporation (“Digirad
Imaging”), MD OFFICE SOLUTIONS, a California corporation (“MD Office”), DMS
HEALTH TECHNOLOGIES, INC., a North Dakota corporation (“DMS Health”), DMS
IMAGING, INC., a North Dakota corporation (“DMS Imaging”), DMS HEALTH
TECHNOLOGIES-CANADA, INC., a North Dakota corporation (“DMS Health Canada”),
PROJECT RENDEZVOUS HOLDING CORPORATION, a Delaware corporation (“PR Holding”),
and PROJECT RENDEZVOUS ACQUISITION CORPORATION, a Delaware corporation (“PR
Acquisition”), as Borrowers (as such term is hereinafter defined), (b) DIGIRAD
CORPORATION, a Delaware corporation (“Digirad”), as Guarantor (as such term is
hereinafter defined), and (c) STERLING NATIONAL BANK, a national banking
association (together with its successors and permitted assigns, the “Lender”).

 

RECITALS

Lender and each Borrower desire to enter into certain financing arrangements
according to the terms and provisions as set forth herein below. Therefore, for
value received, the receipt and sufficiency of which is hereby acknowledged,
together with the mutual benefits provided herein, the Lender, each Borrower and
Guarantor hereby agree as follows:

ARTICLE I
DEFINITIONS

Definitions. The following definitions shall apply throughout this Agreement:

“Account” has the meaning prescribed for such term as defined by the UCC, which
definition is incorporated herein by reference, and includes, without
limitation, a right to payment of a monetary obligation, whether or not earned
by performance, for property that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, or for services rendered or to be rendered
and further includes, without limitation, any “payment intangible” (as defined
in Article 9 of the UCC), together with all income, payments and proceeds
thereof, owed by an issuer of a credit or debit card or any servicing or
processing agent thereof, resulting from charges by a customer in connection
with the sale of goods or for services rendered.

“Account Debtor” means a Person obligated on an Account, Chattel Paper, or
General Intangible.

“Adjusted Fixed LIBOR Rate” means, with respect to any Loan for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by Lender to be equal to the sum of the Fixed LIBOR Rate for
such Interest Period plus the Applicable Margin for such Loan.

“Adjusted Floating LIBOR Rate” means, for any Loan, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined by Lender to be
equal to the sum of the Floating LIBOR Rate plus the Applicable Margin for such
Loan.

1

 

“Affiliate” means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Equity Interests, by contract, or otherwise; provided, that for
purposes of the definition of Eligible Account and Section 9.12: (a) any Person
which owns (directly or indirectly) 10% or more of the outstanding Equity
Interests of another Person, (b) each director (or comparable manager) of a
Person and (c) each partnership in which a Person is a general partner shall, in
each case, be deemed an Affiliate of such Person.

“Agreement” means this Loan and Security Agreement and all schedules, exhibits
and addenda hereto, as may be renewed, extended, amended, supplemented, restated
or otherwise modified from time to time.

“Agreement Date” means the date as of which this Agreement is dated as specified
in the preamble to this Agreement.

“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to Credit Parties and Guarantor and their respective
Subsidiaries and from time to time concerning or relating to bribery or
corruption, all as amended, supplemented or replaced from time to time.

“Anti-Terrorism Laws” shall mean any laws, rules and regulations of any
jurisdiction applicable to Credit Parties and Guarantor and their respective
Subsidiaries relating to terrorism, trade sanctions programs and embargoes,
import/export licensing, bribery, or money laundering, all as amended,
supplemented or replaced from time to time.

“Applicable Law” means, as to a Person, any law (statutory or common), treaty,
ordinance, decree, rule, regulation, executive order or code of a Governmental
Authority or judgment, decree, injunction, order or determination of a court or
binding arbitrator, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is subject,
including, without limitation, all Environmental Laws, all Anti-Terrorism Laws,
all Anti-Corruption Laws, the Patriot Act and the Trading with the Enemy Act.

“Applicable Margin” means (a) for any day with respect to a Loan accruing
interest at the Adjusted Floating LIBOR Rate, 2.50% per annum, and (b) for any
day with respect to a Loan accruing interest at the Adjusted Fixed LIBOR Rate,
2.25%.

“Applicable Rate” means, with respect to any Loan on any day of determination,
either the Adjusted Floating LIBOR Rate or the Adjusted Fixed LIBOR Rate, as
applicable, pursuant to the most recent written request of the Borrower
Representative pursuant to Section 2.2(a) or 2.5.

“Availability” means, at any time of determination, an amount equal to (a) the
lesser of the Revolving Credit Limit or the Borrowing Base less (b) the sum of
(i) the unpaid principal balance of Revolving Loans plus (ii) all LC Obligations
(net of any LC Support that is Cash Collateral), in each case determined at such
time.

“Bank Products” means any one or more of the following financial products or
accommodations extended to a Credit Party or Guarantor by Lender or an Affiliate
of Lender: (a) credit cards (including commercial credit cards and including
so-called “procurement cards” or “P-Cards”), (b) credit card processing
services, (c) debit cards, (d) stored value cards or (e) Cash Management
Services.

2

 

“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101 et
seq.).

“Borrower Representative” means Digirad Health, in its capacity as such
hereunder.

“Borrowers” means, collectively, Digirad Health, Digirad Imaging, MD Office, DMS
Health, DMS Imaging, DMS Health Canada, PR Holding, PR Acquisition, and each
other Person who becomes a Borrower hereunder in accordance with the terms of
Section 8.16, whether now or hereafter existing, and their successors and
assigns.

“Borrowing” means Loans of the same Type, made, converted or continued on the
same date.

“Borrowing Base” means, as of any day of determination, an amount equal to the
difference between:

(a)       the sum of (i) eighty-five percent (85%) of the Net Amount of Eligible
Accounts plus (ii) the lesser of (1) eighty-five percent (85%) of the Net Amount
of Eligible Inventory, (2) fifty percent (50%) of the lower of cost or market
value of Eligible Inventory and (3) the Inventory Sublimit plus (iii) the lesser
of (1) the Eligible Equipment and Rolling Stock Advance Rate of the sum of (x)
the Net Amount of Eligible Equipment plus (y) the Net Amount of Eligible Rolling
Stock and (2) $12,000,000.00, minus

(b)       the aggregate amount of reserves implemented by Lender pursuant to
Section 2.1, in each case determined as of such day;

provided, however, that Lender shall have the continuing right to reduce the
percentage specified in clause (a)(i) of this definition by one percentage point
or fraction of a percentage point for every percentage point or fraction of a
percentage point of dilution of Accounts over five percent.

“Borrowing Base Certificate” means a certificate of Borrower Representative,
signed by a Responsible Officer of Borrower Representative, setting forth the
calculation of the Borrowing Base, including a calculation of each component
thereof, all in form, presentation and detail satisfactory to Lender in its
Permitted Discretion.

“Borrowing Notice” means a request for a Revolving Loan by the Borrower
Representative in compliance with Section 2.2.

“Business Day” means (a) any day that is not a Saturday, Sunday or a day on
which commercial banks in Dallas, Texas are required or permitted to be closed
and (b) with respect to any borrowing, payment or other dealings with respect to
any Loan, any day which is a Business Day described in clause (a) preceding and
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.

“Capital Expenditures” has the meaning prescribed for such term by GAAP.

“Capital Lease” means, with respect to any Person, any lease of property by such
Person which, in accordance with GAAP, should be reflected as a capital lease on
the balance sheet of such Person.

“Cash Collateral” shall mean cash, and any interest or other income earned
thereon, that is deposited with the Lender in accordance with any agreement to
Cash Collateralize any LC Obligations.

“Cash Collateral Account” shall mean a demand deposit, money market or other
account established by the Borrowers with Lender, which account shall hold Cash
Collateral and shall be subject to the Lender’s Liens.

3

 

“Cash Collateralize” shall mean, with respect to LC Obligations arising from
Letters of Credit outstanding on any date, the deposit with the Lender of
immediately available funds into the Cash Collateral Account in an amount equal
to 110% of the sum of the aggregate LC Obligations which are then outstanding
plus all related fees and other amounts due or to become due in connection with
such LC Obligations.

“Cash Management Services” means cash management or related services including
treasury, depository, return items, overdraft, controlled disbursement, netting,
merchant store value cards, e-payables services, electronic funds transfer,
interstate depository network and automatic clearing house transfer (including
the Automated Clearing House processing of electronic funds transfers through
the direct Federal Reserve Fedline system).

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that, notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued.

“Change of Control” means, except as permitted by Section 9.1, any occurrence
the result of which is that (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly of 25% or
more, of the Equity Interests of Digirad, (b) Digirad fails to own and control,
of record and beneficially free and clear of all Liens (other than Liens
securing the Obligations), directly or indirectly, 100% of the Equity Interest
and voting interest of each Credit Party, or (c) from and after the Digirad
Health Transfer, Digirad Health fails to own and control, of record and
beneficially free and clear of all Liens (other than Liens securing the
Obligations), directly or indirectly, 100% of the Equity Interest and voting
interest of each other Credit Party.

“Chattel Paper” has the meaning prescribed for such term as defined by the UCC,
which definition is incorporated herein by reference, and includes, without
limitation, a record or records that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, a security interest in specific goods and license of
software used in the goods, a lease of specific goods, or a lease of specific
goods and license of software used in the goods. “Chattel Paper” includes,
without limitation, electronic chattel paper.

“Collateral” means all personal property of the Credit Parties and Guarantor in
or upon which a Lien is granted (or purported to be granted) to Lender, whether
pursuant to this Agreement or any other Loan Document.

“Collateral Access Agreement” means a landlord waiver or subordination, bailee
letter, acknowledgment agreement, use agreement or other agreement of any
lessor, warehouseman, processor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in any of Credit Parties’ or
Guarantor’s books and records, Equipment, Inventory or other Collateral, in each
case, in form and substance satisfactory to Lender in its Permitted Discretion.

4

 

“Collection Accounts” has the meaning given to such term in Section 5.3(a).

“Commercial Tort Claim” has the meaning prescribed for such term as defined by
the UCC, which definition is incorporated herein by reference, and includes,
without limitation, in the case of a Credit Party or Guarantor, any tort cause
of action claimed by such Credit Party or Guarantor, including those listed on
Schedule 7.32.

“Commitment” means the obligation of Lender to make Loans to Borrowers pursuant
to the terms hereof.

“Compliance Certificate” means a certificate meeting the requirements of Section
8.6 and otherwise in form satisfactory to Lender in its Permitted Discretion.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Consolidated Subsidiaries” means (i) with respect to Guarantor, all of its
Subsidiaries which are Credit Parties and (ii) with respect to any Credit Party,
all of its Subsidiaries.

“Control Agreement” means, with respect to any Deposit Account or Securities
Account, a control agreement, in form and substance acceptable to Lender in its
Permitted Discretion, executed by Lender, the Credit Party or Guarantor owner of
such Deposit Account or Securities Account and the applicable bank (with respect
to a Deposit Account) or Securities Intermediary (with respect to a Securities
Account), and pursuant to which Lender obtains “control” pursuant to the UCC
over such Deposit Account or Securities Account (as applicable).

“Credit Parties” means, collectively, each Borrower.

“Debt” means, with respect to a Person, (a) all obligations for borrowed money
of such Person, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, or other
similar financial products, (c) all obligations or liabilities of others secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) a Lien on any asset of such Person, irrespective of
whether such obligation or liability is assumed, (d) all obligations of such
Person in respect of the deferred purchase price of assets or services (other
than trade payables incurred in the ordinary course of business and repayable in
accordance with customary trade practices), (e) any obligation of such Person
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of the type otherwise described in this definition of any other Person,
(f) asset securitizations and synthetic leases, (g) all obligations of such
Person as a lessee under Capital Leases, (h) all net indebtedness, liabilities
and other monetary obligations under interest rate, credit, commodity and
foreign exchange swaps or similar transactions entered into for the purpose of
hedging such Person’s exposure to fluctuations in interest or exchange rates,
currency valuations or commodity prices and all cancellations, buybacks,
reversals, terminations or assignments of any such transaction, and (i) all
liabilities which would under GAAP be shown on such Person’s balance sheet as a
liability.

“Default” means an event, condition or occurrence that, with the giving of
notice, the passage of time, or both, would constitute an Event of Default.

5

 

“Default Rate” means a rate per annum equal to the lesser of (a) the sum of
(i) the Applicable Rate for such Loan (which shall be adjusted, from time to
time, simultaneously with any change in the Applicable Rate) plus (ii) two
percent (2.0%) and (b) the Maximum Rate.

“Deposit Account” has the meaning prescribed for such term as defined by the
UCC, which definition is incorporated herein by reference, and includes, without
limitation, a nonnegotiable certificate of deposit or a demand, time, savings,
passbook, or similar account maintained with a bank.

“Designated Account” means account No. 6700306614 maintained at Sterling
National Bank in the name of Digirad Health and any other account replacing it
with Lender’s consent, including pursuant to Section 5.3(c).

“Designated Collection Account” has the meaning given to such term in
Section 5.3(a).

“Digirad Health Transfer” means the transfer to Digirad Health of all Equity
Interests in each of Digirad Imaging, MD Office and PR Holding.

“Distribution” means, for any Person: (a) any dividend, payment or distribution
(whether in cash, securities or other property) made on account of any class of
such Person’s Equity Interests or (b) any payment (whether in cash, securities
or other property) on account of, or setting apart of assets for a sinking or
analogous fund for, the purchase, redemption, retirement, cancellation,
termination, defeasance or acquisition of any (i) shares of its Equity Interests
or (ii) options, warrants or other rights to purchase Equity Interests in such
Person.

“Document” has the meaning prescribed for such term as defined by the UCC, which
definition is incorporated herein by reference, and includes, without
limitation, any bill of lading, dock warrant, dock receipt, warehouse receipt or
order for the delivery of goods, or any other document which in the regular
course of business or financing is treated as adequately evidencing that the
person in possession of it is entitled to receive, hold and dispose of the
document and the goods it covers, and which purports to be issued by or
addressed to a bailee and purporting to cover goods in the bailee’s possession
which are either identified or are fungible portions of an identified mass.
“Document” includes, without limitation, electronic documents.

“Dollars” or “$” refers to lawful money of the United States of America.

“EBITDA” means, with respect to a Person for any period, an amount equal to (a)
consolidated net earnings (or loss), for such period minus (b) extraordinary
gains for such period plus (c) Interest Expense (whether paid or accrued),
income taxes, depreciation and amortization for such period plus (d) non-cash
stock-based compensation for such period plus (e) other non-cash, non-recurring
costs and expenses for such period plus (f) cash received for sales of assets
(other than sales of Inventory in the ordinary course of business) during such
period; in each case determined for such Person and its Subsidiaries on a
consolidated basis in accordance with GAAP for the period of four Fiscal
Quarters ending on the last day of the measurement period.

6

 

“Eligible Account” means, with respect to any Borrower, an Account of such
Borrower which is acceptable to Lender for purposes of determining the Borrowing
Base and meets all criteria for inclusion in the Borrowing Base as determined
and established by Lender from time to time in its Permitted Discretion. Without
limiting the discretion of Lender to establish other criteria of ineligibility,
unless otherwise agreed by Lender, Eligible Accounts of any Borrower shall not
include any Account: (a) which is not owned exclusively by such Borrower,
(b) which is not subject to a first priority and perfected security interest in
favor of Lender or which is subject to any other Lien, (c) with respect to which
more than ninety (90) days have elapsed since the date of the original invoice
or which is unpaid, in whole or in part, more than sixty (60) days after its
original due date, (d) if twenty-five percent (25%) or more of the aggregate
Dollar amount of outstanding Accounts owed at such time by the Account Debtor
thereon to such Borrower or any of its Affiliates is classified as ineligible
under clause (c) above, (e) owed by an Account Debtor whose total obligations
(including the obligations of such Account Debtor’s Affiliates) owing to
Borrowers and their Affiliates that would, but for this clause (e), constitute
Eligible Accounts, exceed twenty percent (20%) of the aggregate amount of all
Eligible Accounts of the Borrowers, to the extent such obligations owing by such
Account Debtor are in excess of such percentage, (f) which represents a sale on
a bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis or a progress billing under an
agreement which requires further performance by such Borrower, is otherwise
contingent on such Borrower’s completion of any future performance or is subject
to any other terms by reason of which the payment by the Account Debtor may be
conditional, (g) with respect to which any of the following events has occurred
as to the Account Debtor on such Account: the filing of any petition for relief
under the Bankruptcy Code or other insolvency laws, a general assignment for the
benefit of creditors, the appointment of a receiver or trustee, application or
petition for dissolution, its dissolution, the sale or transfer of all or any
material part of the assets or the cessation of the business as a going concern,
(h) owed by an Account Debtor which does not maintain its chief executive office
in the United States or Canada (not including Quebec) or is not organized under
the laws of the United States or Canada (not including Quebec) or any state or
province thereof, to the extent the amount owing thereon, when combined with the
aggregate amount owing on any and all government Accounts described in the
definition of Permitted Government Account plus the aggregate amount owing on
any and all other foreign Accounts described in this clause (h), at any time
exceeds $500,000 in the aggregate, (i) which is not payable in United States
Dollars, (j) owed by an Account Debtor which is an Affiliate or employee of any
Borrower or any of Borrowers’ Affiliates, (k) except to the extent eligible
under clause (q) below, with respect to which either the perfection,
enforceability, or validity of Lender’s Lien in such Account, or Lender’s right
or ability to obtain direct payment to Lender of the proceeds of such Account,
is governed by any federal, state, provincial or local statutory requirements
other than those of the UCC, or comparable law of Canada (not including Quebec),
or the Federal Assignment of Claims Act, (l) owed by an Account Debtor to which
such Borrower or any of its Affiliates are indebted in any way, or which is
subject to any right of setoff or recoupment, or if the Account Debtor thereon
has disputed liability or made any claim with respect to any other Account due
from such Account Debtor, but in each such case only to the extent of such
indebtedness, setoff, recoupment, dispute, or claim, (m) which is evidenced by a
promissory note or other instrument or by chattel paper, (n) which arises out of
a sale not made in the ordinary course of such Borrower’s business, (o) with
respect to which the goods giving rise to such Account have not been shipped and
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been fully performed by such Borrower, and, if applicable,
accepted by the Account Debtor, or with respect to which the Account Debtor has
revoked its acceptance of any such goods or services, (p) which arises out of an
enforceable contract or order which, by its terms, forbids, restricts or makes
void or unenforceable the granting of a Lien by such Borrower to Lender with
respect to such Account or otherwise requires the consent of the respective
Account Debtor in order for the Lender to obtain direct payment of the proceeds
of such Account, (q) other than with respect to Permitted Government Accounts,
with respect to which the Account Debtor is either (i) the United States or
Canada or any department, agency, or instrumentality of the United States or
Canada, which for the avoidance of doubt includes any quasi government agencies,
including any Accounts owing by the U.S. Department of Veterans Affairs, or (ii)
any state of the United States or province or territory of Canada or any
department, agency or instrumentality of such state, province or territory, (r)
with respect to which the Account Debtor is an individual or natural person, (s)
with respect to which the Account Debtor is a Sanctioned Person or Sanctioned
Country, (t) with respect to which the books and records evidencing or otherwise
relating to such Account are located in a public warehouse, are in possession of
a bailee or are in a facility leased by such Borrower, unless the warehouseman,
bailee or lessor, as the case may be, has executed an enforceable Collateral
Access Agreement (or to the extent acceptable to Lender with respect to any
leased location, Lender has established rent reserves in such amount as Lender
may require in its discretion), (u) with respect to which Lender believes that
the prospect of collection of such Account is impaired or that the Account may
not be paid by reason of the Account Debtor’s financial inability to pay, or
(v) owed by an Account Debtor, to the extent the amount owing thereon exceeds
the credit limit extended to such Account Debtor by such Borrower. The
identification of specific exclusions from eligibility herein is not exclusive
or exhaustive. Lender reserves the right in its Permitted Discretion to
establish additional or different criteria for determining Eligible Accounts, at
any time, without prior notice.

 

7

 

“Eligible Equipment” means, with respect to any Borrower, Equipment (other than
Rolling Stock) and Machinery of such Borrower that is designated by Lender as
eligible from time to time in its Permitted Discretion, but excluding Equipment
and Machinery having any of the following characteristics:

(a)       with respect to Equipment, it is located at premises other than those
(i) owned by such Borrower, (ii) leased and controlled by such Borrower and as
to which an enforceable Collateral Access Agreement with the owner of such
premises shall have been delivered to Lender (or to the extent acceptable to
Lender, Lender has established rent reserves in such amount as Lender may
require in its discretion), or (iii) held out for lease or subject to a bona
fide lease or service agreement acceptable to Lender and subject to a Collateral
Access Agreement to the extent required by Lender in its Permitted Discretion;

(b)       with respect to Machinery, it is located at premises other than those
(i) owned by such Borrower or (ii) leased and controlled by such Borrower and as
to which an enforceable Collateral Access Agreement with the owner of such
premises shall have been delivered to Lender (or to the extent acceptable to
Lender, Lender has established rent reserves in such amount as Lender may
require in its discretion);

(c)       it is located outside the United States of America;

(d)       it is not subject to the first priority, valid and perfected security
interest of Lender or it is subject to any other Lien;

(e)       it is damaged or defective or not used or usable in the ordinary
course of such Borrower’s business as presently conducted or is obsolete or not
currently saleable or has been removed from services;

(f)       it is not covered by “all risk” hazard insurance for an amount equal
to its replacement cost;

(g)        [reserved];

(h)       it consists of computer tooling or molds;

(i)       it is not owned exclusively by such Borrower or as to which such
Borrower does not have good, valid and marketable title thereto; or

(j)       it is otherwise deemed unacceptable by Lender in its Permitted
Discretion.

8

 

“Eligible Equipment and Rolling Stock Advance Rate” means initially sixty
percent (60%), for the period from the Agreement Date through and including
March 31, 2019 and, thereafter, such percentage shall be reduced by one and two
tenths of a percent (1.2%) on the first (1st) Business Day of each calendar
month thereafter, subject to reset, from time to time, to sixty percent (60%)
upon receipt of any subsequent appraisal acceptable to Lender performed pursuant
to the terms hereof no less than once per Fiscal Year, in each case subject to
ongoing monthly reduction in the manner set forth above following such reset.

“Eligible Inventory” means, with respect to any Borrower, Inventory of such
Borrower which is acceptable to Lender for purposes of determining the Borrowing
Base and meets all criteria for inclusion in the Borrowing Base as determined
and established by Lender from time to time in its Permitted Discretion. Without
limiting the discretion of Lender to establish other criteria of ineligibility,
unless otherwise agreed by Lender, Eligible Inventory shall not include any
Inventory: (a) which is not owned exclusively by such Borrower or as to which
Borrower does not have good, valid and marketable title thereto, (b) which is
not subject to a first priority and perfected security interest in favor of
Lender or which is subject to any other Lien, (c) other than finished goods and
raw materials Inventory, (d) which is not in good condition, or is
unmerchantable or does not meet all standards imposed by any Governmental
Authority having regulatory authority over such goods or their use or sale,
(e) which is not currently either usable or salable, at prices approximating at
least cost, in the normal course of such Borrower’s business, or is slow moving
or stale, (f) which is obsolete or returned or repossessed or used goods taken
in trade or goods that constitute spare parts, packaging and shipping materials
or supplies used or consumed in such Borrower’s business, (g) which is located
outside the United States or is in-transit to or from a location of such
Borrower (other than in-transit from one location set forth on Schedule 7.11 to
another location set forth on Schedule 7.11), (h) as to which such Borrower does
not have actual and exclusive possession thereof (either directly or through a
bailee or agent of such Borrower) or which is located in a public warehouse or
is in possession of a bailee or in a facility leased by such Borrower or an
Affiliate thereof unless the warehouseman, bailee, or lessor, as the case may
be, has delivered to Lender a Collateral Access Agreement (or to the extent
acceptable to Lender with respect to any leased location, Lender has established
rent reserves in such amount as Lender may require in its discretion) and unless
it is segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises, (i) which is on consignment from any consignor, or
on consignment to any consignee, (j) is subject to a bill of lading or other
document of title or (k) that contains or bears any Proprietary Rights licensed
to such Borrower by another Person unless such Borrower has delivered to Lender
a consent or sublicense agreement from such licensor in form and substance
acceptable to Lender or Lender is otherwise satisfied that it may sell or
otherwise dispose of such Inventory in accordance with Section 11.2 without
infringing the rights of the licensor of such Proprietary Rights or violating
any contract of such Borrower with such licensor (and without payment of any
royalties other than any royalties due with respect to the sale or disposition
of such Inventory pursuant to the existing license agreement). The
identification of specific exclusions from eligibility herein is not exclusive
or exhaustive. Lender reserves the right in its Permitted Discretion to
establish additional or different criteria for determining Eligible Inventory,
at any time, without prior notice.

9

 

“Eligible Rolling Stock” means Rolling Stock (a) that is owned by a Borrower;
(b) that meets, in all material respects, all applicable material safety or
regulatory standards applicable to it for the use for which it is intended or
for which it is being used; (c) the ownership of which is evidenced by a
certificate of title that has the name of a Borrower noted thereon as the owner
of it or is otherwise properly registered in one of the states of the United
States to such Borrower that is entitled to operate such Rolling Stock in the
state that has issued such certificate of title in accordance with all
applicable laws (other than any Rolling Stock the ownership of which is not
required to be evidenced by a certificate of title under the laws applicable to
it), Lender shall be noted as first priority Lien holder thereon to the extent
required by Lender in its Permitted Discretion, and Lender has received such
evidence thereof as it may reasonably require; (d) that meets, in all material
respects, all applicable material standards of all motor vehicle laws or other
statutes and regulations established by any Governmental Authority and is not
subject to any licensing or similar requirement that would limit the right of
Lender to sell or otherwise dispose of such Rolling Stock; (e) is used or usable
in the ordinary course of a Borrower’s business and has not been damaged in any
material respect or in an inoperable condition that continues for any period of
more than thirty (30) consecutive days; (f) is located in the United States; (g)
is located at premises that are (i) owned by a Borrower, (ii) leased and
controlled by a Borrower and as to which an enforceable Collateral Access
Agreement with the owner of such premises shall have been delivered to Lender
(or to the extent acceptable to Lender, Lender has established rent reserves in
such amount as Lender may require in its discretion), or (iii) held out for
lease or subject to a bona fide lease or service agreement acceptable to Lender
and subject to a Collateral Access Agreement to the extent required by Lender in
its Permitted Discretion; and (h) is not subject to any Lien other than Liens in
favor of Lender.

“Environmental Laws” means any and all applicable federal, state, provincial,
foreign or local statutes, laws, rules, regulations, ordinances, codes, binding
and enforceable guidelines, binding and enforceable written policies or rules of
common law now or hereafter in effect and in each case as amended, or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, in each case, relating to the
environment, the effect of the environment or employee health or relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

“Equipment” has the meaning prescribed for such term as defined by the UCC
(which definition is incorporated herein by reference), wherever located, and
whether now or hereafter existing, and all parts thereof, all accessions thereto
and all replacements therefor. The Equipment includes, without limitation, with
respect to a Person, all personal property used or useable by such Person in its
business.

“Equity Interests” means, with respect to a Person, shares of capital stock,
partnership interests, membership or limited liability company interests in a
limited liability company, beneficial interests in a trust or other equity
ownership interests in a Person, and any warrants, options, participations or
other rights entitling the holder thereof to purchase or acquire any such
interest, whether voting or nonvoting.

10

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.

“ERISA Affiliate” means (a) any Person, trade or business (whether or not
incorporated) subject to ERISA whose employees are treated as being employed by
the same employer as the employees of any Credit Party or Guarantor under
Section 414(b) of the IRC, (b) any Person, trade or business (whether or not
incorporated) subject to ERISA whose employees are treated as being employed by
the same employer as the employees of any Credit Party or Guarantor under
Section 414(c) of the IRC, (c) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any organization subject to ERISA that is a member of an
affiliated service group of which any Credit Party or Guarantor is a member
under Section 414(m) of the IRC, or (d) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to
an arrangement with any Credit Party or Guarantor and whose employees are
aggregated with the employees of any Credit Party or Guarantor under Section
414(o) of the IRC.

“ERISA Benefit Plan” means any “employee benefit plan” (as defined in Section
3(3) of ERISA) as to which any Credit Party or Guarantor or any ERISA Affiliate
(a) is (currently or hereafter), or at any time during the immediately preceding
six (6) years has, sponsored, maintained or contributed to on behalf of any of
its employees or (b) has (currently or hereafter), or has had at any time within
the preceding six (6) years, any liability (contingent or otherwise).

“Event of Default” has the meaning prescribed by Section 10.1.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.

“Excluded Account” means (a) any Deposit Account of a Credit Party or Guarantor
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of any Credit Party’s or
Guarantor’s employees, and (b) any other Deposit Account or Securities Account
designated as an Excluded Account in Part C of Schedule 7.19 as of the Agreement
Date.

“Excluded Property” means, with respect to any Credit Party or Guarantor,
collectively, (i) property of such Credit Party or Guarantor subject to Liens
permitted by clauses (d) or (m) of the definition of Permitted Liens solely in
the event and to the extent that a grant or perfection of a Lien in favor of
Lender on any such property is prohibited by or results in a breach or
termination of, or constitutes a default under, the documentation governing such
Liens or the obligations secured by such Liens (other than to the extent that
such terms would be rendered ineffective pursuant to Section 9.406, 9.407, 9.408
or 9.409 of the UCC (or any successor provision or provisions) of any relevant
jurisdiction and other than to the extent all necessary consents to creation,
attachment and perfection of the Lender’s Liens thereon have been obtained) and,
in any event, immediately upon the ineffectiveness, lapse or termination of such
terms or the obtainment of such consents, such property shall cease to
constitute Excluded Property and shall be Collateral, (ii) any personal property
lease, contract, permit, license, franchise or letter of credit right of such
Credit Party or Guarantor, solely in the event and to the extent that a grant or
perfection of a Lien on such personal property lease, contract, permit, license,
franchise or letter of credit right is prohibited by applicable law or results
in a breach or termination of, or constitutes a default under, any such personal
property lease, contract, permit, license, franchise or letter of credit right
(other than to the extent that such law or terms would be rendered ineffective
pursuant to Section 9.406, 9.407, 9.408 or 9.409 of the UCC (or any successor
provision or provisions) of any relevant jurisdiction and other than to the
extent all necessary consents to creation, attachment and perfection of the
Lender’s Liens thereon have been obtained) and, in any event, immediately upon
the ineffectiveness, lapse or termination of such law or terms or the obtainment
of such consents, such personal property lease, contract, permit, license,
franchise or letter of credit right shall cease to constitute Excluded Property
and shall be Collateral, (iii) the voting equity interests of controlled foreign
corporations (as defined in the IRC) of any Credit Party in excess of 65% of the
voting rights of such corporations, (iv) any Equity Interests held directly by
Digirad other than the Equity Interests in the Credit Parties; (v) any United
States intent-to-use trademark applications to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair the validity or enforceability of such intent-to-use trademark
applications under applicable federal law, provided, that upon submission and
acceptance by the United States Patent and Trademark Office of an amendment to
allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision)
such intent-to-use trademark application shall cease to constitute Excluded
Property and shall be Collateral, and (vi) any property right if and to the
extent that including the same in the Collateral and granting a security
interest therein would violate any applicable law, rule, regulation or order of
any Governmental Authority (unless such Credit Party or Guarantor, as
applicable, could reasonably be expected to remedy such violation through the
use of reasonable commercial efforts).

