UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): March 27, 2019

 

DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware 001-35947 33-0145723
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     

1048 Industrial Court, Suwanee, GA

30024
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (858) 726-1600

 

Not Applicable
(Former Name or Former Address, If Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

 

Item 1.01Entry into a Material Definitive Agreement.

 

Acquisition of Maine Facilities

 

Oxford

 

On March 27, 2019, 56 Mechanic Falls Road, LLC (“56 Mechanic”) entered into a Purchase and Sale Agreement (the “Oxford Purchase Agreement”) with RJF – Keiser Real Estate, LLC (“RJF”), pursuant to which 56 Mechanic will purchase certain real property and related improvements and personal property (including buildings, fixtures, and other improvements on the land, and all machinery and equipment and other personal property, if any, owned by the RJF and located on the property) located in Oxford, Maine (the “Oxford Facility”) from RJF (the “Oxford Transaction”). 56 Mechanic is a wholly-owned indirect subsidiary of Digirad Corporation (“Digirad” or the “Company”), formed for the purpose of acquiring and holding the Oxford Facility. The Oxford Purchase Agreement contains representations, warranties and covenants of RJF and 56 Mechanic that are customary for a transaction of this nature. The completion of the Oxford Transaction is subject to due diligence and other customary closing conditions. Assuming the satisfaction or waiver of the closing conditions, the Oxford Transaction is expected to close on or before April 26, 2019. The purchase price of the Oxford Facility is $1.2 million (the “Oxford Purchase Price”), of which $100,000 was paid as a deposit and is held in escrow. The Oxford Purchase Price is subject to adjustment for taxes and other charges and assessments.

 

Waterford

 

On April 3, 2019, 947 Waterford Road, LLC (“947 Waterford”) entered into a Purchase and Sale Agreement (the “Waterford Purchase Agreement”) with KBS Builders, Inc. (“KBS”), pursuant to which 947 Waterford purchased certain real property and related improvements (including buildings) located in Waterford, Maine (the “Waterford Facility”) from KBS, and acquired the Waterford Facility. The Waterford Purchase Agreement contains representations, warranties and covenants of KBS and 947 Waterford that are customary for a transaction of this nature. The purchase price of the Waterford Facility is $990,000, subject to adjustment for taxes and other charges and assessments.

947 Waterford is a wholly-owned indirect subsidiary of Digirad, formed for the purpose of acquiring and holding the Waterford Facility. KBS is a wholly owned subsidiary of ATRM Holdings, Inc. (“ATRM”). As previously disclosed, the Company and ATRM are party to a joint venture for the purpose of providing the service of purchasing and selling building materials and related goods to KBS. Jeffrey E. Eberwein, the Chairman of our board of directors, is also the Chairman of the board of directors of ATRM. See Item 8.01 (Other Events) for additional information regarding Mr. Eberwein, which is incorporated into this Item 1.01 by reference.

Paris

 

On April 3, 2019, 300 Park Street, LLC (“300 Park”) entered into a Purchase and Sale Agreement (the “Park Purchase Agreement”) with KBS, pursuant to which 300 Park purchased certain real property and related improvements and personal property (including buildings, machinery and equipment) located in Paris, Maine (the “Park Facility”) from KBS, and acquired the Park Facility.

300 Park is a wholly-owned indirect subsidiary of Digirad, formed for the purpose of acquiring and holding the Park Facility. The Park Purchase Agreement contains representations, warranties and covenants of KBS and 300 Park that are customary for a transaction of this nature. The purchase price of the Park Facility is $2.9 million, subject to adjustment for taxes and other charges and assessments.

Lease of Maine Facilities

 

On April 3, 2019, KBS entered into a separate lease agreement with each of 947 Waterford (the “Waterford Lease”) and 300 Park (the “Park Lease”). The Waterford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Waterford Lease are estimated to be between $1.2 million and $1.3 million in the aggregate. The Park Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Park Lease are estimated to be between $3.3 million and $3.6 million in the aggregate. ATRM has unconditionally guaranteed the performance of all obligations under the Waterford Lease and Park Lease to be performed by 947 Waterford and 300 Park, including, without limitation, the payment of all required rent. On April 3, 2019, KBS signed a lease with 56 Mechanic (the “Oxford Lease”), which will be effective upon the closing of the Oxford Transaction. The Oxford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Oxford Lease are estimated to be between $1.4 million and $1.6 million in the aggregate. ATRM has unconditionally guaranteed the performance of all obligations under the Oxford Lease to be performed by 56 Mechanic, including, without limitation, the payment of all required rent. The Oxford, Waterford and Paris Facilities are being acquired as part of the Company’s previously disclosed strategy of becoming a multi-industry holding company.

 

 

 

Financing

 

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) by and among certain subsidiaries of the Company identified on the signature pages thereof, as borrowers (collectively, the “Borrowers”); the Company, as guarantor; and Sterling National Bank, a national banking association, as lender (“SNB”).

The Loan Agreement is a five-year credit facility (maturing in March 2024) with a maximum credit amount of $20,000,000 for both revolving loans and outstanding letter of credit obligations (the “SNB Credit Facility”). Under the SNB Credit Facility, Borrowers can request the issuance of letters of credit in an aggregate amount not to exceed $500,000 at any one time outstanding.

At the Borrowers’ option, the SNB Credit Facility will bear interest at either (i) an Floating LIBOR Rate, as defined in the Loan Agreement, PLUS a margin of 2.50% per annum; or (ii) an Fixed LIBOR Rate, as defined in the Loan Agreement, PLUS a margin of 2.25% per annum.

The Company used a portion of the financing made available under the SNB Credit Facility to refinance and terminate, effective as of March 29, 2019, its credit facility with Comerica Bank, a Texas banking association (“Comerica”), under that certain Revolving Credit Agreement, dated June 21, 2017, by and between the Company and Comerica (the “Comerica Credit Agreement”).

The Loan Agreement includes certain representations, warranties of Borrowers, as well as events of default and certain affirmative and negative covenants by the Borrowers that are customary for loan agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by Borrowers, as well as limitations on the Borrowers’ ability to make certain distributions. Upon the occurrence and during the continuation of an event of default under the Loan Agreement, SNB may, among other things, declare the loans and all other obligations under the Loan Agreement immediately due and payable and increase the interest rate at which loans and obligations under the Loan Agreement bear interest. The SNB Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Company and the Borrowers and a pledge of all shares of the Borrowers.

The foregoing descriptions of the Oxford Purchase Agreement, the Waterford Purchase Agreement, the Park Purchase Agreement, the Waterford Lease, the Park Lease and the Loan Agreement (collectively, the “Agreements”) do not purport to be complete and are qualified in their entirety by reference to the Agreements, copies of which are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 respectively, to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.

Item 1.02.Termination of a Material Definitive Agreement.

 

The information contained in Item 1.01 above regarding the termination of the Comerica Credit Agreement is incorporated into this Item 1.02 by reference.

Item 2.03.Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The description of the SNB Credit Facility and Loan Agreement provided under Item 1.01 is incorporated into this Item 2.03 by reference.

Item 7.01. Regulation FD Disclosure

 

On April 3, 2019, the Company issued a press release relating to the Loan Agreement. A copy of the press release is furnished as Exhibit 99.1 attached to this Form 8-K and incorporated into this item 7.01 by reference.

Item 8.01.Other Events.

 

On March 29, 2019, in connection with the Company’s entry into the Loan Agreement, Mr. Eberwein, the Chairman of the Company’s board of directors, entered into Limited Guaranty Agreement (the “Limited Guaranty”) with SNB pursuant to which he guaranteed to SNB the prompt performance of all the Borrowers’ obligations to SNB under the Loan Agreement, including the full payment of all indebtedness owing by Borrowers to SNB under or in connection with the Loan Agreement and related SNB Credit Facility documents. Mr. Eberwein’s obligations under the Limited Guaranty are limited in the aggregate to the amount of (a) $1,500,000, plus (b) reasonable costs and expenses of SNB incurred in connection with the Limited Guaranty. Mr. Eberwein’s obligations under the Limited Guaranty terminate upon the Company and Borrowers achieving certain milestones set forth therein.

Mr. Eberwein, who is also the Chairman of the board of directors of ATRM, directly owns approximately 17.4% of the outstanding common stock of ATRM. Mr. Eberwein is also the Chief Executive Officer of Lone Star Value Management, LLC (“LSV Management”) a subsidiary of ATRM. LSV Management is the investment manager of Lone Star Value Investors, LP (“LSVI”) and Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”) which respectively own 222,577 shares of ATRM’s 10.00% Series B Cumulative Preferred Stock (the “Series B Stock”) and 374,562 shares of Series B Stock.  Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaims beneficial ownership of Series B Stock, except to the extent of his pecuniary interest therein.

 

 

 

Item 9.01.Financial Statements and Exhibits.

 

(d)        Exhibits

 

Exhibit No.   Description
     
10.1*   Purchase and Sale Agreement, dated March 27, 2019, by and between RJF – Keiser Real Estate, LLC and 56 Mechanic Falls Road, LLC.
     
10.2*   Purchase and Sale Agreement, dated April 3, 2019, by and between KBS Builders, Inc. and 947 Waterford Road, LLC.
     
10.3*   Purchase and Sale Agreement, dated April 3, 2019, by and between KBS Builders, Inc. and 300 Park Street, LLC.
     
10.4*   Lease Agreement, dated April 3, 2019, by and between KBS Builders, Inc. and 947 Waterford Road, LLC.
     
10.5*   Lease Agreement, dated April 3, 2019, by and between KBS Builders, Inc. and 300 Park Street, LLC.
     
10.6*   Loan and Security Agreement, dated March 29, 2019, by and among Digirad Corporation, certain subsidiaries of the Digirad Corporation identified on the signature pages thereto, and Sterling National Bank.
     
99.1   Press Release, dated April 3, 2019

 

*The schedules and exhibits to this Exhibit have been omitted. The Company agrees to furnish a copy of the omitted schedules and exhibits to the Securities and Exchange Commission on a supplemental basis upon its request.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    DIGIRAD CORPORATION
     
  By: /s/ David J. Noble  
   

David J. Noble

Chief Operating Officer and Interim Chief Financial Officer

 

Date: April 3, 2019

Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 27th day of March, 2019 (the “Effective Date”), by and between RJF - Keiser Real Estate, LLC, a Maine limited liability company with a mailing address of 30 Temple Street, Suite 400, Nashua, NH 03060 (“Seller”), and 56 Mechanic Falls Road, LLC, a Delaware limited liability company with a mailing address of 53 Forest Avenue, Old Greenwich, CT 06870 (“Purchaser”).

 

1.Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, the following property:

 

(a)The land located at or about 56 Mechanic Falls Road in the Town of Oxford, County of Oxford, and State of Maine, as more particularly described in Schedule 1(a), attached hereto and made a part hereof, together with all rights, privileges, easements, and appurtenances thereto, including all air rights, water rights, easements, rights-of-way, and other interests in, on, under or to any land, highway, alley, street, or right-of-way abutting, adjoining, or used in connection with the Land or otherwise appurtenant to the Land, including those, if any, set forth on said Schedule (the “Land”);

 

(b)all buildings, fixtures, and other improvements located on the Land (the “Improvements” and, together with the Land, the “Real Property”);

 

(c)all machinery, equipment and other personal property, if any, owned by Seller located on or in the Real Property and used in connection with the operation and maintenance of the Real Estate, together with the trailers located on the Real Property as of the Effective Date (the “Trailers” and, together with the other items identified in this sub-section, collectively, the “Personal Property”); provided, however, that Seller and Purchaser acknowledge and agree that Seller makes no representations or warranties with respect to any Personal Property, other than that the Personal Property is free and clear of encumbrances arising by, through, or under Seller;

 

(d)those certain permits, licenses, and approvals, if any, held by Seller relating to the ownership, development or operation of the Real Property, as set forth on Schedule 1(d), attached hereto and made a part hereof (the “Permits and Approvals”); and

 

(e)all warranties, if any, relating to the Real Property (collectively, the “Warranties”)

 

(all of items (a) through (e) are referred to herein collectively as the “Premises”). Seller and Purchaser acknowledge and agree that Purchaser is not assuming and will not assume at Closing any obligations, debts, or liabilities in connection with the Premises, except as specifically set forth in this Agreement.

 

2.Purchase Price; Deposit. The purchase price for the Premises (the “Purchase Price”) is One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) and shall be payable as follows:

 

1

 

(a)Within one (1) business day after the Effective Date, Purchaser shall deliver a deposit (the “Deposit”) of One Hundred Thousand Dollars and 00/100 ($100,000.00) to Old Republic National Title Insurance Company (the “Escrow Agent”), to be held by Escrow Agent and applied against the Purchase Price or otherwise disbursed according to the terms and conditions of this Agreement;

 

(b)Subject to adjustment and pro-rations as provided herein, the balance of the Purchase Price shall be paid by Purchaser at Closing by cashier’s or treasurer’s check made payable to Seller or by electronic wire transfer in accordance with wiring instructions provided by Seller within a reasonable time prior to the Closing, upon execution, acknowledgment, and delivery of the Deed and other closing documents as contemplated by and in accordance with the terms and conditions set forth in this Agreement.

 

3.Adjustments and Costs.

 

(a)Real estate taxes for the Premises, heating oil value if applicable, and other charges and assessments affecting the Premises and customarily pro-rated between buyers and sellers of property similar to and in the same locality as the Premises shall be apportioned between Seller and Purchaser as of the Closing Date except as may otherwise be provided herein. Seller shall be responsible for taxes and all other such items to be pro-rated that constitute an expense, and shall be entitled to rents and other items that constitute income, for all periods up to the Closing Date, and shall pay in full on or prior to the Closing Date all real estate taxes and other charges and assessments allocable to periods prior to the Closing Date. Notwithstanding the foregoing, in no event shall Seller be entitled to credit at Closing on account of any income allocable to Seller that has not actually been received as of the Closing Date, but Seller shall be entitled to credit for such income if and when the same is actually received by Purchaser. If the amount of real estate taxes or other charges and payments or any items of income have not been determined at the Closing Date, such amounts shall be pro-rated using available data and the same shall be subject to re-pro-ration at such point in time as such amounts have been determined.