11

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
Lender or required to be withheld or deducted from a payment to Lender: (a)
Taxes imposed on or measured by net income (however denominated), franchise
Taxes, and branch profits Taxes, in each case (i) imposed as a result of Lender
being organized under the laws of, or having its principal office or its
applicable lending office located in, the jurisdiction imposing such Tax (or any
political subdivision thereof) or (ii) that are Other Connection Taxes, and
(b) U.S. federal withholding Taxes imposed under FATCA.

“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, and any agreement entered into
pursuant to Section 1471(b)(1) of the IRC.

“Fiscal Month” means a calendar month.

“Fiscal Quarter” means one of four fiscal quarters of a Fiscal Year, each
consisting of a period of three (3) consecutive Fiscal Months, with the first of
such quarters beginning on the first day of a such Fiscal Year and the last of
such quarters ending on the last day of such Fiscal Year.

“Fiscal Year” means Credit Parties’ and Guarantor’s fiscal year for financial
accounting purposes, beginning on January 1 and ending on December 31 of such
year.

“Fixed Charge Coverage Ratio” means, for a Person on any date of determination,
the ratio of (a) EBITDA less unfinanced Capital Expenditures to (b) (i) taxes
paid in cash, plus (ii) to the extent Distributions have not been reflected in
net income, Distributions that are made and permitted pursuant to
Section 9.10(ii), plus, (iii) Interest Expense paid in cash, plus (iv) principal
payments made or required to be made on any and all long term Debt including
Capital Leases (other than in respect of the Revolving Loans prior to the
Maturity Date), in each case determined for such Person and its Subsidiaries on
a consolidated basis in accordance with GAAP for the period of four Fiscal
Quarters ending on the last day of the measurement period.

“Fixed LIBOR”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, bear interest at the
Adjusted Fixed LIBOR Rate.

“Fixed LIBOR Rate” means, with respect to any Loan for any applicable Interest
Period, the greater of (i) the rate per annum published in the “Money Rates”
table of The Wall Street Journal (or such other presentation within The Wall
Street Journal as may be adopted hereafter for such information) as the one
month LIBOR rate, determined two (2) Business Days prior to the commencement of
such Interest Period, and (ii) 0%; provided, that, if any change in market
conditions or any change in Applicable Law shall at any time after the date
hereof, in the reasonable opinion of the Lender, make it unlawful or impractical
for the Lender (other than as a result of the Lender’s creditworthiness) to fund
or maintain Loans at the Fixed LIBOR Rate or to continue such funding or
maintaining, or to determine or change interest rates based on the Fixed LIBOR
Rate then the Fixed LIBOR Rate shall be a rate per annum determined by the
Lender in its Permitted Discretion.

“Floating LIBOR”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, bear interest at the
Adjusted Floating LIBOR Rate.

12

 

“Floating LIBOR Rate” means the greater of (i) the rate per annum published on
each Business Day in the “Money Rates” table of The Wall Street Journal (or such
other presentation within The Wall Street Journal as may be adopted hereafter
for such information) as the one month LIBOR rate, adjusted daily, and (ii) 0%;
provided, that, if any change in market conditions or any change in Applicable
Law shall at any time after the date hereof, in the reasonable opinion of the
Lender, make it unlawful or impractical for the Lender (other than as a result
of the Lender’s creditworthiness) to fund or maintain Loans at the Floating
LIBOR Rate or to continue such funding or maintaining, or to determine or change
interest rates based on the Floating LIBOR Rate then the Floating LIBOR Rate
shall be a rate per annum determined by the Lender in its Permitted Discretion.

“Funded Debt” means, for Parent, on any date of determination, the aggregate
(without duplication) of (i) all Debt for borrowed money of Parent and its
Consolidated Subsidiaries (including guaranty obligations of such Debt) as of
such date that by its terms or by the terms of any instrument or agreement
relating thereto matures more than one year from, or is renewable or extendable
at the option of the debtor to a date more than one year from, the date of
creation thereof (including an option of the debtor under a revolving credit or
similar arrangement obligating the lender or lenders to extend credit over a
period of one year or more), including any current maturities of such Debt and
including Capital Lease obligations and the Obligations hereunder, and (ii) all
other Debt of Parent and its Consolidated Subsidiaries (including guaranty
obligations of such Debt) that accrues interest, each determined in accordance
with GAAP.

“GAAP” means generally accepted accounting principles in the United States, as
in effect from time to time, consistently applied. Notwithstanding anything
herein to the contrary, all financial statements delivered hereunder shall be
prepared and all financial covenants contained herein shall be calculated,
without giving effect to any election under Statement of Financial Accounting
Standards 159 (or any similar account principal) permitting a Person to value
its financial liabilities at the fair value thereof.

“General Intangibles” has the meaning prescribed for such term as defined by the
UCC, which definition is incorporated herein by reference, and in any event
includes, without limitation, all intangible personal property of every kind and
nature (other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Securities Accounts, Documents, Instruments, Investment Property,
Letter of Credit Rights, Letters of Credit and money), including, without
limitation, contract rights, business records, rights and claims against
carriers and shippers, customer lists, registrations, licenses, franchises, tax
refund claims, rights to indemnification, warranty or guaranty contract, claims
for any damages arising out of or for breach or default under or in connection
with any contract, rights to exercise or enforce remedies, powers and privileges
under any contract and rights and claims to any amounts payable under any
contract of insurance, including without limitation, business interruption,
property, casualty, key employee life or any other insurance.

“Governmental Authority” means any federal, state or local government, any
subdivision thereof, and any agency, entity, instrumentality or authority owned
or controlled thereby. For the avoidance of doubt, with respect to Health Care
Laws, the term “Governmental Authority” shall include any agency, branch or
other governmental body (federal or state) charged with the responsibility, or
vested with the authority, to administer or enforce, any Health Care Laws,
including any Medicare or Medicaid contractors, intermediaries, or carriers.

“Governmental Payor” means Medicare, Medicaid, any state health plan adopted
pursuant to Title XIX of the Social Security Act, any other state or federal
health care program, and any other Governmental Authority which presently or in
the future sponsors or maintains a payment or reimbursement program.

13

 

“Guarantor” means Digirad, together with its successors and permitted assigns.

“Guaranty” means, with respect to a Person, any direct or indirect guaranty by
such Person of any Debt or other obligation of another Person or any obligation
by such Person to purchase or acquire or otherwise protect or insure a creditor
against loss in respect of Debt or other obligations of another Person, but
excluding customary contractual indemnities in contracts made in the ordinary
course of business or under organizational documents.

“Guaranty Agreement” means each Guaranty Agreement now or hereafter executed by
Guarantor or Individual Guarantor in favor of Lender pursuant to which such
Guarantor guarantees the payment and/or performance of all or any portion of the
Obligations of the Borrowers, in form and substance acceptable to Lender in its
Permitted Discretion, as amended, restated, supplemented or otherwise modified
from time to time.

“Hazardous Materials” means any substances regulated under any Environmental
Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic
or hazardous substances or wastes, or otherwise.

“Health Care Laws” means all applicable Legal Requirements regulating the health
care industry, health care services, healthcare reimbursement, and the
possession, control, warehousing, manufacture, assembly, renting and leasing,
servicing, sale and distribution of diagnostic imaging equipment, the provision
of hospital services, medical services, and diagnostic imaging services, the
quality and adequacy of patient care, rate setting, equipment, personnel,
operating policies, and fee-splitting, including, without limitation (a) all
federal and state fraud and abuse laws (including, without limitation, the
Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)); the Stark Law (42 U.S.C. §§
1395nn); the civil False Claims Act (31 U.S.C. § 3729 et seq.); Sections 1320a-7
and 1320a-7a and 1320a-7b of Title 42 of the United States Code; the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No.
108173); (b) the federal transparency reporting requirements (42 U.S.C. §
1320a-7h, 42 C.F.R. §§ 403.900 et seq.); (c) the enrollment and participation
requirements of Third Party Payors; (d) state and federal laws, rules, and
regulations relating to licensure or regulation of healthcare providers,
suppliers, professionals, technicians, facilities, distributors, diagnostic
imaging equipment, and healthcare operations; (e) the provision of, or payment
for, health care services, items, or supplies; (f) patient health care; (g)
quality, safety certification and accreditation standards and requirements; (h)
the billing, coding or submission of claims or collection of accounts receivable
or refund of overpayments; (i) HIPAA; (j) the Clinical Laboratory Improvements
Amendments of 1988; (k) the Patient Protection and Affordable Care Act (Pub. L.
111-148); (l) state fee-splitting prohibitions; (m) health planning or rate
setting laws, including laws regarding certificates of need and certificates of
exemption; (n) all laws regulating the provision of free or discounted care or
services; (o) all laws relating to informed consent, medical recordkeeping, and
patient rights; and (p) any and all other federal, state, or local health care
laws, rules, codes, statutes, regulations, manuals, orders, ordinances,
statutes, policies, professional or ethical rules, administrative guidance and
requirements applicable to any Credit Party or Guarantor, its assets, business,
or operations, in each case, with respect to the laws described in clauses (a)
through (p) of this definition, as may be amended from time to time, and any
successor statutes thereto and the regulations promulgated thereunder.

14

 

“Health Care Permits” means any permit, approval, consent, authorization,
license, provisional license, registration, accreditation, certificate,
certification, certificate of need, qualification, operating authority,
concession, grant, franchise, variance or permission from any Governmental
Authority issued or required under applicable Health Care Laws.

“HIPAA” means the (a) Health Insurance Portability and Accountability Act of
1996 (Pub. L. No. 104-191); (b) the Health Information Technology for Economic
and Clinical Health Act (Title XIII of the American Recovery and Reinvestment
Act of 2009); and (c) any state and local laws regulating the privacy and/or
security of individually identifiable information, including state laws
providing for notification of breach of privacy or security of individually
identifiable information, in each case, with respect to the laws described in
clauses (a), (b), and (c) of this definition, as amended and in effect from time
to time, and any successor statutes thereto and the regulations promulgated
thereunder.

“Indemnified Claims” means any and all claims, demands, actions, causes of
action, judgments, obligations, liabilities, losses, damages and consequential
damages, penalties, fines, costs, fees, expenses, Lender Expenses and
disbursements (including without limitation, fees and expenses of attorneys and
other professional consultants and experts in connection with investigation or
defense) of every kind, known or unknown, existing or hereafter arising,
foreseeable or unforeseeable, which may be imposed upon, threatened or asserted
against, or incurred or paid by, an Indemnified Person at any time and from time
to time, because of, resulting from, in connection with, or arising out of any
transaction, act, omission, event or circumstance in any way connected with the
Collateral, the Loan Documents (including enforcement of Lender’s or LC Issuer’s
rights thereunder or defense of Lender’s or LC Issuer’s actions thereunder), any
Default or Event of Default or any acts or omissions taken by such Indemnified
Person in connection with this Agreement or administration of the Loan
Documents.

“Indemnified Persons” means, collectively, Lender, LC Issuer and each of their
Affiliates, Equity Interest owners, officers, directors, members, managers,
partners, employees, agents and representatives.

“Indemnified Taxes” means (a) any Taxes, other than Excluded Taxes, imposed on
or with respect to any payment made by or on account of any obligation of any
Credit Party or Guarantor under any Loan Document and (b) to the extent not
otherwise described in the foregoing clause (a) of this definition, Other Taxes.

“Individual Guarantor” means Jeffrey E. Eberwein, an individual resident of the
State of Connecticut.

“Instrument” has the meaning prescribed for such term as defined by the UCC,
which definition is incorporated herein by reference, and includes, without
limitation, a negotiable instrument or any other writing that evidences a right
to the payment of a monetary obligation, is not itself a security agreement or
lease, and is of a type that in the ordinary course of business is transferred
by delivery with any necessary endorsement or assignment.

15

 

“Intangible Assets” means, for any Person, assets that are treated as intangible
pursuant to GAAP, including, without limitation: (a) obligations owing to such
Person by its stockholders, officers, directors, members, managers, partners,
employees, subsidiaries, Affiliates or any Person in which any such stockholder,
officer, director, member, manager, partner, employee, subsidiary, or Affiliate
owns any interest and (b) any asset which is intangible or lacks intrinsic or
marketable value or collectability, including, without limitation, goodwill,
noncompetition agreements, patents, copyrights, trademarks, franchises,
organization or research and development costs.

“Interest Election Notice” means a request by the Borrower Representative to
convert or continue a Borrowing in accordance with Section 2.5, which shall be
in a form satisfactory to, or provided by, the Lender.

“Interest Expense” means, for a Person for a period, total interest expense for
such Person for such period, as determined in accordance with GAAP.

“Interest Payment Date” means (a) with respect to any Floating LIBOR Loan, the
first calendar day of each month and the Termination Date, and (b) with respect
to any Fixed LIBOR Loan, the last day of each Interest Period applicable to the
Borrowing of which such Loan is a part and the Termination Date.

“Interest Period” means, with respect to any Loan accruing interest at the
Adjusted Fixed LIBOR Rate, the period commencing on the date of such Loan and
ending on the numerically corresponding day in the calendar month that is
one month thereafter; provided that (i) if any Interest Period would end on a
day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Loan initially shall be the
date on which such Loan is made and thereafter shall be the effective date of
the most recent conversion or continuation of such Loan.

“Inventory” has the meaning prescribed for such term as defined by the UCC,
which definition is incorporated herein by reference, and includes, without
limitation, with respect to a Person, goods (including goods in-transit) that
(a) are held or to be held by such Person for sale or lease or to be furnished
under a contract of service, (b) are leased or to be leased by such Person as
lessor or (c) consist of raw materials, work in process, finished goods or
materials used or consumed in such Person’s business.

“Inventory Sublimit” means the lesser of (a) an amount equal to thirty percent
(30%) of the Borrowing Base and (b) $4,000,000.

“Investment” means, with respect to any Person, any investment made, directly or
indirectly by such Person in, to or with respect to any other Person, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP, whether by (a) acquisition of shares of
capital stock or other Equity Interests, indebtedness, securities or other
obligations, (b) a loan, guarantee, advance, capital contribution or other like
investment, or (c) any purchase or other acquisition (or any commitment to make
any such purchase or other acquisition) of all or a material portion of the
assets of (or any division or business line of) any other Person, in each case,
whether made in cash, by the transfer of property or otherwise (including,
without limitation, any joint venture relationship).

“Investment Property” has the meaning prescribed for such term as defined by the
UCC, which definition is incorporated herein by reference, and includes, without
limitation, a security (whether certificated or uncertificated), security
entitlement, securities account, commodity contract, or commodity account.

“IRC” means the Internal Revenue Code of 1986, as amended and in effect from
time to time.

“IRS” means the United States Internal Revenue Service.

16

 

“Joinder Agreement” has the meaning given to such term in Section 8.16.

“LC Application” means any application for a Letter of Credit hereafter made by
any Borrower to LC Issuer and Lender in form as required by LC Issuer, which
shall specify therein (a) the amount of such Letter of Credit, (b) the date of
issuance, amendment, renewal or extension of such Letter of Credit, (c) the
proposed termination date of such Letter of Credit, (d) the name and address of
the beneficiary of such Letter of Credit and (e) such other information as is
necessary to prepare, amend, renew or extend such Letter of Credit or is
otherwise requested by LC Issuer.

“LC Collateral” has the meaning given to such term in Section 2.10(a).

“LC Conditions” has the meaning given to such term in Section 2.6.

“LC Issuer” means each issuer of a Letter of Credit. The LC Issuer may be any of
Lender, any Affiliate of Lender, U.S. Bank, any other financial institution
designated by Lender to issue Letters of Credit and their successors.

“LC Obligations” means, at any time of determination, the sum of all Matured LC
Obligations plus the aggregate maximum amount which LC Issuer might then or
thereafter be called upon to advance under all Letters of Credit then
outstanding.

“LC Payment Amounts” means, with respect to any Other LC Issuer, collectively,
(a) all payments made by Borrowers to Lender, in immediately available funds,
for payment of any Matured LC Obligations owing to such Other LC Issuer, and (b)
all fees and expenses of such Other LC Issuer for and relating to the issuance,
amendment and drawing of each Letter of Credit issued by such Other LC Issuer
that are paid by Borrower to Lender in immediately available funds pursuant to
the terms of Section 3.2(c)(ii).

“LC Sublimit” means $500,000.

“LC Support” shall mean a guaranty, Cash Collateral or other support agreement
in favor of Lender, acceptable to Lender in its sole and absolute discretion,
pursuant to which the payment or performance by Borrowers of their obligations
under an LC Application and/or in respect of any Letter of Credit, including the
obligation to reimburse LC Issuer for any payment made by the LC Issuer under
such Letter of Credit, is guaranteed or otherwise assured to the Lender’s sole
satisfaction.

“Legal Requirement” means any treaty, convention, statute, law, common law,
rule, regulation, ordinance, license, permit, governmental approval, injunction,
judgment, order, consent decree or other requirement of any Governmental
Authority, whether federal, state, or local.

“Lender” has the meaning given to such term in the preamble hereto.

“Lender Account” means Sterling National Bank account number 6700044124, ABA
number 221970443, or such other account as Lender may from time to time specify
to Borrower Representative in writing.

“Lender Expenses” has the meaning prescribed by Section 13.5.

“Lender’s Liens” means Liens granted (or purported to be granted) in favor of
Lender pursuant to this Agreement or any of the other Loan Documents.

17

 

“Letter of Credit” means any standby or commercial letter of credit issued by LC
Issuer at the application of a Borrower pursuant to the terms hereof.

“Letter of Credit Rights” has the meaning prescribed for such term as defined by
the UCC, which definition is incorporated herein by reference, and includes,
without limitation, a right to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is at the time entitled to demand
payment or performance and whether or not evidenced by a writing.

“Leverage Ratio” means, for Parent, as of any date of determination, the ratio
of (a) the Funded Debt of Parent and its Consolidated Subsidiaries as reflected
on a consolidated balance sheet of Parent and its Consolidated Subsidiaries
prepared as of such date in accordance with GAAP to (b) the EBITDA for Parent
and its Consolidated Subsidiaries as of such date in accordance with GAAP.

“Licensed Personnel” has the meaning prescribed by Section 7.37(c).

“Lien” means any interest in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is
based on the common law, statute, or contract, and including a security
interest, collateral assignment, charge, claim, or lien arising from a security
agreement, mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, conditional sale, trust receipt, lease,
consignment or bailment for security purposes or similar agreement, or any
contingent or other agreement to provide any of the foregoing.

“Loan” means any loan or advance made by Lender to Borrowers under this
Agreement and includes Revolving Loans, and “Loans” means, collectively, all
such loans and advances.

“Loan Documents” means this Agreement, each Guaranty Agreement, each
Subordination Agreement, each Revolving Note (if any), each Pledge Agreement (if
any), each Control Agreement, each Collateral Access Agreement, each LC
Application, each Letter of Credit, each Perfection Certificate, and any other
documents, instruments or agreements heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to or executed by any Credit Party
or Guarantor or Individual Guarantor in connection with the Obligations, the
Collateral or any other aspect of the transactions contemplated by this
Agreement, and in each case including any and all renewals, extensions,
modifications, amendments, or restatements of any of the foregoing.

“Lockbox” has the meaning given to such term in Section 5.3(a).

“Machinery” refers to Collateral that would be classified within the definition
of “Equipment” but for the fact that such items have become so affixed to the
related Real Property that an interest has arisen therein under real property
law.

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U
or X of the Federal Reserve Board.

“Material Adverse Effect” means the occurrence of any of the following: (i) a
material adverse change in, or effect on, the business, assets, operations,
prospects or financial condition of any Credit Party, Guarantor or Individual
Guarantor, (ii) a material impairment of the ability of any Credit Party,
Guarantor or Individual Guarantor to perform any obligations under the Loan
Documents to which it is a party, (iii) a material adverse effect upon the
Collateral or the validity, perfection or priority of Lender’s Liens on the
Collateral, or (iv) a material adverse effect upon the legality, validity,
binding effect or enforceability of any Loan Document.

18

 

“Matured LC Obligations” means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be made under any Letter
Credit and all other amounts due and owing to LC Issuer under any LC
Application, to the extent such amounts have not been repaid to LC Issuer (with
the proceeds of Revolving Loans or otherwise).

“Maturity Date” means March 29, 2024.

“Maximum Drawing Amount” means, at the time in question, the sum of the maximum
amounts which LC Issuer might then or thereafter be called upon to advance under
all Letters of Credit which are then outstanding.

“Maximum Rate” means the maximum rate of interest permitted to be charged under
Applicable Law from time to time in effect; provided, that in the event
Applicable Law provides for an interest ceiling on any day under Chapter 303 of
the Texas Finance Code, as amended (the “Texas Finance Code”), for that day the
ceiling shall be the “monthly ceiling” as referred to and in effect from time to
time under the provisions of Section 303.004 of the Texas Finance Code.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Credit Party or Guarantor or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
six plan years, has made or been obligated to make contributions.

“Net Amount” means, (a) with respect to an Eligible Account of any Borrower at
any time, an amount equal to: (i) the gross amount of such Account less (ii)
sales, excise or similar taxes, and all returns, discounts, claims, credits,
rebates and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed, (b) with respect to Eligible Inventory at any
time, the net orderly liquidation value of such Inventory, as determined
pursuant to the most recent appraisal acceptable to Lender in its discretion,
(c) with respect to Eligible Equipment at any time, the net orderly liquidation
value of such Equipment, as determined pursuant to the most recent appraisal
acceptable to Lender in its discretion, and (d) with respect to Eligible Rolling
Stock at any time, the net orderly liquidation value of such Rolling Stock, as
determined pursuant to the most recent appraisal acceptable to Lender in its
discretion.

“Obligations” means all obligations, liabilities and indebtedness now or
hereafter owing by any Credit Party or Guarantor to Lender pursuant to or
otherwise arising in connection with this Agreement or any other Loan Documents,
including, without limitation, all loan repayment obligations, accrued interest
obligations (including interest that accrues after the commencement of an
insolvency proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in such insolvency proceeding), Indemnified Claims, Lender
Expenses (including any fees or expenses that accrue after the commencement of
an insolvency proceeding, regardless of whether allowed or allowable in whole or
in part as a claim in such insolvency proceeding), all obligations or
liabilities arising from Bank Products, LC Obligations, premiums, fees, or
guaranties arising out of, under, pursuant to, in connection with or evidenced
by this Agreement or any other Loan Document, in each case, whether direct or
indirect, primary or secondary, joint, several, or joint and several, fixed or
contingent, including indebtedness, liabilities and obligations, if any, which
may be assigned to or acquired by Lender, and any and all renewals and
extensions of the foregoing or of any part thereof.

19

 

“OFAC” means the Office of Foreign Assets Control of the United States
Department of the Treasury.

“Other Connection Taxes” means Taxes imposed as a result of a present or former
connection between Lender and the jurisdiction imposing such Tax (other than
connections arising from Lender having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected
a security interest under, engaged in any other transactions pursuant to or
enforced any Loan Document, or sold or assigned an interest in any Loan, Letter
of Credit or Loan Document).

“Other LC Issuer” means any LC Issuer that is not Lender (and includes, without
limitation U.S. Bank).

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment.

“Parent” means Digirad, together with its successors and permitted assigns in
such capacity.

“Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107–56) as
amended, supplemented or replaced from time to time.

“Payment Intangibles” means all “payment intangibles” as defined in the UCC,
which definition is incorporated herein by reference.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA, or any successor thereto.

“Perfection Certificate” means any perfection certificate executed by the Credit
Parties and Guarantor on and as of the Agreement Date which provides information
with respect to the assets and/or property of such Credit Parties and Guarantor
as of the Agreement Date and is in form acceptable to Lender in its Permitted
Discretion and any additional similar perfection certificate delivered by one or
more Credit Parties or Guarantor to the Lender after the Agreement Date pursuant
to Section 8.16.

“Permitted Debt” shall have the meaning given to such term in Section 9.5.

“Permitted Discretion” means a determination made by the Lender in the exercise
of its commercially reasonable business judgment (from the perspective of a
secured asset-based lender).

“Permitted Disposition” shall have the meaning given to such term in Section
9.8.

“Permitted Government Account” means an Account with respect to which the
Account Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States, which for the avoidance of doubt includes
any quasi government agencies, including any Accounts owing by the U.S.
Department of Veterans Affairs, or (ii) any state of the United States or any
department, agency or instrumentality of such state, to the extent the amount
owing thereon, when combined with the aggregate amount owing on any and all
other government Accounts described in this definition plus the aggregate amount
owing on any and all foreign Accounts described in clause (h) of the definition
of “Eligible Account”, does not at any time exceed $500,000 in the aggregate.

 

20

 

“Permitted Investment” means, with respect to any Credit Party, (a) advances
made in connection with purchases of goods and services in the ordinary course
of business, (b) acquisitions (not otherwise prohibited by this Agreement) of
Equipment by such Credit Party for use in the ordinary course of business, (c)
Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course of business, (d) guarantees constituting
Permitted Debt, (e) direct obligations of the United States of America or any
agency thereof, or obligations guaranteed by the United States of America, that
mature within one year from the date of acquisition thereof, (f) certificates of
deposit maturing within one year from the date of acquisition, issued by
Sterling National Bank or a commercial bank organized under the laws of the
United States of America or any state thereof having capital and surplus
aggregating at least $100,000,000, (g) commercial paper of an issuer rated at
least A-1 by Standard & Poor’s Corporate or P-1 from Moody’s Investor Services
Inc., (h) money market mutual funds so long as substantially all of the assets
of such fund are comprised of securities of the type described in clauses (e),
(f) and (g) above, (i) travel and similar advances to employees made in the
ordinary course of business, (j) ordinary extensions of credit and loans to
customers buying goods, supplies and services in the ordinary course of business
so long as not for longer periods than in the ordinary course of business and
payable on customary trade terms for such Credit Party, (k) receivables owing to
such Credit Party created or acquired in the ordinary course of business, so
long as not for longer periods than in the ordinary course of business and
payable on customary trade terms, and (l) Investments made by a Credit Party in
another Credit Party.

 

“Permitted Liens” means, with respect to any Credit Party, (a) Lender’s Liens,
(b) Liens for unpaid taxes, assessments or other governmental charges or levies
that either (i) are not delinquent or (ii) (A) do not have priority over the
Lender’s Liens or are less than $250,000 in the aggregate and (B) are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves are maintained on the books
of such Credit Party in accordance with GAAP, (c) Liens, if any, described in
Schedule 7.22, but only to the extent such Liens secure Permitted Debt existing
on the Agreement Date and any Refinancing Debt, (d) Liens which constitute
purchase money Liens and secure Debt permitted under clause (e) of Section 9.5,
but only to the extent such Liens attach only to the property acquired by the
incurrence of such purchase money secured Debt and such Liens only secure the
Debt incurred to acquire such property or any related Refinancing Debt, (e) the
interests of lessors or sublessors under operating leases entered into in the
ordinary course of business and not prohibited by any other provision hereof,
(f) statutory Liens in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers or suppliers, incurred in the ordinary course of business
of such Credit Party and not in connection with the borrowing of money, and
which Liens are for sums not delinquent or sums being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and for
which adequate reserves are maintained on the books of such Credit Party in
accordance with GAAP, (g) Liens arising from deposits made in connection with
obtaining worker’s compensation or other unemployment insurance, (h) purported
Liens evidenced by the filing of precautionary UCC financing statements relating
solely to operating leases of personal property entered into in the ordinary
course of business, (i) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods in the ordinary course of business, (j) judgment
liens in respect of judgments that do not constitute an Event of Default,
(k) non-exclusive licenses of intellectual property rights granted by such
Credit Party in the ordinary course of business, (l) with respect to real
property, zoning restrictions, easements, rights of way, restrictions,
reservations, declarations, licenses, covenants, encroachments, and other minor
defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business of
such Credit Party, (m) Liens on cash deposits to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeals bonds, bids,
insurance, leases, government contracts, trade contracts, performance and return
of money bonds, letters of credit and other similar obligations (exclusive of
obligations for the payment of borrowed money) entered into in the ordinary
course of business, (n) security deposits to public utilities or to any
municipalities or Governmental Authority or other public authorities when
required by such utility, municipality, Governmental Authority or other public
authority in connection with the supply of services or utilities, and (o)
statutory or common law rights of setoff of depository banks with respect to
funds of Credit Parties at such banks to secure fees and charges in connection
with returned items or the standard fees and charges of such banks in connection
with Deposit Accounts maintained by Credit Parties at such banks (but not any
other Debt or other obligations).

21

 

“Person” means any natural person, corporation, joint venture, limited liability
company, general partnership, limited partnership, limited liability limited
partnership, trust, land trust, unincorporated organization or Governmental
Authority.

“Pledge Agreement” means, collectively, each Pledge Agreement now or hereafter
executed by any Credit Party or Guarantor in favor of the Lender, pursuant to
which such Credit Party or Guarantor pledges and grants to Lender, as security
for such Credit Party’s or Guarantor’s Obligations, a security interest in all
or any portion of the Equity Interests owned by it, in form and substance
acceptable to Lender in its Permitted Discretion, as amended, restated,
supplemented or otherwise modified from time to time.

“Proprietary Rights” means collectively, all rights, priorities and privileges
relating to intellectual property, whether arising under United States,
multinational, foreign laws or otherwise, including, without limitation,
inventions, invention disclosures, designs, blueprints, plans, specifications,
licenses, permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade names, trade
styles, patent, trademark and service mark applications, trade secrets, domain
names, good will and all licenses and rights related to any of the foregoing,
including, without limitation, all royalties, license fees or other payments due
under or in respect of any of the foregoing, all extensions, renewals, reissues,
divisions and continuations of any of the foregoing, and all rights to sue at
law or in equity for past, present and future infringement, misappropriation,
violation or other impairment of any of the foregoing, including the right to
receive all proceeds and damages therefrom.

“Protective Advances” has the meaning set forth in Section 2.4.

“Real Property” means any estates or interests in real property now owned or
hereafter acquired by any Credit Party or Guarantor and the improvements
thereto.

“Refinancing Debt” means, with respect to any Debt of any Person, refinancings,
renewals, or extensions thereof so long as (a) the terms and conditions of such
refinancings, renewals, or extensions do not materially impair the prospects of
repayment of the Obligations or materially impair such Person’s
creditworthiness, (b) the terms of such refinancings, renewals and extensions
are not less favorable to the obligor thereon or to the Lender than the Debt so
refinanced, renewed or extended (individually or in the aggregate), (c) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of the Debt so refinanced, renewed, or extended, (d) such
refinancings, renewals, or extensions do not result in an increase in the
interest rate with respect to the Debt so refinanced, renewed, or extended, (e)
such refinancings, renewals, or extensions do not result in a shortening of the
average weighted maturity of the Debt so refinanced, renewed, or extended, nor
are they on terms or conditions that, taken as a whole, are materially more
burdensome or restrictive to such Person, (f) if the Debt that is refinanced,
renewed, or extended (or any Lien securing such Debt) was subordinated in right
of payment or priority to the Obligations (or any Lien securing any
Obligations), then the terms and conditions of the refinancing, renewal, or
extension must include subordination terms and conditions that are at least as
favorable to the Lender as those that were applicable to the refinanced,
renewed, or extended Debt and any Liens securing such Debt, and (g) the Debt
that is refinanced, renewed, or extended is not recourse to any Person that is
liable on account of the Obligations other than that Person or those Persons
which were obligated with respect to the Debt that was refinanced, renewed, or
extended.

22

 

“Reportable Event” shall mean an event described in Section 4043(c) of ERISA
with respect to an ERISA Benefit Plan that is subject to Title IV of ERISA other
than those events as to which the 30 day notice period is waived under 29 C.F.R.
Sections 4043.22, .23, .25, .27 or .28.

“Reporting Date” means, with respect to any Schedule hereto, (i) initially, the
Agreement Date and (ii) thereafter, the most recent date as to which such
Schedule was updated or required to be updated, as applicable, in accordance
with the terms hereof.

“Responsible Officer” means, for any Person, the chairman, chief executive
officer, chief operating officer, chief financial officer, or president of such
Person and, in addition, with respect to a Borrowing Base Certificate or a
Compliance Certificate, the treasurer or controller of such Person or any other
Person authorized by board resolution and approved by Lender in its Permitted
Discretion.

“Revolving Credit Limit” means $20,000,000.

“Revolving Loans” has the meaning set forth in Section 2.1(a).

“Revolving Note” has the meaning set forth in Section 2.1(a).

“Rolling Stock” means all trucks, trailers, other motor vehicles that are used
or capable of being used to transport Borrowers’ Inventory or Equipment or
otherwise used by Borrowers in the ordinary course of business.

“Sanctioned Country” means, at any time, a country or territory which is the
subject or target of any Sanctions.

“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC, the U.S.
Department of State, any other U.S. government entity, the United Nations
Security Council or any similar list maintained by Canada, the European Union or
any EU member state, (b) any Person operating, organized or resident in a
Sanctioned Country or (c) any Person controlled by any Person described in
clauses (a) or (b) of this definition.

“Sanctions” means economic or financial sanctions or trade embargoes imposed,
administered or enforced from time to time by (a) the U.S. government, including
those administered by OFAC or the U.S. Department of State, the U.S. Department
of Commerce or the U.S. Department of the Treasury or (b) the United Nations
Security Council, the European Union of Her Majesty’s Treasury of the United
Kingdom or the relevant sanctions authority of Canada, and in each case, the
regulations promulgated thereunder.

“Securities Account” has the meaning prescribed for such term as defined by the
UCC, which definition is incorporated herein by reference.

23

 

“Securities Intermediary” has the meaning prescribed for such term as defined by
the UCC, which definition is incorporated herein by reference.

“Shareholder’s Equity” means, as of any date, stockholder’s or member’s equity
as determined in accordance with GAAP or, in the case of a partnership, a
partner’s partnership interest.

“Solvent” means, when used with respect to any Person at any time of
determination, that:

(a)       the assets of such Person, at a fair valuation, are in excess of the
total amount of its liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities); and

(b)       the present fair saleable value of such Person’s assets is greater
than the total amount of its existing debts (including contingent, subordinated,
unmatured and unliquidated liabilities) as such debts become absolute and
matured; and

(c)       such Person is then able and expects to be able to pay its debts
(including contingent, subordinated, unmatured and unliquidated liabilities) as
they mature; and

(d)       such Person has capital sufficient to carry on its business as
conducted and as proposed to be conducted.

For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

“Star Procurement” means Star Procurement, LLC, a Delaware limited liability
company.

“Subordinated Debt” means (a) Debt (whether secured or unsecured) that is
subordinated to the Obligations pursuant to a Subordination Agreement or (b)
unsecured Debt that is subordinated in right of payment to the Obligations, on
terms acceptable to Lender in its Permitted Discretion, in each case that does
not have a final maturity on or before the date that is six months after the
Maturity Date.

“Subordination Agreement” means any subordination agreement among Lender, the
applicable Credit Party and the applicable third party creditor (including,
without limitation, any Affiliate of such Credit Party), pursuant to which all
obligations and indebtedness now or hereafter owing by such Credit Party to such
creditor are subordinated to the Obligations in right of payment and claim, and
all Liens securing such obligations and indebtedness are subordinated to
Lender’s Liens in the Collateral, in form and substance satisfactory to Lender
in its Permitted Discretion.

“Subsidiary” means, with respect to a Person, any other Person of which more
than ten percent (10%) of the voting Equity Interests is owned or controlled
directly or indirectly by such Person or one or more of its Subsidiaries, or a
combination thereof; provided that, for the purposes of this definition, any
Person that is required to be consolidated with a Credit Party or Guarantor in
accordance with GAAP will be considered to be a Subsidiary of such Credit Party
or Guarantor.

“Supporting Obligations” has the meaning prescribed for such term as defined by
the UCC, which definition is incorporated herein by reference and includes
letters of credit and guaranties issued in support of Accounts, Chattel Paper,
Documents, General Intangibles, Instruments or Investment Property.

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“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority or taxing authority thereof or therein,
including any interest, additions to tax or penalties applicable thereto.

“Termination Date” means the earlier of (a) the Maturity Date, (b) the day on
which the obligations of Lender to make Loans hereunder have been terminated
pursuant to Section 12.1 or (c) the day on which the Obligations first become
due and payable in full (or, with the exception of contingent indemnity
obligations for which no claim has been asserted, are paid in full) and the
obligation of Lender to make Loans hereunder are terminated.

“Termination Event” shall mean (i) a Reportable Event with respect to any ERISA
Benefit Plan; (ii) the existence with respect to any ERISA Benefit Plan of a
non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or
Section 4975 of the IRC); (iii) the withdrawal of any Credit Party or Guarantor
or any ERISA Affiliate from an ERISA Benefit Plan or Multiemployer Plan during a
plan year in which such entity was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA; (iv) the providing of notice of intent to terminate
an ERISA Benefit Plan in a distress termination described in Section 4041(c) of
ERISA; (v) the institution by the PBGC of proceedings to terminate an ERISA
Benefit Plan or Multiemployer Plan; (vi) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Benefit Plan or Multiemployer
Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vii) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of any Credit Party or Guarantor or
any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization.

“Third Party Payor” means any Governmental Payor, private insurers, managed care
plans, and any other Person or entity which presently or in the future sponsors
or maintains a payment or reimbursement program.

“Trading with the Enemy Act” shall mean the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any enabling legislation or executive order relating thereto.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Floating LIBOR Rate or the Fixed LIBOR Rate.

“UCC” means the Uniform Commercial Code in effect in the State of New York, as
amended from time to time.

“U.S. Bank” means U.S. Bank National Association, and its successors.

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the IRC.

Section 1.2. Types of Loans and Borrowings. For purposes of this Agreement,
Loans may be referred to by Type (e.g., a “Floating LIBOR Loan”, a “Fixed LIBOR
Borrowing”, etc.).

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Section 1.3. Interpretive Provisions. Unless expressly provided otherwise, any
term which is defined by the UCC, wherever used in this Agreement, shall have
the same meaning as is prescribed by the UCC. The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms. The
words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement
as a whole and not to any particular provision of this Agreement. Unless the
context indicates otherwise, references to “Section,” “Subsection,” “clause”
“Schedule” and “Exhibit” are references to this Agreement. The term “documents”
(if not capitalized as a defined term) includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced. The term “including” is not limiting and means “including
without limitation.” Unless the context requires otherwise, in the computation
of periods of time from a specified date to a later specified date, the word
“from” means “from and including,” the words “to” and “until” each mean “to but
excluding” and the word “through” means “to and including.” The term
“discretion” when used in reference to a Person means, unless qualified by the
word(s) “reasonable” or Permitted Discretion, the sole and absolute discretion
of such Person, honestly determined by such Person under the circumstances.
Unless otherwise expressly provided herein, references to agreements (including
this Agreement) and other contractual documents shall be deemed to include all
subsequent amendments, restatements and other modifications thereto, and
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation. The captions and
headings of this Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement. This Agreement and the other Loan
Documents are the result of negotiations among the parties, have been reviewed
by counsel to each party and are the products of all parties, and in
consideration thereof, it is agreed that they shall not be construed against
either party solely because of such party’s involvement in their preparation.
Unless otherwise specified, any reference to time shall be deemed to mean
Central Standard Time or Central Daylight Time, as applicable, as in effect in
Dallas County, Texas.

Section 1.4. Individual Guarantor References. Effective upon the release of
Individual Guarantor from his obligations under his Guaranty after the
satisfaction of the Conditions to Release (as such term is defined in such
Guaranty), all references to Individual Guarantor appearing in Sections 6.2(f)
and 10.1 and in the definition of “Material Adverse Effect” set forth in Section
1.1 shall be deemed to be deleted automatically and without further action;
provided, however, that upon the request of Borrower Representative or Lender,
the parties hereto shall execute and deliver an amendment to this Agreement to
reflect such deletions.

ARTICLE II
LOANS

Section 2.1. Loans.

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(a)       Revolving Loans. Subject to the terms and provisions of this
Agreement, Lender agrees to make advances to Borrowers from time to time during
the period from the date of this Agreement to the Termination Date in an amount
not exceeding the Availability as of such time of determination (such advances
made by Lender pursuant to this Section 2.1(a) collectively, the “Revolving
Loans”); provided, that in no event shall the aggregate outstanding principal
balance of the Revolving Loans plus all LC Obligations exceed the Revolving
Credit Limit. Borrower may borrow, repay and re-borrow Revolving Loans from time
to time, subject to the terms of this Agreement. Lender shall have the
continuing right to establish and maintain any reserves for purposes of
calculating the Borrowing Base in such amounts and at such times and with
respect to such matters and for such purposes as Lender deems appropriate
without prior notice to Borrowers, including reserves with respect to collection
performance, slow moving or obsolete Inventory, dilution of Accounts,
contingencies, amounts a Borrower is or may be required to pay (such as taxes,
freight and shipping charges, duties, insurance premiums, amounts owing to
licensors, landlords, warehousemen, carriers, mechanics, materialmen, laborers
or suppliers, or ad valorem, excise, sales, or other taxes) or any other matter
in Lender’s discretion. Any such reserves are solely for purposes of calculating
the Borrowing Base and do not constitute or represent cash funds. No Revolving
Loans shall be evidenced by a note unless requested otherwise by Lender, in
which case the Revolving Loans shall be evidenced by a note executed by
Borrowers in favor of Lender (as amended, supplemented, restated or otherwise
modified, the “Revolving Note”) in form and substance reasonably satisfactory to
Lender.

(b)       Accounting for Loans. Lender shall maintain, in accordance with its
usual practice, electronic or written records evidencing the outstanding
Obligations of each Borrower to Lender, including without limitation the
Obligations resulting from each Loan made by Lender to each Borrower from time
to time, and the amounts of principal and interest payable and paid to Lender
from time to time in respect of each Loan. The entries made in the electronic or
written records maintained pursuant to this Section 2.1(b) shall be prima facie
evidence of the existence and amounts of the Obligations therein recorded;
provided, however, that the failure of Lender to maintain such records or any
error therein shall not in any manner affect the obligations of the Borrowers to
repay their respective Obligations in accordance with the terms of this
Agreement and the other Loan Documents.

Section 2.2. Request for and Making of Revolving Loans.

(a)       Request for Revolving Loans. Borrower Representative shall request
each Revolving Loan, on behalf of all Borrowers, by delivering to Lender a
written Borrowing Notice, signed by a Responsible Officer of Borrower
Representative, accompanied by a Borrowing Base Certificate complying with
Section 8.5 and reflecting sufficient Availability. Unless otherwise agreed by
Lender, each request for a Loan shall be irrevocable and, in order to be
effective, must be received by Lender (i) in the case of a Fixed LIBOR Loan,
prior to 10:00 a.m., Dallas time, two (2) Business Days before the requested
funding date or (b) in the case of a Floating LIBOR Loan, prior to 10:00 a.m.,
Dallas time, on the requested funding date, specifying (i) the amount of the
requested Loan, (ii) the requested funding date, which shall be a Business Day,
and (iii) whether the requested Loan will be a Floating LIBOR Loan or a Fixed
LIBOR Loan (and if no election is specified as to the Type of Loan, then the
requested Loan shall be a Floating LIBOR Loan); provided that all Loans made on
the Agreement Date must be made as Floating LIBOR Loans but may be converted
into Fixed LIBOR Loans in accordance with Section 2.5. At the commencement of
each Interest Period for any Fixed LIBOR Loan, such Loan shall be in an
aggregate amount that is an integral multiple of $250,000 and not less than
$1,000,000. Floating LIBOR Loans may be in any amount. Loans of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of three (3) Fixed LIBOR Borrowings outstanding.

(b)       Making of Loans. Lender shall make the amount of any requested
borrowing available to Borrowers on the applicable funding date by transferring
immediately available funds equal to such amount to the Designated Account;
provided, however, that Lender shall not be required (nor have any obligation)
to make any advance if (1) one or more of the applicable conditions precedent
set forth in Article VI will not be satisfied on the requested funding date for
the applicable borrowing unless such condition has been waived, or (2) the
requested borrowing would exceed the Availability on such funding date or, after
giving effect thereto, cause the aggregate principal amount outstanding of the
Revolving Loans plus all LC Obligations to exceed the Revolving Credit Limit.

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(c)       Disbursement of Proceeds; Borrower Representative. Unless otherwise
requested by Borrower Representative and agreed by Lender, the proceeds of each
Loan, when funded, shall be disbursed by Lender to the Designated Account. Each
Borrower shall have the full benefit of and access to each Loan made hereunder.
Each Borrower hereby designates and appoints Digirad Health to act as Borrower
Representative for and on behalf of it for purposes of requesting Loans,
requesting Letters of Credit and for all other purposes hereunder and under the
other Loan Documents for which Borrower Representative acts from time to time.
The agency relationship established pursuant to this Section 2.2(c) is for
administrative convenience only and such agency relationship shall not extend to
any matter outside the scope of the Loan Documents.

(d)       Joint and Several Obligations. Each Borrower hereby agrees that the
Obligations under this Agreement and the other Loan Documents are joint and
several obligations of each Borrower.

(e)       No Fraudulent Conveyances. Notwithstanding any provisions of this
Agreement to the contrary, it is intended that the joint and several nature of
the Obligations and the Liens granted by Borrowers to secure the Obligations not
constitute a “Fraudulent Conveyance” (as defined below). Consequently, the
Lender and Borrowers agree that if the Obligations of a Borrower, or any Liens
granted by such Borrower securing the Obligations would, but for the application
of this sentence, constitute a Fraudulent Conveyance, the Obligations of such
Borrower and the Liens securing such Obligations shall, to the fullest extent
permitted by Applicable Law, be valid and enforceable only to the maximum extent
that would not cause such Obligations or such Liens to constitute a Fraudulent
Conveyance, and the Obligations of such Borrower and this Agreement shall
automatically be deemed to have been amended accordingly. For purposes hereof,
“Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of the
Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the
applicable provisions of any fraudulent conveyance or fraudulent transfer law or
similar law of any state, nation or other governmental unit, as in effect from
time to time.

Section 2.3. Deemed Request for Revolving Loans. Each Borrower irrevocably
authorizes the Lender, at its election and without necessity for request by any
Borrower, to make a Revolving Loan to Borrowers in an amount equal to any amount
due and owing by Borrowers pursuant to the terms of this Agreement and the other
Loan Documents, including, without limitation, payments of principal, interest,
fees and Lender Expenses, and to apply the proceeds thereof in payment of such
Obligations. Any such Revolving Loans shall be secured by the Collateral and
shall be included in the Obligations.

Section 2.4. Protective Advances. Upon the occurrence and during the continuance
of a Default or an Event of Default, Lender may make from time to time in its
discretion (but without any obligation to do so), Revolving Loans to Borrowers
which Lender deems necessary or appropriate to preserve or protect the
Collateral, or any portion thereof, or to enhance the likelihood of collection
of any of the Obligations (“Protective Advances”). All such Revolving Loans
shall be secured by the Collateral and shall be included in the Obligations.

Section 2.5. Interest Elections.

(a) Each Borrowing initially shall be of the Type specified in the applicable
Borrowing Notice. Thereafter, the Borrower Representative may elect to convert
such Borrowing to a different Type or to continue such Borrowing, all as
provided in this Section. The Borrower Representative may elect different
options with respect to different portions of the affected Borrowing, and the
Loans comprising each such portion shall be considered a separate Borrowing.

 

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(b) To make an election pursuant to this Section, the Borrower shall notify the
Lender of such election in writing (delivered by hand or email) by delivering an
Interest Election Notice signed by a Responsible Officer of the Borrower
Representative, by the time that a Borrowing Notice would be required under
Section 2.2(a) if the Borrower were requesting a Borrowing of the Type resulting
from such election to be made on the effective date of such election. Each such
Interest Election Notice shall be irrevocable.

 

(c) Each Interest Election Notice shall specify the following information in
compliance with Section 2.2(a):

 

(i) the Borrowing to which such Interest Election Notice applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clause (iii) below shall be
specified for each resulting Borrowing);

 

(ii) the effective date of the election made pursuant to such Interest Election
Notice, which shall be a Business Day; and

 

(iii) whether the resulting Borrowing is to be a Floating LIBOR Borrowing or a
Fixed LIBOR Borrowing.

 

(d) If the Borrower Representative fails to deliver a timely Interest Election
Notice with respect to a Fixed LIBOR Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
a Floating LIBOR Borrowing. Notwithstanding any contrary provision hereof, if a
Default or an Event of Default has occurred and is continuing, then, so long as
a Default or an Event of Default is continuing (i) no outstanding Borrowing may
be converted to or continued as a Fixed LIBOR Borrowing and (ii) unless repaid,
each Fixed LIBOR Borrowing shall be converted to a Floating LIBOR Borrowing at
the end of the Interest Period applicable thereto.

 

Section 2.6. Letters of Credit.

(a)       Requesting Letters of Credit. Subject to the terms and conditions
hereof, any Borrower may at any time prior to the Termination Date request
Lender to issue (or an Other LC Issuer, in Lender’s discretion, to issue), or to
amend or extend (or request that an Other LC Issuer amend or extend) the
expiration date of, one or more Letters of Credit, so long as the following
conditions are met (collectively, the “LC Conditions”): (i) the amount of the
requested Letter of Credit does not exceed Availability and would not cause the
aggregate amount of the LC Obligations, plus the aggregate outstanding principal
balance of the Revolving Loans, to exceed the Revolving Credit Limit; (ii) the
amount of LC Obligations, after taking such Letter of Credit into account, does
not exceed the LC Sublimit; (iii) the expiration date of such Letter of Credit
is not more than one year after such Letter of Credit’s date of issuance and in
no event later than the date that is 30 days prior to the Maturity Date;
(iv) such Letter of Credit is to be used for general corporate purposes of
Borrowers and is not directly or indirectly used to assure payment of or
otherwise support any Debt of any Person or an employment contract; (v) the
issuance of such Letter of Credit will be in compliance with all applicable
governmental restrictions, policies, and guidelines and will not subject Lender
or LC Issuer to any cost which is not reimbursable under Article III; (vi) the
form and terms of such Letter of Credit are acceptable to Lender and LC Issuer
in their sole and absolute discretion and (vii) Lender shall have received such
LC Support as Lender, in the exercise of its sole discretion, shall have
requested and (viii) all other conditions in this Agreement to the issuance of
such Letter of Credit have been satisfied.

29

 

(b)       Application of UCP or ISP. Each Letter of Credit shall provide for the
payment of sight drafts, other written demands for payment or acceptances of
drafts when presented for honor thereunder in accordance with the terms thereof
and when accompanied by the documents described therein. Each standby Letter of
Credit and subsequent revision thereof shall be subject either to the Uniform
Customs and Practice for Documentary Credits (“UCP”) as most recently published
by the International Chamber of Commerce or the International Standby Practices
(ISP98 International Chamber of Commerce Publication Number 590). Each
commercial Letter of Credit and subsequent revisions thereof shall be subject to
the UCP.

(c)       Issuance. Borrowers hereby acknowledge and agree that the issuance of
any standby or commercial Letter of Credit by an Other LC Issuer is subject to
the approval of such Other LC Issuer in its sole discretion on a case-by-case
basis and that, if such approval is denied, (i) if such Letter of Credit is a
standby Letter of Credit, such Letter of Credit will be issued by Lender (or an
Affiliate thereof) only to the extent the LC Conditions have been met and (ii)
if such Letter of Credit is a commercial Letter of Credit, such Letter of Credit
will not be issued.

Section 2.7. Requesting Letters of Credit. The applicable Borrower must make
written application to the Lender for any Letter of Credit (or amendment or
extension of a Letter of Credit) by delivering to Lender an executed LC
Application and such other documents and instruments as are customarily required
by LC Issuer for the issuance of a letter of credit of equivalent type and
amount on or prior to 10:00 a.m. Dallas time at least three Business Days before
the date which such Borrower desires for LC Issuer to issue such Letter of
Credit (or such shorter period as may be acceptable to LC Issuer). By making any
such written application, such Borrower shall be deemed to have represented and
warranted to Lender and LC Issuer that the LC Conditions described in Section
2.6 will be met as of the date of issuance of such Letter of Credit. Lender will
either issue (in its capacity as LC Issuer) or will cause the issuance by an
Other LC Issuer of any such Letter of Credit that is a standby Letter of Credit
on the third Business Day after request by the applicable Borrower therefor (or
such later date as requested in such request), so long as the LC Conditions for
such Letter of Credit have been met. If any such requested Letter of Credit is a
commercial Letter of Credit, Lender will cause the applicable Other LC Issuer to
issue such Letter of Credit, so long as such Other LC Issuer has approved its
issuance and the LC Conditions for such Letter of Credit have been met, on the
third Business Day after request by the applicable Borrower therefor (or such
later date as requested in such request or such earlier date as may be agreed to
by the applicable LC Issuer). The applicable Borrower shall promptly examine a
copy of each Letter of Credit and each amendment thereto that is delivered to it
and, in the event of any claim of noncompliance with a Borrower’s instructions
or other irregularity, such Borrower will immediately notify Lender. Borrowers
hereby authorize and direct the LC Issuer to name the Borrower that requested
any Letter of Credit as the “applicant” or “account party” of such Letter of
Credit. If Lender is not the LC Issuer of any Letter of Credit, Borrowers hereby
authorize and direct the Other LC Issuer to deliver to Lender all instruments,
documents, and other writings and property received by the Other LC Issuer
pursuant to such Letter of Credit and to accept and rely upon Lender’s
instructions and agreements with respect to all matters arising in connection
with such Letter of Credit, the application therefor, or any acceptance
therefor.

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Section 2.8. Reimbursement. In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, Lender will promptly
notify Borrower Representative. Borrowers jointly and severally promise to pay
to Lender, on demand and for the benefit of LC Issuer, the full amount of each
Matured LC Obligation and, in the absence of such payment, the amount of such
Matured LC Obligation (or any portion thereof which has not been paid by
Borrowers) shall immediately and automatically be deemed to be a Revolving Loan
advance hereunder (notwithstanding any failure to satisfy any condition
precedent set forth in Section 2.2(b) or Article VI) and shall bear interest at
the then applicable rate to Revolving Loans. The obligation of Borrowers to
reimburse the LC Issuer for each Matured LC Obligation shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement (including any LC Application) under all circumstances,
including the following: (i) any lack of validity or enforceability of such
Letter of Credit or any other agreement or instrument relating thereto; (ii) the
existence of any claim, counterclaim, set-off, defense or other right that
Borrowers may have at any time against any beneficiary or any such transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), Lender, LC Issuer or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by such
Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction; (iii) any draft, demand, certificate or other document
presented under such Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under such Letter
of Credit; (v) any payment by LC Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or (vi) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing. Without limiting the
generality of the foregoing, it is expressly agreed that the absolute and
unconditional nature of Borrowers’ obligations under this Section 2.8 to
reimburse the LC Issuer for each drawing under a Letter of Credit will not be
excused by the gross negligence or willful misconduct of the LC Issuer. However,
the foregoing shall not be construed to excuse LC Issuer from liability to
Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by Borrowers to the extent
permitted by Applicable Law) suffered by Borrowers that are caused by the LC
Issuer’s gross negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment) in determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. All LC Payment Amounts received by Lender shall be paid
to the applicable Other LC Issuer in accordance with the terms of this Section
2.8. The Lender shall indemnify the Borrowers for all LC Payment Amounts that it
receives in immediately available funds from Borrowers that are not paid to the
applicable Other LC Issuer in accordance with the terms hereof.

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Section 2.9. No Duty to Inquire.

(a)       Release and Indemnity. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand as the
officer, representative or agent of any beneficiary under any Letter of Credit,
and payment by LC Issuer to any such beneficiary when requested by any such
purported officer, representative or agent is hereby authorized and approved. To
the fullest extent permitted by Applicable Law, each Borrower releases each
Indemnified Person from, and agrees to hold each Indemnified Person harmless
from and indemnified against, any Indemnified Claims in connection with or
arising out of the issuance, acceptance or payment of any Letter of Credit,
WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH INDEMNIFIED CLAIM IS IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ANY INDEMNIFIED PERSON; provided however, that that no
Indemnified Person shall be entitled to indemnification for that portion, if
any, of any claim, demand, action, cause of action, judgment, obligation,
liability, loss, damage, penalty, fine, cost, fee, expense, or disbursement
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined by a court of competent jurisdiction in a final
non-appealable judgment.

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(b)       Binding Effect. If the maturity of any Letter of Credit is extended by
its terms or by Applicable Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of Borrower Representative,
or if the amount of any Letter of Credit is increased at the request of Borrower
Representative, this Agreement shall be binding upon each Borrower with respect
to such Letter of Credit as so extended, increased or otherwise modified, with
respect to drafts and property covered thereby, and with respect to any action
taken by LC Issuer, Lender or their correspondents, in accordance with such
extension, increase or other modification.

(c)       Transfers. If any Letter of Credit provides that it is transferable,
LC Issuer shall have no duty to determine the proper identity of anyone
appearing as transferee of such Letter of Credit, nor shall LC Issuer be charged
with responsibility of any nature or character for the validity or correctness
of any transfer or successive transfers, and payment by LC Issuer to any
purported transferee or transferees as determined by LC Issuer is hereby
authorized and approved, and, to the fullest extent permitted by Applicable Law,
each Borrower releases each Indemnified Person from, and agrees to hold each
Indemnified Person harmless from and indemnified against, any Indemnified Claim
in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL APPLY
WHETHER OR NOT ANY SUCH INDEMNIFIED CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED,
IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY
INDEMNIFIED PERSON; provided however, that no Indemnified Person shall be
entitled to indemnification for that portion, if any, of any claim, demand,
action, cause of action, judgment, obligation, liability, loss, damage, penalty,
fine, cost, fee, expense, or disbursement which is proximately caused by its own
individual gross negligence or willful misconduct, as determined by a court of
competent jurisdiction in a final non-appealable judgment.

Section 2.10. LC Collateral.

(a)       Cash Collateral. If, after the making of all mandatory prepayments
required under Section 4.2 and reimbursement of the LC Issuer by Lender pursuant
to Section 2.8, the outstanding LC Obligations plus the outstanding Revolving
Loans would exceed the lesser of (i) the Borrowing Base or (ii) the Revolving
Credit Limit, Borrowers will immediately pay to Lender an amount equal to such
excess. Lender will hold such amounts as security for the remaining LC
Obligations and other Obligations (all such amounts, all amounts delivered to
Lender pursuant to the next sentence of this Section 2.10(a), and all Cash
Collateral delivered to Lender as LC Support pursuant to Section 2.5(a) being
herein collectively called “LC Collateral”). LC Collateral may be applied from
time to time to any Matured LC Obligations or other Obligations which are due
and payable. If the Obligations or any part thereof become immediately due and
payable pursuant to Section 11.1, then all LC Obligations shall become
immediately due and payable without regard to whether or not actual drawings or
payments on the Letters of Credit have occurred, and, to the extent not already
previously delivered as LC Support pursuant to Section 2.5(a), Borrowers shall
be obligated to pay to Lender, on behalf of LC Issuer and the Lender,
immediately an amount equal to one-hundred and ten percent (110%) of the
aggregate LC Obligations which are then outstanding to Cash Collateralize the LC
Obligations, which amount shall be held by Lender in a Cash Collateral Account
as LC Collateral securing the remaining LC Obligations and the other
Obligations, and such LC Collateral may be applied from time to time to any
Matured LC Obligations or any other Obligations which are due and payable. This
Section 2.10(a) shall not limit or impair any rights which Lender or LC Issuer
may have under any other document or agreement relating to any Letter of Credit,
LC Collateral or LC Obligation, including any LC Application or any rights which
LC Issuer or Lender may have to otherwise apply any payments by Borrower and any
LC Collateral hereunder.

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(b)       Investment of LC Collateral. Pending application thereof, LC
Collateral may be invested by Lender in such investments as Lender may choose in
its Permitted Discretion. All interest on (and other proceeds of) such
investments shall be reinvested or applied to Matured LC Obligations or other
Obligations which are due and payable. When all Obligations have been satisfied
in full, including all LC Obligations, all Letters of Credit have expired or
been terminated, and all of Borrower’s reimbursement obligations in connection
therewith have been satisfied in full, Lender shall release any remaining LC
Collateral to Borrower Representative. Borrowers hereby assign and grant to
Lender a continuing security interest in all LC Collateral paid by them to
Lender, all investments purchased with such LC Collateral, and all proceeds
thereof to secure the Matured LC Obligations and the Obligations under this
Agreement and the other Loan Documents, and Borrowers agree that such LC
Collateral, investments and proceeds shall be subject to all of the terms and
conditions of the Loan Documents. Borrowers further agree that Lender shall have
all of the rights and remedies of a secured party under the UCC with respect to
such security interest and that an Event of Default under this Agreement shall
constitute a default for purposes of such security interest.

(c)       When Borrowers are required to provide LC Collateral for any reason
and fail to do so on the day when required, Lender may, without prior notice to
any Borrower or Guarantor, provide such LC Collateral (whether by application of
proceeds of other Collateral or otherwise) using any available funds of
Borrowers or any other Person also liable to make such payments. Any such
amounts which are required to be provided as LC Collateral and which are not
provided on the date required shall, for purposes of each Loan Document, be
considered past due Obligations owing hereunder, and Lender is hereby authorized
to exercise its respective rights hereunder and under the other Loan Documents
to obtain such amounts.

Section 2.11. Third Party Beneficiary. The parties hereto hereby agree that
regardless of whether any Other LC Issuer is a signatory to this Agreement, the
terms and provisions of this Agreement relating to the LC Issuer and any Letters
of Credit issued by such Other LC Issuer (and any security therefor) are and
shall be for the benefit of such Other LC Issuer as a third party beneficiary
hereof.

Section 2.12. Cross Guaranty.

(a)       Guaranty. Each Borrower (each referred to in this Section individually
as a “Co-Borrower” and collectively, as the “Co-Borrowers”) hereby agrees that
it is liable for, and hereby irrevocably, absolutely and unconditionally
guarantees to Lender the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations and other amounts
owed or hereafter owing to the Lender under this Agreement and the other Loan
Documents by the other Co-Borrowers. Each Co-Borrower agrees that its guaranty
obligation hereunder is a continuing guaranty of payment and performance and not
of collection, that its obligations under this Section shall not be discharged
until indefeasible payment and performance, in full, of the Obligations and
other amounts owed or hereafter owing under this Agreement has occurred, and
that its obligations under this Section shall be absolute and unconditional,
irrespective of, and unaffected by:

(i)       the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement or any other Loan Document;

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

(iii)       the existence, value or condition of, or failure to perfect its
security interest in or 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);

(iv)       the insolvency of any Co-Borrower; or

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

Each Co-Borrower shall be regarded, and shall be in the same position, as
principal debtor with respect to the Obligations and other amounts guaranteed
hereunder.

(b)       Waivers. Each Co-Borrower expressly waives, to the fullest extent
permitted by Applicable Law, 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
subrogation, to compel Lender to marshal assets or to proceed in respect of the
Obligations and other amounts guaranteed hereunder against any other
Co-Borrower, any other party or against any security for the payment and
performance of the Obligations and other amounts before proceeding against, or
as a condition to proceeding against, such Co-Borrower.