 

(b)If the proration of taxes pursuant to this Agreement are based on estimated amounts, either party may present to the other party a recalculation of the proration of such taxes under Section 3(a) above, within thirty (30) days after issuance of the current year tax bills. The parties shall make the appropriate adjusting payment between them within thirty (30) days after the determination of the amount thereof on account any such recalculation.

 

2

 

4.Conveyance.

 

(a)Seller shall convey the Real Property to Purchaser by good and sufficient warranty deed following the Maine statutory short form (the “Deed”). If requested by Purchaser, Seller agrees to convey the Real Property utilizing a description prepared from a survey procured by Purchaser. Seller shall convey and assign the Permits and Approvals, if any, and the Warranties, if any, to Purchaser by one or more good and sufficient assignment instruments in form and substance reasonably satisfactory to Purchaser. Title to the Premises shall be good and marketable, free of all encumbrances, and subject only to the Permitted Exceptions (as such term is defined below). Seller shall have the right to use the Purchase Price paid at Closing to satisfy any indebtedness secured by the Premises or any portion thereof provided that all payments related thereto are made at Closing and provided that discharges or terminations of all mortgages of and security interests in the Premises are executed, acknowledged, and delivered by the holder(s) of such indebtedness at Closing (or commercially reasonable arrangements acceptable to Purchaser and its title insurance company have been made for the execution, acknowledgment, and delivery of such discharges and terminations have been made at or prior to Closing).

 

(b)Without limiting the generality of Section 4(a), the Premises shall not be considered to be in compliance with the provisions of this Agreement with respect to title unless title to the Real Property is insurable for the benefit of Purchaser at ordinary rates under the 2006 ALTA form of owner’s title insurance policy by a title insurance company of Purchaser’s selection, with so-called “extended coverage,” and including such reasonable endorsements as Purchaser shall require and subject only to the Permitted Exceptions (as that term is hereafter defined). As used herein, the term “Permitted Exceptions” shall mean (i) environmental, and other laws and governmental rules, regulations, ordinances or bylaws as may affect the use, maintenance or ownership of the Property; (ii) such property taxes for the then current municipal fiscal year as are not yet due and payable on the Closing Date (but subject to pro-ration thereof as provided in this Agreement); (iii) any liens for municipal betterments assessed after the Closing Date; (iv) subject to the provisions of the following paragraph, easements, special permits, and restrictions of record as of the date hereof; and (v) subject to the provisions of the following paragraph, any state of facts existing on any existing or current survey of the Real Property.

 

3

 

On or before the expiration of the Due Diligence Period (as such term is defined below), Purchaser shall review title to the Property and deliver to Seller a written notice (“Title Objection Notice”) of any title matters existing of record existing as of the effective date of the title insurance commitment or survey matters existing as of the date of such survey (with the effective date of the title commitment and the date of the surveying being hereinafter referred to as the “Title Effective Date”), which written notice shall be given no later than 5:00 p.m. on the last day of the Due Diligence Period (other than Permitted Exceptions (i) through (iii) above) which shall be cured or otherwise addressed to Purchaser’s satisfaction prior to Closing (“Title Objections”). Any Title Objection Notice shall provide a summary description of the nature of the Title Objections referenced therein. If Purchaser fails to timely deliver a Title Objection Notice to Seller on or before the expiration of the Due Diligence Period, any right of Purchaser to claim any Title Objections with respect to title matters existing of record as of the Title Effective Date and survey matters existing as of the Title Effective Date shall be deemed waived for all purposes, and, subject to the terms hereof, Purchaser shall be deemed satisfied with the state of title and survey to the Property as of the Title Effective Date. If Purchaser delivers a timely Title Objection Notice prior to the expiration of the Due Diligence Period, any title matters existing of record as of the Title Effective Date and any survey matters existing as of the Title Effective Date, in either case which would properly constitute Title Objections, and which Purchaser fails to call to Seller’s attention in the Title Objection Notice shall be deemed to constitute a “Permitted Exception” for purposes of this Agreement and Purchaser shall be deemed satisfied with the state of title and survey to the Property as of the Title Effective Date, except only for the Title Objections stated in the Title Objection Notice so delivered and except for Monetary Liens. Seller shall have ten (10) days (the “Cure Notice Period”) after the timely receipt of a Title Objection Notice to give Purchaser written notice (a “Cure Notice”) as to which, if any, Title Objections Seller agrees to cure on or before the Closing Date (the “Cured Title Objections”); provided, however, that Seller shall cure any mortgage liens, mechanics liens and any other voluntary monetary liens or encumbrances affecting the Property (collectively, “Monetary Liens”). If Seller does not give a Cure Notice within such period, Seller shall be deemed to have elected not to cure any of the Title Objections. If Seller does not give a Cure Notice, or if Seller gives Purchaser a Cure Notice within such period but does not agree therein to cure all Title Objections (or Seller’s proposed efforts to cure are not satisfactory to Purchaser), then Purchaser may elect to either (i) proceed to the Closing subject to Permitted Exceptions, specifically including any Title Objections which Seller has elected not to cure, and without reduction of the Purchase Price; or (ii) terminate this Agreement by giving Seller written notice of such election within ten (10) days after the expiration of the Cure Notice Period or ten (10) days after Purchaser’s receipt of Seller’s Cure Notice. If Purchaser so elects to terminate this Agreement, then this Agreement shall terminate as of the date of Purchaser’s termination notice, whereupon the Deposit, less the sum of $100.00 (the “Independent Consideration”), shall be promptly returned to Purchaser, the Independent Consideration shall be paid to Seller in consideration of this Agreement, and this Agreement shall become void and without recourse to the parties hereto. Seller shall use commercially reasonable efforts prior to Closing to cure any Title Objections referenced in the Cure Notice in a manner reasonably satisfactory to Purchaser, and may extend the time for Closing up to an additional thirty (30) days as necessary; provided, however, that notwithstanding the foregoing, in no event shall Seller be obligated to expend more than Ten Thousand Dollars ($10,000.00) (the “Title Cap”), in the aggregate, in using reasonable efforts to cure or otherwise resolve any Title Objections or additional objections to title which would properly be the subject of a Title Objection as described below; provided further that the Title Cap shall in no event be deemed to limit the expenditures required by Seller to discharge and release Monetary Liens. Purchaser shall have the right prior to Closing to make additional objections to title and/or survey with respect to any matters which would properly be the subject of a Title Objection, but which first appear of record after the Title Effective Date and, in any such event, Seller shall use commercially reasonable efforts prior to Closing to cure any such additional objections which would properly be the subject of a Title Objection, subject to the limitations and extension rights set forth above, including the Title Cap.

 

4

 

If Purchaser’s diligence of the Property discloses judgments, bankruptcies or other returns against other persons or entities having names the same as or similar to that of Seller, Seller, on request, shall deliver to Purchaser or the Title Company affidavits to the effect that such judgments, bankruptcies or other returns are not against Seller. If the title commitment issued by the Title Company discloses exceptions (other than the Permitted Exceptions) which (i) may be removed solely by delivery of an affidavit, reasonably requested by the Title Company, which can be delivered by Seller or by reference to Seller’s existing title policy, or (ii) Seller voluntarily created subsequent to the Effective Date, or (iii) may be removed or satisfied by the payment of a liquidated sum of money not in excess of the Title Cap in the aggregate, then Seller shall remove such exceptions.

 

(c)At Closing, Seller shall furnish such evidence of Seller’s existence and authority to enter into and perform the transactions contemplated by this Agreement as is sufficient to satisfy the requirements of Purchaser’s title insurance company and shall execute, acknowledge, and deliver affidavits and indemnity agreements in the forms customarily required by Purchaser’s title insurance company, including those necessary to: (i) delete the exceptions for unfiled mechanics’ liens and for parties in possession; (ii) delete the standard exception for such matters that would be shown by a current ALTA survey; and (iii) insure against matters affecting title to the Premises that arise during the period between the effective date of Purchaser’s title insurance commitment and the recording of the Deed (the “Title Affidavits”).

 

5

 

5.Items to be Delivered to Purchaser from Seller. To the extent within the possession or control of Seller, Seller shall promptly deliver to Purchaser copies of any and all surveys, environmental reports, engineering reports, title insurance policies and title reports, and such other information and/or documentation pertaining to the Premises as is reasonably requested by Purchaser from time-to-time after the Effective Date. Seller makes no representation or warranty as to the truth, accuracy or completeness of (other than that Seller has not intentionally withheld information so as to render incomplete) any materials, data or information delivered by Seller to Purchaser in connection with the transaction contemplated hereby. Purchaser acknowledges and agrees that all materials, data and information delivered by Seller to Purchaser in connection with the transaction contemplated hereby are provided to Purchaser as a convenience only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser. Without limiting the generality of the foregoing provisions, Purchaser acknowledges and agrees that with regard to any environmental or other report with respect to the Property which is delivered by Seller to Purchaser, neither Seller, any affiliate of Seller nor the person or entity which prepared any such report delivered by Seller to Purchaser shall have any liability to Purchaser for any inaccuracy in or omission from any such report.

 

6.Due Diligence; Specific Conditions. The obligations of Purchaser under this Agreement are contingent on Purchaser being satisfied, in its sole discretion, with the Premises in all respects within a period of thirty (30) days after the Effective Date (the “Due Diligence Period”), including with respect to the following:

 

(a)the physical condition (including the environmental condition) of the Real Property;

 

(b)the boundaries and other states of facts, conditions and possible conditions shown by, and other results of, any existing surveys of the Real Property, if any, and/or any survey procured by or on behalf of Purchaser; and

 

(c)Purchaser’s review and analysis of applicable zoning and land use laws and the Permits and Approvals.

 

Purchaser shall have the right, in Purchaser’s sole discretion, to terminate this Agreement, for any reason or for no reason, by giving written notice of termination to Seller prior to the expiration of the Due Diligence Period, in which event the Independent Consideration shall be paid to Seller in consideration of this Agreement, the remainder of the Deposit shall be refunded to Purchaser, and neither party shall be under any further obligations under this Agreement.

 

6

 

For the purpose of conducting physical inspections (which may include, without limitation, an on-the-ground instrument survey of the Premises and a Phase I Environmental Site Assessment (“Phase I”) of the Premises ), Seller agrees to provide Purchaser and its authorized agents, accompanied by a representative of Seller if Seller so chooses, reasonable access to the Premises at all reasonable times on business days during the Due Diligence Period upon at least twenty four (24) hours prior written notice to Seller, and Purchaser shall conduct such inspections in a manner not unreasonably disruptive to Seller or the operation of the Premises. In the event that the Phase I reveals any condition for which Purchaser desires to conduct a further “Phase II” investigation, Purchaser shall notify Seller of such finding and shall not conduct any such Phase II investigation without Seller’s express written consent, which consent shall be subject to such reasonable conditions as Seller may prescribe. To the extent necessary, the parties shall agree on a reasonable extension of the Due Diligence Period to complete such Phase II investigation. Purchaser hereby agrees to indemnify Seller and to hold Seller, Seller’s agents and employees and the Premises harmless from and against any and all losses, costs, actions, causes of action, injuries, expenses, fees, demands, damages, claims or liabilities including, but not limited to, mechanic’s and materialmen’s liens and reasonable attorneys’ fees, arising out of or in connection with Purchaser’s access to or entry upon the Premises under this Section 6, but in no event shall the foregoing be construed to apply to the discovery of any adverse conditions not created by Purchaser (including adverse environmental conditions). If any inspection, investigation or test performed by or on behalf of Purchaser disturbs the Premises, Purchaser shall promptly restore the Premises to substantially the same condition as existed prior to any such investigation, inspection or test. In addition, Purchaser shall be responsible, prior to any entry onto the Premises to provide Seller with insurance certificates for Purchaser and all contractors entering onto the Premises, naming the Seller as an additional insured, evidencing at least $1,000,000 in general liability coverage. Purchaser’s indemnification and repair obligations set forth in this paragraph shall survive the termination of this Agreement.

 

7

 

7.Representation and Warranties.