(c)       Benefit of Guaranty. Each Co-Borrower agrees that the provisions of
this Section are for the benefit of Lender and its successors, transferees,
endorsees and assigns.

(d)       Election of Remedies. If Lender, under Applicable Law, proceeds to
realize its benefits under any of the Loan Documents giving Lender a security
interest in or lien upon any Collateral, whether owned by any Co-Borrower or by
Guarantor, 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 the rights and remedies under this
Section. 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 Co-Borrower or Guarantor, whether because of any applicable
laws pertaining to “election of remedies” or the like, each Co-Borrower hereby
consents to such action by Lender and waives any defense to the Lender’s
enforcement of remedies based upon such action, to the fullest extent permitted
by Applicable Law. Any election of remedies that results in the denial or
impairment of the right of Lender to seek a deficiency judgment against any
Co-Borrower shall not impair any other Co-Borrower’s obligation to pay the full
amount of the Obligations and other amounts owed or hereafter owing under this
Agreement.

(e)       Liability Cumulative. The liability of Co-Borrowers under this Section
is in addition to and shall be cumulative with all liabilities of each
Co-Borrower to Lender under this Agreement and other Loan Documents to which
such Co-Borrower is a party or in respect of any Obligations or obligation of
the other Co-Borrowers, without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.

(f)       Limitation of Liability. Notwithstanding anything in this Section to
the contrary, the liability of each Co-Borrower as a guarantor hereunder shall,
to the fullest extent permitted by Applicable Law, be limited to the maximum
amount of liability that can be incurred without rendering such Person’s
guaranty hereunder voidable under Applicable Law relating to fraudulent transfer
or fraudulent conveyance, and not for any greater amount.

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ARTICLE III
INTEREST, FEES, REIMBURSEMENTS

Section 3.1. Interest.

(a)       Except as otherwise provided herein, all outstanding Loans shall bear
interest at a per annum rate equal to the lesser of (1) the Applicable Rate for
such Loan and (2) the Maximum Rate.

(b)       At any time when any Default or Event of Default has occurred and is
continuing, effective as of the date on which such Default or Event of Default
occurred and continuing for so long as any such Default or Event of Default is
continuing, all Obligations shall bear interest at a rate per annum equal to the
Default Rate applicable thereto.

(c)       Subject to Section 3.7, interest shall be computed on the basis of a
year of 360 days and actual days elapsed (which results in more interest being
paid than if computed on the basis of a 365 day year).

Section 3.2. Fees. Subject to the terms of this Agreement:

(a)       Commitment Fee. In consideration of Lender’s commitment hereunder to
make Revolving Loans, Borrowers agree to pay to the Lender a commitment fee,
which amount shall be payable on the Agreement Date, in an amount equal to
one-half of one percent (0.50%) multiplied by the Revolving Credit Limit.

(b)       Unused Line Fee. Borrowers agree to pay to Lender an unused line fee
determined on a daily basis, payable on the first day of each month, in an
amount equal to one-quarter of one percent (0.25%) per annum multiplied by the
amount by which the Revolving Credit Limit exceeded the sum of the average daily
outstanding amount of Revolving Loans and outstanding Letters of Credit during
the immediately preceding calendar month, or shorter period if calculated on the
Termination Date (prorated for a partial calendar month). Such fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
All payments on the Revolving Loans received by Lender shall be deemed to be
credited to the Revolving Loans immediately upon receipt for purposes of
calculating the amount payable pursuant to this Section 3.2(b).

(c)       Letter of Credit Fees.

(i)       In consideration of Lender’s commitment to issue Letters of Credit,
Borrowers will pay to Lender a letter of credit fronting fee, determined on a
daily basis, in an amount equal to the Adjusted Floating LIBOR Rate for
Revolving Loans multiplied by the Maximum Drawing Amount for all outstanding
Letters of Credit issued by Lender. Such letter of credit fee shall be due and
payable monthly in arrears on the first day of each month and on the Termination
Date (and shall be prorated for any partial calendar month).

(ii)       With respect to each Letter of Credit issued by an Other LC Issuer,
Borrowers will pay to Lender, for the account of such Other LC Issuer, all
customary fees and expenses of such Other LC Issuer for and relating to the
issuance, amendment and drawing of each such Letter of Credit. For the avoidance
of doubt, this paragraph is subject to the provisions of Section 2.8.

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(d)       Collateral Monitoring Fee. Borrowers shall pay to Lender a monthly
collateral monitoring fee in the amount of $1,500.00 for each calendar month, or
portion thereof, during the term of this Agreement. The collateral monitoring
fee for each calendar month shall be due and payable in arrears on the first day
of each calendar month and on the Termination Date, and shall be prorated for
any partial calendar month.

Section 3.3. Increased Costs.

(a)       Increased Costs. If any Change in Law shall (i) subject Lender to any
Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clause (b) of
the definition of Excluded Taxes and (iii) Connection Income Taxes) on any Loan,
Loan principal, Letters of Credit, the Commitments or other obligations or its
deposits, reserves, other liabilities or capital attributable thereto, (ii)
impose or modify any reserve, special deposit, compulsory loan, insurance
charge, assessment or similar requirement against assets of, deposits with or
for the account of, or credit extended or participated in by, Lender (except any
reserve requirement reflected in the Applicable Rate) or (iii) impose on Lender
any condition, cost or expense (other than Taxes) affecting this Agreement, any
Letter of Credit or any extensions of credit or commitments hereunder, and the
result of any of the foregoing is to increase the cost to Lender of making,
converting to, continuing or maintaining any Loans (or of maintaining its
obligation to make any Loan), to increase the cost to Lender of issuing or
maintaining any Letter of Credit or to reduce any amount received or receivable
by Lender under this Agreement (whether of principal, interest or any other
amount), then upon written demand by Lender (which demand shall be delivered to
Borrower Representative and accompanied by a statement setting forth the basis
for such demand and calculation of the amount thereof in reasonable detail),
Borrowers shall promptly pay to Lender such amount or amounts as will compensate
Lender for such additional costs incurred or reduction suffered.

(b)       Capital Requirements. If Lender determines that any Change in Law
affecting Lender, any lending office of Lender or Lender’s holding company
regarding capital or liquidity requirements, has or would have the effect of
reducing the rate of return on Lender’s capital or on the capital of Lender’s
holding company as a consequence of this Agreement, the Commitment of, the Loans
made by, or the Letters of Credit issued by Lender, to a level below that which
Lender or Lender’s holding company could have achieved but for such Change in
Law (taking into consideration Lender’s policies and the policies of Lender’s
holding company with respect to capital adequacy), then from time to time the
Borrowers will pay to Lender such additional amount or amounts as will
compensate Lender or Lender’s holding company for any such reduction suffered.

(c)       Certificates for Reimbursement. Demand of Lender setting forth the
amount or amounts necessary to compensate Lender or its holding company, as the
case may be, as specified in clauses (a) or (b) of this Section and delivered to
the Borrower Representative shall be conclusive absent manifest error. The
Borrowers shall pay Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

(d)       Delay in Requests. Failure or delay on the part of Lender to demand
compensation pursuant to this Section shall not constitute a waiver of Lender’s
right to demand such compensation; provided that the Borrowers shall not be
required to compensate Lender pursuant to this Section for any increased costs
incurred or reductions suffered more than nine months prior to the date that
Lender notifies the Borrower Representative of the Change in Law giving rise to
such increased costs or reductions, and of Lender’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

37

 

Section 3.4. Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for Lender or its applicable lending
office to make, maintain or fund Loans hereunder, then Lender shall promptly
notify Borrower Representative thereof and Lender’s obligation to make Loans
shall be suspended until such time as Lender may again make, maintain and fund
Loans.

Section 3.5. Break Funding Payments. In the event of (a) the payment of any
principal of any Fixed LIBOR Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default or as a
result of any prepayment under Sections 4.2, 4.3, 4.4 or 4.5), (b) the
conversion of any Fixed LIBOR Loan other than on the last day of the Interest
Period applicable thereto, or (c) the failure to borrow, convert, continue or
prepay any Fixed LIBOR Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked), then, in any
such event, the Borrower shall compensate the Lender for the loss, cost and
expense attributable to such event. In the case of a Fixed LIBOR Loan, such
loss, cost or expense to the Lender shall be deemed to the greater of $2,500 or
an amount determined by the Lender to be the excess, if any, of (i) the amount
of interest which would have accrued on the principal amount of such Fixed LIBOR
Loan had such event not occurred, at the Adjusted Fixed LIBOR Rate that would
have been applicable to such Fixed LIBOR Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Fixed LIBOR Loan), over (ii) the amount
of interest which would accrue on such principal amount for such period at the
interest rate which the Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market. A certificate of the Lender setting forth any
amount or amounts that the Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower Representative and shall be
conclusive absent manifest error. The Borrowers shall pay the Lender the amount
shown as due on any such certificate within ten (10) days after receipt thereof

Section 3.6. Taxes.

(a)       Indemnified Taxes. Any and all payments by or on account of any
obligation of any Credit Party or Guarantor under any Loan Document shall be
made free and clear of, and without deduction or withholding for, any present or
future Indemnified Taxes, except as required by Applicable Law (which, for
purposes of this Section 3.6, includes FATCA). If any Applicable Law requires
the deduction or withholding of any Indemnified Tax from any payment by any
Credit Party or Guarantor, then Credit Parties and Guarantor agree: (i) to
timely pay the full amount of such Indemnified Taxes to the relevant
Governmental Authority in accordance with Applicable Law and (ii) that the sum
payable by Credit Parties and Guarantor shall be increased as necessary so that
after such deduction or withholding has been made (including deductions and
withholdings applicable to additional sums payable under this Section 3.6(a)),
the Lender receives an amount equal to the sum it would have received had no
such deductions or withholdings been made. Without duplication of any other
obligation set forth in this Section 3.6 or in Section 3.3, the Credit Parties
and Guarantor shall timely pay to the relevant Governmental Authority in
accordance with Applicable Law, or at the option of the Lender timely reimburse
it for the payment of, any Other Taxes. As soon as practicable after any payment
of Taxes by any Credit Party or Guarantor to a Governmental Authority pursuant
to this Section 3.6, such Credit Party or Guarantor shall deliver to the Lender
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Lender.

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(b)       Indemnification by Credit Parties. Each Credit Party and Guarantor
hereby agrees to indemnify, to the fullest extent permitted by Applicable Law,
the Lender, within ten (10) days after demand therefor, for the full amount of
any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 3.6) payable or paid by
Lender or required to be withheld or deducted from a payment to Lender and any
reasonable expenses arising therefrom or with respect thereto (including,
without limitation, reasonable attorneys’ fees incurred in connection
therewith), whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower Representative
by the Lender shall be conclusive absent manifest error.

(c)       Refunds. If Lender determines, in its sole discretion exercised in
good faith, that it has received a refund of any Indemnified Taxes that were
paid by any Credit Party or Guarantor pursuant to this Section 3.6, so long as
no Event of Default has occurred and is continuing, it shall pay an amount equal
to such refund (but only to the extent of indemnity payments made under this
Section 3.6 with respect to the Indemnified Taxes giving rise to such refund) to
such Credit Party or Guarantor, net of all out-of-pocket expenses (including
Taxes) of Lender and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, that
Credit Parties and Guarantor, upon request of Lender, agree to repay the amount
paid to such Credit Party or Guarantor (plus any penalties, interest or other
charges imposed by the applicable Governmental Authority, other than such
penalties, interest or other charges imposed as a result of the willful
misconduct or gross negligence of Lender hereunder) to Lender in the event
Lender is required to repay such refund to such Governmental Authority.
Notwithstanding anything to the contrary in this Section 3.6(d), in no event
will Lender be required to pay any amount to any Credit Party or Guarantor
pursuant to this Section 3.6(d) if such payment would place Lender in a less
favorable net after-Tax position than Lender would have been in if the
Indemnified Tax giving rise to such refund had not been deducted, withheld or
otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require Lender to make available its tax returns (or any other information
relating to its Taxes that it deems confidential) to the Credit Parties,
Guarantor or any other Person.

(d)       Survival of Obligations. Each party’s obligations under this Section
3.6 shall survive the assignment of rights by the Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all Obligations
under any Loan Document.

Section 3.7. Maximum Interest; Controlling Limitation.

(a)       Maximum Interest. If the rate of interest on the Obligations, absent
the limitations set forth in this Section 3.7, would at any time exceed the
Maximum Rate, then the actual rate of interest shall be the Maximum Rate, and,
if in the future, the interest rate would otherwise be less than the Maximum
Rate, then the interest rate shall remain at the Maximum Rate until such time as
the amount of interest paid hereunder equals the amount of interest which would
have been paid if the same had not been limited by the Maximum Rate. In the
event that, upon payment in full of the Obligations, the total amount of
interest paid or accrued under the terms of this Agreement is less than the
total amount of interest which would, but for this Section 3.7, have been paid
or accrued if the interest rate otherwise provided by this Agreement had at all
times been in effect, then Borrowers shall, to the fullest extent permitted by
Applicable Law, pay to Lender an amount equal to (a) the lesser of (i) the
amount of interest which would have been paid or accrued if the Maximum Rate
had, at all times, been in effect and (ii) the amount of interest which would
have been paid or accrued had the interest rate otherwise set forth in this
Agreement, at all times, been in effect, less (b) the amount of interest
actually paid or accrued under this Agreement.

39

 

(b)       Controlling Limitation. Lender, each Borrower and Guarantor hereby
acknowledge, agree, and declare that it is its intention to expressly comply
with all Applicable Laws in respect of limitations on the amount or rate of
interest that can legally be contracted for, charged or received under or in
connection with the Loan Documents. Notwithstanding anything to the contrary
contained in any Loan Document (even if any such provision expressly declares
that it controls all other provisions of the Loan Documents), in no contingency
or event whatsoever shall the amount of interest (including the aggregate of all
charges, fees, benefits, or other compensation which constitutes interest under
any Applicable Law) under the Loan Documents paid by Borrowers or Guarantor,
received by Lender, agreed to be paid by Borrowers or Guarantor, or requested or
demanded to be paid by Lender exceed the Maximum Rate, and all provisions of the
Loan Documents in respect of the contracting for, charging, or receiving
compensation for the use, forbearance, or detention of money shall be limited as
provided by this Section 3.7. In the event any such interest is paid to Lender
by Borrowers or Guarantor in an amount or at a rate which would exceed the
Maximum Rate, then, notwithstanding any entry on Lender’s books otherwise, such
excess shall conclusively be deemed to be automatically applied to any unpaid
amount of the Obligations other than interest, in inverse order of maturity, or
if the amount of such excess exceeds said unpaid amount, such excess shall be
refunded to Borrowers or Guarantor. All interest paid, or agreed to be paid, by
Borrowers or Guarantor, or taken, reserved, or received by Lender shall be
amortized, prorated, spread, and allocated in respect of the Obligations
throughout the full term of this Agreement. Notwithstanding any provision
contained in any of the Loan Documents, or in any other related documents
executed pursuant hereto, the Lender shall not be entitled to charge, receive,
take, reserve, collect, or apply as interest any amount which, together with all
other interest under the Loan Documents, would result in a rate of interest
under the Loan Documents in excess of the Maximum Rate and, in the event the
Lender ever charges, receives, takes, reserves, collects, or applies any amount
in respect of Borrowers or Guarantor that otherwise would, together with all
other interest under the Loan Documents, be in excess of the Maximum Rate, such
amount shall automatically be deemed to be applied in reduction of the unpaid
principal balance of the Obligations other than interest and, if the principal
balance thereof is paid in full, any remaining excess shall forthwith be
refunded to the Borrowers or Guarantor. Each Borrower, Guarantor and the Lender
shall, to the maximum extent permitted under any Applicable Law,
(i) characterize any non-principal payment as a standby fee, commitment fee,
prepayment charge, delinquency charge, expense, or reimbursement for a
third-party expense rather than as interest and (ii) exclude prepayments,
acceleration, and the effect thereof. Nothing in any Loan Document shall be
construed or so operate as to require or obligate Borrowers or Guarantor to pay
any interest, fees, costs, or charges greater than is permitted by any
Applicable Law. Subject to the foregoing, each Borrower and Guarantor hereby
agrees that the actual effective rate of interest from time to time existing
under the Loan Documents, including all amounts agreed to by Borrowers and
Guarantor pursuant to and in accordance with the Loan Documents which may be
deemed to be interest under any Applicable Law, shall be deemed to be a rate
which is agreed to and stipulated by Borrowers, Guarantor and the Lender in
accordance with Applicable Law.

ARTICLE IV
payment

Section 4.1. Interest. Accrued interest on the Loans shall be due and payable in
arrears on each Interest Payment Date.

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Section 4.2. Prepayment; Mandatory Payment of Deficiencies. Borrowers may prepay
Loans at any time, subject to payment of any break funding expenses under
Section 3.5. Borrowers promise to pay to Lender on demand, the amount, if any,
at any time, by which the sum of (1) the unpaid principal balance of the
Revolving Loans plus (2) the existing LC Obligations exceeds the lesser of the
Borrowing Base or the Revolving Credit Limit at such time.

Section 4.3. Mandatory Payments; Payment on the Termination Date.

(a)       On the Termination Date:

(i)       Borrowers shall pay to Lender in full the outstanding principal
balance, if any, of the Revolving Loans plus all unpaid accrued interest
thereon;

(ii)       If the Termination Date is prior to the third anniversary of the
Agreement Date, Borrowers shall pay to Lender the amount required by
Section 4.5; and

(iii)       Borrowers shall pay to Lender all unpaid Lender Expenses and all
other Obligations payable under the Loan Documents.

Section 4.4. Mandatory Prepayment in Respect of Certain Events. All proceeds or
other cash payments received by any Borrower in respect of a Distribution to
such Borrower (other than Distributions to such Borrower made by another
Borrower or Guarantor) or in respect of the sale, lease or other disposition by
any Borrower of any asset resulting in net proceeds to such Borrower of greater
than $100,000 (other than the sale of Inventory in the ordinary course of
business or the sale of Equipment permitted under Section 9.8(c)(ii)), shall be
promptly paid to Lender for application to the Obligations in accordance with
Section 4.7 (unless, with respect to any sale of Equipment, such proceeds are
reinvested in replacement Equipment).

Section 4.5. Early Termination; Prepayment Penalty. Each Borrower may at any
time prepay in full the Obligations and terminate the commitment of Lender to
make Loans hereunder. Each Borrower acknowledges that occurrence of the
Termination Date and prepayment of all outstanding Obligations prior to the
third anniversary of the Agreement Date would result in the loss by Lender of
benefits under this Agreement and that the damages incurred by Lender as a
result thereof would be difficult and impractical to ascertain. Subject to the
terms of this Agreement, if for any reason the Termination Date occurs on any
date prior to the third anniversary of the Agreement Date, Borrowers shall pay
to Lender, in addition to all other amounts payable under the Loan Documents, a
prepayment penalty, calculated as of the Termination Date, equal to the product
of (a) the Revolving Credit Limit times (b) the following percentage, as
applicable: (i) if the Termination Date is on any day during the period from the
Agreement Date through the day preceding the date that is the first anniversary
of the Agreement Date, three percent (3.0%), (ii) if the Termination Date is on
any day during the period from and including the date that is the first
anniversary of the Agreement Date through the day preceding the date that is the
second anniversary of the Agreement Date, two percent (2.0%) or (iii) if the
Termination Date is on any day during the period from and including the date
that is the second anniversary of the Agreement Date through the day preceding
the date that is the third anniversary of the Agreement Date, one percent
(1.0%), which amount Borrower and Lender each acknowledges to be the best
estimate of the amount necessary to fairly and reasonably compensate Lender for
its loss resulting from occurrence of the Termination Date and prepayment of all
outstanding Loans prior to the third anniversary of the Agreement Date.

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Section 4.6. General Payment Provisions. All payments to be made by Borrowers
under the Loan Documents shall be made without set-off, recoupment, or
counterclaim. Except as otherwise expressly provided herein, all payments by
Borrowers shall be made in Dollars and in immediately available funds to Lender
at its address set forth in Section 13.6 or to the Lender Account no later than
2:00 p.m. on the date specified herein. Any payment received by Lender later
than 2:00 p.m. shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue. Whenever any
payment is due on a day other than a Business Day, such payment shall be due on
the following Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.

Section 4.7. Application. All payments not relating to amounts due on Loans
(including interest) or specific fees, and all proceeds of Accounts or other
Collateral received and applied by Lender during any time when no Event of
Default has occurred and is continuing, shall be applied first, to pay to Lender
any Lender Expenses then due; second, to interest due and payable on the
Revolving Loans; third, to any unreimbursed Matured LC Obligations; fourth, to
principal of the Floating LIBOR Loans; fifth, to principal of the Fixed LIBOR
Loans in direct order of Interest Period maturities (applied first to those
soonest to mature); sixth, to the payment of any other outstanding Obligations
then due and payable, in such manner and order as Lender determines in its
discretion; and seventh, to the Borrowers by deposit in the Designated Account.
At any time that an Event of Default has occurred and is continuing, all
payments and collections received by Lender and all proceeds of Collateral,
shall be applied, first, to pay to Lender any Lender Expenses then due; second,
to interest due and payable in respect of the remaining Obligations; third, to
pay or prepay principal of the Loans, in such manner and order as Lender
determines in its discretion; and fourth to the payment of any other
Obligations, in such manner and order as Lender determines in its discretion.
Lender shall have the continuing right, to the fullest extent permitted by
Applicable Law, to apply and reverse and reapply any application, subject to the
terms of this Agreement.

Section 4.8. Reinstatement. If after receipt and application of any payment or
proceeds any such application is invalidated, set aside, determined to be void
or voidable for any reason, then the Obligations or part thereof intended to be
satisfied by such application shall be revived and continued and this Agreement
shall continue in full force as if such payment or proceeds had not been
received by Lender and the Borrowers shall be liable to pay to Lender and each
Borrower hereby does indemnify Lender and defend and hold Lender harmless in, an
amount equal to the amount of such application. The provisions of this Section
4.8 shall survive the termination of this Agreement.

Section 4.9. Account Stated. Lender will provide to Borrower Representative a
monthly statement of all Loans, payments thereon, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct, accurate,
and binding on Borrowers and an account stated, subject to reversals and
reapplications made as provided in Section 4.8 and corrections of errors
discovered by Lender, unless Borrower Representative notifies Lender in writing
to the contrary within thirty (30) days after such statement is rendered. In the
event a timely written notice of objections is given by Borrower Representative,
only the items to which exception is expressly made will be considered to be
disputed.

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ARTICLE V
COLLATERAL

Section 5.1. Security Interest. Each Credit Party and Guarantor hereby pledges,
assigns to and grants to Lender, as security for the payment and performance of
such Credit Party’s and Guarantor’s Obligations, a continuing security interest,
lien and collateral assignment in all of such Credit Party’s and Guarantor’s
right, title and interest in and to all of the following, respectively, in each
case both now owned and hereafter acquired by such Credit Party or Guarantor:
all Accounts, Inventory, Equipment, Rolling Stock, other goods, Machinery,
fixtures, General Intangibles, Payment Intangibles, Chattel Paper, Letter of
Credit Rights, Supporting Obligations, Proprietary Rights, Instruments,
promissory notes, Documents and documents of title, Investment Property, Deposit
Accounts, Securities Accounts, Commercial Tort Claims, money, cash, cash
equivalents, securities and other personal property of any kind (whether held
directly or indirectly by such Credit Party or Guarantor), all books and
records, whether in tangible or intangible form, all other assets, if any, and
all accessions to, substitutions for and replacements, products and proceeds
(including all “proceeds” as defined in Section 9.102 of the UCC and, including
all dividends, distributions and other income from such Credit Party’s or
Guarantor’s Collateral, collections thereon or distributions with respect
thereto) of any of the foregoing. Lender’s Liens shall continue in full force
and effect in all Collateral until all Obligations (other than contingent
indemnification obligations) have been indefeasibly and fully paid and all
commitments of the Lender under this Agreement have been terminated.
Notwithstanding anything to the contrary, in no event shall the Collateral
include, or the security interest in this Section 5.1 attach to, any property or
assets that constitute Excluded Property, but only for so long as such property
or assets constitute Excluded Property.

Section 5.2. Perfection and Protection of Lender’s Security Interest. Lender’s
Liens at all times shall be and remain first, prior and senior to any other
interests in the Collateral, except those Permitted Liens which are expressly
permitted to be prior to Lender’s Liens in accordance with the definition
thereof and except as may be expressly agreed otherwise by Lender in writing.
Credit Parties and Guarantor shall take all action reasonably requested by
Lender at any time to perfect, maintain, protect and enforce Lender’s Liens and
to ensure that Lender’s Liens at all times are first, prior and senior to any
other interests in the Collateral, except those Permitted Liens which are
expressly permitted to be prior to Lender’s Liens in accordance with the
definition thereof. Without limiting the foregoing, unless Lender agrees
otherwise in writing, Credit Parties and Guarantor will deliver to Lender the
originals of all Instruments, Documents and Chattel Paper, duly endorsed or
assigned to Lender without restriction, and all certificates of title covering
any portion of the Collateral for which certificates of title have been issued,
together with executed applications for corrected certificates of title,
notation of Lender’s Lien and other such documentation and related information
as may be requested by Lender. If at any time any Collateral or any books and
records relating to Borrowers’ Accounts, Inventory, Equipment, or Rolling Stock
are located on any leased premises not owned by a Borrower or Guarantor, then,
at Lender’s request, the Borrower Representative or applicable Borrower or
Guarantor shall use commercially reasonable efforts to obtain a Collateral
Access Agreement from the record owner thereof for such leased premises. If any
Collateral is at any time in the possession or control of any warehouseman,
bailee, processor or any other Person other than a Borrower or Guarantor, then
Borrower Representative shall notify Lender thereof and, at Lender’s request,
shall use commercially reasonable efforts to obtain a Collateral Access
Agreement from such Person. For the avoidance of doubt, the parties hereto
understand and agree that, without a Collateral Access Agreement (or to the
extent acceptable to Lender with respect to any leased location, Lender has
established rent reserves in such amount as Lender may require in its
discretion), (a) Accounts and Inventory of the Borrowers will not be eligible
for inclusion in the Borrowing Base in accordance with the definitions of
Eligible Account and Eligible Inventory, and (b) Equipment and Rolling Stock of
the Borrowers will not be eligible for inclusion in the Borrowing Base in
accordance with the definitions of Eligible Equipment and Eligible Rolling Stock
(except when such Equipment or Rolling Stock is held out for lease or subject to
a bona fide lease or service agreement acceptable to Lender and not otherwise
required by Lender to be subject to a Collateral Access Agreement). If at any
time any of Credit Parties’ or Guarantor’s Equipment that is necessary or
otherwise material (as determined by Lender in its Permitted Discretion) to the
manufacturing of any Borrower’s Inventory is subject to a Lien of a third party,
then such Borrower shall obtain a Collateral Access Agreement and/or
Subordination Agreement from such Person.

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Section 5.3. Collateral Proceeds Management. All collections and proceeds of
Collateral shall be subject to an express trust for the benefit of Lender and
shall be subject to this Section 5.3.

(a)       Borrowers and Guarantor have established lock-box services for
collection of Accounts with (1) Comerica Bank, having a P.O. Box No. 671497,
along with associated Deposit Account No. 1895190062, a P.O. Box No. 671153,
along with associated Deposit Account No. 1895190104, and a P.O. Box No. 670747,
along with associated Deposit Account No. 1895190153, and (2) Wells Fargo Bank,
having a P.O. Box No. 206104, along with associated Deposit Account No.
4940672868, a P.O. Box No. 206141, along with associated Deposit Account No.
4940672876, and a P.O. Box No 206143, along with associated Deposit Account No.
4419053111. Borrowers have also established Deposit Account No. 4419053103 with
Wells Fargo Bank. Each lockbox described in this subsection, together with any
other lockbox replacing it with Lender’s consent including pursuant to Section
5.3(c) below, shall be referred to herein as a “Lockbox”, and all such lockboxes
shall be referred to herein collectively as the “Lockboxes”. Each Deposit
Account described in this subsection, and any other account replacing it with
Lender’s consent, including pursuant to Section 5.3(c) below, shall be referred
to herein as a “Designated Collection Account”, and all such Deposit Accounts
shall be referred to herein collectively as the “Designated Collection
Accounts”. All Designated Collection Accounts, together with any and all other
collection accounts of each Credit Party and Guarantor (including credit card
accounts) listed in Part A of Schedule 7.19, shall be referred to herein
collectively as the “Collection Accounts” and each as a “Collection Account”.
All collections and amounts deposited into or held in the Collection Accounts
shall be swept to the Lender Account on a daily basis, and no Credit Party nor
Guarantor shall have any access to any funds therein. Each Collection Account
and Lockbox shall at all times be subject to a Control Agreement or, if such
Collection Account is held by Lender, otherwise be subject to Lender’s “control”
under the UCC. Any such Control Agreement shall provide, among other things, for
Lender’s “control” under the UCC over such Collection Account and further that
(i) all items of payment received in such account are received by such bank for
the Lender, (ii) such bank has no rights of setoff or recoupment or any other
claim against such items (other than for payment of its service fees and other
charges directly related to the administration of such account, returned or
charged back items, reversals, cancellation of payment orders and other
electronic fund transfers or other corrections, adjustments or overdrafts),
(iii) no Credit Party nor Guarantor shall have access to any funds therein and
(iv) such bank will deposit all collections and amounts therein to the Lender
Account on a daily basis.

(b)       Schedule 7.19 lists all of Credit Parties’ and Guarantor’s Deposit
Accounts and Securities Accounts as of the date hereof (with the Collection
Accounts being listed in Part A thereof, Excluded Accounts being listed in Part
C thereof and all other Deposit Accounts and Securities Accounts listed in Part
B thereof). All Deposit Accounts and Securities Accounts listed or required to
be listed in Part B of Schedule 7.19 (as updated pursuant to the terms of
Section 7.19) are and shall at all times be subject to a Control Agreement or,
if such Deposit Accounts and/or Securities Accounts are held with Lender, shall
otherwise be subject to Lender’s “control” under the UCC (such accounts so
subject to a Control Agreement or otherwise under Lender’s “control” under the
UCC, collectively the “Controlled Accounts”). Each Control Agreement in respect
of a Controlled Account shall provide, among other things, for Lender’s
“control” under the UCC over such accounts (allowing the applicable Credit Party
or Guarantor access to funds therein until such time as an activation notice is
sent to the applicable bank by Lender). Lender hereby agrees that (i) it will
not send an activation notice with respect to any Controlled Account subject to
a Control Agreement unless an Event of Default has occurred and is continuing
and (ii) it will not block Credit Parties’ and Guarantor’s access to any
Controlled Account held by Lender unless an Event of Default has occurred and is
continuing (but, for the avoidance of doubt, it is expressly agreed that Lender
can block Credit Parties’ and Guarantor’s access to any Controlled Account after
the occurrence and during the continuance of any Event of Default). Except as
expressly permitted by Lender in writing, no Deposit Account or Securities
Account of any Credit Party or Guarantor not held at Lender shall at any time
have a balance in excess of $100,000. Deposit Account No. 466521981 maintained
at JPMorgan Chase shall not at any time have a balance in excess of $10,000. The
Deposit Accounts of Credit Parties maintained with Silicon Valley Bank shall not
at any time have an aggregate balance in excess of $100,000, and all collections
and amounts deposited into or held in such Deposit Accounts maintained with
Silicon Valley Bank shall be swept to a Collection Account or the Lender Account
on a weekly basis and at any time the aggregate balance of such Deposit Accounts
is equal to or greater than $100,000.