 

(a)Seller represents and warrants to Purchaser that the following are true and correct as of the date of this Agreement and will be true and correct as of the Closing:

 

(i)Seller is a limited liability company, duly organized and validly existing under the laws of the State of Maine;

 

(ii)Seller has the right, power, and authority to enter into this Agreement and to perform its obligations hereunder, without the joinder of any other party;

 

(iii)the execution and delivery of this Agreement, the consummation of the transactions herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the articles of organization or certificate of formation, operating or limited liability company agreement, or any other similar instrument of Seller and will not conflict with or, with or without notice or the passage of time, or both, result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, agreement, or other instrument to which Seller is a party or by which Seller or the Premises are bound, or of any applicable governmental regulation or any judgment, order, or decree of any court or governmental authority having jurisdiction over Seller or the Premises;

 

(iv)to the best of Seller’s knowledge, without undertaking independent investigation for purposes of entering into this Agreement, there are no violations of laws or regulations affecting the Premises, including any laws relating to Hazardous Substances (as hereafter defined), and Seller has not received any written notice from any person claiming or inquiring into the existence of any such violation;

 

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(v)there is no action, suit, or other proceeding (including proceedings for condemnation or eminent domain) pending or, to the best of Seller’s knowledge, threatened (or, to the best of Seller’s knowledge, any basis therefor) against Seller or affecting any portion of the Premises in any court or before any arbitrator of any kind or before any governmental body or tribunal for dispute resolution that may materially or adversely affect the transactions contemplated by this Agreement or which may affect any portion of the Premises;

 

(vi)Seller has not released or disposed of any Hazardous Substances on, in, under or from the Real Property, and, to the best of Seller’s knowledge, without independent investigation for purposes of entering into this Agreement, there has been no release or disposal of any Hazardous Substance on, in, under or from the Real Property at any time by any other person other than as may be stated in any environmental reports delivered by Seller to Purchaser pursuant to Section 5. Pursuant to 38 M.R.S. § 563, Seller certifies that, to Seller’s knowledge without independent investigation, there are no underground oil storage facilities on the Real Property and there are no above-ground oil storage facilities with underground piping on the Real Property. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state laws regulating pollution or contamination of the environment;

 

(vii)other than this Agreement, and agreements (if any) that may be of record in the Oxford County Registry of Deeds, there are no other contracts or agreements (including leases or occupancy agreements) in effect that relate to the Premises and which require performance by any party thereto at any time after the Closing Date, including property management agreements;

 

(viii)Seller has not received any notice from any governmental, quasi-governmental agency or other group or individual alleging that the Improvements or any portion thereof does not comply with applicable law or requiring the correction of any condition with respect to the Premises by reason of any violation of any law or ordinance;

 

(ix)Seller has paid or shall pay at Closing all taxes, charges and assessments required to be paid to each taxing or other governmental authority which could in any way constitute a lien against the Premises or any part thereof. Seller has not received any written notice of any special assessments or betterments with respect to the Premises or any written notice of an increase or proposed increase in the assessed valuation of the Premises or any part thereof and no exemption from full taxation of the Premises or any part thereof has been claimed by Seller;

 

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(x)the Premises are served by public water facilities and do not contain and are not served by a private water supply; the Premises are served by an onsite subsurface wastewater disposal system;

 

(xi)pursuant to 33 M.R.S. § 193, to Seller’s knowledge without independent investigation, no abandoned or discontinued town ways, public easements, or private roads are located on or abutting the Premises; and

 

(xii)the Premises are not subject to tax classifications known as tree growth, farmland, or open space, or to any tax increment financing arrangement or other arrangement for payments in lieu of taxes.

 

(b)Purchaser represents and warrants to Seller that the following are true as of the Effective Date and will be true as of the Closing:

 

(i)Purchaser is a limited liability company, duly organized and validly existing under the laws of the State of Delaware;

 

(ii)Purchaser has the right, power, and authority to enter into this Agreement and to perform its obligations hereunder; and

 

(iii)The execution and delivery of this Agreement, the consummation of the transaction herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the organizing documents of Purchaser or conflict with, or, with or without notice or the passage of time, or both, result in a breach of, any of the terms or provisions of or constitute a default under any indenture, mortgage, loan agreement or instrument to which Purchaser is a party or by which Purchaser is bound, or any applicable governmental regulation or any judgment, order or decree of any court having jurisdiction over Purchaser.

 

(c)All representations and warranties set forth in this Section shall survive the Closing for a period of six (6) months. If either party discovers that any representation or warranty to the other party is untrue or incorrect in any material respect, it shall promptly notify the other party and the party having made the untrue or incorrect representation or warranty shall indemnify and hold harmless the discovering party for all demands, claims, causes of action, losses, liabilities, costs, and expenses (including reasonable attorneys’ fees), incurred by the discovering party arising out of such untrue or incorrect representation or warranty, which obligation shall survive the Closing for a period of six (6) months.

 

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(d)Purchaser hereby acknowledges and agrees that Seller is selling the Premises and that Purchaser is purchasing the Premises on an “AS IS, WITH ALL FAULTS” basis without any representations or warranties express or implied, other than those representations and warranties expressly set forth herein or in any document required by this Agreement to be delivered by Seller at Closing, and that Purchaser and Purchaser’s consultants and advisors will have been given the opportunity, prior to Closing, to fully inspect the Premises (including but not limited to, all matters pertaining to title, survey, governmental and legal requirements, taxes, assessments, zoning, use, permit requirements and building code, the physical condition of the Premises, all environmental matters concerning the presence or absence of hazardous materials and compliance with all federal, state and local environmental laws, any easement and access rights, relating to the Premises, and all other matters affecting the Premises). Except as expressly set forth herein or in any such document to be delivered by Seller at Closing, Purchaser is not relying upon any statement or representation of Seller, Seller’s agents, any Seller related party or their agents or brokers, express or implied, with respect to the condition of the Premises or the feasibility or any prospective use of the Premises.

 

8.Covenants and Agreements of Seller. Seller covenants and agrees with Purchaser that between the Effective Date and the Closing:

 

(a)It shall not dispose of any interest in the Premises; shall not grant, mortgage, pledge or subject to lien or other encumbrances any interest in the Premises; shall not enter into any leases or other agreements relating to the Premises that would affect the sale or survive the Closing; shall not terminate or modify the Permits and Approvals or the Warranties; shall keep the Real Property insured in the amounts and with the deductibles that are currently in place; and maintain, preserve and keep all of the Real Property in substantially the same condition and repair it is in on the Effective Date, ordinary and reasonable wear and tear excepted; and shall maintain its general liability insurance in effect consistent with its normal conduct of business;

 

(b)It shall not take any action or fail to take any action that would cause the Premises not to conform with the provisions of this Agreement, would cause any statements set forth in this Agreement to be untrue or incorrect, or would otherwise cause Seller to be unable to perform its obligations under this Agreement.

 

9.Conditions Precedent to Purchaser’s Performance.

 

(a)Purchaser’s obligations hereunder, including the obligation to purchase and pay for the Premises, are subject to the satisfaction of the following conditions, any of which may be waived by Purchaser, but only in a writing signed by Purchaser:

 

(i)All of Seller’s representations and warranties being true and correct as of the Closing Date;

 

(ii)Except for any casualty or condemnation event covered by Section 11 hereof, no material adverse changes in the physical condition of the Premises shall have occurred and the Premises shall be in the same condition at the Closing as of the Effective Date, ordinary and reasonable wear and tear excepted; and

 

(iii)Seller shall have performed all of the material obligations required by this Agreement to be performed by Seller.

 

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(b)If any of the conditions set forth above are, in Purchaser’s reasonable discretion, not satisfied, Purchaser may, by giving written notice to Seller on or before the Closing Date, elect (i) to waive such condition and proceed with the Closing without any reduction in the Purchase Price or (ii) to terminate this Agreement by giving written notice of termination to Seller, in which event, neither party shall be under any further obligations under this Agreement except as provided in the next sentence and the Deposit shall be returned to Purchaser. The foregoing notwithstanding, if any such condition is not satisfied due to a breach of this Agreement by Seller, Purchaser shall be entitled to its remedies as set forth in this Agreement.

 

(c)Purchaser shall have the right to waive any of Purchaser’s contingencies and/or any other conditions to Purchaser’s obligations set forth in this Agreement.

 

10.Closing.

 

(a)The consummation of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Purchaser’s counsel or at such other place as is agreed upon by the parties within fifteen (15) days after the end of the Due Diligence Period, or on such other date as may be agreed upon by the parties (the “Closing Date”).

 

(b)The following shall occur at the Closing, each being a condition precedent to the others and all being considered as occurring simultaneously:

 

(i)Seller shall execute, acknowledge, and deliver to Purchaser the Deed, said Deed being subject only to the matters described in Section 4 and to any Exceptions accepted by Purchaser;

 

(ii)If Seller owns any Personal Property, Seller and Purchaser shall execute and deliver a bill of sale with respect to such Personal Property, provided that such bill of sale shall make no representations or warranties whatsoever other than warranties against encumbrances arising by, through or under Seller;

 

(iii)Seller shall execute and deliver to Purchaser and Purchaser shall accept from Seller an assignment instrument with respect to the Permits and Approvals and the Warranties, if any, in the form attached hereto as Schedule 10(b)(iii);

 

(iv)Seller will execute and deliver to Purchaser a notice pursuant to 38 M.R.S. § 563 with respect to underground oil storage facilities or above-ground oil storage facilities with underground piping on the Premises;

 

(v)Seller shall execute and deliver the Title Affidavits;

 

(vi)Seller and Purchaser shall deliver certifications confirming that their respective representations and warranties set forth in this Agreement continue to be true and correct as of the Closing Date;

 

(vii)Seller will execute and deliver to Purchaser at Closing a Maine residency affidavit in accordance with 33 M.R.S. §5250-A, failing which, Purchaser shall be entitled to withhold from the Purchase Price all amounts required thereunder unless Seller demonstrates to Purchaser’s satisfaction that another exemption applies;

 

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(viii)Seller will execute and deliver to Purchaser at Closing a non-foreign person certification in accordance with Section 1445 of the Internal Revenue Code, failing which, Purchaser shall be entitled to withhold from the Purchase Price all amounts required thereunder unless Seller demonstrates to Purchaser’s satisfaction that another exemption applies;

 

(ix)Seller shall deliver to Purchaser a manager’s certificate or member’s certificate certifying as to authority and appropriate resolutions adopted by Seller, current managers, members or other parties authorized to execute documents on behalf of Seller, and such other organizational documents as shall be reasonably requested in connection with this transaction;

 

(x)Purchaser shall pay the Purchase Price as provided in this Agreement and the parties shall execute and deliver a settlement statement setting forth the Purchase Price, the adjustments thereto, the credits and debits affecting each party’s transaction, the disbursements to be made at Closing, and such other information as is customary and reasonable for transactions of the type contemplated by this Agreement;

 

(xi)Seller and Purchaser shall each execute and deliver any real estate transfer tax forms or returns required by applicable law;

 

(xii)Each party shall deliver to the other such other instruments and documentation as may be required herein or as may be necessary to carry out the obligations under this Agreement; and

 

(xiii)Seller shall deliver to Purchaser keys to and possession of the Premises, free and clear of any tenancy or persons in possession.

 

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11.Risk of Loss; Casualty; Condemnation.

 

(a)Except as provided in any indemnity provisions of this Agreement, Seller shall bear all risk of loss with respect to the Premises on the date upon which title is transferred to Purchaser in accordance with this Agreement. Notwithstanding the foregoing, in the event of damage to the Premises by fire or other casualty occurring from and after the Effective Date but prior to the Closing Date, the repair of which would cost less than $50,000.00 (as determined by a third party insurance adjuster), Purchaser shall not have the right to terminate its obligation hereunder to purchase the Premises by reason thereof, but Seller shall have the right to elect to repair and restore the Premises to the substantially same condition as existed prior to the fire or other casualty, or at the Closing, to: (i) agree to pay over or assign to Purchaser all Seller’s rights to any insurance proceeds on account of such damage or destruction, to the extent not previously used for any partial restoration, as and when and if such proceeds are actually received by Seller and (ii) credit Purchaser against the Purchase Price for any deductible under such insurance, to the extent not previously used for any partial restoration; provided, that nothing herein shall require Seller to repair and restore the Premises unless Seller expressly agrees to do so. Seller shall promptly notify Purchaser in writing of any such fire or other casualty and the adjuster’s determination of the cost to repair the damage caused thereby. In the event of damage to the Premises by fire or other casualty from and after the Effective Date but prior to the Closing Date, the repair of which would cost in excess of $50,000.00 (as determined by a third party insurance adjuster), then the Purchaser’s obligations hereunder to purchase the Premises may be terminated at the option of Purchaser, which option shall be exercised, if at all, by Purchaser’s written notice thereof to Seller within five (5) business days after Purchaser receives written notice of such fire or other casualty and said insurance adjuster’s determination of the amount of such damages, and upon the exercise of such option by Purchaser the obligations of the parties hereunder to sell or purchase (as applicable) the Premises shall become null and void, the Deposit shall be promptly returned to Purchaser, and neither party shall have any further liability or obligations hereunder except for Purchaser’s indemnification and hold harmless obligations set forth in this Agreement. If Purchaser does not so elect to terminate, then the Purchaser’s obligations hereunder to purchase the Premises shall remain in full force and effect and Seller shall assign and transfer to Purchaser on the Closing Date all of Seller’s right, title and interest in and to all insurance proceeds (if any) paid or payable to Seller on account of such fire or casualty, and credit the Purchase Price with the amount of any deductible applicable to policy(ies) of insurance applicable the fire or casualty, and Seller shall have no obligation to repair or restore the Premises.

 

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(b)In the event between the date of this Agreement and the Closing Date, any condemnation or eminent domain proceedings against any material part of the Premises is commenced, or the taking or closing of any right of access to the Premises, or in the event any person with the power of eminent domain gives Seller notice of that any such condemnation, eminent domain, or taking will be commenced, Purchaser may:

 

(i)terminate the obligations of the parties hereunder to purchase and sell (as applicable) the Premises by written notice to Seller as contemplated by the final paragraph of this Section 11(b), and upon the exercise of such option by Purchaser, the obligations of the parties hereunder to sell or purchase (as applicable) the Premises shall become null and void, the Deposit shall be returned to Purchaser, and neither party shall have any further liability or obligations hereunder except as otherwise expressly provided for herein; or

 

(ii)proceed with the Closing, in which event Seller shall assign to Purchaser all of Seller’s right, title and interest in and to any award made (or to be made) in connection with such condemnation or eminent domain proceedings or taking, and Purchaser shall receive no credit against or deduct from the Purchase Price incident to such condemnation, eminent domain, or taking.