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(c)       Within 90 days following the Agreement Date (the “Cash Management
Transition Date”), each Credit Party and Guarantor shall (i) establish and
maintain at Lender all cash management services, including new Designated
Collection Accounts other Collection Accounts and all Controlled Accounts and
all lockbox services and (ii) close all Deposit Accounts and Securities Accounts
not maintained with Lender; provided, however, that Credit Parties and Guarantor
shall be permitted to maintain Deposit Accounts and Securities Accounts with
financial institutions other than Lender in accordance with the last sentence of
Section 5.3(b) above. Such cash management services maintained by each Credit
Party and Guarantor with Lender shall be of a type and on terms reasonably
satisfactory to Lender. On the Cash Management Transition Date, Credit Parties
and Guarantor shall deliver an updated Schedule 7.19 to Lender.

(d)       No Credit Party nor Guarantor will use, dispose, withhold or otherwise
exercise dominion over any proceeds of Collateral. Borrowers shall instruct each
Account Debtor to send all payments in respect of Accounts to a Designated
Collection Account or the related Lockbox. At all times on and after Borrowers
borrow the initial Loan hereunder, if a Borrower or Guarantor at any time
receives any proceeds of Collateral, it shall receive such proceeds as Lender’s
trustee and shall immediately (and in any event within one (1) Business Day of
such receipt) deliver such proceeds to Lender in their original form duly
endorsed in blank or to the order of Lender.

(e)       All payments received by Lender pursuant to Section 5.3(a) or
Section 5.3(d) shall be credited to the Obligations in accordance with Section
4.7, immediately upon receipt (conditional upon final collection) after allowing
one (1) Business Day for collection, provided, that such payments shall be
deemed to be credited to such Obligations immediately upon receipt for purposes
of determining Availability and calculating the unused line fee pursuant to
Section 3.2(b). Any payments received by Lender pursuant to Section 5.3(a) or
Section 5.3(d) that are to be distributed to Borrowers pursuant to Section 4.7
shall be deposited in the Designated Account within one Business Day of receipt
of good funds by Lender.

Section 5.4. Examinations; Inspections; Verifications. At any time when a
Default or an Event of Default exists, and also at such other times not more
frequently than (i) three times from the Agreement Date through and including
December 31, 2019 and (ii) twice per Fiscal Year thereafter, Lender shall have
the right without hindrance or delay to conduct field examinations (including
through third party field examiners) to inspect the Collateral and to inspect,
audit and copy Credit Parties’ and Guarantor’s books and records relating to the
Collateral or any Credit Party’s or Guarantor’s business. Credit Parties and
Guarantor agree to pay all customary fees and expenses of such third party field
examiners and Lender’s customary fees and disbursements relating to such field
examinations and the preparation of reports thereof. Lender is authorized to
discuss Credit Parties’ and Guarantor’s affairs with any Person, including
without limitation employees of any Credit Party or Guarantor, as Lender may
deem necessary in relation to the Collateral, any Credit Party’s or Guarantor’s
business or financial condition or Lender’s rights under the Loan Documents.
Lender shall have full access to all records available any Credit Party or
Guarantor from any credit reporting service, bureau or similar service and shall
have the right to examine and make copies of any such records. Lender may
exhibit a copy of this Agreement to such service and such service shall be
entitled to rely on the provisions hereof in providing access to Lender as
provided herein. If requested by Lender, Credit Parties and Guarantor will
deliver to Lender any authorization or consent necessary for Lender to obtain
records from any such service.

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Section 5.5. Appraisal. At any time when a Default or an Event of Default
exists, and also at such other times not more frequently than twice per Fiscal
Year, Lender shall, at Borrower’s expense, conduct appraisals, or updates of
appraisals, of any Collateral, prepared by an appraiser acceptable to Lender and
on a basis satisfactory to the Lender.

Section 5.6. Right to Cure. Lender may pay any amount or do any act required of
any Credit Party or Guarantor hereunder or under any other Loan Document in
order to preserve, protect, maintain or enforce the Collateral or Lender’s
Liens, and which such Credit Party or Guarantor fails to pay or do, including
payment of any license, fee, maintenance costs, judgment lien, insurance
premium, charge, landlord’s claim or bailee’s claim relating to the Collateral
or Lender’s Liens. All payments that Lender makes under this Section 5.6 and all
costs, fees and expenses that Lender pays or incurs in connection therewith
shall be paid or reimbursed to Lender on demand. Any action taken by Lender
under this Section 5.6 shall not waive any Default or Event of Default or any
rights of Lender with respect thereto.

Section 5.7. Power of Attorney. Each Credit Party and Guarantor hereby
irrevocably appoints Lender as its agent and attorney-in-fact to take any action
necessary to preserve and protect the Collateral and Lender’s interests under
the Loan Documents or to sign and file any document necessary to perfect
Lender’s Liens, in each case, to the fullest extent permitted under Applicable
Law. Without limiting the foregoing:

(a)       Lender shall have the right at any time to take any of the following
actions, in its own name or in the name of any Credit Party or Guarantor,
whether or not an Event of Default is in existence: (i) make written or verbal
requests for verification of the validity, amount or any other matter relating
to any Collateral from any Person, (ii) endorse a Credit Party’s or Guarantor’s
name on checks, instruments or other evidences of payment on Collateral for
application in accordance with this Agreement, (iii) sign and file, in a Credit
Party’s or Guarantor’s name or in Lender’s name as secured party, any proof of
claim or other document in any bankruptcy proceedings of any Account Debtor or
obligor on Collateral, (iv) access, copy or utilize any information related to
the Collateral, recorded or contained in any computer or data processing
equipment or system maintained by a Credit Party or Guarantor in respect of the
Collateral and (v) open mail addressed to a Credit Party or Guarantor and take
possession of checks or other proceeds of Collateral for application in
accordance with this Agreement.

(b)       Lender shall have the right at any time to take any of the following
actions, in its own name or in the name of a Credit Party or Guarantor, at any
time when any Event of Default is in existence: (i) notify any or all Persons
which Lender believes may be Account Debtors or obligors on Collateral to make
payment directly to Lender, for the account of such Credit Party or Guarantor,
(ii) redirect the deposit and disposition of collections and proceeds of
Collateral; provided, that such proceeds shall be applied to the Obligations as
provided by this Agreement, (iii) settle, adjust, compromise or discharge
Accounts or extend time of payment upon such terms as Lender may determine,
(iv) notify post office authorities, in the name of such Credit Party or
Guarantor or in the name of Lender, as secured party, to change the address for
delivery of such Credit Party’s or Guarantor’s mail to an address designated by
Lender, (v) sign such Credit Party’s or Guarantor’s name on any invoice, bill of
lading, warehouse receipt or other document of title relating to any Collateral
and (vi) clear Inventory through customs in such Credit Party’s or Guarantor’s
name, in Lender’s name as secured party or in the name of Lender’s designee, and
to sign and deliver to customs officials powers of attorney in such Credit
Party’s or Guarantor’s name for such purpose.

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(c)       Each Credit Party and Guarantor authorizes Lender at any time and from
time to time to file, transmit, or communicate, as applicable, financing
statements and amendments naming such Credit Party or Guarantor as debtor
thereon (i) describing such Credit Party’s or Guarantor’s Collateral as “all
personal property of debtor” or “all assets of debtor” or words of similar
effect, (ii) describing such Credit Party’s or Guarantor’s Collateral as being
of equal or lesser scope or with greater detail, or (iii) that contain any
information required by part 5 of Article 9 of the UCC for the sufficiency or
filing office acceptance.

(d)       The powers of attorney granted under this Section 5.7 are coupled with
an interest and are irrevocable until all Obligations (other than contingent
indemnification Obligations) have been indefeasibly paid in full and all
commitments of Lender under this Agreement have been terminated. The powers of
attorney granted under this Section 5.7 are durable and should not be affected
by the subsequent disability or incapacity of any Credit Party or Guarantor.
Costs, fees and expenses incurred by Lender in connection with any of such
actions by Lender, including attorneys’ fees and out-of-pocket expenses, shall
be reimbursed to Lender on demand.

Section 5.8. Preservation of Lender’s Rights. To the extent allowed by
Applicable Law, none of Lender, its Affiliates nor any of its officers,
directors, stockholders, members, managers, employees or agents shall be liable
or responsible in any way for the safekeeping of any Collateral or for any act
or failure to act with respect to the Collateral, or for any loss or damage
thereto or any diminution in the value thereof, or for any act by any other
Person, except to the extent of gross negligence or willful misconduct on the
part of Lender (as determined by a final non-appealable judgment of a court of
competent jurisdiction). In the case of any Instruments and Chattel Paper
included within the Collateral, Lender shall have no duty or obligation to
preserve rights against prior parties. The Obligations shall not be affected by
any failure of Lender to take any steps to perfect its security interests or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Credit Party or Guarantor from any of the Obligations.

Section 5.9. Deficiency. In the event that the proceeds of any sale, collection
or realization of or upon the Collateral by Lender are insufficient to pay all
Obligations in full, each Credit Party and Guarantor shall be liable for the
deficiency, together with interest thereon as provided in this Agreement,
together with the costs of collection and the reasonable fees of any attorneys
employed by the Lender to collect such deficiency.

Section 5.10. Rolling Stock and other Vehicles. With respect to each vehicle or
item of Rolling Stock subject to a certificate of title statute that is
Collateral acquired after the Agreement Date, Borrowers shall deliver to Lender,
in form and substance satisfactory to Lender: (a) a fully-executed, notarized
power of attorney authorizing Lender or a service company designated by Lender
to perfect Liens in favor of Lender; (b) new unencumbered titles for each item
of Rolling Stock within the earlier of (i) five (5) days of receipt by a
Borrower of a new title certificate for Rolling Stock and (ii) twenty-five (25)
days of purchase; (c) to the extent applicable, an odometer statement clearly
identifying the current mileage of each item of Collateral; and (d) to the
extent applicable, an in-state garaging address for each item of Collateral.

ARTICLE VI
CONDITIONS

Section 6.1. Conditions Precedent to Initial Loan. The obligation of Lender to
make the initial extension of credit and to issue the initial Letter of Credit
under this Agreement is subject to the fulfillment, to Lender’s satisfaction, of
each of the following conditions precedent:

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(a)       Lender shall have received each of the following, in each case in form
and substance satisfactory to Lender:

(i)       A copy of the organizational documents of each Credit Party and
Guarantor and all amendments thereto, accompanied by the certificate of the
appropriate Governmental Authority of such Person’s jurisdiction of organization
bearing a recent date acceptable to Lender, to the effect that such copy is
correct and complete and that such Person is duly organized and validly existing
in such jurisdiction;

(ii)       Certification by the appropriate Governmental Authority, bearing a
recent date acceptable to Lender, to the effect that each Credit Party and
Guarantor is in good standing and qualified to transact business in its
jurisdiction of organization and in each other jurisdiction where it transacts
business where failure to be so qualified or maintain such good standing could
not reasonably be expected to have a Material Adverse Effect;

(iii)       (A) a copy of the bylaws or similar governing document of each
Credit Party and Guarantor and all amendments thereto, (B) certification of the
name, signature and incumbency of all officers of such Person who are authorized
to execute any Loan Document or, with respect to Borrower Representative,
request Loans and (C) a copy of authorizing resolutions approving the
transactions contemplated by the Loan Documents, and authorizing and directing
an officer or officers of such Person to sign and deliver all Loan Documents to
be executed by it, duly adopted by such Person’s board of directors or similar
governing body, all accompanied by a certificate from a secretary or a
Responsible Officer of such Person dated as of the Agreement Date to the effect
that each such item is true and complete and in full force and effect as of the
Agreement Date;

(iv)       This Agreement, duly executed by each Borrower and Guarantor;

(v)       Evidence of insurance in compliance with the requirements of this
Agreement;

(vi)       All Collateral Access Agreements and other third-party waivers,
subordinations and consents as are required hereunder;

(vii)       A Subordination Agreement with respect to any Debt proposed by
Credit Parties as Subordinated Debt and a copy of the instrument and other
documents evidencing, securing or otherwise relating to any such Debt;

(viii)       An executed Guaranty Agreement from Guarantor, pursuant to which
Guarantor guaranties the payment and performance of all of Borrowers’
Obligations;

(ix)       An executed Guaranty Agreement from Individual Guarantor, pursuant to
which Individual Guarantor guaranties the payment and performance of Borrowers’
Obligations to the extent provided in such Guaranty Agreement;

(x)       A security agreement in respect of Proprietary Rights from each Credit
Party and Guarantor owning any Proprietary Rights;

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(xi)       An executed Pledge Agreement from Digirad, Digirad Health, DMS
Health, DMS Imaging, PR Holding, and PR Acquisition;

(xii)       [Reserved];

(xiii)       A payoff letter executed by Comerica Bank, in form and substance
acceptable to Lender, together with such UCC termination statements, releases of
Liens and other instruments, documents and agreements necessary or appropriate
to terminate any Liens in favor of Comerica Bank securing the Debt owing to
Comerica Bank which is to be indefeasibly paid in full on or prior to the
Agreement Date, as Lender may request, duly executed and otherwise in form and
substance satisfactory to Lender;

(xiv)       An executed Perfection Certificate from each Credit Party and
Guarantor;

(xv)       A disbursement letter executed by Borrower Representative to Lender
setting forth therein the flow of funds information for the initial Loans and
extensions of credit made by the Lender, which such letter shall include the
name of, the amount to be sent to, and the wiring instructions for each such
party receiving Loan proceeds, and shall be in form acceptable to Lender;

(xvi)       All certificates of title covering any portion of the Collateral for
which certificates of title have been issued, together with executed
applications for corrected certificates of title, notation of Lender’s Lien and
other such documentation and related information as may be requested by Lender,
together with a fully-executed, notarized power of attorney authorizing Lender
or a service company designated by Lender to perfect Liens in favor of Lender;

(xvii)       Evidence satisfactory to Lender that all taxes owing to each taxing
authority that has a tax lien on any property of any of the Credit Parties have
been paid in full;

(xviii)       A net orderly liquidation value appraisal and a forced liquidation
value appraisal of Borrowers’ Equipment and Rolling Stock, each prepared by a
credentialed appraiser acceptable to Lender;

(xix)       UCC-3 termination statements, partial releases or such other
releases as may be required by Lender with respect to the Collateral;

(xx)       Copies of Parent’s consolidated financial statements for the Fiscal
Year ending December 31, 2017 audited by Parent’s independent certified public
accountants;

(xxi)       Copies of the interim unaudited consolidated financial statements of
the Parent and its Subsidiaries for the period ending December 31, 2018;

(xxii)       Copies of the Credit Parties’ and Guarantor’s forecasts and
projections for the period specified by Lender, in form and substance reasonably
satisfactory to Lender;

(xxiii)       Opinions of counsel for each Credit Party and Guarantor,
respectively, in form and substance satisfactory to Lender;

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(xxiv)       With respect to the initial Revolving Loan, an executed Borrowing
Notice as required by Section 2.2(a) and Borrowing Base Certificate as required
by Section 8.5(a), in each case, duly executed by a Responsible Officer of
Borrower Representative;

(xxv)       An appraisal of the Inventory in form and substance acceptable to
Lender in its sole discretion;

(b)       Lender shall have received satisfactory evidence that Availability,
after giving effect to (i) the initial Revolving Loans and LC Obligations (if
applicable), (ii) payment of all fees and Lender Expenses required to be paid
hereunder, (iii) payment of all taxes due and owing and (iv) payment of all
trade indebtedness such that no trade indebtedness is sixty (60) days or more
past due, will be in an amount equal to or greater than $4,000,000;

(c)       A field examination of the Credit Parties, Guarantor and the
Collateral satisfactory to Lender shall have been completed and delivered to
Lender;

(d)       Credit Parties and Guarantor shall have established cash proceeds
management pursuant to Section 5.3 and confirmed that Credit Parties’ and
Guarantor’s reporting systems are acceptable to Lender;

(e)       Lender shall have filed all financing statements as required to
perfect Lender’s Liens in all Collateral with respect to which perfection can be
achieved by filing a financing statement, and shall have received evidence or
other confirmation of such filing, satisfactory to Lender;

(f)       Lender shall have received satisfactory reference checks with respect
to the senior management of each Credit Party and Guarantor;

(g)       Lender shall have completed confirmation of Borrowers’ Accounts, via
telephone or otherwise, and the results of such confirmation shall be
satisfactory to Lender;

(h)       Credit Parties and Guarantor shall have paid all Lender Expenses owed
by them as of the Agreement Date; and

(i)       All legal and business matters in connection with the transaction
contemplated by this Agreement shall be satisfactory to Lender.

Section 6.2. Conditions Precedent to all Loans. In addition to the conditions
precedent specified by Section 6.1, the obligation of Lender to make any Loan or
of LC Issuer to issue, renew or extend any Letter of Credit shall be subject to
the following conditions precedent:

(a)       All representations and warranties in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of
the date of such Loan or issuance, renewal or extension of such Letter of
Credit, as though such representations and warranties are made on and as of such
date (except to the extent any such representations and warranties relate solely
to an earlier date);

(b)       No Default or Event of Default shall have occurred and be continuing
on the date of such Loan or issuance, renewal or extension of such Letter of
Credit, and no Default or Event of Default will result from the making of such
Loan or issuance, renewal or extension of such Letter of Credit;

50

 

(c)       The funding of such Loan or issuance, renewal or extension of such
Letter of Credit shall not be prohibited by any Applicable Law;

(d)       Borrowers shall have satisfied all applicable requirements for
requesting such Loan or issuance, renewal or extension of such Letter of Credit;

(e)       No Material Adverse Effect shall have occurred or will result from the
making of such Loan or issuance, renewal or extension of such Letter of Credit;

(f)       No involuntary petition shall have been filed against any Credit
Party, Guarantor or Individual Guarantor that has not been dismissed and there
shall not exist any other action or proceeding seeking relief under the
Bankruptcy Code or seeking any reorganization, arrangement, consolidation or
readjustment of the debts of any Credit Party, Guarantor or Individual Guarantor
under any other bankruptcy or insolvency law; and

(g)       Credit Parties and Guarantor shall have paid all Lender Expenses
incurred through the date of the funding of such Loan.

Any request for a Loan or for the issuance, renewal or extension of a Letter of
Credit pending at a time when any condition precedent specified by Section 6.1
or Section 6.2 is not satisfied may be declined by Lender without prior notice.

ARTICLE VII
REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement and make Loans and to
induce the LC Issuer to issue, renew or extend Letters of Credit, each Credit
Party and Guarantor (as applicable), jointly and severally, makes each of the
following representations and warranties to the Lender as being true, complete
and correct in all respects as of the Agreement Date and as of the date of the
making of each Loan thereafter and as of the date of issuance, renewal or
extension of each Letter of Credit thereafter, as though made on and as of the
date of such Loan or the date of such issuance, renewal or extension of such
Letter of Credit (except to the extent such representations or warranties relate
solely to an earlier date, in which case such representations and warranties
shall be true and correct in all respects as of such earlier date):

Section 7.1. Fundamental Information. Schedule 7.1 sets forth, as of the most
recent Reporting Date, for each Credit Party and Guarantor: (a) its legal name,
(b) its federal tax identification number, (c) its jurisdiction of organization,
(d) its address of its chief executive office, (e) jurisdictions in which
qualification is necessary in order for it to own or lease its property and
conduct its business, except where failure to so qualify could not reasonably be
expected to have a Material Adverse Effect, and (f) the number and the
percentage of the outstanding shares of each class of such Person’s and its
direct and indirect Subsidiaries’ Equity Interests, all of which are validly
issued, outstanding, fully paid and non-assessable, and owned beneficially and
of record by the Person identified therein. Each Credit Party and Guarantor (i)
is a registered organization, as defined by the UCC, duly organized and validly
existing and in good standing under the laws of its jurisdiction of
organization, (ii) is qualified to do business and is in good standing as a
foreign organization in each jurisdiction in which qualification is necessary in
order for it to own or lease its property and conduct its business, except where
failure to so qualify or maintain such good standing could not reasonably be
expected to have a Material Adverse Effect and (iii) has all requisite power and
authority to conduct its business and to own its property.

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Section 7.2. Prior Transactions. No Credit Party nor Guarantor has, during the
past five (5) years, (a) except as set forth on Schedule 7.2, changed its name
or used any fictitious name or been a party to any merger or organizational
change or (b) acquired any of its property outside of the ordinary course of
business.

Section 7.3. Subsidiaries. No Credit Party nor Guarantor has any Subsidiaries
except as shown in Schedule 7.1.

Section 7.4. Authorization, Validity and Enforceability. Each Credit Party and
Guarantor has the corporate or company power and authority to execute, deliver
and perform this Agreement and the other Loan Documents to which it is a party,
to incur the Obligations, and to grant the Lender’s Liens on the Collateral.
Each Credit Party and Guarantor has taken all necessary action to properly
authorize its execution, delivery and performance of the Loan Documents to which
it is a party. This Agreement and the other Loan Documents to which any Credit
Party or Guarantor is a party have been duly executed and delivered by such
Credit Party or Guarantor, and constitute the legal, valid and binding
obligations of such Credit Party or Guarantor, enforceable against it in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to enforcement
of creditors’ rights.

Section 7.5. Noncontravention. Each Credit Party’s and Guarantor’s execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party do not and will not conflict with, violate or constitute a
violation of or breach or default under, as applicable, (a) its organizational
documents, (b) any agreement or instrument to which it or any of its
Subsidiaries is a party or which is otherwise binding upon it or any of its
Subsidiaries or (c) any Applicable Law applicable to it or any of its
Subsidiaries.

Section 7.6. Financial Statements. Credit Parties and Guarantor have delivered
to Lender the audited consolidated balance sheet and related statements of
income, retained earnings, cash flows and changes in stockholders’ equity for
Parent and its Consolidated Subsidiaries as of December 31, 2017, and for the
Fiscal Year then ended, accompanied by the report thereon of the Credit Parties’
and Guarantor’s independent certified public accountants. Credit Parties and
Guarantor have also delivered to Lender the unaudited consolidated balance sheet
and related statements of income and cash flows for Parent and its Consolidated
Subsidiaries as of December 31, 2018. All such financial statements have been
prepared in accordance with GAAP and present accurately and fairly the financial
position of Parent and its Consolidated Subsidiaries as at the dates thereof and
their results of operations for the specified periods, subject, in the case of
such unaudited financials to normal year-end adjustments and the absence of
footnote disclosure. No Material Adverse Effect has occurred since the dates of
such financial statements, respectively.

Section 7.7. Litigation. As of the most recent Reporting Date, except as set
forth on Schedule 7.7 (which sets forth a complete and accurate description of
each action, suit, claim or proceeding described therein, the parties thereto,
the nature of such dispute, and whether any potential liability is covered by
insurance), there is no pending or, to the knowledge of Credit Parties and
Guarantor after due inquiry, threatened, action, suit, proceeding or claim by
any Person against or with respect to a Credit Party or Guarantor or any of
their respective Subsidiaries, or to the knowledge of Credit Parties and
Guarantor after due inquiry, investigation by any Governmental Authority into or
relating in any way to a Credit Party or Guarantor or any of their respective
Subsidiaries, or any basis for any of the foregoing, which, in each case, could
reasonably be expected to result in a Material Adverse Effect. To the extent any
Credit Party or Guarantor notifies Lender of any new pending or threatened
action, suit, proceeding or claim pursuant to Section 8.7(b) hereto, such new
information shall be deemed added to Schedule 7.7 hereto.

52

 

Section 7.8. ERISA and Employee Benefit Plans. Except as set forth on
Schedule 7.8, no Credit Party nor Guarantor nor any ERISA Affiliate maintains or
contributes to an ERISA Benefit Plan. Except for those events or circumstances
that could not reasonably be expected to result in a Material Adverse Effect,
(x) each ERISA Benefit Plan is in compliance with applicable provisions of
ERISA, the IRC and other Applicable Law and (y) there are no existing or pending
(or to the knowledge of Credit Parties and Guarantor, threatened) claims (other
than routine claims for benefits in the normal course), sanctions, actions,
lawsuits or other proceedings or investigations involving any ERISA Benefit Plan
to which a Credit Party or Guarantor or any of their respective Subsidiaries
incurs or otherwise has or could have a material obligation or any material
liability. No ERISA Affiliate is required to contribute to, or has any other
absolute or contingent liability in respect of, any Multiemployer Plan. No
“accumulated funding deficiency” (as defined in Section 412(a) of the IRC)
exists with respect to any ERISA Benefit Plan, whether or not waived by the
Secretary of the Treasury or his delegate, and the current value of the benefits
of each ERISA Benefit Plan that is subject to the funding requirements of
Section 412 of the IRC does not exceed the current value of such ERISA Benefit
Plan’s assets available for the payment of such benefits. No Termination Event
has occurred, and no Credit Party nor Guarantor is aware of any fact, event or
circumstance that could reasonably be expected to constitute or result in a
Termination Event with respect to any ERISA Benefit Plan. No Credit Party nor
Guarantor nor any ERISA Affiliate has (i) incurred any liability to the PBGC
other than for the payment of premiums, and there are no premium payments which
have become due that are unpaid or (ii) engaged in a transaction that could be
subject to Section 4069 or Section 4212(c) of ERISA.

Section 7.9. Compliance with Laws. Each Credit Party and Guarantor and each of
their respective Subsidiaries are (a) in compliance, in all material respects,
with the Patriot Act and (b) in compliance with all other Applicable Laws,
except where such failure to comply under this subsection (b) could not
reasonably be expected to result in a Material Adverse Effect.

Section 7.10. Taxes. Credit Parties and Guarantor have filed all federal and
other tax returns and reports required to be filed by Applicable Law, and have
paid all federal and other taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable other than any unpaid taxes, assessments fees or other
charges that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and for which adequate reserves are
maintained on the books of the applicable Credit Party or Guarantor in
accordance with GAAP, and so long as none of the Collateral would become subject
to forfeiture, any Lien (other than a Permitted Lien not prior to Lender’s Lien
on the Collateral) or any loss as a result of such contest or delay in payment.

Section 7.11. Location of Collateral and Books and Records. Schedule 7.11 is a
complete list of the location of the Collateral and of Credit Parties’ and
Guarantor’s books and records as of the most recent Reporting Date, with a
notation as to whether such location is leased or owned and which Credit Party
or Guarantor so leases or owns such property. If any such location is not owned
by a Credit Party or Guarantor, Schedule 7.11 includes the name and mailing
address of the owner thereof. If any Collateral or any books or records of any
Credit Party or Guarantor is transported or transferred to a location not
previously disclosed in Schedule 7.11, such schedule shall be updated within
five (5) Business Days of such transfer.

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Section 7.12. Accounts. Each Account represents a bona fide sale or lease and
delivery of goods or rendition of services by a Borrower in the ordinary course
of such Borrower’s business. Each Account is for a liquidated amount payable by
the Account Debtor thereon on the terms set forth in the invoice therefor and in
the schedule of Accounts delivered to Lender, without any offset, deduction,
defense or counterclaim except those known to Borrowers and disclosed to Lender
in writing. No payment has been received, and no credit, discount or extension
or agreement has been granted, on any Account except as reported to and
permitted by Lender in writing. Each copy of an invoice delivered to Lender by
Borrowers is a genuine copy of the original invoice sent to the Account Debtor
named therein. All goods described in any invoice representing a sale of goods
have been delivered to the Account Debtor named therein and all services of
Borrowers described in each invoice representing services have been performed.

Section 7.13. Inventory. No Instruments or documents of title have been issued
in respect of any Inventory.

Section 7.14. Documents, Instruments, and Chattel Paper. All Documents,
Instruments and Chattel Paper, and all signatures and endorsements thereon, are
complete, valid and genuine.

Section 7.15. Proprietary Rights. Schedule 7.15 sets forth a correct and
complete list of all Proprietary Rights owned by the Credit Parties and
Guarantor that are material to any Credit Party’s or Guarantor’s business as of
the most recent Reporting Date. None of such Proprietary Rights is subject to
any licensing agreement or similar arrangement except as set forth on
Schedule 7.15. All Proprietary Rights set forth on Schedule 7.15 are valid,
subsisting, unexpired and enforceable. To Credit Parties’ and Guarantor’s
knowledge, none of such Proprietary Rights infringes on, misappropriates,
dilutes or conflicts with any other Person’s property, and no other Person’s
property infringes on, misappropriates, dilutes or conflicts with such
Proprietary Rights. The Proprietary Rights described on Schedule 7.15 and all
other Proprietary Rights in which any Credit Party or Guarantor has an interest
constitute all of the property of such type necessary to the current and
anticipated future conduct of Credit Parties’ and Guarantor’s business. No
holding, decision or judgment has been rendered by any Governmental Authority or
court of law which would cancel or question the validity of, or such Credit
Parties’ or Guarantor’s rights in, any Proprietary Rights material to the
conduct of any Credit Party’s or Guarantor’s business. No action, suit, claim,
demand, order or proceeding is pending, or threatened in writing (i) seeking to
limit, cancel or question the validity of any Proprietary Rights material to the
conduct of any Credit Party’s or Guarantor’s business, or such Credit Party’s or
Guarantor’s ownership interest therein (other than office actions issued in the
ordinary course of prosecution of any pending applications for Patents or
applications for registration of other Proprietary Rights), or (ii) which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on any Proprietary Rights material to the conduct of any Credit Party’s
or Guarantor’s business. If any Credit Party or Guarantor becomes the owner of
any Proprietary Rights that are material to the conduct of any Credit Party’s or
Guarantor’s business not previously disclosed in Schedule 7.15, such Schedule
shall be updated promptly, and in any event, within five (5) Business Days of
becoming the owner thereof. If any Credit Party or Guarantor enters into any
licensing agreement or similar arrangement with respect to any of Credit
Parties’ or Guarantor’s Proprietary Rights not previously disclosed in Schedule
7.15, such Schedule shall be updated promptly, and in any event, within five (5)
Business Days of entering into such agreement.

Section 7.16. Investment Property. Schedule 7.16 sets forth a correct and
complete list of all Investment Property owned by each Credit Party and
Guarantor as of the most recent Reporting Date. As of the most recent Reporting
Date, Credit Parties and Guarantor are the legal and beneficial owner of such
Investment Property, as applicable, and have not sold, granted any option with
respect to, assigned or transferred, or otherwise disposed of any of their
rights or interest therein. Credit Parties and Guarantor shall update
Schedule 7.16 on the last Business Day of any month in which (and to the extent)
there are any changes thereto.

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Section 7.17. Real Property and Leases. The Credit Parties and Guarantor have
good, valid, marketable and legal title to all of the Real Property owned by
them, free and clear of all Liens, encumbrances, or adverse claims other than
Permitted Liens and free and clear of all impediments to the use of such
properties in Credit Parties’ and Guarantor’s business. Schedule 7.17 sets forth
a correct and complete list of all Real Property owned by each Credit Party and
Guarantor, all leases and subleases of Real Property on which a Credit Party or
Guarantor is lessee or sublessee, and all leases or subleases of Real Property
on which a Credit Party or Guarantor is lessor or sublessor, each as of the most
recent Reporting Date. Each Credit Party and Guarantor enjoys peaceful and
undisturbed possession under all leases listed in Schedule 7.17, as applicable,
and each such lease is valid and enforceable in accordance with its terms and is
in full force and effect, and no default by any party to any such lease exists.
Credit Parties and Guarantor shall update Schedule 7.17 on the last Business Day
of any month in which (and to the extent) there are any changes thereto.