 

Seller shall immediately notify Purchaser in writing of the commencement or occurrence of any condemnation or eminent domain proceedings or any notice that any condemnation, eminent domain, or taking will be commenced. Purchaser shall then notify Seller, within ten (10) business days of Purchaser’s receipt or deemed receipt of Seller’s notice, whether Purchaser elects to exercise its rights under subparagraph (a) or subparagraph (b) of this Section 11(b). Subject to the next sentence, the Closing shall be delayed, if necessary, until Purchaser makes such election. If Purchaser fails to make an election within such 10-business day period, Purchaser shall be deemed to have elected to exercise its rights under subparagraph (b) and the Closing shall be delayed, if necessary, until the later to occur of (i) the Closing Date; or (ii) three (3) business days after the expiration of the 10-business day period.

 

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12.Default.

 

(a)Default by Purchaser: If Purchaser shall fail to comply with any material term of this Agreement, then Seller’s sole remedy for Purchaser’s default, shall be to terminate this Agreement and accept the full amount of the Deposit as reasonable, and full and complete, liquidated damages.

 

(b)Default by Seller: If Seller shall materially default in the performance of Seller’s obligations under this Agreement, Purchaser shall have the option of terminating this Agreement and requiring the Escrow Agent to return the Deposit to Purchaser, or pursuing an action for specific performance.

 

13.Broker. Seller and Purchaser warrant and represent to each other that neither has employed or engaged any real estate broker or agent in connection with this transaction that could give rise to a lien against the Premises. Each party agrees to hold the other party harmless from and against any and all demands, claims, causes of action, losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees) arising from the breach of such party’s representation or warranty contained in this Section. The provisions of this Section shall survive the Closing.

 

14.Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be hand delivered, or given by certified mail, return receipt requested, or by Federal Express or another nationally recognized overnight courier service, addressed to the party to receive such notice at the address set forth in the preamble of this Agreement. Any such notice shall be deemed effective when personally delivered (in the case of hand delivery) or upon being deposited with such courier service or with the United States Postal Service. Any party may change the address to which its future notices shall be sent by notice given in the manner set forth above. A copy of any notice to Seller shall be given simultaneously to Seller’s counsel at the following address:

 

James D. Kerouac, Esq.

Bernstein, Shur, Sawyer & Nelson, P.A.

670 N. Commercial Street, Suite 108

Manchester, NH 03101

 

A copy of any notice to Purchaser shall be given simultaneously to Purchaser’s counsel at the following address:

 

Paul D. Pietropaoli, Esq.

Perkins Thompson

One Canal Plaza, Suite 900

Portland, ME 04101

 

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15.Miscellaneous.

 

(a)Any reference herein to time periods of seven (7) days or less shall be computed to exclude Saturdays, Sundays, and statutory holidays in the State of Maine. Any time period provided for herein which ends on a Saturday, Sunday, or statutory holiday in the State of Maine shall extend to midnight at the end of the next day that is not a Saturday, Sunday, or statutory holiday in the State of Maine.

 

(b)This Agreement shall be binding upon and shall inure to the benefit of Seller and Purchaser and their respective successors and assigns.

 

(c)All understandings, agreements, warranties, and representations, either oral or in writing, heretofore between the parties hereto with respect to the purchase and sale of the Premises are merged into this Agreement, which alone fully and completely expresses the parties’ agreement with respect to the transaction contemplated hereby. The representations and warranties set forth in this Agreement shall survive the Closing. This Agreement may not be modified in any manner except by an instrument in writing signed by Seller and Purchaser.

 

(d)This Agreement, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Agreement, shall be governed by and enforced in accordance with the internal laws of the State of Maine, including its statutes of limitations, without regard or reference to conflicts of law principles. In the event of a breach of this Agreement by any party, the other party shall be entitled to recover reasonable attorneys’ fees incurred in connection with the enforcement of its rights hereunder. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, and all of which, taken together, shall constitute a single instrument.

 

(e)Whenever the word “include,” “includes,” or “including” or similar expression is used in this Agreement, it is deemed to be followed by the words “without limitation.” The terms “this Agreement,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Agreement as a whole and not to any particular section of this Agreement unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Agreement.

 

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16.Duties of Escrow Agent. The Deposit shall be held in a non-interest bearing account by the Escrow Agent, and shall be credited towards payment of the Purchase Price at Closing or otherwise disbursed according to the terms of this Agreement. In its capacity as escrow agent, Escrow Agent shall have only those duties and obligations as are expressly set forth herein. No implied duties or obligations shall be read into this Agreement against Escrow Agent. Except as explicitly stated herein, Escrow Agent shall be under no obligation to refer to any other documents between or among Purchaser and Seller or otherwise related to the Property or the transaction contemplated hereunder. Escrow Agent shall not be liable to either party or any other person on account of any error of judgment, any act done or stop taken or omitted in good faith, any mistake of fact or law, or anything else Escrow Agent may do or refrain from doing in connection herewith, unless caused by or arising out of actual and intentional misconduct, willful disregard of this Agreement or gross negligence on the part of the Escrow Agent. Escrow Agent shall be entitled to rely, and shall not be subject to any liability in acting in reliance, upon any writing furnished to Escrow Agent by either party, and shall be entitled to treat as genuine and as the document which it purports to be, any letter, paper or other document furnished to Escrow Agent in connection with this Agreement. Escrow Agent further may rely on any affidavit of either Party or any other person as to the existence and accuracy of any facts stated therein to be known by the affiant. In the event of any dispute relative to the deposit monies held in escrow, the Escrow Agent may, in its sole discretion, pay such deposit monies into the Clerk of the Superior Court of Oxford County or Cumberland County, Maine, with notice to the parties hereto at the addresses recited hereinabove, and thereupon the Escrow Agent shall be discharged from its obligations as recited herein, and each party to this Agreement shall thereafter hold the Escrow Agent harmless in such capacity. Both parties hereto agree that the Escrow Agent may (a) deduct the administrative cost of opening, maintaining and closing the said escrow account from the deposit monies before disbursing any of said monies, and (b) deduct the cost of bringing such Interpleader action, from the deposit monies held in escrow prior to the forwarding of the same to the Clerk of such Court. Purchaser and Seller shall jointly and severally defend, indemnify and hold Escrow Agent for solely for its actions as escrow agent under this Agreement harmless from and against any and all losses, liabilities, damages, costs, expenses or claims incurred by Escrow Agent in the performance of its duties as escrow agent under this Agreement, except only to the extent caused by the Escrow Agent’s intentional misconduct, bad faith, willful disregard of its obligations hereunder or gross negligence. As between themselves, each party shall be responsible for one-half of the total costs incurred in connection with such indemnity, and each shall have the right of contribution from the other to the extent necessary to achieve such allocation. The provisions of this Section 16 shall survive the termination of this Agreement.

 

 

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their undersigned representatives as of the date first written above.

 

  SELLER:
  RJF – Keiser Real Estate, LLC
   
  By:

/s/ Daniel M. Monfried

    Name: Daniel M. Monfried
    Its: Manager

 

 

  PURCHASER:
  56 Mechanic Falls Road, LLC
   
  By:

/s/ David J. Noble

    Name: David J. Noble
    Its: President

 

 

JOINDER OF ESCROW AGENT

 

The undersigned Escrow Agent hereby acknowledges receipt of the Deposit and a copy of this Agreement and agrees to act as Escrow Agent hereunder, to hold the Deposit in a segregated, federally-insured account acceptable to Purchaser, and to hold, account for, and deliver the Deposit in accordance with the terms of this Agreement. Escrow Agent joins in this Agreement for the limited purpose set forth above and is not a party to this Agreement and need not be joined in any amendment hereto.

 

Dated:  March 28, 2019 ESCROW AGENT:
  Old Republic National Title Insurance Company
   
  By: /s/ Michael Gagnon
 
    Printed Name: Michael Gagnon
    Its: FVP

 

 

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Exhibit 10.2

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 3rd day of April, 2019 (the “Effective Date”) by and between KBS Builders, Inc., a Delaware corporation with a mailing address of 300 Park Street, Paris, Maine 04271 (“Seller”), and 947 Waterford Road, LLC, a Delaware limited liability company with a mailing address of 53 Forest Avenue, Old Greenwich, CT 06870 (“Purchaser”).

 

1.Purchase and Sale; Leases at Closing.

 

(a)Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, the following property:

 

(i)The land located at or about 947 Waterford Road in the Town of Waterford, County of Oxford, and State of Maine, as more particularly described in Schedule 1(a)(i), attached hereto and made a part hereof, together with all rights, privileges, easements, and appurtenances thereto, including all air rights, water rights, easements, rights-of-way, and other interests in, on, under or to any land, highway, alley, street, or right-of-way abutting, adjoining, or used in connection with said land or otherwise appurtenant to said land, including those, if any, set forth on said Schedule (the “Waterford Land”);

 

(ii)all buildings and other improvements located on the Waterford Land (the “Waterford Improvements” and, together with the Waterford Land, the “Waterford Real Property” or the “Real Property”);

 

(iii)(reserved);

 

(iv)(reserved);

 

(v)(reserved);

 

(vi)(reserved);

 

(vii)(reserved);

 

(viii)all warranties, if any, relating to the Real Property (collectively, the “Warranties”)

 

(all of items (i) through (viii) are referred to herein collectively as the “Premises”). Seller and Purchaser acknowledge and agree that Purchaser is not assuming and will not assume at Closing any obligations, debts, or liabilities in connection with the Premises, except as specifically set forth in this Agreement.

 

(b)Lease from Purchaser to Seller at Closing. Contemporaneous with the Closing (as hereafter defined), Purchaser, as landlord, and Seller, as tenant, shall enter into the lease agreement with respect to the Premises in substantially the form attached hereto as Schedule 1(b).

 

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2.Purchase Price.

 

(a)The purchase price for the Premises (the “Purchase Price”) is Nine Hundred Ninety Thousand and 00/100 Dollars ($990,000.00) and shall be payable as follows:

 

The Purchase Price, subject to adjustment as provided herein, shall be paid by Purchaser at Closing by cashier’s or treasurer’s check made payable to Seller or by electronic wire transfer in accordance with wiring instructions provided by Seller within a reasonable time prior to the Closing.

 

(b)(reserved.)

 

3.Adjustments and Costs. All applicable real estate taxes, common area charges, association dues, fuel value, utility charges and other charges and assessments affecting the Premises shall be apportioned between Seller and Purchaser as of the Closing Date (as hereinafter defined), subject, however, to Seller’s obligations under the Lease.

 

4.Deed; Conveyance.

 

(a)Seller shall convey the Real Property to Purchaser by good and sufficient Quitclaim Deed with Covenant following the Maine statutory short form (the “Deed”). Title to the Real Property shall be good and marketable, free of all encumbrances, and subject only to such real estate taxes for the then-current tax year as are not yet due and payable as of the Closing Date. If requested by Purchaser, Seller agrees to convey the Premises utilizing a description prepared from a survey procured by Purchaser. Seller shall assign the Warranties by good and sufficient assignment instrument. Seller shall have the right to use the Purchase Price paid at Closing to satisfy any indebtedness secured by the Premises or any portion thereof provided that discharges or terminations of all mortgages of and security interests in the Premises are executed and delivered by the holder(s) of such indebtedness at Closing (or commercially reasonable arrangements acceptable to Purchaser and its title insurance company have been made for the execution and delivery of such discharges and terminations have been made at or prior to Closing).

 

(b)Without limiting the generality of Section 4(a), the Premises shall not be considered to be in compliance with the provisions of this Agreement with respect to title unless title to the Real Property is insurable for the benefit of Purchaser at ordinary rates under the 2006 ALTA form of owner’s title insurance policy by a title insurance company of Purchaser’s selection, with so-called “extended coverage,” and including such endorsements as Purchaser shall require and subject only to those exceptions from coverage (including for any easements, restrictions, encumbrances, or other matters set forth or referenced on any schedule hereto) that are approved by Purchaser in its sole discretion as provided in this Agreement.

 

(c)At Closing, Seller shall furnish such evidence of Seller’s existence and authority to enter into and perform the transactions contemplated by this Agreement as is sufficient to satisfy the requirements of Purchaser’s title insurance company and shall execute, acknowledge, and deliver affidavits and indemnity agreements in the forms customarily required by Purchaser’s title insurance company, including those necessary to: (i) delete the exceptions for unfiled mechanics’ liens and for parties in possession; (ii) delete the standard exception for such matters that would be shown by a current ALTA survey; and (iii) insure against matters affecting title to the Premises that arise during the period between the effective date of Purchaser’s title insurance commitment and the recording of the Deed.

 

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5.Items to be Delivered to Purchaser from Seller. To the extent within the possession or control of Seller, and to the extent such documents exist, Seller shall promptly deliver to Purchaser any and all surveys, environmental reports, engineering reports, title insurance policies and title reports, and such other information and/or documentation pertaining to the Premises as is reasonably requested by Purchaser from time-to-time after the Effective Date.

 

6.Specific Conditions. The obligations of Purchaser under this Agreement are subject to Purchaser being satisfied, in its sole discretion, with the following at or prior to Closing:

 

(a)the physical condition (including the environmental condition) of the Premises, including the Improvements;

 

(b)the status of title to the Premises and Purchaser’s ability to obtain an owner’s title insurance policy for the Real Property that is in all respects satisfactory to Purchaser, including with respect to the absence of tenants in possession and other occupants, and with such coverages and endorsements as Purchaser shall reasonably require;

 

(c)the boundaries and other states of facts, conditions and possible conditions shown by, and other results of, any existing surveys of the Real Property, if any, and/or any survey commissioned by or on behalf of Purchaser; and

 

(d)(Reserved.)

 

Purchaser shall have the right to enter upon the Premises at reasonable times after the Effective Date in connection with Purchaser’s efforts to satisfy the foregoing conditions. If any of the foregoing conditions are not satisfied, Purchaser shall have the right to terminate this Agreement by giving written notice to Seller, in which event all obligations of the parties hereunder shall cease.

 

7.Representation and Warranties.

 

(a)Seller represents and warrants to Purchaser that the following are true and correct as of the date of this Agreement and will be true and correct as of the Closing

 

(i)Seller is a limited liability company, duly organized and validly existing under the laws of the State of Delaware;

 

(ii)Seller has the right, power, and authority to enter into this Agreement or to perform its obligations hereunder, without the joinder of any other party;

 

(iii)The execution and delivery of this Agreement, the consummation of the transactions herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the articles of incorporation, bylaws, or any other similar instrument of Seller and will not conflict with or, with or without notice or the passage of time, or both, result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, agreement, or other instrument to which Seller is a party or by which Seller or the Premises are bound, or of any applicable governmental regulation or any judgment, order, or decree of any court or governmental authority having jurisdiction over Seller or the Premises;

 

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(iv)There are no violations of laws or regulations affecting the Premises, including without limitation any laws relating to accessibility or Hazardous Substances (as defined below) and Seller has not received any notice from any source claiming or inquiring into the existence of any such violation;

 

(v)There is no action, suit, legal proceeding, or other proceeding (including proceedings for condemnation or eminent domain) pending or threatened (or, to the best of Seller’s knowledge, any basis therefor) against Seller or affecting any portion of the Premises in any court or before any arbitrator of any kind or before any governmental body or tribunal for dispute resolution that may materially or adversely affect the transactions contemplated by this Agreement or which may affect any portion of the Premises, other than the proceedings that are the subject of attachments recorded in the Oxford County Registry of Deeds in Book 5441, Page 463 and Book 5445, Page 667, both of which either have been fully resolved on or about the Effective Date or will be fully resolved prior to Closing;

 

(vi)Seller has not released or disposed of any Hazardous Substances on, in, under or from the Real Property, and Seller has no knowledge of the release or disposal of any Hazardous Substance on, in, under or from the Real Property at any time by any other person. There are no underground storage tanks on the Real Property. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state laws regulating pollution or contamination of the environment;

 

(vii)The Real Property consists of an independent unit that does not rely on any property or facilities (other than public utilities) located on any property not included in such portion of the Real Property for any of the means of ingress or egress, to fulfill any zoning or other municipal or governmental requirements, for structural support, or for utilities, septic or water service, or any similar purposes, and no other property or facilities rely on any of the Real Property for any such purposes;

 

(viii)To the best of Seller’s knowledge, all written information furnished by Seller or its agents to Purchaser and its agents is true, accurate and complete; and no document, certificate or written statement furnished to Purchaser by or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omit or will omit or state any material fact necessary in order to make the statements contained herein and therein not misleading;

 

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(ix)The Improvements contain all heating systems and fixtures, ventilating systems and fixtures, cooling systems and fixtures, plumbing systems and fixtures (including water supply and wastewater disposal), electrical systems and fixtures, security systems and fixtures, fire alarms, sprinkler systems and fixtures, smoke detection systems and fixtures, storm water management facilities and other mechanical and life safety systems required for the operation of the Improvements for their intended use and in compliance with applicable laws and regulations, and the Improvements and all such systems and fixtures same are in good order, condition, and repair. Seller has not received any notice from any governmental, quasi-governmental agency or other group or individual alleging that the Improvements or any portion thereof does not comply with applicable law or requiring the correction of any condition with respect to the Premises by reason of any violation of any law or ordinance;

 

(x)Seller has paid or shall pay at Closing all taxes, charges and assessments required to be paid to each taxing authority which could in any way constitute a lien against the Premises or any part thereof. Seller has not received any written notice of any special assessments or betterments with respect to the Premises or any written notice of an increase or proposed increase in the assessed valuation of the Premises or any part thereof and no exemption from full taxation of the Premises or any part thereof has been claimed by Seller;

 

(xi)the Premises are not located in whole or in part within 250 feet of the normal high water line of a great pond, river, saltwater body or coastal or fresh water wetland and the Premises are serviced by public water and public sewer services and, if there is a subsurface waste water disposal system located on or serving the Premises, (A) Seller has a written inspection report for an inspection of the subsurface waste water disposal system that was performed within three years prior to the Closing Date by a person certified by the Department of Health and Human Services; and (B) it has not malfunctioned during the 180 days preceding the date of this Agreement and will not have malfunctioned during the 180 days preceding the Closing.

 

(xii)no abandoned or discontinued town ways, public easements, or private roads are located on or abutting the Premises

 

(xiii)the Premises are not subject to any special real estate tax classification, including tree growth, farmland, or open space, or to any tax increment financing arrangement or other arrangement for payments in lieu of taxes.

 

(c)Purchaser represents and warrants to Seller that the following are true as of the Effective Date and will be true as of the Closing:

 

(i)Purchaser is a corporation, duly organized and validly existing under the laws of the State of Delaware;

 

(ii)Purchaser has the right, power and authority to enter into this Agreement or to perform its obligations hereunder; and

 

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(iii)The execution and delivery of this Agreement, the consummation of the transaction herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the Articles of Incorporation, Operating Agreement, Bylaws or similar instrument of Purchaser nor conflict with, or with or without notice or the passage of time, or both, result in a breach of, any of the terms or provisions of or constitute a default under any indenture, mortgage, loan agreement or instrument to which Purchaser is a party or by which Purchaser is bound, or any applicable governmental regulation or any judgment, order or decree of any court having jurisdiction over Purchaser.

 

(d)All representations and warranties set forth in this Section shall survive the Closing. If either party discovers that any representation or warranty to the other party is untrue or incorrect in any material respect, it shall promptly notify the other party and the party having made the untrue or incorrect representation or warranty shall indemnify and hold harmless the discovering party for all demands, claims, causes of action, losses, liabilities, costs, and expenses (including reasonable attorneys’ fees), incurred by the discovering party arising out of such untrue or incorrect representation or warranty, which obligation shall survive the Closing.

 

8.Covenants and Agreements of Seller. Seller covenants and agrees with Purchaser that between the Effective Date and the Closing:

 

(a)It shall not dispose of any interest in the Premises; shall not grant, mortgage, pledge or subject to lien or other encumbrances any interest in the Premises; shall not enter into any leases or other agreements relating to the Premises that would affect the sale or survive the Closing; shall keep the Improvements insured for not less than full replacement value and maintain, preserve and keep all of the Improvements in good condition and repair, ordinary and reasonable wear and tear excepted; and shall maintain its general liability insurance in effect consistent with its normal conduct of business;

 

(b)It shall not take any action or fail to take any action that would cause the Premises not to conform with the provisions of this Agreement, would cause any statements set forth in this Agreement to be untrue or incorrect, or would otherwise cause Seller to be unable to perform its obligations under this Agreement.

 

9.Conditions Precedent to Purchaser’s Performance.

 

(a)Purchaser’s obligations hereunder, including the obligation to purchase and pay for the Premises, are subject to the satisfaction of the following conditions, any of which may be waived by Purchaser, but only in a writing signed by Purchaser:

 

(i)All of Seller’s representations and warranties being true and correct as of the Closing Date;

 

(ii)no material adverse changes in the physical condition of the Premises or the results of operations thereof shall have occurred and the Premises shall be in the same condition at the Closing as of the Effective Date, ordinary and reasonable wear and tear excepted;

 

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(iii)no portion of the Premises shall have been condemned or sold in lieu thereof or be the subject of any pending or threatening condemnation proceeding or subject to any pending or threatening legislation, regulation, rezoning or zoning amendment, moratorium or referendum; and

 

(iv)Seller shall have performed all of the obligations required by this Agreement to be performed by Seller and all of the obligations required by a Purchase and Sale Agreement of even or near date between Seller and 300 Park Street, LLC, pertaining to certain property owned by Seller and located at or about 300 Park Street in Paris, Maine, and such agreement shall not have been terminated.

 

(b)If any of the conditions set forth above are, in Purchaser’s sole discretion, not satisfied, Purchaser may, by giving written notice to Seller on or before the Closing Date, elect (i) to waive such condition and proceed with the Closing or (ii) to terminate this Agreement. The foregoing notwithstanding, if such contingency is not satisfied and such dissatisfaction arises as a result of any act or omission of Seller in violation of this Agreement, Purchaser may exercise all remedies available to it, in law or in equity, against Seller for breach of this Agreement.

 

10.Closing.

 

(a)The consummation of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Purchaser’s counsel or at such other place as is agreed upon by the parties on or before April 3, 2019, or such other date as may be agreed upon by the parties (the “Closing Date”).

 

(b)The following shall occur at the Closing, each being a condition precedent to the others and all being considered as occurring simultaneously:

 

(i)Seller shall execute, acknowledge, and deliver to Purchaser the Deed, said Deed being subject only to the matters described in Section 4 and to any Exceptions accepted by Purchaser;

 

(ii)(reserved.);

 

(iii)Seller shall execute, acknowledge, and deliver to Purchaser one or more instruments conveying to Purchaser good and marketable title to the Warranties, free of all encumbrances, in form and substance acceptable to Seller;

 

(iv)Seller shall execute and deliver the title insurance affidavits and indemnities as provided in this Agreement;

 

(v)Seller and Purchaser shall deliver certifications confirming that their respective representations and warranties set forth in this Agreement continue to be true and correct as of the Closing Date;

 

(vi)Seller shall deliver an affidavit indicating that Seller is not a foreign person and that the transaction is exempt from the requirements of 26 U.S.C. § 1445, or in lieu thereof, Purchaser shall be entitled to withhold and account for a portion of the Purchase Price as required by such statute and corresponding regulations;

 

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(vii)Seller shall deliver an affidavit indicating that Seller is a Maine resident, or in lieu thereof, Purchaser shall be entitled to withhold and account for a portion of the Purchase Price as required by 33 M.R.S. §5250-A;

 

(viii)Each party shall deliver to the other a manager’s or member’s certificate certifying as to authority and appropriate resolutions adopted by the party, current officers or other parties authorized to execute documents on behalf of such party, and such other organizational and/or authority documents as shall be reasonably requested in connection with this transaction;

 

(ix)Purchaser shall pay the Purchase Price as provided in this Agreement and the parties shall execute and deliver a settlement statement memorializing the Purchase Price, the adjustments thereto, and other costs and expenses to be paid, or credited to or debited from the amounts due from or to either Party, at Closing;

 

(x)Each party shall deliver to the other such other documents, certificates and the like as may be required herein or as may be necessary to carry out the obligations under this Agreement; and

 

(xi)Seller shall deliver to Purchaser keys to and possession of the Premises, free and clear of any tenancy or persons in possession other than Seller as tenant under the Leases.

 

11.Risk of Loss.

 

(a)Risk of loss to the Premises prior to the Closing shall be borne by Seller. If between the Effective Date and the Closing, any part of the Premises (including any right appurtenant to the Premises) is taken in condemnation or under the right of eminent domain, or any portion of the Premises is damaged by fire or other peril, Purchaser shall have the right to terminate this Agreement by giving written notice to Seller at any time at or prior to Closing.

 

(b)If Purchaser does not elect to terminate this Agreement pursuant to this Section, Seller and Purchaser shall perform their respective obligations under this Agreement and Seller shall (i) deliver to Purchaser at the Closing any insurance proceeds and/or condemnation awards received by Seller as a result of any occurrence specified in this Section in respect of or allocable to the Premises; and (ii) assign to Purchaser all of Seller's right, title, and interest in any to any insurance proceeds and condemnation awards allocable to the Premises which have not yet been received by Seller.

 

12.Broker. Seller and Purchaser warrant and represent to each other that neither has employed or engaged any real estate broker or agent in connection with this transaction that could give rise to a lien against the Premises. Each party agrees to hold the other party harmless from and against any and all demands, claims, causes of action, losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees) arising from the breach of such party’s representation or warranty contained in this Section. The provisions of this Section shall survive the Closing.

 

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13.Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be hand delivered, or given by certified mail, return receipt requested, or by Federal Express or another nationally recognized overnight courier service, addressed to the party to receive such notice at the address set forth in the preamble of this Agreement. Any such notice shall be deemed effective when personally delivered (in the case of hand delivery) or upon being deposited with such courier service or with the United States Postal Service. Any party may change the address to which its future notices shall be sent by notice given in the manner set forth above.

 

14.Miscellaneous.

 

(a)Any reference herein to time periods of less than seven (7) days shall be computed to exclude Saturdays, Sundays, and statutory holidays in the State of Maine. Any time period provided for herein which ends on a Saturday, Sunday, or statutory holiday in the State of Maine shall extend to midnight at the end of the next day that is not a Saturday, Sunday, or statutory holiday in the State of Maine.

 

(b)Purchaser or Purchaser’s agents shall have the right to enter upon the Real Property prior to the Closing for the purpose of making studies and inspections of the Real Property during normal business hours, so long as Purchaser or Purchaser’s agents do not unreasonably interfere with Seller’s use of the Real Property. Any such entry shall be at Purchaser’s own risk and Purchaser agrees to indemnify and hold Seller harmless from and against any property damage or personal injury or claim or lien against the Premises to the extent caused by any such access or inspection by Purchaser or its representatives.

 

(c)This Agreement shall be binding upon and shall inure to the benefit of Seller and Purchaser and their respective successors and assigns.

 

(d)All understandings, agreements, warranties, and representations, either oral or in writing, heretofore between the parties hereto with respect to the purchase and sale of the Premises are merged into this Agreement, which alone fully and completely expresses the parties’ agreement with respect to the transaction contemplated hereby. The representations and warranties set forth in this Agreement shall survive the Closing. This Agreement may not be modified in any manner except by an instrument in writing signed by Seller and Purchaser.