Section 7.18. Material Agreements. Schedule 7.18 sets forth all material
agreements to which any Credit Party or Guarantor is a party or is otherwise
bound as of the most recent Reporting Date. Credit Parties and Guarantor shall
update Schedule 7.18 on a monthly basis on the last Business Day of each month
to the extent there are any changes thereto. All such material agreements set
forth on Schedule 7.18 are in full force and effect and no defaults by a Credit
Party or Guarantor exist thereunder.

Section 7.19. Bank Accounts. Schedule 7.19 contains a complete list of all
Deposit Accounts and Securities Accounts maintained by the Credit Parties and
Guarantor as of the most recent Reporting Date. If any Credit Party or Guarantor
opens or otherwise comes into possession of a Deposit Account or a Securities
Account not previously disclosed on Schedule 7.19, such schedule shall be
updated immediately upon such opening, or coming into possession (including,
without limitation, upon transition of Credit Parties’ and Guarantor’s cash
management services to the Lender on the Cash Management Transition Date).

Section 7.20. Title to Property. Each Credit Party and Guarantor has good,
valid, marketable and exclusive title to, or a valid leasehold interest or
license in (as applicable), all of its property, free of all Liens except
Permitted Liens. Each Credit Party and Guarantor possesses all Proprietary
Rights (or otherwise possesses the right to use such Proprietary Rights without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Credit Party nor Guarantor is in violation in any material
respect of the terms under which it possesses such Proprietary Rights or the
right to use such Proprietary Rights. Lender’s Liens are not subject or junior
to any other Lien other than those Permitted Liens that are prior to Lender’s
Liens.

Section 7.21. Debt. After giving effect to the making of the initial Loans, no
Credit Party has any Debt except the Obligations and other Debt expressly
permitted under Section 9.5.

Section 7.22. Liens. There are no Liens on any property of any Credit Party
other than Permitted Liens.

Section 7.23. Solvency. Prior to and after giving effect to the making of the
initial Loans hereunder and each subsequent Loan thereafter, each Credit Party
is, on an individual basis, Solvent.

55

 

Section 7.24. Non-Regulated Entities. No Credit Party nor Guarantor and no
Subsidiary of any Credit Party or Guarantor is a “registered investment company”
or a company “controlled” by a “registered investment company” or a “principal
underwriter” of a “registered investment company” as such terms are defined in
the Investment Company Act of 1940. No Credit Party nor Guarantor and no
Subsidiary of any Credit Party or Guarantor is subject to regulation under the
Federal Power Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur Debt
or may otherwise render all or any portion of the Obligations unenforceable.

Section 7.25. Governmental Authorization. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, any Credit Party or Guarantor of this
Agreement or any other Loan Document, other than: (i) the filing of UCC
Financing Statements to be filed against the Credit Parties and Guarantor
evidencing Lender’s Liens; (ii) filings to be made with the United States Patent
and Trademark Office or United States Copyright Office evidencing Lender’s Liens
on registered Proprietary Rights; (iii) as may be required in connection with
any exercise of remedies by Lender in respect of the Equity Interests of any
Credit Party or Guarantor by Applicable Laws affecting the offering and sale of
securities generally; and (iv) those which have been obtained and are still in
full force and effect.

Section 7.26. Investment Banking or Finder’s Fees. No Credit Party nor Guarantor
has agreed to pay or is otherwise obligated to pay or reimburse any Person with
respect to any investment banking or similar or related fee, underwriter’s fee,
finder’s fee or broker’s fee in connection with this Agreement.

Section 7.27. Full Disclosure. None of the representations or warranties made by
any Credit Party or Guarantor in the Loan Documents and none of the statements
contained in any Schedule or any report, statement or certificate furnished to
Lender by or on behalf of any Credit Party or Guarantor in connection with the
Loan Documents contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.

Section 7.28. Other Obligations and Restrictions. No Credit Party nor Guarantor
has any outstanding liabilities of any kind (including contingent obligations,
tax assessments, or long-term commitments) of a nature and type required to be
set forth as a liability on a balance sheet in accordance with GAAP which are,
in the aggregate, material to Credit Parties or Guarantor or material with
respect to Borrowers’ consolidated financial condition that are not reflected on
the financial statements delivered pursuant to Section 6.1(a), Section 8.4(a) or
Section 8.4(b), or in the notes thereto. No Credit Party nor Guarantor is
subject to or restricted by any franchise, contract, deed, charter restriction,
or other instrument or restriction which could reasonably be expected to result
in a Material Adverse Effect.

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Section 7.29. Acts of God and Labor Matters. Neither the business nor the
properties of any Credit Party or Guarantor has been affected by any fire,
explosion, accident, drought, storm, hail, earthquake, embargo, act of God or
other casualty (whether or not covered by insurance), which could reasonably be
expected to result in a Material Adverse Effect. There is (a) no unfair labor
practice complaint pending or, to the knowledge of any Credit Party or
Guarantor, threatened against any Credit Party or Guarantor or any of their
respective Subsidiaries before any Governmental Authority and no grievance or
arbitration proceeding pending or, to the knowledge of any Credit Party or
Guarantor, threatened against any Credit Party or Guarantor or any of their
respective Subsidiaries which arises out of or under any collective bargaining
agreement, (b) no strike, labor dispute, lockout, slowdown, stoppage or similar
action or grievance, pending or, to Credit Parties’ or Guarantor’s knowledge,
threatened against any Credit Party or Guarantor or any of their respective
Subsidiaries that could reasonably be expected to result in a material liability
and (c) no union certification application or representation petition existing
with respect to the employees of any Credit Party or Guarantor or any of their
respective Subsidiaries, and no union organizing activities are taking place
with respect to any of the employees of any Credit Party or Guarantor or any of
their respective Subsidiaries. No Credit Party nor Guarantor nor any of their
respective Subsidiaries has incurred any liability or obligation under the
Worker Adjustment and Retraining Notification Act or similar state law, which
remains unpaid or unsatisfied. The hours worked and payments made to employees
of each Credit Party and Guarantor and each of their respective Subsidiaries
have not been in violation of the Fair Labor Standards Act or any other
applicable legal requirements, except to the extent such violations could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. All material payments due from any Credit Party or Guarantor or
any of their respective Subsidiaries on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of Credit Parties and Guarantor, except where the failure to do so
could not individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.

Section 7.30. Environmental and Other Laws. (a) Except as individually or in the
aggregate could not result in a Material Adverse Effect, each Credit Party and
Guarantor is conducting its business in material compliance with all Applicable
Laws, including Environmental Laws, and is in compliance with all licenses and
permits required under any such laws; (b) to the knowledge of Credit Parties and
Guarantor, (i) none of the operations or properties of any Credit Party or
Guarantor is the subject of federal, state or local investigation evaluating
whether any material remedial action is needed to respond to a release of any
Hazardous Materials into the environment or to the improper storage or disposal
(including storage or disposal at offsite locations) of any Hazardous Materials,
except as set forth on Schedule 7.30 and (ii) no Credit Party’s nor Guarantor’s
nor any of their respective Subsidiaries’ properties or assets has ever been
used by a Credit Party or Guarantor or any of their respective Subsidiaries or
any previous owner or operator in the disposal of, or to produce, store, handle,
treat, release, or transport any Hazardous Materials, where such disposal,
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of any applicable Environmental Law; (c) no Credit
Party nor Guarantor has (and to the knowledge of Credit Parties and Guarantor,
no other Person has) filed any notice under any Applicable Law indicating that
any Credit Party or Guarantor or any of their respective Subsidiaries is
responsible for the improper release into the environment, or the improper
storage or disposal, of any material amount of any Hazardous Materials or that
any Hazardous Materials have been improperly released, or are improperly stored
or disposed of, upon any property of any Credit Party or Guarantor or any of
their respective Subsidiaries; (d) no Credit Party nor Guarantor has (nor have
any Credit Party’s or Guarantor’s Subsidiaries) transported or arranged for the
transportation of any Hazardous Material to any location which is (i) listed on
the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, listed for possible
inclusion on such National Priorities List by the Environmental Protection
Agency in its Comprehensive Environmental Response, Compensation and Liability
Information System List, or listed on any similar state list or (ii) the subject
of federal, state or local enforcement actions or other investigations which may
lead to claims against such Credit Party or Guarantor for clean-up costs,
remedial work, damages to natural resources or for personal injury claims
(whether under Environmental Laws or otherwise); and (e) no Credit Party nor
Guarantor has any known material contingent liability under any Environmental
Laws or in connection with the release into the environment, or the storage or
disposal, of any Hazardous Materials.

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Section 7.31. Security Interests.

(a)       This Agreement creates in favor of Lender a valid first priority
security interest in the Collateral. Upon the filing of the UCC-1 financing
statements described in Section 6.1(e) hereof and the delivery of Control
Agreements and recordings of filings to be made with the United States Patent
and Trademark Office or United States Copyright Office evidencing Lender’s Liens
on registered Proprietary Rights, as applicable, such security interests in and
Liens on the Collateral granted thereby shall be perfected to the extent
perfection can be accomplished through such filings, agreements or recordings
(subject to Permitted Liens), and

(b)       except as contemplated in this Agreement, no further or subsequent
filing, recording, registration, other public notice or other action is
necessary to perfect or otherwise continue, preserve or protect Lender’s
security interest in the Collateral that may be perfected by the filing of a
financing statement pursuant to the UCC except (i) for continuation statements
described in UCC §9.515(d), (ii) for filings required to be filed in the event
of a change in the name, jurisdiction of organization, type of organization or
organizational structure of a Credit Party or Guarantor, or (iii) in the event
any financing statement filed by Lender relating hereto otherwise becomes
inaccurate or incomplete.

Section 7.32. Commercial Tort Claims. Schedule 7.32 sets forth all Commercial
Tort Claims brought by any Credit Party or Guarantor against any Person as of
the most recent Reporting Date. If any Credit Party or Guarantor brings a
Commercial Tort Claim against any Person on or after such Reporting Date, such
Schedule shall be updated promptly, and in any event, within five (5) Business
Days of such Credit Party or Guarantor bringing such Commercial Tort Claim
against such Person.

Section 7.33. Common Enterprise. The successful operation and condition of each
of the Borrowers is dependent on the continued successful performance of the
functions of the group of Borrowers as a whole and the successful operation of
each of the Borrowers is dependent on the successful performance and operation
of each other Borrower. Each Borrower expects to derive benefit (and its board
of directors, manager(s), general partner(s) or other governing body has
determined that it may reasonably be expected to derive benefit), directly and
indirectly, from (i) successful operations of each of the other Borrowers and
(ii) the credit extended by the Lender to the Borrowers hereunder, both in their
separate capacities and as members of the group of companies. Each Borrower has
determined that execution, delivery, and performance of this Agreement and any
other Loan Documents to be executed by such Borrower is within its purpose, will
be of direct and indirect benefit to such Borrower, is in its best interest and
necessary or convenient to the conduct, promotion or attainment of the business
of such Borrower, its wholly owned direct or indirect Subsidiaries and/or its
direct or indirect parent. Guarantor has determined that execution, delivery and
performance of this Agreement and any other Loan Document to which it is a party
(including without limitation, its Guaranty Agreement) is within its purpose,
will be of direct and indirect benefit to Guarantor, is in its best interest and
is necessary or convenient to the conduct, promotion, or attainment of the
business of Guarantor.

Section 7.34. Anti-Terrorism Laws.

(a)       No Credit Party nor Guarantor nor any Subsidiary of any Credit Party
or Guarantor is in violation of any Anti-Terrorism Law or engages in or
conspires to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.

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(b)       No Credit Party nor Guarantor nor any Subsidiary of any Credit Party
or Guarantor, nor to the knowledge of any Credit Party or Guarantor, their
respective agents acting or benefiting in any capacity in connection with the
Loans or other transactions hereunder, is any of the following (each a “Blocked
Person”): (i) a Person that is listed in the annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224; (ii) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, the Executive Order No.
13224; (iii) a Person or entity with which Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a Person
or entity that commits, threatens or conspires to commit or supports “terrorism”
as defined in the Executive Order No. 13224; (v) a Person or entity that is
named as a “specially designated national” on the most current list published by
the U.S. Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official publication of
such list, or (vi) a Person or entity who is affiliated or associated with a
Person or entity listed above. No Credit Party nor Guarantor nor any Subsidiary
of any Credit Party or Guarantor, nor to the knowledge of any Credit Party or
Guarantor, their respective agents acting in any capacity in connection with the
Loans or other transactions hereunder (i) conducts any business or engages in
making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any
transaction relating to, any property or interests in property blocked pursuant
to the Executive Order No. 13224.

Section 7.35. Trading with the Enemy. No Credit Party nor Guarantor has engaged,
nor does it intend to engage, in any business or activity prohibited by the
Trading with the Enemy Act.

Section 7.36. Anti-Corruption Laws and Sanctions. Each Credit Party and
Guarantor and each of their respective Subsidiaries, and, to the knowledge of
such Credit Party and Guarantor, their respective officers, employees, directors
and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions
in all material respects and have instituted and maintain policies and
procedures designed to promote and achieve compliance with such laws. None of
the Credit Parties or Guarantor or any of their Subsidiaries or, to the
knowledge of Credit Parties or Guarantor, their respective directors, officers,
employees, agents or representatives (a) is a Sanctioned Person, (b) is a Person
owned or controlled by a Sanctioned Person, (c) is located, organized or
resident in a Sanctioned Country or (d) has directly or indirectly engaged in,
or is now directly or indirectly engaged in, any dealings or transactions (i)
with any Sanctioned Person, (ii) in any Sanctioned Country or (iii) otherwise in
violation with any Sanctions. No Loan or use of proceeds of the Loans has or
will violate Anti-Corruption Laws or applicable Sanctions.

Section 7.37. Health Care Matters.

(a) Compliance with Health Care Laws. Each Credit Party and Guarantor is in
material compliance with all Health Care Laws, and no circumstance exists or
event has occurred which could reasonably be expected to result in a violation
of any Health Care Law.

(b) Health Care Permits. Each Credit Party and Guarantor holds all Health Care
Permits necessary for it to own, lease, sublease, or operate its assets or to
conduct its business or operations for the period covered by such Health Care
Permit. All such Health Care Permits are in full force and effect and there is
no material default under, violation of, or other noncompliance with the terms
and conditions of any such Health Care Permit. No condition exists or event has
occurred which, in itself, or with the giving of notice or lapse of time or
both, has resulted or would result in the suspension, revocation, termination,
restriction, limitation, modification, or nonrenewal of any Health Care Permit.
No Governmental Authority has taken, or to the knowledge of any Credit Party or
Guarantor, intends to take, action to suspend, revoke, terminate, place on
probation, restrict, limit, modify or not renew any Health Care Permit of any
Credit Party or Guarantor.

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(c) Licensed Personnel. In each case to the knowledge of each Credit Party and
Guarantor, each Person employed, retained or contracted by any Credit Party or
Guarantor and involved in the delivery of health care or medical services or
supplies (collectively, the “Licensed Personnel”) has complied and currently is
in compliance with all applicable Health Care Laws and holds, and, at all times
that such Persons have been Licensed Personnel of any Credit Party or Guarantor,
has held, all professional licenses and other Health Care Permits required in
the performance of such Licensed Personnel’s duties for such Credit Party or
Guarantor, and each such Health Care Permit is in full force and effect and no
suspension, revocation, termination, impairment, modification or nonrenewal of
any such Health Care Permit is pending or threatened in writing.

(d) Accreditation. Each Credit Party and Guarantor and each of their respective
Subsidiaries have obtained and maintain accreditation in good standing and
without limitation or impairment by all applicable accrediting organizations, to
the extent prudent and customary in the industry in which it is engaged or
required by law (including any foreign law or equivalent regulation).

(e) Proceedings; Audits. There is no pending (or, to the knowledge of any Credit
Party or Guarantor, threatened) investigation, inquiry, litigation, review,
hearing, suit, claim, audit, arbitration, proceeding or action (in each case,
whether civil, criminal, administrative, investigative or informal) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator) (collectively, a “Proceeding”) against or
affecting (i) any Credit Party or Guarantor, to the knowledge of any Credit
Party or Guarantor, any Licensed Personnel, relating to any actual or alleged
noncompliance with any Health Care Law or requirement of any Third Party Payor,
or (ii) any customer of any Credit Party or Guarantor, relating to any actual or
alleged noncompliance with any Health Care Law or requirement of any Third Party
Payor in connection with an arrangement with or the activities of any Credit
Party or Guarantor. There are no facts, circumstances or conditions that would
reasonably be expected to form the basis for any such Proceeding against or
affecting any Credit Party or Guarantor, to the knowledge of any Credit Party or
Guarantor, any Licensed Personnel. There currently exist no restrictions,
deficiencies, required plans of correction or other such remedial measures with
respect to any Health Care Permit of any Credit Party or Guarantor, or the
participation by any Credit Party or Guarantor in any Third Party Payor program
or network. Without limiting the foregoing, no validation review, program
integrity review, audit or other investigation in connection with any Health
Care Law and related to any Credit Party or Guarantor or its operations, or the
consummation of the transactions contemplated in the Loan Documents or related
to the Collateral, (i) has been conducted by or on behalf of any Governmental
Authority, or (ii) is scheduled, pending or, to the knowledge of any Credit
Party or Guarantor, threatened in writing, in each case that would reasonably be
expected to have, in the aggregate, a Material Adverse Effect.

(f) Overpayments. No Credit Party nor Guarantor (i) has knowingly retained an
overpayment received from, or failed to refund any amount due to, any Third
Party Payor in violation of any Health Care Law or contract; or (ii) has
received written notice of, or has knowledge of, any overpayment or refunds due
to any Third Party Payor.

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(g) Material Statements. No Credit Party nor Guarantor, nor any officer,
employee or agent of any Credit Party or Guarantor, has made an untrue statement
of a material fact or fraudulent statement to any Governmental Authority, or
failed to disclose a material fact that must be disclosed to any Governmental
Authority.

(h) Prohibited Transactions. No Credit Party nor Guarantor, nor any officer or
managing employee of any Credit Party or Guarantor, directly or indirectly, has
done any of the following, except to the extent any of the following,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect: (i) offered, paid, solicited or received any
remuneration, in cash or in kind, or made any financial arrangements, in
violation of any Health Care Law; (ii) given or agreed to give, or is aware that
there has been made or that there is any agreement to make, any gift or
gratuitous payment of any kind, nature or description (whether in money,
property or services) in violation of any Health Care Law; (iii) made or agreed
to make, or is aware that there has been made or that there is any agreement to
make, any contribution, payment or gift of funds or property to, or for the
private use of, any governmental official, employee or agent where either the
contribution, payment or gift or the purpose of such contribution, payment or
gift is or was illegal under the laws of any Governmental Authority having
jurisdiction over such payment, contribution or gift; (iv) established or
maintained any unrecorded fund or asset for any purpose or made any misleading,
false or artificial entries on any of its books or records for any reason; or
(v) made, or agreed to make, or is aware that there has been made or that there
is any agreement to make, any payment to any Person with the intention or
understanding that any part of such payment would be in violation of any Health
Care Law or used or was given for any purpose other than that described in the
documents supporting such payment. To the knowledge of each Credit Party and
Guarantor, no Person has filed or has threatened in writing to file against any
Credit Party or Guarantor an action under any federal or state whistleblower
statute, including, without limitation, under the False Claims Act of 1863 (31
U.S.C. § 3729 et seq.).

(i) Exclusion. No Credit Party nor Guarantor, nor any owner, officer, director,
partner, agent, managing employee or Person with a “direct or indirect ownership
interest” (as that phrase is defined in 42 C.F.R. § 420.201) in any Credit Party
or Guarantor, nor, to the knowledge of any Credit Party or Guarantor, any
Licensed Personnel of any Credit Party or Guarantor, has been (or has been
threatened to be) (i) excluded from any Third Party Payor program pursuant to 42
U.S.C. § 1320a-7 or related regulations, (ii) “suspended” or “debarred” from
selling products to the U.S. government or its agencies pursuant to the Federal
Acquisition Regulation, relating to debarment and suspension applicable to
federal government agencies generally (42 C.F.R. Subpart 9.4), or other
applicable laws or regulations, (iii) debarred, disqualified, suspended or
excluded from participation by any Third Party Payor or is listed on the General
Services Administration list of excluded parties, nor is any such debarment,
disqualification, suspension or exclusion threatened or pending, or (iv) made a
party to any other action by any Governmental Authority that may prohibit it
from selling products or providing services to any governmental or other
purchaser pursuant to any federal, state or local laws or regulations.

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(j) Corporate Integrity Agreement. Except as where any of the following would
not be reasonably expected to result in a Material Adverse Effect, no Credit
Party nor Guarantor, nor any owner, officer, director, partner, agent, managing
employee or Person with a “direct or indirect ownership interest” (as that
phrase is defined in 42 C.F.R. §1001.1001) in any Credit Party or Guarantor, is
a party to, or bound by, any material order, individual integrity agreement,
corporate integrity agreement, corporate compliance agreement, or deferred
prosecution agreement.

Section 7.38. Continuing Representations. All representations and warranties
under this Agreement shall survive the execution and delivery of this Agreement.

ARTICLE VIII
AFFIRMATIVE COVENANTS

Until termination of this Agreement and the indefeasible payment and performance
in full of the Obligations (other than contingent indemnification obligations),
each Credit Party and Guarantor, as applicable, agrees, jointly and severally,
as follows:

Section 8.1. Existence and Good Standing. Each Credit Party and Guarantor shall
maintain (a) its existence and good standing in its jurisdiction of organization
and (b) its qualification and good standing in all other jurisdictions in which
the failure to maintain such qualification or good standing could reasonably be
expected to result in a Material Adverse Effect.

Section 8.2. Compliance with Agreements and Laws. Each Credit Party and
Guarantor will perform all obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which it is
a party or by which it or any of its properties is bound, except where failure
to do so could not reasonably be expected to result in a Material Adverse
Effect. Each Credit Party and Guarantor will conduct its business and affairs in
compliance with all Applicable Laws applicable thereto, except where the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect. Each Credit Party and Guarantor shall, and shall ensure that each of its
Subsidiaries will (a) conduct its business in compliance with all
Anti-Corruption Laws and Anti-Terrorism Laws and (b) maintain policies and
procedures designed to promote and achieve compliance with Anti-Corruption Laws.
Each Credit Party and Guarantor will cause all licenses and permits necessary
for the conduct of its business and the ownership and operation of its property
used and property reasonably expected to be used in the conduct of its business
to be at all times maintained in good standing and in full force and effect,
except where failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

Section 8.3. Books and Records. Each Credit Party and Guarantor shall maintain
at all times correct and complete books and records in which complete, correct
and timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited financial statements required to be delivered
pursuant to Section 8.4.

Section 8.4. Financial Reporting. Borrower Representative and, to the extent
required hereby, each other Credit Party and Guarantor, shall promptly furnish
to Lender all such financial information with respect to Credit Parties and
Guarantor as Lender may reasonably request. Without limiting the foregoing,
Borrower Representative and, to the extent required hereby, Parent and each
Consolidated Subsidiary, will furnish to Lender the following:

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(a)       As soon as available, but in any event not later than ninety (90) days
after the end of each Fiscal Year, (i) consolidated audited balance sheets, and
statements of income and expense, cash flow and of stockholders’ equity for
Parent and its Consolidated Subsidiaries for such Fiscal Year, and the
accompanying notes thereto, and (ii) beginning in the Fiscal Year 2020 and
thereafter, unaudited consolidating balance sheets, and statements of income and
expense, cash flow and of stockholders’ equity for Parent and its Consolidated
Subsidiaries, each prepared in accordance with GAAP, in reasonable detail and
fairly presenting the financial position and results of operations of Parent and
its Consolidated Subsidiaries as of the date thereof and for the Fiscal Year
then ended. Such audited statements shall be examined in accordance with
generally accepted accounting standards by independent certified public
accountants selected by Parent and reasonably satisfactory to Lender, whose
report thereon shall not be qualified in any respect. Parent and each
Consolidated Subsidiary hereby authorizes Lender to communicate directly with
its certified public accountants and, by this provision, authorizes such
accountants to disclose to Lender any and all financial statements and other
supporting financial documents and schedules relating to Parent and its
Consolidated Subsidiaries and to discuss directly with Lender the finances and
affairs of Parent and its Consolidated Subsidiaries.

(b)       As soon as available, but in any event not later than forty-five (45)
days after the end of each Fiscal Quarter, consolidated (and, beginning January
2020 and thereafter, consolidating) unaudited balance sheets of Parent and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter, and consolidated
(and, beginning January 2020 and thereafter, consolidating) unaudited statements
of income and expense and cash flow for Parent and its Consolidated Subsidiaries
for such Fiscal Quarter and for the period from the beginning of the Fiscal Year
to the end of such Fiscal Quarter, all in reasonable detail, fairly presenting
the financial position and results of operations of Parent and its Consolidated
Subsidiaries as of the date thereof and for such Fiscal Quarters, and prepared
in accordance with GAAP applied consistently with the audited financial
statements required by Section 8.4(a). Borrower Representative shall certify by
a certificate signed by a Responsible Officer of Borrower Representative that
all such statements have been prepared in accordance with GAAP and present
fairly, subject to normal year-end adjustments and the absence of footnote
disclosure, Parent’s and its Consolidated Subsidiaries’ financial position as of
the dates thereof and its results of operations for the Fiscal Quarters then
ended.

(c)       Annually, on or prior to December 31 of each Fiscal Year (and not
sooner than November 30 of such Fiscal Year) of Parent, annual forecasts (to
include forecasted consolidated balance sheets, statements of income and
expenses and statements of cash flow) for Parent and its Consolidated
Subsidiaries as of the end of and for each Fiscal Month of the succeeding Fiscal
Year of Parent.

(d)       As soon as available, but in any event not later than fifteen (15)
days after Parent’s or any Consolidated Subsidiary’s receipt thereof, a copy of
all management reports and management letters prepared for Parent and its
Consolidated Subsidiaries by any independent certified public accountants of
Parent and its Consolidated Subsidiaries.

(e)       Promptly after filing, but in any event not later than ninety (90)
days after any Credit Party’s or Guarantor’s filing thereof, a copy of each tax
return filed by each Credit Party and Guarantor.

(f)       Promptly after receipt thereof, copies of all non-Lender bank
statements in respect of any Deposit Account or Securities Account of any Credit
Party or Guarantor (which may be satisfied by providing Lender electronic
read-only access to such accounts).

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(g)       Such additional information as Lender may from time to time reasonably
request regarding the financial and business affairs of Credit Parties,
Guarantor or any of their respective Subsidiaries.

Section 8.5. Collateral Reporting. Borrower Representative, on behalf of all
Borrowers, shall provide the following to Lender:

(a)       On the twentieth (20th) day of each month (and reporting as of the
last day of the prior calendar month), at the time of each request for a
Revolving Loan and at any other time requested by Lender, a Borrowing Base
Certificate including (i) a detailed calculation of the Borrowing Base, (ii) a
certification of Eligible Accounts, Eligible Inventory, Eligible Equipment, and
Eligible Rolling Stock and (iii) all supporting documents and information
(including, without limitation, sales journals, credit memos, cash receipts
journals and reconciliation of changes from the most recent certificate
delivered to Lender);

(b)       Monthly, or anytime a borrowing is requested, not later than the
twentieth (20th) day of each Fiscal Month:

(i)       a schedule of Accounts and a schedule of payments on Accounts, as of
the last day of the preceding Fiscal Month;

(ii)       a reconciliation to the Borrowing Base as calculated in the most
recent Borrowing Base Certificate delivered to Lender, in the form prescribed by
Lender;

(iii)       an aging of Borrowers’ Accounts as of the last day of the preceding
Fiscal Month, showing (A)(i) Accounts aged 30 days or less from date of invoice,
(ii) Accounts aged over 30 days, but less than 61 days, from date of invoice,
(iii) Accounts aged over 60 days, but less than 91 days, from date of invoice,
(iv) Accounts aged over 90 days, but less than 120 days, from date of invoice,
and (v) Accounts aged 120 days or more from date of invoice and (B) a listing of
the name and complete address of each Account Debtor and such other information
as Lender may request and (C) a reconciliation to the previous calendar month’s
aging of Borrowers’ Accounts and to Borrowers’ general ledgers;

(iv)       an aging of Borrowers’ accounts payable (including the due date for
each account payable) as of the last day of the preceding Fiscal Month;

(v)       Inventory reports as of the last day of the preceding Fiscal Month, by
category and location, with detail showing additions to and deletions from
Inventory, together with a reconciliation to the general ledger;

(vi)       at Lender’s request, copies of invoices and supporting delivery or
service records, copies of credit memos or other advices of credit or reductions
against amounts previously billed, shipping and delivery documents, purchase
orders and such other copies or reports in respect of any Collateral as Lender
may request from time to time; and

(vii)       semiannually, on or before the last Business Day in June and
December of each year, or more often at Lender’s request, a listing of each
Account Debtor in respect of Borrowers’ Accounts, with full contact information
for each such Account Debtor (including, without limitation, the complete
address, contact person, phone number and email address) and such other
information as Lender may request in respect of the Borrowers’ Accounts.

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For any request for a Revolving Loan prior to the twentieth day of a Fiscal
Month and after the last day of the preceding Fiscal Month, the requirement to
deliver any of the foregoing items that refer to the last day of the preceding
Fiscal Month shall be satisfied by delivering copies of such items that were
delivered for the preceding Fiscal Month. Each Borrowing Base Certificate,
schedule, reconciliation, aging, copy or report delivered to Lender shall bear a
signed statement by a Responsible Officer of Borrower Representative certifying
the accuracy and completeness of all information included therein. The execution
and delivery of a Borrowing Base Certificate shall in each instance constitute a
representation and warranty by each Borrower to Lender that (A) no Account
included therein as an Eligible Account should be excluded from inclusion in the
Borrowing Base pursuant to the terms of the definition of “Eligible Account”,
(B) no Inventory included therein as Eligible Inventory should be excluded from
inclusion in the Borrowing Base pursuant to the terms of the definition of
“Eligible Inventory”, (C) no Equipment included therein as Eligible Equipment
should be excluded from inclusion in the Borrowing Base pursuant to the terms of
the definition of “Eligible Equipment”, and (D) no Rolling Stock included
therein as Eligible Rolling Stock should be excluded from inclusion in the
Borrowing Base pursuant to the terms of the definition of “Eligible Rolling
Stock”. In the event any request for a Revolving Loan or a Borrowing Base
Certificate or other information required by this Section 8.5 is delivered to
Lender by Borrower Representative electronically or otherwise without signature,
such request, or such Borrowing Base Certificate or other information shall,
upon such delivery, be deemed to be signed and certified on behalf of Borrower
Representative by a Responsible Officer thereof and constitute a representation
to Lender as to the authenticity thereof. Lender shall have the right to review
and adjust any such calculation of the Borrowing Base to reflect exclusions from
Eligible Accounts, Eligible Inventory, Eligible Equipment, or Eligible Rolling
Stock, reserves pursuant to Section 2.1, declines in value of Collateral or such
other matters as are necessary to determine the Borrowing Base. Lender shall
have the continuing right to establish and adjust reserves in determining or
re-determining the Borrowing Base, pursuant to Section 2.1.