 

(e)This Agreement, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Agreement, shall be governed by and enforced in accordance with the internal laws of the State of Maine, including its statutes of limitations, without regard or reference to conflicts of law principles. In the event of a breach of this Agreement by any party, the other party shall be entitled to recover reasonable attorneys’ fees incurred in connection with the enforcement of its rights hereunder. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, and all of which, taken together, shall constitute a single instrument.

 

(f)Whenever the word “include,” “includes,” or “including” is used in this Agreement, it is deemed to be followed by the words “without limitation.” The terms “this Agreement,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Agreement as a whole and not to any particular section of this Agreement unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Agreement.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their undersigned representatives as of the date first written above.

 

  SELLER:
  KBS Builders, Inc.
     
  By: /s/Daniel M. Koch
  Name:  Daniel M. Koch
  Its: President
     
     
  PURCHASER:
  947 Waterford Road, LLC
     
  By: /s/David Noble
  Name: David Noble
  Its: President

 

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Exhibit 10.3

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 3rd day of April, 2019 (the “Effective Date”) by and between KBS Builders, Inc., a Delaware corporation with a mailing address of 300 Park Street, Paris, Maine 04271 (“Seller”), and 300 Park Street, LLC, a Delaware limited liability company with a mailing address of 53 Forest Avenue, Old Greenwich, CT 06870 (“Purchaser”).

 

1.Purchase and Sale; Leases at Closing.

 

(a)Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, the following property:

 

(i)The land located at or about 300 Park Street in the Town of Paris, County of Oxford, and State of Maine, as more particularly described in Schedule 1(a)(i), attached hereto and made a part hereof, together with all rights, privileges, easements, and appurtenances thereto, including all air rights, water rights, easements, rights-of-way, and other interests in, on, under or to any land, highway, alley, street, or right-of-way abutting, adjoining, or used in connection with said land or otherwise appurtenant to said land, including those, if any, set forth on said Schedule (the “Paris Land”);

 

(ii)all buildings and other improvements located on the Paris Land (the “Paris Improvements” and, together with the Paris Land, the “Paris Real Property” or the “Real Property”);

 

(iii)the machinery, equipment, furniture, furnishings, tangible personal property, trade fixtures, and fixtures located at or used in connection with the Paris Real Property, which are more particularly described on Schedule 1(a)(iii) (all such items, other than the aforesaid excluded items, being referred to herein as the “Paris Personal Property or the Personal Property”);

  

(iv)(reserved);

 

(v)(reserved);

 

(vi)(reserved);

 

(vii)(reserved)

 

(viii)all warranties, if any, relating to the Real Property and all warranties, if any, relating to the Personal Property (collectively, the “Warranties”)

 

(all of items (i) through (viii) are referred to herein collectively as the “Premises”). Seller and Purchaser acknowledge and agree that Purchaser is not assuming and will not assume at Closing any obligations, debts, or liabilities in connection with the Premises, except as specifically set forth in this Agreement.

 

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(b)Lease from Purchaser to Seller at Closing. Contemporaneous with the Closing (as hereafter defined), Purchaser, as landlord, and Seller, as tenant, shall enter into the lease agreement with respect to the Premises in substantially the form attached hereto as Schedule 1(b).

 

2.Purchase Price; Allocation.

 

(a)The purchase price for the Premises (the “Purchase Price”) is Two Million Eight Hundred Eighty-Three Thousand Two Hundred Five and 70/100 Dollars ($2,883,205.70) and shall be payable as follows:

  

The Purchase Price, subject to adjustment as provided herein, shall be paid by Purchaser at Closing by cashier’s or treasurer’s check made payable to Seller or by electronic wire transfer in accordance with wiring instructions provided by Seller within a reasonable time prior to the Closing.

 

(b)The Purchase Price shall be allocated as follows:

 

  Paris Real Property $2,335,000.00
  Personal Property
  Hundegger Saw $230,105.70
  Other Personal Property

$318,100.00

 

3.Adjustments and Costs. All applicable real estate taxes, personal property taxes, common area charges, association dues, fuel value, utility charges and other charges and assessments affecting the Premises shall be apportioned between Seller and Purchaser as of the Closing Date (as hereinafter defined), subject, however, to Seller’s obligations under the Lease.

 

4.Deed; Conveyance.

 

(a)Seller shall convey the Real Property to Purchaser by good and sufficient Quitclaim Deed with Covenant following the Maine statutory short form (the “Deed”). Title to the Real Property shall be good and marketable, free of all encumbrances, and subject only to such real estate taxes for the then-current tax year as are not yet due and payable as of the Closing Date. If requested by Purchaser, Seller agrees to convey the Premises utilizing a description prepared from a survey procured by Purchaser. Seller shall convey the Personal Property to Purchaser by one or more good and sufficient warranty bills of sale. Title to the Personal Property shall be good and marketable, free of all encumbrances, and subject only to personal property taxes for the then-current tax year as are not yet due and payable as of the Closing Date. Seller shall assign the Warranties by good and sufficient assignment instrument. Seller shall have the right to use the Purchase Price paid at Closing to satisfy any indebtedness secured by the Premises or any portion thereof provided that discharges or terminations of all mortgages of and security interests in the Premises are executed and delivered by the holder(s) of such indebtedness at Closing (or commercially reasonable arrangements acceptable to Purchaser and its title insurance company have been made for the execution and delivery of such discharges and terminations have been made at or prior to Closing).

 

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(b)Without limiting the generality of Section 4(a), the Premises shall not be considered to be in compliance with the provisions of this Agreement with respect to title unless title to the Real Property is insurable for the benefit of Purchaser at ordinary rates under the 2006 ALTA form of owner’s title insurance policy by a title insurance company of Purchaser’s selection, with so-called “extended coverage,” and including such endorsements as Purchaser shall require and subject only to those exceptions from coverage (including for any easements, restrictions, encumbrances, or other matters set forth or referenced on any schedule hereto) that are approved by Purchaser in its sole discretion as provided in this Agreement.

 

(c)At Closing, Seller shall furnish such evidence of Seller’s existence and authority to enter into and perform the transactions contemplated by this Agreement as is sufficient to satisfy the requirements of Purchaser’s title insurance company and shall execute, acknowledge, and deliver affidavits and indemnity agreements in the forms customarily required by Purchaser’s title insurance company, including those necessary to: (i) delete the exceptions for unfiled mechanics’ liens and for parties in possession; (ii) delete the standard exception for such matters that would be shown by a current ALTA survey; and (iii) insure against matters affecting title to the Premises that arise during the period between the effective date of Purchaser’s title insurance commitment and the recording of the Deed.

 

5.Items to be Delivered to Purchaser from Seller. To the extent within the possession or control of Seller, and to the extent such documents exist, Seller shall promptly deliver to Purchaser any and all surveys, environmental reports, engineering reports, title insurance policies and title reports, and such other information and/or documentation pertaining to the Premises as is reasonably requested by Purchaser from time-to-time after the Effective Date.

 

6.Specific Conditions. The obligations of Purchaser under this Agreement are subject to Purchaser being satisfied, in its sole discretion, with the following at or prior to Closing:

 

(a)the physical condition (including the environmental condition) of the Premises, including the Improvements and the Personal Property;

 

(b)the status of title to the Premises and Purchaser’s ability to obtain an owner’s title insurance policy for the Real Property that is in all respects satisfactory to Purchaser, including with respect to the absence of tenants in possession and other occupants, and with such coverages and endorsements as Purchaser shall reasonably require;

 

(c)the boundaries and other states of facts, conditions and possible conditions shown by, and other results of, any existing surveys of the Real Property, if any, and/or any survey commissioned by or on behalf of Purchaser; and

 

(d)(Reserved.)

 

Purchaser shall have the right to enter upon the Premises at reasonable times after the Effective Date in connection with Purchaser’s efforts to satisfy the foregoing conditions. If any of the foregoing conditions are not satisfied, Purchaser shall have the right to terminate this Agreement by giving written notice to Seller, in which event all obligations of the parties hereunder shall cease.

 

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7.Representation and Warranties.

 

(a)Seller represents and warrants to Purchaser that the following are true and correct as of the date of this Agreement and will be true and correct as of the Closing

 

(i)Seller is a limited liability company, duly organized and validly existing under the laws of the State of Delaware;

 

(ii)Seller has the right, power, and authority to enter into this Agreement or to perform its obligations hereunder, without the joinder of any other party;

 

(iii)The execution and delivery of this Agreement, the consummation of the transactions herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the articles of incorporation, bylaws, or any other similar instrument of Seller and will not conflict with or, with or without notice or the passage of time, or both, result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, agreement, or other instrument to which Seller is a party or by which Seller or the Premises are bound, or of any applicable governmental regulation or any judgment, order, or decree of any court or governmental authority having jurisdiction over Seller or the Premises;

 

(iv)There are no violations of laws or regulations affecting the Premises, including without limitation any laws relating to accessibility or Hazardous Substances (as defined below) and Seller has not received any notice from any source claiming or inquiring into the existence of any such violation;

 

(v)There is no action, suit, legal proceeding, or other proceeding (including proceedings for condemnation or eminent domain) pending or threatened (or, to the best of Seller’s knowledge, any basis therefor) against Seller or affecting any portion of the Premises in any court or before any arbitrator of any kind or before any governmental body or tribunal for dispute resolution that may materially or adversely affect the transactions contemplated by this Agreement or which may affect any portion of the Premises, other than the proceedings that are the subject of attachments recorded in the Oxford County Registry of Deeds in Book 5441, Page 463 and Book 5445, Page 667, both of which either have been fully resolved on or about the Effective Date or will be fully resolved prior to Closing;

 

(vi)Seller has not released or disposed of any Hazardous Substances on, in, under or from the Real Property, and Seller has no knowledge of the release or disposal of any Hazardous Substance on, in, under or from the Real Property at any time by any other person. There are no underground storage tanks on the Real Property. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state laws regulating pollution or contamination of the environment;

 

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(vii)The Real Property consists of an independent unit that does not rely on any property or facilities (other than public utilities) located on any property not included in such portion of the Real Property for any of the means of ingress or egress, to fulfill any zoning or other municipal or governmental requirements, for structural support, or for utilities, septic or water service, or any similar purposes, and no other property or facilities rely on any of the Real Property for any such purposes;

 

(viii)To the best of Seller’s knowledge, all written information furnished by Seller or its agents to Purchaser and its agents is true, accurate and complete; and no document, certificate or written statement furnished to Purchaser by or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omit or will omit or state any material fact necessary in order to make the statements contained herein and therein not misleading;

 

(ix)The Improvements contain all heating systems and fixtures, ventilating systems and fixtures, cooling systems and fixtures, plumbing systems and fixtures (including water supply and wastewater disposal), electrical systems and fixtures, security systems and fixtures, fire alarms, sprinkler systems and fixtures, smoke detection systems and fixtures, storm water management facilities and other mechanical and life safety systems required for the operation of the Improvements for their intended use and in compliance with applicable laws and regulations, and the Improvements and all such systems and fixtures same are in good order, condition, and repair. Seller has not received any notice from any governmental, quasi-governmental agency or other group or individual alleging that the Improvements or any portion thereof does not comply with applicable law or requiring the correction of any condition with respect to the Premises by reason of any violation of any law or ordinance;

 

(x)Seller has paid or shall pay at Closing all taxes, charges and assessments required to be paid to each taxing authority which could in any way constitute a lien against the Premises or any part thereof. Seller has not received any written notice of any special assessments or betterments with respect to the Premises or any written notice of an increase or proposed increase in the assessed valuation of the Premises or any part thereof and no exemption from full taxation of the Premises or any part thereof has been claimed by Seller;

 

(xi)the Premises are not located in whole or in part within 250 feet of the normal high water line of a great pond, river, saltwater body or coastal or fresh water wetland and the Premises are serviced by public water and public sewer services.

 

(xii)no abandoned or discontinued town ways, public easements, or private roads are located on or abutting the Premises

 

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(xiii)the Premises are not subject to any special real estate tax classification, including tree growth, farmland, or open space, or to any tax increment financing arrangement or other arrangement for payments in lieu of taxes.

 

(c)Purchaser represents and warrants to Seller that the following are true as of the Effective Date and will be true as of the Closing:

 

(i)Purchaser is a corporation, duly organized and validly existing under the laws of the State of Delaware;

 

(ii)Purchaser has the right, power and authority to enter into this Agreement or to perform its obligations hereunder; and

 

(iii)The execution and delivery of this Agreement, the consummation of the transaction herein contemplated, and the compliance with the terms of this Agreement will not violate any provisions of the Articles of Incorporation, Operating Agreement, Bylaws or similar instrument of Purchaser nor conflict with, or with or without notice or the passage of time, or both, result in a breach of, any of the terms or provisions of or constitute a default under any indenture, mortgage, loan agreement or instrument to which Purchaser is a party or by which Purchaser is bound, or any applicable governmental regulation or any judgment, order or decree of any court having jurisdiction over Purchaser.

 

(d)All representations and warranties set forth in this Section shall survive the Closing. If either party discovers that any representation or warranty to the other party is untrue or incorrect in any material respect, it shall promptly notify the other party and the party having made the untrue or incorrect representation or warranty shall indemnify and hold harmless the discovering party for all demands, claims, causes of action, losses, liabilities, costs, and expenses (including reasonable attorneys’ fees), incurred by the discovering party arising out of such untrue or incorrect representation or warranty, which obligation shall survive the Closing.

 

8.Covenants and Agreements of Seller. Seller covenants and agrees with Purchaser that between the Effective Date and the Closing:

 

(a)It shall not dispose of any interest in the Premises; shall not grant, mortgage, pledge or subject to lien or other encumbrances any interest in the Premises; shall not enter into any leases or other agreements relating to the Premises that would affect the sale or survive the Closing; shall keep the Improvements and Personal Property insured for not less than full replacement value and maintain, preserve and keep all of the Improvements and Personal Property in good condition and repair, ordinary and reasonable wear and tear excepted; and shall maintain its general liability insurance in effect consistent with its normal conduct of business;

 

(b)It shall not take any action or fail to take any action that would cause the Premises not to conform with the provisions of this Agreement, would cause any statements set forth in this Agreement to be untrue or incorrect, or would otherwise cause Seller to be unable to perform its obligations under this Agreement.

 

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9.Conditions Precedent to Purchaser’s Performance.

 

(a)Purchaser’s obligations hereunder, including the obligation to purchase and pay for the Premises, are subject to the satisfaction of the following conditions, any of which may be waived by Purchaser, but only in a writing signed by Purchaser:

 

(i)All of Seller’s representations and warranties being true and correct as of the Closing Date;

 

(ii)no material adverse changes in the physical condition of the Premises or the results of operations thereof shall have occurred and the Premises shall be in the same condition at the Closing as of the Effective Date, ordinary and reasonable wear and tear excepted;

 

(iii)no portion of the Premises shall have been condemned or sold in lieu thereof or be the subject of any pending or threatening condemnation proceeding or subject to any pending or threatening legislation, regulation, rezoning or zoning amendment, moratorium or referendum; and

 

(iv)Seller shall have performed all of the obligations required by this Agreement to be performed by Seller and all of the obligations required by a Purchase and Sale Agreement of even or near date between Seller and 947 Waterford Road, LLC, pertaining to certain property owned by Seller and located at or about 947 Waterford Road in Waterford, Maine, and such agreement shall not have been terminated.

 

(b)If any of the conditions set forth above are, in Purchaser’s sole discretion, not satisfied, Purchaser may, by giving written notice to Seller on or before the Closing Date, elect (i) to waive such condition and proceed with the Closing or (ii) to terminate this Agreement. The foregoing notwithstanding, if such contingency is not satisfied and such dissatisfaction arises as a result of any act or omission of Seller in violation of this Agreement, Purchaser may exercise all remedies available to it, in law or in equity, against Seller for breach of this Agreement.

 

10.Closing.

 

(a)The consummation of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Purchaser’s counsel or at such other place as is agreed upon by the parties on or before April 3, 2019, or such other date as may be agreed upon by the parties (the “Closing Date”).

 

(b)The following shall occur at the Closing, each being a condition precedent to the others and all being considered as occurring simultaneously:

 

(i)Seller shall execute, acknowledge, and deliver to Purchaser the Deed, said Deed being subject only to the matters described in Section 4 and to any Exceptions accepted by Purchaser;

 

(ii)Seller shall execute, acknowledge, and deliver to Purchaser one or more warranty bills of sale conveying to Purchaser good and marketable title to the Personal Property, free of all encumbrances, in form and substance acceptable to Seller;

 

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(iii)Seller shall execute, acknowledge, and deliver to Purchaser one or more instruments conveying to Purchaser good and marketable title to the Warranties, free of all encumbrances, in form and substance acceptable to Seller;

 

(iv)Seller shall execute and deliver the title insurance affidavits and indemnities as provided in this Agreement;

 

(v)Seller and Purchaser shall deliver certifications confirming that their respective representations and warranties set forth in this Agreement continue to be true and correct as of the Closing Date;

 

(vi)Seller shall deliver an affidavit indicating that Seller is not a foreign person and that the transaction is exempt from the requirements of 26 U.S.C. § 1445, or in lieu thereof, Purchaser shall be entitled to withhold and account for a portion of the Purchase Price as required by such statute and corresponding regulations;

 

(vii)Seller shall deliver an affidavit indicating that Seller is a Maine resident, or in lieu thereof, Purchaser shall be entitled to withhold and account for a portion of the Purchase Price as required by 33 M.R.S. §5250-A;

 

(viii)Each party shall deliver to the other a manager’s or member’s certificate certifying as to authority and appropriate resolutions adopted by the party, current officers or other parties authorized to execute documents on behalf of such party, and such other organizational and/or authority documents as shall be reasonably requested in connection with this transaction;

 

(ix)Purchaser shall pay the Purchase Price as provided in this Agreement and the parties shall execute and deliver a settlement statement memorializing the Purchase Price, the adjustments thereto, and other costs and expenses to be paid, or credited to or debited from the amounts due from or to either Party, at Closing;

 

(x)Each party shall deliver to the other such other documents, certificates and the like as may be required herein or as may be necessary to carry out the obligations under this Agreement; and

 

(xi)Seller shall deliver to Purchaser keys to and possession of the Premises, free and clear of any tenancy or persons in possession other than Seller as tenant under the Leases.

 

11.Risk of Loss.

 

(a)Risk of loss to the Premises prior to the Closing shall be borne by Seller. If between the Effective Date and the Closing, any part of the Premises (including any right appurtenant to the Premises) is taken in condemnation or under the right of eminent domain, or any portion of the Premises is damaged by fire or other peril, Purchaser shall have the right to terminate this Agreement by giving written notice to Seller at any time at or prior to Closing.

 

(b)If Purchaser does not elect to terminate this Agreement pursuant to this Section, Seller and Purchaser shall perform their respective obligations under this Agreement and Seller shall (i) deliver to Purchaser at the Closing any insurance proceeds and/or condemnation awards received by Seller as a result of any occurrence specified in this Section in respect of or allocable to the Premises; and (ii) assign to Purchaser all of Seller's right, title, and interest in any to any insurance proceeds and condemnation awards allocable to the Premises which have not yet been received by Seller.

 

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12.Broker. Seller and Purchaser warrant and represent to each other that neither has employed or engaged any real estate broker or agent in connection with this transaction that could give rise to a lien against the Premises. Each party agrees to hold the other party harmless from and against any and all demands, claims, causes of action, losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees) arising from the breach of such party’s representation or warranty contained in this Section. The provisions of this Section shall survive the Closing.

 

13.Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be hand delivered, or given by certified mail, return receipt requested, or by Federal Express or another nationally recognized overnight courier service, addressed to the party to receive such notice at the address set forth in the preamble of this Agreement. Any such notice shall be deemed effective when personally delivered (in the case of hand delivery) or upon being deposited with such courier service or with the United States Postal Service. Any party may change the address to which its future notices shall be sent by notice given in the manner set forth above.

 

14.Miscellaneous.

 

(a)Any reference herein to time periods of less than seven (7) days shall be computed to exclude Saturdays, Sundays, and statutory holidays in the State of Maine. Any time period provided for herein which ends on a Saturday, Sunday, or statutory holiday in the State of Maine shall extend to midnight at the end of the next day that is not a Saturday, Sunday, or statutory holiday in the State of Maine.

 

(b)Purchaser or Purchaser’s agents shall have the right to enter upon the Real Property prior to the Closing for the purpose of making studies and inspections of the Real Property during normal business hours, so long as Purchaser or Purchaser’s agents do not unreasonably interfere with Seller’s use of the Real Property. Any such entry shall be at Purchaser’s own risk and Purchaser agrees to indemnify and hold Seller harmless from and against any property damage or personal injury or claim or lien against the Premises to the extent caused by any such access or inspection by Purchaser or its representatives.

 

(c)This Agreement shall be binding upon and shall inure to the benefit of Seller and Purchaser and their respective successors and assigns.

 

(d)All understandings, agreements, warranties, and representations, either oral or in writing, heretofore between the parties hereto with respect to the purchase and sale of the Premises are merged into this Agreement, which alone fully and completely expresses the parties’ agreement with respect to the transaction contemplated hereby. The representations and warranties set forth in this Agreement shall survive the Closing. This Agreement may not be modified in any manner except by an instrument in writing signed by Seller and Purchaser.

 

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(e)This Agreement, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Agreement, shall be governed by and enforced in accordance with the internal laws of the State of Maine, including its statutes of limitations, without regard or reference to conflicts of law principles. In the event of a breach of this Agreement by any party, the other party shall be entitled to recover reasonable attorneys’ fees incurred in connection with the enforcement of its rights hereunder. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, and all of which, taken together, shall constitute a single instrument.

 

(f)Whenever the word “include,” “includes,” or “including” is used in this Agreement, it is deemed to be followed by the words “without limitation.” The terms “this Agreement,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Agreement as a whole and not to any particular section of this Agreement unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Agreement.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their undersigned representatives as of the date first written above.

 

  SELLER:
  KBS Builders, Inc.
     
  By: /s/David Noble
  Name:  David Noble
  Its: President
     
     
  PURCHASER:
  300 Park Street, LLC
     
  By: /s/ David Noble
  Name: David Noble
  Its: President

 

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Exhibit 10.4

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Lease”) is made this 3rd day of April, 2019 (the “Commencement Date”), by and between 947 Waterford Road, LLC, a Delaware limited liability company with a mailing address of 53 Forest Avenue, Old Greenwich, Connecticut 06870 (“Landlord”), and KBS Builders, Inc., a Delaware corporation with a mailing address of 300 Park Street, Paris, Maine 04271 (“Tenant”). The parties hereby agree as follows:

 

LEASE INFORMATION AND DEFINITIONS

 

The following information and definitions are incorporated into and made a part of this Lease:

 

Leased Premises:

Certain land located in the Town of Waterford, County of Oxford, and State of Maine, and being more particularly described on Exhibit A, attached hereto and made a part hereof, together with all improvements thereon and all rights and easements appurtenant thereto (the “Leased Premises” or the “Real Property”).

 

Term:

The “Term” means:

 

(a)        an “Initial Term,” being a period commencing on the Commencement Date and ending at 5:00 p.m. on March 31, 2029, subject to adjustment and earlier termination as provided in the Lease; and

 

(b)        if Tenant duly exercises its option to extend the term of this Lease for one or both Extension Terms as provided in the Lease, then also each such Extension Term for which Tenant has duly exercised such option.

   
Extension Terms:

The Extension Terms shall be two (2) separate, consecutive sixty (60) month periods (hereinafter referred to as "First Extension Term” and the “Second Extension Term,” respectively, and also referred to in the singular as an “Extension Term” and in the plural as the “Extension Terms”), all on the terms and conditions set forth in the Lease.

 

Rent Commencement Date:

Tenant’s obligations to pay Base Rent shall commence on July 1, 2019 (the “Rent Commencement Date”), provided, however, that Tenant shall have the right, exercisable only by giving written notice to Landlord prior to May 1, 2019 (the “Rent Commencement Extension Notice”), to elect to defer the Rent Commencement Date until October 1, 2019.

 

 

 

Base Rent:

(a)       In the event that Tenant does not give Landlord a timely Rent Commencement Extension Notice as provided herein, the Base Rent for the Leased Premises during the Initial Term shall be as set forth on Exhibit B, attached hereto and made a part hereof.

 

  (b) In the event that Tenant gives Landlord a timely Rent Commencement Extension Notice as provided herein, the Base Rent for the Leased Premises during the Initial Term shall be as set forth on Exhibit C, attached hereto and made a part hereof.
   
  (c) The Base Rent for the Leased Premises for each year of each Extension Term shall be shall be an amount which is equal to 100% of the prevailing market rates in effect at the time of Tenant’ s exercise of its extension right for property comparable to the Leased Premises in the vicinity of the Leased Premises (and, for clarity, shall include annual escalators consistent with such prevailing market), all as determined by a licensed commercial real estate broker or appraiser doing business in the greater Portland, Maine vicinity and chosen by Landlord, but in no event shall Base Rent for any year of any Extension Term be less than the Base Rent payable for the immediately preceding year of the Term.
   
Rent:

The term “Rent” means Base Rent and all other sums payable by Tenant under this Lease.

 

Taxes:

Without limiting the “net” nature of this Lease as provided in herein, Tenant shall pay all Taxes (as defined in this Lease).

 

Utilities:

Without limiting the “net” nature of this Lease as provided herein, Tenant shall contract for and pay for all Utilities (as defined in this Lease).

 

Operating Expenses; Maintenance and Repairs:

Without limiting the “net” nature of this Lease as provided herein, Tenant shall pay 100% of all costs and expenses associated with the use, occupancy, operation, maintenance, repair, and/or replacement of the Leased Premises.

 

Permitted Use:

 

Subject in all events to the terms and conditions of the Lease, the Leased Premises shall be used only for purposes of a facility for the manufacture of modular homes and other components of modular home construction and associated administrative and general business offices of Tenant in connection therewith.

 

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1.       Leased Premises. Landlord leases to Tenant, in consideration of the Rent to be paid by Tenant and subject to the terms and conditions set forth herein, the Leased Premises. Tenant acknowledges that Tenant was the owner of the Leased Premises prior to the Commencement Date and has conveyed the Leased Premises to Landlord on the Commencement Date. Accordingly, Tenant agrees that Tenant accepts and is leasing the Leased Premises in their “as is” condition.

 

2.       Commencement and Term. The term of this Lease shall commence on the Commencement Date and shall be the Lease Term, unless earlier terminated or extended by mutual agreement of the parties or as otherwise provided in this Lease.

 

3.       Rent; Net Lease.

 

(a)       Tenant covenants and agrees to pay to Landlord at its address as set forth in the preamble to this Lease or at such other place as Landlord shall from time to time designate in writing, during the Lease Term, the Base Rent, without holdback or set-off, in advance, commencing on the Rent Commencement Date and continuing thereafter on the first day of each calendar month during the Lease Term. All other items of Rent shall be paid, without holdback or set-off, in accordance with the terms of this Lease. If any payment of Rent is received by Landlord more than five (5) days after the date when such payment is due, a late charge of five percent (5%) of the past due payment shall be assessed, due and payable immediately and without notice.