Section 8.6. Compliance Certificate. With each of the financial statements
delivered pursuant to Section 8.4(a) and Section 8.4(b), respectively, Borrower
Representative shall deliver to Lender a certificate signed by a Responsible
Officer of Borrower Representative (i) setting forth in reasonable detail the
calculations required to establish that Parent and its Consolidated Subsidiaries
were in compliance with the covenants set forth in Section 9.14 during the
period covered in such financial statements and as of the end thereof and
(ii) stating that, except as explained in reasonable detail in such certificate
(A) all of the representations and warranties of Credit Parties and Guarantor
contained in this Agreement and the other Loan Documents are correct and
complete in all material respects as at the date of such certificate as if made
at such time, except for those that are solely effective as of a particular
date, which shall be correct and complete in all material respects as of such
particular date, (B) on the date of such certificate, Credit Parties and
Guarantor are in compliance in all material respects with all of their
respective covenants and agreements in this Agreement and the other Loan
Documents and (C) no Default or Event of Default then exists or existed during
the period covered by such financial statements. If such certificate discloses
that a representation or warranty is not correct or complete, or that a covenant
has not been complied with, or that a Default or Event of Default existed or
exists, such certificate shall set forth what action Credit Parties and
Guarantor have taken or propose to take with respect thereto.

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Section 8.7. Notification to Lender.

(a)       Credit Parties and Guarantor shall notify Lender in writing
immediately (i) of the occurrence of any Default or Event of Default, (ii) after
becoming aware of any event or circumstance, including without limitation any
pending or threatened action, suit or claim by any Person, any pending or
threatened investigation by a Governmental Authority or any violation of any
Applicable Law, that would be treated as a contingent liability of any Credit
Party or Guarantor under GAAP and is in an amount in excess of $250,000 or which
could reasonably be expected to result in a Material Adverse Effect, (iii) if
any Credit Party’s or Guarantor’s board of directors, other governing boards or
committees, members or partners authorizes the filing by such Credit Party or
Guarantor of a petition in bankruptcy, (iv) of the acceleration of the maturity
of any Debt owed by any Credit Party or of any default by any Credit Party under
any indenture, mortgage, agreement, contract or other instrument to which such
Credit Party is a party or by which any of its properties is bound and is in an
amount in excess of $100,000, (v) of any claim under any Environmental Law or in
respect of any Hazardous Materials of $100,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or any
other material adverse claim asserted against any Credit Party or Guarantor or
with respect to any Credit Party’s or Guarantor’s properties, and (vi) of any
other development that results, or could reasonably be expected to result, in a
Material Adverse Effect. Each notice given shall describe the subject matter
thereof in reasonable detail and specify the action that Credit Parties and
Guarantor have taken or propose to take with respect thereto.

(b)       Credit Parties and Guarantor shall give Lender at least thirty (30)
days prior written notice of the Digirad Health Transfer and shall promptly (i)
deliver to Lender new original stock certificates representing the Equity
Interests transferred to Digirad Health, together with stock powers duly
executed in blank, (ii) deliver to Lender an updated Schedule 7.1 hereto, (iii)
deliver to Lender an updated Schedule 1.1 to the Pledge Agreement, and (iv)
execute and deliver (or cause to be executed and delivered) all other documents
and take (or cause to be taken) all other actions that Lender reasonably
requests in connection with the Digirad Health Transfer.

(c)       Credit Parties and Guarantor shall give Lender at least ten (10)
Business Days prior written notice if Digirad is to be delisted and no longer
publicly traded on the NASDAQ Stock Market pursuant to a voluntary delisting and
prompt written notice of any involuntary delisting.

Section 8.8. Accounts. If any Borrower becomes aware of any matter adversely
affecting the collectability of any Account of any Borrower involving an amount
greater than $100,000, including information regarding the Account Debtor’s
creditworthiness, such Borrower will promptly so advise Lender. Each Borrower
hereby agrees to promptly notify Lender of all disputes and claims in excess of
$100,000 with respect to any Account Debtor of such Borrower. No discount,
credit or allowance shall be granted to any such Account Debtor without Lender’s
prior written consent. Borrowers shall deliver to Lender a copy of each credit
memorandum upon demand by Lender.

Section 8.9. Inventory.

(a)       All Inventory shall be held for sale in the ordinary course of Credit
Parties’ and Guarantor’s business, and is and will be fit for such purpose.
Credit Parties and Guarantor will keep the Inventory in good and marketable
condition, at their own expense. No Borrower will acquire or accept any
Inventory on consignment or approval. No Borrower will sell any Inventory on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or other repurchase or return basis.

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(b)       Borrowers will maintain a perpetual inventory system at all times.
Borrowers will conduct a physical count of the Inventory at least once per
Fiscal Year and at Lender’s request, within thirty (30) days of conducting any
physical count, Borrowers shall supply Lender with a copy of such count.

(c)       Borrowers shall promptly report to Lender in writing any Inventory
returned by an Account Debtor involving an amount in excess of $150,000. All
such returned Inventory shall be segregated from all other Inventory, and shall
not be reportable as Eligible Inventory unless and until Borrowers demonstrate
to Lender’s satisfaction that such returned Inventory is in saleable condition
and meets all criteria for Eligible Inventory. Unless otherwise agreed by
Lender, the amount of Borrowers’ Accounts relating to such returned Inventory
shall be deemed excluded from Eligible Accounts. No Borrower shall issue any
credits or allowances with respect to such returned Inventory without Lender’s
prior written consent. All returned Inventory shall be subject to Lender’s
Liens.

Section 8.10. Equipment, Machinery and Rolling Stock. Credit Parties and
Guarantor will maintain, preserve, protect and keep all Equipment, Machinery and
Rolling Stock in good condition, repair and working order, ordinary wear and
tear excepted, and will cause such Equipment, Machinery and Rolling Stock to be
used and operated in a good and workmanlike manner, in accordance with
Applicable Law and in a manner which will not make void or cancelable any
insurance with respect to such Equipment, Machinery and Rolling Stock. Credit
Parties and Guarantor will promptly make or cause to be made all repairs,
replacements and other improvements to or in connection with such Equipment,
Machinery and Rolling Stock which are necessary or desirable or that Lender may
request to such end. Current maintenance records will be maintained on all
Equipment, Machinery and Rolling Stock and made available to Lender upon
request. Borrowers will promptly furnish to Lender a statement respecting any
loss or damage to any of such Equipment, Machinery, or Rolling Stock with an
aggregate value in excess of $150,000. No Credit Party nor Guarantor will alter
or remove any identifying symbol or number on any Equipment, Machinery or
Rolling Stock or permit any of the Collateral which constitutes Equipment to at
any time become so related or attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral and
as to which Lender has a first priority Lien.

Section 8.11. Insurance. Credit Parties and Guarantor shall, keep and maintain
insurance with respect to their business and all Collateral, wherever located,
covering liabilities, losses or damages as are customarily insured against by
other Persons in the same or similar business and similarly situated or located.
All such policies of insurance shall be written by financially sound and
reputable insurers reasonably acceptable to Lender. Such insurance shall be with
respect to loss, damages, and liability of amounts acceptable to Lender and
shall include, at a minimum, business interruption, workers compensation,
general premises liability, fire, theft, casualty and all risk. Credit Parties
and Guarantor will make timely payment of all premiums required to maintain such
insurance in force. Credit Parties and Guarantor shall cause Lender to be an
additional insured and lenders loss payee under all policies of insurance
covering any of the Collateral, to the extent of Lender’s interest, in form
satisfactory to Lender, and shall cause a lenders loss payable endorsement to be
issued in favor of Lender in respect of Credit Parties’ and Guarantor’s property
insurance. All insurance proceeds paid to Lender shall be applied in reduction
of the Obligations unless otherwise agreed by Lender. Credit Parties and
Guarantor shall deliver copies of each insurance policy to Lender upon request.

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Section 8.12. Payment of Trade Liabilities, Taxes, Etc. Each Credit Party and
Guarantor will (a) timely file all required tax returns including any
extensions; (b) timely pay all taxes, assessments, and other governmental
charges or levies imposed upon it or upon its income, profits or property before
the same become delinquent; (c) timely (and in any event within ninety (90) days
past the original invoice billing date), pay all material liabilities owed by it
on ordinary trade terms to vendors, suppliers and other Persons providing goods
and services used by it in the ordinary course of its business; (d) pay and
discharge when due all other material liabilities now or hereafter owed by it,
other than royalty payments suspended in the ordinary course of business; and
(e) maintain appropriate accruals and reserves for all of the foregoing in
accordance with GAAP. A Credit Party or Guarantor may, however, delay paying or
discharging any of the foregoing so long as (i) it is in good faith contesting
the validity thereof by appropriate proceedings promptly instituted and
diligently conducted and has set aside on its books adequate reserves therefore
in accordance with GAAP, and (ii) none of the Collateral would become subject to
forfeiture, any Lien (other than a Permitted Lien not prior to Lender’s Lien on
the Collateral) or loss as a result of such delay or contest.

Section 8.13. Protective Advances. Borrowers hereby agree to immediately pay
Lender for any Protective Advances made by the Lender on their behalf or in
respect of any Collateral and such amounts are due and payable by Borrowers on
the date such Protective Advances are so made.

Section 8.14. Evidence of Compliance. Credit Parties and Guarantor will furnish
to Lender at Credit Parties’ and Guarantor’s expense all evidence which Lender
may from time to time reasonably request in writing as to the accuracy and
validity of or compliance with all representations, warranties and covenants
made by Credit Parties and Guarantor, as applicable, in the Loan Documents, the
satisfaction of all conditions contained therein, and all other matters
pertaining thereto.

Section 8.15. Environmental Matters; Environmental Reviews.

(a)       Each Credit Party and Guarantor will, and will cause its Subsidiaries
to, comply in all material respects with all Environmental Laws now or hereafter
applicable to such Person, as well as all contractual obligations and agreements
with respect to environmental remediation or other environmental matters, and
shall obtain, at or prior to the time required by applicable Environmental Laws,
all environmental, health and safety permits, licenses and other authorizations
necessary for its operations and will maintain such authorizations in full force
and effect, except for those which if not obtained or maintained could not
reasonably be expected to result in a Material Adverse Effect. No Credit Party
nor Guarantor will do anything or permit anything to be done which will subject
any of its properties or Subsidiaries to any remedial obligations under, or
result in noncompliance with applicable permits and licenses issued under, any
applicable Environmental Laws, assuming disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances.

(b)       Credit Parties and Guarantor will promptly furnish to Lender all
written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Credit Party or
Guarantor, or of which Credit Parties and Guarantor otherwise have notice,
pending or threatened against any such Person by any Governmental Authority with
respect to any alleged violation of or non-compliance with any Environmental
Laws or any permits, licenses or authorizations in connection with such Person’s
ownership or use of its properties or the operation of its business.

(c)       Credit Parties and Guarantor will promptly furnish to Lender all
requests for information, notices of claim, demand letters, and other
notifications, received by any Credit Party or Guarantor in connection with any
Credit Party’s or Guarantor’s or any of their respective Subsidiaries’ ownership
or use of their properties or the conduct of its business, relating to potential
responsibility with respect to any investigation or clean-up of Hazardous
Material at any location.

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Section 8.16. Subsidiaries; Fundamental Information. In the event that a direct
or indirect Subsidiary of any Credit Party is created or acquired or otherwise
comes into existence (which new Subsidiary must have been created or acquired in
compliance with the terms hereof), then (a) such Subsidiary shall (i) become
party to this Agreement as a Borrower through a joinder agreement in form and
substance acceptable to Lender (a “Joinder Agreement”), (ii) execute and deliver
to Lender a Perfection Certificate, and (iii) execute and deliver to Lender such
other documents, instruments and agreements as reasonably required by Lender in
order to pledge such Person’s real and personal property to Lender as security
for the Obligations free and clear of any Liens (other than Permitted Liens) and
(b) the Credit Party parent of such Subsidiary shall execute and deliver to
Lender a Pledge Agreement and such other documents, instruments and agreements
as reasonably required by Lender in order to pledge the Equity Interest of such
new Subsidiary (and confer such other rights as reasonably required by Lender in
respect thereof) to Lender as security for the Obligations. Upon creation of any
new Subsidiary or any change to any fundamental information of any Credit Party
from that set forth in Schedule 7.1 hereto, Credit Parties shall promptly (and
in any event within three (3) days of such change) deliver to Lender an updated
Schedule 7.1 hereto.

Section 8.17. Further Assurances. Credit Parties and Guarantor shall execute and
deliver, or cause to be executed and delivered, to Lender such documents and
agreements, and shall take or cause to be taken such actions, as Lender may,
from time to time, reasonably request to carry out the terms and conditions of
this Agreement and the other Loan Documents.

Section 8.18. Maintenance of Properties. Each Credit Party and Guarantor will,
and will cause its Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted.

Section 8.19. Lien Law. If any account or general intangible included in the
Collateral represents money owing pursuant to any contract for the improvement
of real property or for a public improvement for purposes of the Lien Law of the
State of New York (the “Lien Law”), Borrowers shall comply with the filing
requirements of the Lien Law and (i) give Lender notice of such fact; (ii)
receive and hold any money advanced by Lender with respect to such account or
general intangible as a trust fund to be applied to the payment of trust claims
as such term is defined in the Lien Law (Section 71 or otherwise); and (iii)
until such trust claim is paid, not use or permit the use of any such money for
any purpose other than the payment of such trust claims.

Section 8.20. Health Care Laws.

(a)       The Credit Parties and Guarantor shall, at all times, comply in all
material respects with all Health Care Laws.

(b)       Each Credit Party and Guarantor shall:

(i)       obtain, maintain and preserve, and take all necessary action to timely
renew, all material Health Care Permits which are necessary or useful in the
proper conduct of its business;

(ii)       be and remain in compliance with all requirements for participation
in, and for licensure required to provide the goods or services that are
reimbursable by Medicare, Medicaid and other Third Party Payors;

(iii)       cause all Licensed Personnel to be in compliance with all applicable
Health Care Laws in the performance of their duties to or for any Credit Party
or Guarantor, and to maintain in full force and effect all professional licenses
and other Health Care Permits required to perform such duties;

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(iv)       keep and maintain all records required to be maintained by any
Governmental Authority or otherwise under any Health Care Law; and

(v)       cause all business arrangements with hospitals, physicians, and other
customers to be structured to comply with all Health Care Laws.

(c) Promptly after knowledge thereof shall have come to the attention of any
Responsible Officer of any Credit Party or Guarantor, such Credit Party or
Guarantor shall provide written notice of any of the following health care
related events to Lender:

(i)       that any Credit Party or Guarantor hereafter becomes subject to any
federal or state governmental or private payor civil or criminal investigations,
inquiries or audits involving and/or related to its compliance with Health Care
Laws;

(ii)       that a Person with a “direct or indirect ownership interest” (as that
phrase is defined in 42 C.F.R. §420.201) in, or an officer or member of senior
management of, a Credit Party or Guarantor: (A) has had a civil monetary penalty
assessed against him or her pursuant to 42 U.S.C. §1320a-7a or is the subject of
a proceeding seeking to assess such penalty; (B) has been excluded from
participation in a Federal Health Care Program (as that term is defined in 42
U.S.C. §1320a-7b) or is the subject of a proceeding seeking to assess such
penalty; (C) has been convicted (as that term is defined in 42 C.F.R. §1001.2)
of any of those offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C. §§669,
1035, 1347, 1518 or is the subject of a proceeding seeking to assess such
penalty; or (D) has been involved or named in a U.S. Attorney complaint made or
any other action taken pursuant to the False Claims Act under 31 U.S.C.
§§3729-3731 or qui tam action brought pursuant to 31 U.S.C. §3729 et seq.;

(iii)       receipt by a Credit Party or Guarantor of any notice or
communication from any applicable accrediting organization that such Person or
entity is (A) subject to or is required to file a plan of correction with
respect to any accreditation survey, or (B) in danger of losing its
accreditation due to a failure to comply with a plan of correction;

(iv)       any health care survey report relating to licensure or certification
which includes any statement of deficiencies pertaining to a Credit Party or
Guarantor for which a plan of correction has not been submitted by the required
due date or accepted by the applicable Governmental Authority within thirty (30)
days following timely submission of the plan of correction;

(v)       without duplication, any failure of a Credit Party or Guarantor to
comply with the covenants and conditions of this Section 8.20; or

(vi)        promptly, from time to time, such other health care related
information regarding the operations, business affairs and financial condition
of any Credit Party or Guarantor, or compliance with the terms of any Loan
Document, as the Lender may reasonably request.

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Section 8.21. Post-Closing Requirements. To the extent not completed prior to
the Agreement Date, the Credit Parties shall satisfy the requirements set forth
below on or prior to the dates set forth below:

(a)       On or before the date which is thirty (30) days after the Agreement
Date, the Credit Parties shall obtain Collateral Access Agreements, executed and
delivered to Lender by each landlord for the following locations: (a) the
property located at 13100 Gregg Street, Poway, California 92064, and (b) the
property located at 51048 Industrial Court, Suite E, Suwanee, Georgia 30024.

(b)       On or before the date which is thirty (30) days after the Agreement
Date, the Credit Parties shall deliver to Lender customary insurance
endorsements, as required under Section 8.11, in form and substance satisfactory
to Lender related to the property and liability insurance policies of the Credit
Parties, which name (whether directly or indirectly by reference to the
requirements set forth in this Agreement) Lender as additional insured or lender
loss payee, as applicable, with respect to such insurance, and related policy
provisions reasonably requested by Lender.

(c)       On or before the date which is fifteen (15) days after the Agreement
Date, the Credit Parties shall deliver to Lender the original certificates of
title for all vehicles and Rolling Stock included in the Collateral and such
information as Lender may require for the purpose of having Lender’s Lien noted
on such certificates of title.

(d)       On or before the date which is ten (10) Business Days after the
Agreement Date, the Credit Parties shall deliver, or cause to be delivered, to
Lender a Control Agreement with respect to each Deposit Account for which a
Control Agreement is required under this Agreement.

(e)       On or before the date which is two (2) Business Days after the
Agreement Date, the Credit Parties shall deliver, or cause to be delivered, to
Lender or its designee all original stock certificates representing Equity
Interests pledged to Lender pursuant to the Pledge Agreement, together with
transfer powers duly executed in blank.

(f)       On or before the date which is forty-five (45) days after the
Agreement Date, the Credit Parties shall deliver, or cause to be delivered, to
Lender releases of all tax liens on any property of any of the Credit Parties,
duly executed by the applicable taxing authority.

 

ARTICLE IX
NEGATIVE COVENANTS

Until termination of this Agreement and the indefeasible payment and performance
in full of the Obligations (other than contingent indemnification obligations),
each Credit Party and Guarantor, as applicable, agrees, jointly and severally,
as follows:

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Section 9.1. Fundamental Changes. No Credit Party shall enter into any
transaction of merger, reorganization, consolidation, wind-up, liquidation,
recapitalization or dissolution (or suffer any liquidation or dissolution)
except that (a) any Credit Party may merge with and into another Credit Party
provided that (i) a Borrower must be the surviving entity of any such merger to
which it is party and no merger may occur between Digirad Health and any other
Borrower unless Digirad Health is the surviving entity, (b) a Credit Party may
merge with a Subsidiary of a Credit Party that is not a Credit Party so long as
such Credit Party is the surviving entity of any such merger, (c) any Credit
Party (other than Digirad Health) shall be permitted to liquidate or dissolve so
long as the assets of such Credit Party are transferred to another Credit Party.
No Credit Party will change its name, identity, jurisdiction of organization,
organizational type or location of its chief executive office or principal place
of business unless such Credit Party (or Borrower Representative, on behalf of
such Credit Party) gives Lender at least thirty (30) days prior written notice
thereof and executes (or causes such applicable Credit Party to execute) all
documents and takes (or causes such applicable Credit Party to take) all other
actions that Lender reasonably requests in connection therewith, including but
not limited to the delivery of a legal opinion to Lender, reasonably
satisfactory in form and substance to Lender.

Section 9.2. Collateral Locations. Except for Inventory in transit to a Credit
Party or Guarantor in the ordinary course of business, no Credit Party nor
Guarantor will maintain any Collateral at any location other than those
locations listed on Schedule 7.11 unless it (i) gives the Lender at least thirty
(30) days prior written notice thereof, (ii) delivers or causes to be delivered
to Lender all documents that Lender reasonably requests in connection therewith
and, in the case of any leased location, at Lender’s request, exercises
commercially reasonable efforts to deliver to Lender a Collateral Access
Agreement, in accordance with the terms of Section 5.2, signed by the owner of
such location, and (iii) takes all other actions that Lender reasonably requests
in connection therewith.

Section 9.3. Use of Proceeds. Borrowers will not use any proceeds of any Loan,
directly or indirectly, for any purpose other than (a) on the Agreement Date, to
pay transactional fees, costs and expenses incurred in connection with the Loan
Documents, (b) on the Agreement Date, to refinance or pay off indebtedness for
money borrowed prior to the Agreement Date, and (c) on the Agreement Date and
thereafter, for general corporate purposes. No Borrower will use any Letter of
Credit for any purpose other than for its general corporate purposes. Borrowers
will not use any proceeds of any Loan or use any Letter of Credit, directly or
indirectly, to purchase or carry margin stock, repay or otherwise refinance
indebtedness incurred to purchase or carry Margin Stock or to extend credit for
the purpose of purchasing or carrying any Margin Stock. None of the Borrowers,
the other Credit Parties or their Subsidiaries have used or procured, nor shall
they use or procure, the proceeds of any Loan or other extension of credit, or
any Letter of Credit, (i) in furtherance of an offer, payment, promise to pay,
or authorization of the payment or giving money, or anything else of value, to
any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of
funding, financing or facilitating any activities, business or transaction of or
with any Sanctioned Person or any Blocked Person, or in any Sanctioned Country
or (iii) in any manner that would result in the violation of any Sanctions
applicable to any party hereto.

Section 9.4. Business. No Credit Party will (i) engage, directly or indirectly,
in any line of business other than the businesses in which Credit Parties are
engaged on the Agreement Date and similar or related businesses associated
therewith, or (ii) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except, in each case, in the ordinary
course of business.

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Section 9.5. Debt. No Credit Party shall incur, create, assume or suffer to
exist any Debt, other than the following (collectively, “Permitted Debt”): (a)
the Obligations, (b) trade payables and contractual obligations to suppliers and
customers arising in the ordinary course of business, (c) Subordinated Debt, (d)
Debt, existing on the Agreement Date and described on Schedule 7.21, and any
related Refinancing Debt, (e) purchase money secured Debt (including Capital
Leases) incurred to purchase Equipment, provided, that the aggregate amount of
such Debt outstanding does not exceed $1,000,000 at any one time outstanding,
(f) Debt of such Credit Party with respect to surety, appeal, indemnity,
performance, or other similar bonds incurred in the ordinary course of business,
(g) Debt owing to any Person providing property, casualty, liability or other
insurance to Credit Parties, so long as the amount of such Debt does not exceed
the amount of the unpaid cost of, and shall be incurred only to defer the cost
of, such insurance for the year in which such Debt is incurred and such Debt is
outstanding only during such year, (h) Debt incurred in the ordinary course of
business in respect of credit cards, credit card processing services, debit
cards, stored value cards, or purchase cards (including so-called “procurement
cards” or “P-cards”), (i) Debt constituting Permitted Investments, (j) Debt
arising from endorsement of instruments or other payment items for deposit, (k)
unsecured Debt incurred in respect of netting services, overdraft protection,
and other like services, in each case incurred in the ordinary course of
business, (l) guarantees by one Credit Party of Debt of another Credit Party
otherwise permitted under this Section 9.5.

Section 9.6. Subordinated Debt. No Credit Party shall make any payment or
prepayment of, or redemption, purchase, retirement, defeasance, sinking fund or
similar payment with respect to (a) any Subordinated Debt, except as expressly
permitted under the applicable Subordination Agreement or (b) any Debt owing to
a holder of such Person’s Equity Interests.

Section 9.7. Liens. No Credit Party shall create, incur, assume, or permit to
exist any Lien on any property now owned or hereafter acquired by any of them,
except Permitted Liens. No Credit Party will enter into or become subject to any
agreement whereby any Credit Party is prohibited from, or would otherwise be in
default as a result of, creating, assuming, incurring, or suffering to exist,
directly or indirectly, any Lien on any of its assets in favor of Lender.

Section 9.8. Disposition of Property. No Credit Party will transfer, sell,
assign, lease, license or otherwise dispose of any of its property, or agree to
do any of the foregoing, except any of the following (collectively, “Permitted
Dispositions”):

(a)       use of money or cash equivalents, not constituting proceeds of
Collateral, in the ordinary course of business and in a manner that is not
prohibited by this Agreement;

(b)       sale of Inventory in the ordinary course of business;

(c)       sale or other disposition of Equipment in the ordinary course of
business that is obsolete or no longer useable by such Credit Party in the
ordinary course of its business, provided, that (i) if such sale or disposition
is made without replacement of such Equipment, or such Equipment is replaced by
Equipment leased by a Borrower, then all net proceeds of any such sale or
disposition shall be applied to the Obligations in accordance with the terms
hereof or (ii) if such sale or disposition is made in connection with the
purchase by a Borrower of replacement Equipment, then such Borrower shall use
the proceeds of such sale or disposition to purchase such replacement Equipment
(and any net proceeds of such sale or disposition not used in connection with
the purchase of replacement Equipment shall be applied to the Obligations in
accordance with the terms hereof);

(d)       sales or assignments of past-due receivables which do not constitute
Eligible Accounts to a collection agency in the ordinary course of business,
only in connection with the compromise or collection thereof;

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(e)       the license, on a non-exclusive basis, by such Credit Party of its
Proprietary Rights in the ordinary course of business;

(f)       the granting of Permitted Liens;

(g)       the lapse of registered Proprietary Rights of any Credit Party or the
abandonment of Proprietary Rights in the ordinary course of business so long as,
in each case (i) such Proprietary Rights are not material to the conduct of its
or any other Credit Party’s business, (ii) with respect to copyrights, such
copyrights are not material revenue generating copyrights, and (iii) such lapse
is not materially adverse to the interest of the Credit Parties;

(h)       the making of Distributions that are expressly permitted pursuant to
Section 9.10;

(i)       liquidation or dissolution of a Credit Party permitted by Section 9.1;
and

(j)       the making of Permitted Investments.

Section 9.9. Sale and Leaseback. No Credit Party shall directly or indirectly
enter into any arrangement with any Person providing for any Credit Party to
lease or rent property that such Credit Party has sold or will sell or otherwise
transfer to such Person.

Section 9.10. Distributions; Capital Contribution; Redemption.

(a)       No Credit Party shall directly or indirectly declare or make, or incur
any liability to make, any Distribution, except:

(i)       Distributions to any Borrower by its Subsidiaries;

(ii)       so long as no Event of Default has occurred and is continuing or
would result therefrom, cash Distributions by any Credit Party to holders of its
Equity Interests not exceeding the liability of each such holder for income
taxes solely attributable to such Credit Party’s net income;

(iii)       cash Distributions directly or indirectly to Digirad in respect of
its Equity Interests in any Credit Party, so long as (A) no Default or Event of
Default has occurred and is continuing or would result therefrom, (B) all Credit
Parties and Guarantor, as applicable, are in pro forma compliance with all
financial covenants contained herein as of the date of and after giving effect
to such Distribution, (C) the aggregate amount of such Distributions does not
exceed $5,300,000, (D) such Distributions are used for the purchase by Digirad
of real property from ATRM Holdings, Inc. or any Subsidiary thereof and for no
other purpose, (E) the Guaranty Agreement of Individual Guarantor is in full
force and effect, and the validity or enforceability of such Guaranty Agreement
is not being contested or challenged, and (F) after giving effect to payment of
(1) such Distribution, (2) all taxes due and owing, and (3) all trade
indebtedness such that no trade indebtedness is sixty (60) days or more past
due, average Availability for the period beginning on the later of the Agreement
Date or the day which is ninety (90) days prior to such Distribution and ending
on the date of such Distribution is not less than $2,500,000 and Availability as
of the date of such Distribution is not less than $2,500,000; and

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(iv)       cash Distributions directly or indirectly to Digirad in respect of
its Equity Interests in any Credit Party, so long as (A) no Default or Event of
Default has occurred and is continuing or would result therefrom, (B) all Credit
Parties and Guarantor, as applicable, are in pro forma compliance with all
financial covenants contained herein as of the date of and after giving effect
to such Distribution, and (C) after giving effect to payment of (1) such
Distribution, (2) all taxes due and owing, and (3) all trade indebtedness such
that no trade indebtedness is sixty (60) days or more past due, average
Availability for the period beginning on the later of the Agreement Date or the
day which is ninety (90) days prior to such Distribution and ending on the date
of such Distribution is not less than $4,000,000 and Availability as of the date
of such Distribution is not less than $4,000,000.

(b)       No Credit Party will, directly or indirectly: (i) make any capital
contribution of any nature to any Person other than a Credit Party, (ii) redeem
or retire any share of the capital stock of or partnership or limited liability
company interests in any other Credit Party (whether such interests are now or
hereafter issued, outstanding or created), or (iii) cause or permit any
reduction or retirement of the capital stock of any other Credit Party.

Section 9.11. Investments. No Credit Party will acquire any assets other than in
the ordinary course of business or otherwise meeting the requirements of this
Agreement. No Credit Party will make any Investment other than a Permitted
Investment.

Section 9.12. Transactions with Affiliates. No Credit Party will sell, lease or
otherwise transfer any property or any assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with any Affiliate of any Credit Party, except transactions (not
including payment of any management, consulting, monitoring, advisory or other
similar fees) that are not otherwise restricted hereunder entered into between
Credit Parties only in the ordinary course of such Credit Parties’ business,
consistent with past practices and undertaken in good faith, upon fair and
reasonable terms fully disclosed to Lender in amounts and upon terms no less
favorable to such Credit Parties than would be obtained in a comparable
arm’s-length transaction with a Person who is not an Affiliate. Without in any
way limiting the foregoing, Credit Parties will not engage in any transaction
with, make any payment to, or transfer any property or assets to Star
Procurement or provide any personnel or employees to Star Procurement or for the
performance of services by Star Procurement.

 

Section 9.13. New Subsidiaries. No Credit Party shall organize, create or
acquire any new Subsidiary without the consent of Lender (which shall be in
Lender’s sole discretion) and unless such Credit Party and new Subsidiary
complies with Section 8.16; provided, however, that (a) the Digirad Health
Transfer shall be permitted, so long as the Credit Parties comply with Section
8.7(b), and (b) Digirad Health may organize and create a new Subsidiary that is
100% owned directly or indirectly by Digirad Health, for the purpose of
transferring the assets of Digirad’s camera business to such Subsidiary, so long
as the Credit Parties and such new Subsidiary comply with Section 8.16 and all
documentation and other matters pertaining to the formation of such new
Subsidiary are satisfactory to Lender in all respects.

Section 9.14. Financial Covenants.

(a)       The Fixed Charge Coverage Ratio for Parent and its Consolidated
Subsidiaries for any Fiscal Quarter of Parent, determined as of the last day of
such Fiscal Quarter, shall not be less 1.25 to 1.0.

(b)       The Leverage Ratio for Parent and its Consolidated Subsidiaries, for
any Fiscal Quarter of Parent, determined as of the last day of such Fiscal
Quarter, shall not be greater than 3.50 to 1.0.

Section 9.15. Fiscal Year; Accounting Method. No Credit Party nor Guarantor will
change its Fiscal Year or its method of accounting (other than as required to
conform to GAAP).

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Section 9.16. Impairment of Security Interest. Credit Parties and Guarantor will
not take or fail to take any action which would in any manner impair the value
of, or the enforceability of Lender’s security interest in, any Collateral.
Further, Credit Parties and Guarantor will not adjust, settle, compromise, amend
or modify any of their rights in the Collateral (other than in the ordinary
course of business).

Section 9.17. Prohibited Contracts. Except as expressly provided for in the Loan
Documents, no Credit Party will, directly or indirectly, enter into, create, or
otherwise allow to exist any contract or other consensual restriction on the
ability of any Subsidiary of a Credit Party to: (a) pay dividends or make other
distributions to such Credit Party, (b) redeem equity interests held in it by
such Credit Party, (c) repay loans and other indebtedness owing by it to such
Credit Party, or (d) transfer any of its assets to such Credit Party. No Credit
Party will amend or permit any amendment to any contract or lease which
releases, qualifies, limits, makes contingent or otherwise detrimentally affects
the rights and benefits of Lender under or acquired pursuant to any Loan
Document.

Section 9.18. Deposit Accounts and Securities Accounts. No Credit Party nor
Guarantor shall establish or maintain any new Deposit Account or Securities
Account unless Lender shall have received a Control Agreement in respect thereof
or shall otherwise have “control” over such Deposit Account or Securities
Account under the UCC in accordance with the terms of Section 5.3; provided,
however, no such Control Agreement shall be required for Excluded Accounts.

Section 9.19. Compliance with ERISA. No Credit Party nor Guarantor shall, nor
shall any Credit Party or Guarantor permit any of its Subsidiaries to: (i)
maintain, or permit any ERISA Affiliate to maintain, or become obligated to
contribute, to any ERISA Benefit Plan other than any ERISA Benefit Plans
disclosed on Schedule 7.8, (ii) engage, or knowingly permit any ERISA Affiliate
to engage, in any non-exempt “prohibited transaction”, as that term is defined
in section 406 of ERISA and Section 4975 of the IRC, (iii) incur, or permit any
ERISA Affiliate to incur, any “accumulated funding deficiency”, as that term is
defined in Section 302 of ERISA or Section 412 of the IRC, (iv) terminate, or
permit any ERISA Affiliate to terminate, any ERISA Benefit Plan where such event
could result in any liability of any Credit Party or Guarantor any ERISA
Affiliate or the imposition of a lien on the property of any Credit Party or
Guarantor or any ERISA Affiliate pursuant to Section 4068 of ERISA, (v) assume,
or permit any ERISA Affiliate to assume any obligation to contribute to any
Multiemployer Plan, (vi) incur or permit any ERISA Affiliate to incur, any
withdrawal liability to any Multiemployer Plan, (vii) fail promptly to notify
the Lender of the occurrence of any Termination Event, (viii) fail to comply in
any material respect, or permit an ERISA Affiliate to fail to comply in any
material respect, with the requirements of ERISA or the IRC or other Applicable
Law in respect of any ERISA Benefit Plan, (ix) fail to meet, or permit any ERISA
Affiliate to fail to meet, all minimum funding requirements under ERISA or the
IRC or postpone or delay or allow any ERISA Affiliate to postpone or delay any
funding requirement with respect of any ERISA Benefit Plan.

ARTICLE X
EVENT OF DEFAULT

Section 10.1. Event of Default. Each of the following shall constitute an Event
of Default under this Agreement:

(a)       any failure by Borrowers to timely pay any of the Obligations when
due;

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(b)       any representation or warranty made or deemed made by any Credit
Party, Guarantor or Individual Guarantor in any Loan Document, or any financial
or other written statement, or any information furnished by such Person to
Lender shall be untrue in any material respect as of the date on which made,
deemed made or furnished;

(c)       any noncompliance or breach of any requirements contained in:

(i)       Sections 5.3 through 5.5, Sections 8.1 through 8.7, Sections 8.10
through 8.12, Section 8.16, Section 8.20, Section 8.21 or Article IX;

(ii)       Section 8.8, or Section 8.9, and any such failure continues for a
period of five (5) days; or

(iii)       any provision of the Loan Documents other than those listed in
clauses (i) and (ii) of this Section 10.1(c), and such failure continues for a
period of ten (10) days after the earlier of Borrower’s actual knowledge thereof
or written or verbal notice thereof by Lender to Borrower Representative;

(d)       any Credit Party, Guarantor or Individual Guarantor shall (i) file a
voluntary petition in bankruptcy or otherwise commence any action or proceeding
seeking reorganization, arrangement or readjustment of its debts, or consent to
or acquiesce in any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, custodian,
trustee or similar officer for it or for all or any part of its property; (iii)
make an assignment for the benefit of creditors; or (iv) be generally unable to
pay (or admit in writing that it is unable to pay) its debts as they become due;

(e)       an involuntary petition shall be filed or an action or proceeding
otherwise commenced seeking relief under the Bankruptcy Code in respect of, or
seeking any reorganization, arrangement, consolidation or readjustment of the
debts of, any Credit Party, Guarantor or Individual Guarantor under any other
bankruptcy or insolvency law and any of the following events occur: (i) such
Credit Party, Guarantor or Individual Guarantor consents or acquiesces to the
institution of such petition or proceeding, (ii) the petition commencing such
proceeding is not timely controverted, (iii) the petition commencing such
proceeding is not dismissed within thirty (30) calendar days of the filing date
thereof, (iv) an interim trustee is appointed to take possession of all or any
substantial portion of the property or assets of, or to operate all or any
substantial portion of the business of, such Credit Party, Guarantor or
Individual Guarantor or (v) an order for relief shall have been issued or
entered therein; provided, that Lender shall have no obligation to provide any
extension of credit to Borrowers during such thirty (30) day calendar period
specified in (iii) above;

(f)       a receiver, interim receiver, receiver manager, assignee, liquidator,
sequestrator, custodian, trustee or similar officer shall be appointed for any
Credit Party, Guarantor or Individual Guarantor or for all or any part of its
property or a warrant of attachment, execution or similar process shall be
issued against any part of the property of any Credit Party, Guarantor or
Individual Guarantor;

(g)       except as otherwise permitted by Section 9.1, any Credit Party or
Guarantor shall file a certificate of dissolution or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
action in furtherance thereof, or Individual Guarantor shall die or become
incompetent;

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(h)       any default, event of default or other breach shall occur with respect
to any Debt for borrowed money (other than the Obligations) of any Credit Party
or Guarantor in an outstanding principal amount which exceeds $100,000 and such
default shall continue for more than the period of grace, if any, therein with
respect thereto, if the effect thereof (with or without the giving of notice or
further lapse of time or both) is to accelerate, or to permit the holder of any
such Debt to accelerate, the maturity of any such Debt, or any such Debt shall
be declared due and payable or be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;

(i)       one or more judgments, orders, decrees or arbitration awards is
entered against any Credit Party or Guarantor involving in the aggregate
liability (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage) of $100,000 or more and either (i)
there is a period of 30 consecutive days at any time after the entry of such
judgment, order, decree or award during which (1) the same is not discharged,
satisfied, vacated or bonded pending appeal or (2) a stay of enforcement thereof
is not in effect or (ii) enforcement proceedings are commenced upon such
judgment, order, decree or award;

(j)       the filing or commencement of any attachment, sequestration,
garnishment, execution or similar process, or other involuntary Lien (other than
Permitted Liens) or action, against or with respect to any Collateral;

(k)       any Loan Document ceases to be in full force and effect or any Lien
with respect to any material portion of the Collateral intended to be secured
thereby ceases to be, or is not, valid, perfected (for any reason other than the
failure of Lender to file a financing statement or continuation thereof to
maintain perfection) and prior to all other Liens (other than Permitted Liens
that are expressly allowed to be prior pursuant to the terms hereof) or is
terminated, revoked or declared void, or any Loan Document shall terminate
(other than in accordance with its terms with the written consent of Lender) or
become void or unenforceable, or the validity or enforceability of any Loan
Document shall be contested by Credit Party, Guarantor or Individual Guarantor,
or any Affiliate of a Credit Party, Guarantor or Individual Guarantor;

(l)       any event or circumstance occurs which, in the Permitted Discretion of
Lender exercised in good faith, causes Lender to suspect that Credit Party,
Guarantor or Individual Guarantor has engaged in fraudulent activity;

(m)       the occurrence of a Material Adverse Effect;

(n)       the occurrence of a Change of Control; or

(o)       a Termination Event occurs which has resulted or could reasonably be
expected to result in liability of any Credit Party or Guarantor under Title IV
of ERISA to the ERISA Benefit Plan or the PBGC in an aggregate amount in excess
of $100,000 or any Credit Party or Guarantor or any ERISA Affiliate fails to pay
when due, after expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan on an aggregate amount in excess of $50,000.

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ARTICLE XI
REMEDIES

Section 11.1. Obligations.

(a)       If an Event of Default exists, Lender may do any one or more of the
following, at any time or times during such existence of an Event of Default and
in any order, without notice to or demand on any Credit Party, Guarantor or
Individual Guarantor: (i) reduce the Revolving Credit Limit, or the advance
rates used in computing the Borrowing Base, (ii) restrict the amount of or
refuse to make Loans, (iii) terminate the Lender’s Commitment to make Revolving
Loans and obligation to issue Letters of Credit or otherwise extend credit
hereunder, (iv) declare the Obligations to be immediately due and payable and
(v) pursue its other rights and remedies under the Loan Documents or otherwise
under Applicable Law.

(b)       Notwithstanding anything to the contrary contained in Section 11.1(a)
and in addition to the remedies set forth therein, upon the occurrence of any
Event of Default described in Sections 10.1(d), 10.1(e), 10.1(f) or 10.1(g), the
Lender’s Commitment to make Revolving Loans and obligation to issue Letters of
Credit or otherwise extend credit hereunder shall automatically and immediately
terminate and all Obligations shall automatically become immediately due and
payable without notice or demand of any kind.

Section 11.2. Collateral. If an Event of Default has occurred and is continuing,
Lender shall have, in addition to all other rights of Lender, the rights and
remedies of a secured party under the UCC. At any time when an Event of Default
is in existence: (i) Lender may notify Account Debtors to make payment directly
to Lender or to such address as Lender may specify, and enforce, settle or
adjust Accounts, General Intangibles or Chattel Paper with Account Debtors or
obligors thereon for amounts and upon terms which Lender considers appropriate,
and in such case, Lender will credit the Obligations with only the net amounts
received by Lender in payment thereof after deducting all Lender Expenses
incurred or expended in connection therewith; (ii) Lender may take possession of
the Collateral and keep it on Credit Parties’ or Guarantor’s premises or remove
all or any part of it to another location selected by Lender; (iii) on request
by Lender, Credit Parties and Guarantor will, at Credit Parties’ and Guarantor’s
cost, assemble the Collateral and make it available to Lender at a place
reasonably convenient to Lender; and (iv) Lender may, to the fullest extent
permitted by Applicable Law, sell or otherwise dispose of any Collateral at
public or private sales, for cash, upon credit or otherwise, at such prices and
upon such terms as Lender deems appropriate. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give the appropriate Credit Party or Guarantor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. For this purpose, it is agreed that at least ten (10) days’ notice
of the time of sale or other intended disposition of the Collateral delivered in
accordance with Section 13.6 shall be deemed to be reasonable notice in
conformity with the UCC. Lender may adjourn or otherwise reschedule any public
sale by announcement at the time and place specified in the notice of such
public sale, and such sale may be made at the time and place as so announced
without necessity of further notice. Lender shall not be obligated to sell or
dispose of any Collateral, notwithstanding any prior notice of intended
disposition. If any Collateral is sold on terms other than payment in full at
the time of sale, no credit shall be given in reduction of the Obligations until
Lender receives payment in cash, and if any such buyer defaults in payment,
Lender may resell the Collateral without further notice to Credit Parties and
Guarantor. In the event Lender seeks to take possession of all or any portion of
the Collateral by judicial process, each Credit Party and Guarantor waives the
posting of any bond, surety or security with respect thereto which might
otherwise be required. Each Credit Party and Guarantor agrees that Lender has no
obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. Lender is hereby granted a license or other right to
use, without charge, each Credit Party’s and Guarantor’s Proprietary Rights in
completing production of, advertising or selling any Collateral, and each Credit
Party’s and Guarantor’s rights under all licenses shall inure to Lender’s
benefit for such purpose. The proceeds of any sale or disposition of Collateral
shall be applied to the Obligations as set forth in Section 4.7. The rights and
remedies of the Lender under this Agreement and the other Loan Documents shall
be cumulative. The Lender shall have all other rights and remedies not
inconsistent herewith as provided under the UCC, other Applicable Law or in
equity.

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Section 11.3. Injunctive Relief. All cash proceeds of Collateral from time to
time existing, including without limitation collections and payments of
Accounts, whether consisting of cash, checks or other similar items, at all
times shall be subject to an express trust for the benefit of Lender. All such
proceeds shall be subject to Lender’s Liens. Except as may be specifically
allowed otherwise by this Agreement (including use of cash not in violation of
the terms hereof distributed to Borrowers by Lender pursuant to Section 4.7),
Credit Parties and Guarantors are expressly prohibited from using, spending,
retaining or otherwise exercising any dominion over such proceeds. Each Credit
Party and Guarantor acknowledges and agrees that an action for damages against a
Credit Party or Guarantor for any breach of such prohibitions shall not be an
adequate remedy at law. In the event of any such breach, each Credit Party and
Guarantor agrees to the fullest extent allowed by law that Lender shall be
entitled to injunctive relief to restrain such breach and require compliance
with the requirements of this Agreement.

Section 11.4. Setoff. If an Event of Default shall have occurred and be
continuing, Lender is hereby authorized at any time and from time to time to the
fullest extent permitted by Applicable Law to set off and apply any and all cash
and any and all deposits (whether general or special, time or demand,
provisional or final) at any time held, and any obligations at any time owing,
by Lender to or for the credit or the account of any Borrower or Guarantor
against any Obligations held by Lender, irrespective of whether or not Lender
shall have made any demand under the Loan Documents and regardless of whether
such Obligations are contingent or unmatured. The rights of Lender under this
Section 11.4 are in addition to other rights and remedies (including other
rights of setoff) that Lender may have. Lender agrees to notify the Borrower
Representative promptly after any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and
application.

ARTICLE XII
TERMINATION

Section 12.1. Term and Termination. Upon the effective date of termination of
this Agreement for any reason, Lender’s obligation to make Loans shall
automatically terminate and all Obligations shall become immediately due and
payable in full. Notwithstanding the termination of this Agreement, until all
Obligations (other than contingent indemnity obligations) are indefeasibly paid
in cash and performed in full, Credit Parties and Guarantor shall remain bound
by the terms of this Agreement and Lender shall retain all rights and remedies
under the Loan Documents.

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ARTICLE XIII
MISCELLANEOUS

Section 13.1. Waivers & Amendments. No waiver or amendment of any provision of
any Loan Document and no consent to any departure therefrom shall be effective
unless it is in writing and signed as provided below in this Section, and then
such waiver, amendment or consent shall be effective only in the specific
instances and for the purposes for which given and to the extent specified in
such writing. No waiver, consent, release, modification or amendment of or
supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
(i) if such party is a Credit Party, by such Credit Party, (ii) if such party is
LC Issuer, by LC Issuer (or, if LC Issuer is an Other LC Issuer, by Lender on
behalf of such Other LC Issuer), and (iii) if such party is Lender, by Lender.

Section 13.2. Severability. The illegality or unenforceability of any provision
of any Loan Document shall not in any way affect or impair the legality or
enforceability of the remaining provisions thereof.

Section 13.3. Governing Law; Venue.

(a)       THIS AGREEMENT HAS BEEN EXECUTED OR COMPLETED AND/OR IS TO BE
PERFORMED IN NEW YORK, AND IT AND ALL TRANSACTIONS HEREUNDER OR PURSUANT HERETO
SHALL BE GOVERNED AS TO INTERPRETATION, VALIDITY, EFFECT, RIGHTS, DUTIES AND
REMEDIES OF THE PARTIES THEREUNDER AND IN ALL OTHER RESPECTS BY THE LAWS OF NEW
YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT
INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW.

(b)       ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR IN
ANY FEDERAL OR STATE COURT SITTING IN NEW YORK COUNTY, ROCKLAND COUNTY OR
WESTCHESTER COUNTY, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH CREDIT
PARTY, GUARANTOR AND LENDER CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH CREDIT PARTY, GUARANTOR AND LENDER IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO VENUE ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH JURISDICTION. NOTWITHSTANDING THE FOREGOING, LENDER
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY CREDIT PARTY
OR GUARANTOR OR ANY CREDIT PARTY’S OR GUARANTOR’S PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION AS LENDER DEEMS NECESSARY OR APPROPRIATE IN ORDER TO EXERCISE
REMEDIES WITH RESPECT TO THE COLLATERAL.

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Section 13.4. WAIVER OF JURY TRIAL. EACH CREDIT PARTY, GUARANTOR AND LENDER EACH
IRREVOCABLY WAIVES ITS RESPECTIVE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY KIND BROUGHT BY ANY SUCH PERSON
AGAINST ANOTHER, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. EACH CREDIT PARTY, GUARANTOR AND LENDER EACH AGREES THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS, WHETHER OR NOT SPECIFICALLY SET FORTH THEREIN.

Section 13.5. Fees and Expenses. Credit Parties and Guarantor agree to pay to
Lender, on demand, all costs, fees and expenses that Lender pays or incurs in
connection with the negotiation, preparation, consummation, administration,
enforcement, perfection and termination of this Agreement or any of the other
Loan Documents, including: (a) reasonable attorney’s fees and costs for
preparation, negotiation and closing of the Loan Documents and any amendment,
supplement, waiver, consent or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby, (b) ongoing administration
of the Loan Documents, including without limitation, reasonable attorney’s fees
and costs incurred in consultation with attorneys, (c) costs and expenses of
lien and title searches, (d) taxes, fees and other charges for filing financing
statements and other actions to perfect, protect and continue Lender’s Liens,
(e) sums paid or incurred to pay any amount or take any action required of any
Credit Party or Guarantor under the Loan Documents that Credit Parties and
Guarantor fail to pay or take, (f) costs of appraisals, inspections and
verifications of the Collateral, including travel, lodging, and meals for
inspections of the Collateral and Credit Parties’ and Guarantor’s operations by
Lender, subject to the terms of Sections 5.4 and 5.5 hereof, (g) costs and
expenses of disbursing Loans and administering cash management of Collateral
proceeds, including collection accounts and lock-boxes, (h) costs and expenses
of preserving and protecting the Collateral, (i) costs, fees and expenses,
including reasonable attorney’s fees and costs, paid or incurred to enforce
Lender’s Liens, sell or dispose of the Collateral, and obtain payment of the
Obligations, (j) costs and expenses, including reasonable attorney’s fees and
costs, paid or incurred to defend any claims made or threatened against Lender
arising out of the transactions contemplated by the Loan Documents and (k) costs
and expenses incurred by Lender in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder (all such costs, expenses and fees described in this Section 13.5,
the “Lender Expenses”). The foregoing shall not limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by Credit Party,
Guarantor or Individual Guarantor.

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Section 13.6. Notices. Except as otherwise expressly provided in any Loan
Document, all notices, demands and requests that any party is required to give
to any other party shall be in writing and shall become effective (a) upon
personal delivery or upon delivery by any nationally recognized courier service,
(b) three (3) days after it shall have been mailed by United States first class
mail, certified or registered, with postage prepaid, or (c) when properly
transmitted by telecopy or email, so long as a copy is also mailed that same day
by United States first class mail, in each case addressed to the party to be
notified as follows:

If to Lender:

Sterling National Bank
8401 North Central Expressway, Suite 600
Dallas, Texas 75225
Attention: Portfolio Manager, URGENT

With a copy to:

Sterling National Bank
21 Scarsdale Road
Yonkers, New York 10707
Attention: General Counsel
Fax No.: (914) 961-7378

If to Borrowers, to Borrower Representative, as follows:

Digirad Health, Inc.

1048 Industrial Court, Suite E

Suwanee, GA 30024

Telephone: (858) 726-1600

Fax No.: (858) 726-1546

Email: David.Noble@digirad.com

Attention: Chief Financial Officer

 

If to Guarantor:

 

Digirad Corporation

1048 Industrial Court, Suite E

Suwanee, GA 30024

Telephone: (858) 726-1600

Fax No.: (858) 726-1546

Email: David.Noble@digirad.com

Attention: Chief Financial Officer

 

or to such other address as each party may designate for itself by like notice.

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Section 13.7. Waiver of Notices. Unless otherwise expressly provided in any Loan
Document, each Credit Party and Guarantor hereby waives presentment and notice
of demand or dishonor and protest, notice of intent to accelerate the
Obligations and notice of acceleration of the Obligations, as well as any and
all other notices to which it might otherwise be entitled. No notice to or
demand on any Credit Party or Guarantor which Lender may elect to give shall
entitle such Credit Party or any other Credit Party or Guarantor to any or
further notice or demand in the same, similar or other circumstances.

Section 13.8. Non-applicability of Chapter 346 of Texas Finance Code. Except for
the opt-out provision of Section 346.004 thereof, the provisions of Chapter 346
of the Texas Finance Code (regulating certain revolving credit loans and
revolving tri-party accounts) shall not be applicable to this Agreement, any
other Loan Document or the Loans.

Section 13.9. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Credit Parties, Guarantor, the Lender and their respective
representatives, successors, and assigns, provided, that no interest herein may
be assigned, and no obligation may be delegated, by any Credit Party or
Guarantor without prior written consent of the Lender. Subject to Section 13.13,
the rights and benefits of the Lender under the Loan Documents shall inure to
any Person acquiring any interest in the Obligations from the Lender, unless
otherwise agreed by the Lender and any such Person.

Section 13.10. INDEMNITY BY CREDIT PARTIES AND GUARANTOR. EACH CREDIT PARTY AND
GUARANTOR AGREES TO DEFEND, INDEMNIFY AND HOLD EACH INDEMNIFIED PERSON HARMLESS
FROM AND AGAINST ANY AND ALL INDEMNIFIED CLAIMS INCLUDING THOSE INDEMNIFIED
CLAIMS WHICH RELATE TO OR ARISE OUT OF ANY INDEMNIFIED PERSON’S OWN NEGLIGENCE,
provided, that no Credit Party nor Guarantor shall have any obligation hereunder
to any Indemnified Person with respect to Indemnified Claims resulting solely
and directly from the willful misconduct or gross negligence of such Indemnified
Person. The agreements in this Section shall survive any termination of this
Agreement or payment of all Obligations.

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Section 13.11. Limitation of Liability. To the fullest extent permitted by
Applicable Law, no claim may be made by any party hereto against any other party
hereto or any of their Affiliates, directors, officers, members, managers,
stockholders, employees or agents (and their respective successors and assigns)
for any special, indirect, consequential, exemplary or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement, any other Loan Document, or any agreement or
instrument contemplated hereby or thereby, the transactions contemplated hereby
or thereby, any Loan or the use of the proceeds thereof, or any act, omission or
event occurring in connection therewith, and each party hereto hereby waives,
releases and agrees not to sue upon any claim for such damages, whether or not
accrued and whether or not known or suspected to exist in its favor; provided,
that nothing in this Section 13.11 shall relieve any Credit Party or Guarantor
of any obligations it may have to indemnify an Indemnified Person against
special, indirect, or consequential Indemnified Claims by a third party.

Section 13.12. Continuing Rights of Lender in Respect of Obligations. In the
event any amount from time to time applied in reduction of the Obligations is
subsequently set aside, avoided, declared invalid or recovered by any Credit
Party or Guarantor or any trustee or in bankruptcy, or in the event the Lender
is otherwise required to refund or repay any such amount pursuant to any
Applicable Law, then the Obligations shall automatically, to the fullest extent
permitted by Applicable Law, be deemed to be revived and increased to the extent
of such amount and the same shall continue to be secured by the Collateral as if
such amount had not been so applied.

Section 13.13. Assignments.

(a)       Lender may at any time sell, assign, delegate or otherwise transfer
all or part of the rights and duties of Lender under this Agreement and the
other Loan Documents to any of the following Persons (an “Assignee”): (i) any
Affiliate of the Lender or (ii) any other Person with the prior written consent
of the Borrowers (which consent may be given by Borrower Representative on
behalf of all Borrowers and shall not be unreasonably withheld, conditioned or
delayed; provided, however, Borrowers shall be deemed to have given their
consent unless they (or Borrower Representative, on behalf of all Borrowers)
shall object thereto by written notice to the Lender within five (5) Business
Days after notice thereof has actually been delivered by the Lender to Borrower
Representative); provided, that the consent of Borrowers shall not be required
under this subclause (ii) if an Event of Default has occurred and is continuing
or for any such sale, assignment or transfer in connection with a sale of all or
substantially all of the assets of Lender or all or substantially all of the
loans or asset based loans of Lender. Subject to the provisions of Section
13.14, each Credit Party and Guarantor hereby authorizes Lender to disseminate
any information it has pertaining to the Obligations, including without
limitation, complete and current credit information on the Credit Parties and
Guarantor and any of their principals to any Assignee or prospective Assignee.
Each Credit Party and Guarantor hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrowers and Guarantor to
the Assignee and that the Assignee shall be considered to be a Lender hereunder.
Except as otherwise provided herein, Lender shall be relieved of any of its
obligations hereunder as a result of any sale, assignment, delegation or other
transfer of all or any part of the Loans or other Obligations owed to it. Lender
may furnish any information concerning Credit Parties and Guarantor from time to
time to Assignees and participants and to any Affiliate of Lender or its parent
company. Credit Parties and Guarantor hereby agree to execute any amendment or
other document that may be necessary to effectuate such an assignment, including
an amendment to this Agreement providing for multiple lenders and an
administrative agent to act on behalf of such lenders.

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(b)       Notwithstanding anything in this Agreement or the other Loan Documents
to the contrary, Lender may pledge, or grant a security interest in, all or any
portion of its rights and other obligations under or relating to Loans under
this Agreement and the other Loan Documents to secure obligations of the Lender,
including, without limitation, any pledge or assignment to secure obligations to
a Federal Reserve Lender; provided that, no such pledge or grant of a security
interest shall release the Lender from any of its obligations hereunder or under
any other Loan Document.

(c)       Lender shall have the right at any time, without the consent of
Borrowers, to sell one or more participant rights to any Person in all or any
part of its Commitments, Loans or in any other Obligation. The holder of any
such participation shall not be entitled to require Lender to take or omit to
take any action hereunder or under the other Loan Documents except with respect
to any amendment, modification or waiver that would extend the final scheduled
maturity of any Loan in which such participant is participating, or reduce the
rate or extend the time of payment of interest or fees thereon (except in
connection with a waiver of applicability of any post default increase in
interest rates) or reduce the principal amount thereof, or increase the amount
of the participant’s participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Commitment shall not constitute a change in the terms
of such participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant’s
participation is not increased as a result thereof). Borrowers agree that each
participant shall be entitled to the benefits of Sections 3.3, 3.5 and 3.6
(subject to the requirements and limitations therein) to the same extent as if
it were Lender and had acquired its interest by assignment pursuant to Section
13.13(a); provided that such participant shall not be entitled to receive any
greater payment under Sections 3.3, 3.5 or 3.6 with respect to any participation
than such participating Lender would have been entitled to receive, except to
the extent such entitlement to receive a greater payment results from a change
in Applicable Law that occurs after the participant acquired the applicable
participation.

Section 13.14. Confidentiality.

(a)       Each Credit Party and Guarantor agrees, and agrees to cause each of
its Affiliates, (i) not to transmit or disclose any provision of any Loan
Document to any Person (other than (1) to such Credit Party’s or Guarantor’s
employees, auditors, advisors, consultants, Affiliates and counsel, (2) as may
be required by statute judicial decision, or judicial or administrative order,
rule or regulations, (3) as may be agreed in advance by Credit Parties,
Guarantor and Lender or as requested or required by any Governmental Authority
pursuant to any subpoena or other process, (4) as to any such information that
is or becomes generally available to the public (other than as a result of a
prohibited disclosure by any Credit Party or Guarantor) or (5) in connection
with any litigation or other adversary proceeding involving parties hereto which
such litigation or adversary proceeding involves claims related to the rights or
duties of such parties under this Agreement or the other Loan Documents) without
Lender’s prior written consent, (ii) to inform all Persons of the confidential
nature of the Loan Documents and to direct them not to disclose the same to any
other Person and to require each of them to be bound by these provisions. Each
Credit Party and Guarantor agrees to submit to Lender and Lender reserves the
right to review and approve all materials (other than any financial statements,
period reports, or other formal documents that such Credit Party or Guarantor is
required to submit to the United States Securities and Exchange Commission) that
such Credit Party or Guarantor or any of their respective Affiliates prepares
that contain Lender’s name or describe or refer to any Loan Document, any of the
terms thereof or any of the transactions contemplated thereby. No Credit Party
nor Guarantor shall, and shall not permit any of its Affiliates to, use the
Lender’s name (or the name of any of its Affiliates) in connection with any of
its business operations, including without limitation, advertising, marketing or
press releases or such other similar purposes, without the Lender’s prior
written consent (except as required by Applicable Law). Nothing contained in any
Loan Document is intended to permit or authorize any Credit Party or Guarantor
or any of their respective Affiliates to contract on behalf of the Lender.

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(b)       Lender agrees that material, non-public information regarding the
Credit Parties and Guarantor, their operations, assets, and existing and
contemplated business plans shall be treated by Lender in a confidential manner,
and shall not be disclosed by Lender to Persons who are not parties to this
Agreement, except: (i) to attorneys for and other advisors, accountants,
auditors, and consultants to the Lender, (ii) to Subsidiaries and Affiliates of
the Lender, (iii) as may be required by statute, judicial decision, or judicial
or administrative order, rule, or regulation, (iv) as may be agreed to in
advance by the Credit Parties and Guarantor or as requested or required by any
Governmental Authority pursuant to any subpoena or other legal process, (v) as
to any such information that is or becomes generally available to the public
(other than as a result of prohibited disclosure by the Lender), (vi) in
connection with any assignment, participation or pledge of the Lender’s interest
under this Agreement, and (vii) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents. Notwithstanding the foregoing, each
Credit Party and Guarantor hereby expressly authorizes the Lender to use the
respective Credit Party’s or Guarantor’s name and logo in tombstone
advertisements and press releases regarding this transaction, provided that the
Borrower Representative has had a chance to review and approve the contents of
such tombstone or press release, such approval not to be unreasonably withheld
or delayed.

Section 13.15. USA Patriot Act Notice. The Lender hereby notifies the Credit
Parties and Guarantor that, pursuant to the requirements of the Patriot Act, it
is required to obtain, verify and record information that identifies each Credit
Party and Guarantor, which information includes the name and address of each
Credit Party and Guarantor and other information that will allow the Lender to
identify each Credit Party and Guarantor in accordance with the Patriot Act.

Section 13.16. Schedules. All Schedules referenced herein and attached hereto
are incorporated in this Agreement and made a part hereof for all purposes.

Section 13.17. Counterparts. This Agreement may be executed in any number of
counterparts, and signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. A telecopy or other electronic
transmission of any such executed counterpart signature page shall be deemed
valid as an original.

Section 13.18. Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and may not be
construed to modify, enlarge or restrict any provision of this Agreement.

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Agreement Date.

  DIGIRAD HEALTH, INC., as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  DIGIRAD IMAGING SOLUTIONS, INC., as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: Chief Executive Officer

 

 

  MD OFFICE SOLUTIONS, as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  PROJECT RENDEZVOUS HOLDING CORPORATION, as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  PROJECT RENDEZVOUS ACQUISITION CORPORATION, as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  DMS HEALTH TECHNOLOGIES, INC., as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

Signature Page

 

  DMS IMAGING, INC., as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  DMS HEALTH TECHNOLOGIES – CANADA, INC., as a Borrower       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

  DIGIRAD CORPORATION, as Guarantor       By:

/s/ Matthew G. Molchan

    Name: Matthew G. Molchan     Title: President

 

 

Signature Page

 

  STERLING NATIONAL BANK, as Lender       By:

/s/ Barbara J. Coffin

    Name: Barbara J. Coffin     Title: Vice President

 

Signature Page