 

(b)       Landlord and Tenant acknowledge and agree that this Lease is intended to constitute, and shall constitute, an absolutely ‘net” Lease such that the Rent shall provide Landlord with a “net” return for the Term, free of all expenses and charges with respect to the Leased Premises, all of which shall be Tenant’s responsibility. Accordingly, Tenant shall pay as additional Rent and discharge, at the times specified herein, or if no time is specified, before failure to pay the same shall give rise to any interest or penalty or create any risk of lien or forfeiture, each and every item of expense, of every kind and nature whatsoever, foreseen or unforeseen, ordinary or extraordinary, related to or arising from the Leased Premises, or by reason of, or in any manner connected with or arising from, the development, leasing, operation, management, maintenance, repair, replacement, use, and/or occupancy of the Leased Premises.

 

4.       (Reserved.)

 

5.       (Reserved.)

 

6.       Permitted Use; Compliance with Laws.

 

(a)       Tenant agrees to use and occupy the Leased Premises for the Permitted Use, and for no other purpose without the written consent of Landlord, and further agrees not to use the Leased Premises for any purpose deemed extra hazardous or not covered by insurance. Tenant acknowledges and agrees that Landlord shall have the right to adopt reasonable rules and regulations for the use and/or occupancy of the Leased Premises and Tenant agrees that it shall at all times observe and comply with such rules and regulations.

 

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(b)       Tenant agrees to abide by and comply with all Laws (as hereafter defined) applicable to the Leased Premises and/or the use or occupancy of the Leased Premises. It is the responsibility of Tenant to determine all zoning information and secure all necessary permits, licenses, and approvals for Tenant’s use and occupancy of the Leased Premises. Without limiting the generality of the foregoing, Tenant agrees to maintain in full force and effect, during the Lease Term, at Tenant’s cost and expense, all permits, licenses, registrations, and approvals required under applicable Laws for the use and/or occupancy of the Leased Premises. Without limiting the “AS IS” nature of this Lease, Tenant acknowledges and agrees that Landlord has not made and is not making any representations or warranties as to the suitability of, or the ability to obtain any permits or approvals for, Tenant’s intended use of the Leased Premises.

 

(c)       As used in this Lease, the term “Laws” means all federal, state, municipal or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

7.       Taxes.

 

(a)       Tenant shall be responsible for the prompt payment of all taxes, levies, betterments, and assessments, and governmental impositions of every kind or nature, whether now existing or hereafter created, general or special, ordinary or extraordinary, foreseen or unforeseen, that may be charged, assessed, laid, levied, or imposed upon, or become a lien or liens against, the Leased Premises or this Lease, including any amount that Landlord may be required to pay to any governmental authority as sales tax, gross receipt tax, or any tax of like nature specifically measured as a percentage of, or fraction of, or other factors based upon the all or any portion of the Rent payable hereunder (whether in lieu of, or in addition to the current system of real estate taxation) (all amounts payable under this Section being referred to herein as “Taxes”).

 

(b)       Tenant shall pay all Taxes, at Landlord’s option, either (i) to Landlord as additional Rent in estimated monthly installments, with the actual amount of Taxes reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated Taxes exceeds the actual Taxes for such annual period (provided Tenant is not then in breach of this Lease), or Tenant paying to Landlord the amount by which the actual Taxes for such annual period exceeds the estimated payments made by Tenant to Landlord; or (ii) to Landlord within thirty (30) days after Landlord makes demand therefor, with copies of any bills for Taxes; or (iii) directly to the taxing authority, in which event Tenant shall provide to Landlord evidence of the prompt payment of all Taxes prior to the date the same are due without the accrual of any interest on such Taxes.

 

8.       Utilities.

 

(a)       Tenant shall make arrangements for, and pay on or before the date the same become due, all charges for or relating to gas, oil, electricity, water, sewer, septic, telecommunications, and all other services used at or supplied to the Leased Premises (collectively, “Utilities”).

 

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(b)       Landlord shall in no way be liable for any loss, expense, or damage (whether direct or indirect) that Tenant may sustain or incur by reason of any change, failure, interference, disruption, interruption, or defect in the supply or character of any Utilities serving the Leased Premises, regardless of its duration, or if the quantity or character of Utilities become unavailable to the Leased Premises or no longer suitable for Tenant’s requirements. Additionally, any such change, failure, interference, disruption, interruption, defect, unavailability, or unsuitability mentioned in this Section shall not: (i) constitute an actual or constructive eviction of Tenant, in whole or in part; (ii) entitle Tenant to any abatement or diminution of Rent, or any other costs due from Tenant pursuant to this Lease; (iii) relieve or release Tenant from any of its obligations under this Lease; or (iv) entitle Tenant to terminate this Lease.

 

9.       Operation, Maintenance and Repairs.

 

(a)       Tenant agrees that from and after the Commencement Date, Tenant will keep neat and clean and maintain in good and safe order, condition and repair, and in compliance with all Laws the entirety of the Leased Premises, including any and all alterations or improvements to the Leased Premises occurring after the date of this Lease. Tenant agrees to pay the costs for cleaning and janitorial services relating to the Leased Premises (including trash removal and trash hauling), which services shall be provided or caused to be provided by Tenant. Tenant shall be responsible for the plowing, shoveling, and treatment of snow and ice and all grounds keeping, including all landscaping and sweeping of pavement and other hardscaped surfaces. Tenant shall be responsible for all items of maintenance and all repairs to and replacements (except as otherwise provided in Section 18) of all buildings and improvements and all Building Systems (as hereafter defined), and all foundations, structural supports, walls, ceilings, windows (including plate glass), siding, roof structure, roofing materials, doors, plate glass, driveways, parking areas, fences and signs located in, on or at the Leased Premises) that the Leased Premises may require from time to time during the Term, whether interior or exterior, structural or non-structural, ordinary or extra-ordinary, foreseen or unforeseen, all to keep the Leased Premises in good and safe order, condition, and repairs, and in at least as good condition as the Leased Premises are in on the Commencement Date. The term “Building Systems” means all heating systems, ventilating systems, air conditioning systems, fire alarm systems, sprinkler systems, and other life safety systems, septic systems, water supply systems (including any water treatment or filtration systems), plumbing systems, electrical systems, storm water management facilities, and all other systems located at or serving the Real Property.

 

(b)       Without limiting the generality of sub-section (a) of this Section, Tenant shall procure and maintain, with qualified vendors reasonably acceptable to Landlord, contracts providing for periodic inspections and maintenance of the heating, ventilating, and air conditioning (HVAC) systems, fire alarm, sprinkler, and life safety systems, the septic system, the crane(s) and related appurtenances in the building, at such intervals as are reasonably required by Landlord, but in all events at least annually.

 

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(c)       Without limiting the generality of sub-section (a) of this Section, Tenant shall promptly after the Commencement Date undertake all investigations (including an evaluation by a structural engineer and a roofing surveyor) with respect to, and promptly undertake all work necessary to repair, the roof (including roof framing) of the building on the Leased Premises and all damage and other adverse conditions associated with or arising out of the condition of the roof of the building, including any damage to the flooring, walls, siding, windows, ceilings (including drop ceilings), and trim of the building and any Building Systems that may have been adversely affected by any damage to or leaks in the roof of the Building. Tenant shall keep Landlord informed as to the results of all inspections and shall provide all plans and specifications for the foregoing repair work, which will be subject to the approval of Landlord, which will not be unreasonably withheld.

 

10.       Alterations, Renovations and Improvements. Tenant shall not make any alterations, renovations or improvements to the Leased Premises without obtaining Landlord’s prior written consent to the plans and specifications therefor and the contractor(s) to be retained by Tenant to perform such work, which shall not be unreasonably withheld, conditioned, or delayed in the case of cosmetic renovations that do not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, but otherwise shall be in Landlord’s sole discretion. Prior to any contractor or subcontractor (of any tier) providing or furnishing any labor, materials, or services in connection with any alterations, renovations, or improvements, Tenant shall obtain and furnish to Landlord the name and address of each such contractor and subcontractor. In addition, prior to any such labor, materials, or services being provided or furnished, Tenant shall furnish to Landlord a mechanic’s lien waiver and notice to prevent lien in a form prescribed by Landlord, duly executed by each such contractor or subcontractor who will furnish or provide labor, materials, and/or services. Tenant shall ensure that all such alterations, renovations and improvements are performed in a good and workmanlike and in compliance with all applicable Laws. In the event any lien is filed against the Leased Premises in connection with or arising out of any work performed at or materials, labor or other services supplied to the Leased Premises, Tenant shall cause the same to be discharged within thirty (30) days after such lien is filed. Tenant shall indemnify and hold Landlord harmless from and against all claims, demands, liabilities, liens, losses, costs and expenses (including reasonable attorneys’ fees) which may arise or be incurred by Landlord as a direct or indirect result of or in connection with such alterations, renovations and improvements, and Tenant shall be responsible for all costs, liabilities, and expenses arising out of such alterations, renovations and/or improvements. All alterations, renovations and improvements which may be made or installed by or on behalf of Tenant upon the Leased Premises and which in any manner are attached to the floors, walls or ceilings shall, at Landlord's option, remain upon the Leased Premises, and, upon termination of this Lease, shall be surrendered with the Leased Premises as a part thereof without disturbance, molestation or injury, provided, however, that Tenant’s furniture, equipment, other personal property, and trade fixtures (which, for avoidance of doubt, shall in no event include the crane(s) or related appurtenances located at the Leased Premises) may be removed by Tenant from the Leased Premises upon the expiration or termination of this Lease, subject to the provisions relating to removal thereof as provided in this Lease.

 

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11.       Signs. Tenant shall have the right to maintain the existing signage at the Real Property as of the Commencement Date and shall have the right to install additional signage that does not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, provided, however, that all signage shall be at Tenant’s sole cost and expense, and shall comply with all applicable Laws.

 

12.       Surrender; Holdover. Tenant shall vacate and surrender the Leased Premises to Landlord at the expiration or sooner termination of the Lease Term and the same shall be in the same condition as Tenant is required to maintain the same during the Lease Term, free of all of Tenant’s personal property except as may otherwise be provided herein, “broom clean,” and otherwise in accordance with the provisions of the Lease. Tenant shall have no right to holdover beyond the expiration of the Lease Term. If Tenant continues to occupy the Leased Premises after the end of the Lease Term, such continued occupancy shall be deemed a tenancy-at-sufferance even if Landlord accepts any payment from Tenant, but in the event that a court of competent jurisdiction deems such acceptance of a payment to constitute acceptance of “rent”, such acceptance shall create no rights in Tenant beyond a tenancy-at-will under the terms and conditions stated herein but at a Base Rent rate equal to one hundred fifty percent (150%) of the Base Rent applicable immediately preceding the end of the Lease Term, plus all additional Rent, until (i) Tenant shall vacate the Leased Premises; (ii) the termination of the tenancy-at-will; or (iii) Landlord shall give notice of a different rental amount. Nothing contained in this Section shall be deemed to (a) constitute consent by Landlord to such occupancy or holdover by Tenant; (b) confer any rights on Tenant as more than a tenant-at-sufferance or, if Landlord accepts any rental payments applicable to such period of holding over, a tenant-at-will; or (c) relieve Tenant from liability for damages suffered by Landlord as a result of such holding over.

 

13.       Removal of Tenant’s Property. Tenant’s trade fixtures, personal property, furniture and equipment, other than those items which are to remain or which Landlord elects to have remain at the Leased Premises as provided in Section 10 of this Lease, may be removed by Tenant at the termination of this Lease, provided (a) Tenant is not then be breach of any provision of this Lease; (b) such removal shall not cause any material damage to any portion of the Leased Premises, and any other damage created by such removal shall be repaired by Tenant at Tenant's expense prior to the expiration of the Lease Term to at least as good condition as existed when possession of the Leased Premises was delivered to Tenant; and (c) such removal shall be made before the termination of the Lease Term.

 

14.       Subletting and Assignment. Tenant shall not assign this Lease, in whole or in part, or sublet the Leased Premises or any portion thereof, or encumber the leasehold interest created by this Lease in any manner without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion during the first twenty-four full calendar months of the Term, and thereafter will not be unreasonably withheld. No assignment or sublease shall operate to release Tenant from any of its obligations under this Lease. Each sublease of the Leased Premises or any portion thereof must contain a release of and waiver of claims against Landlord and the other Releasees (as that term is defined in this Lease), in form and content acceptable to Landlord, and must require the subtenant’s property insurer to issue in favor of Landlord and the other Releasees waiver of subrogation rights endorsements to all policies of property insurance carried in connection with the Leased Premises and the contents thereof. Every transfer by levy or sale on execution, or other legal process, every transfer in bankruptcy, every transfer by merger, consolidation, or by operation of Law, every transfer of a controlling interest in Tenant, and every transfer under any compulsory procedure or order of court shall be deemed to constitute an “assignment” within the meaning of this Lease. Any attempted assignment or sublease in violation of this Section shall, at Landlord’s option, be void and shall constitute a default under this Lease. Consent by Landlord to an assignment or sublease in one instance shall not operate to release the requirement that consent from Landlord be obtained for any further or subsequent assignment or sublease. Tenant shall pay all fees and expenses, including reasonable attorneys’ fees, incurred by Landlord in connection with any proposed subletting or assignment, irrespective of whether Landlord’s consent is in fact granted.

 

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15.       Indemnification and Insurance.

 

(a)       Tenant agrees to maintain in full force during the Lease Term insurance as follows:

 

(i)        commercial general liability insurance, written on an occurrence basis, with a deductible in an amount not to exceed $10,000.00, and providing:

 

(A)        minimum limits of (y) $1,000,000.00 per occurrence with $3,000,000.00 annual aggregate limit for bodily injury (including death) and property damage; and (z) $3,000,000.00 in the annual aggregate with respect to products and completed operations;

 

(B)        coverage for damages arising out of bodily injury (including death) sustained by any person or persons or arising out of damage to or destruction of property;

 

(C)       coverage for damages arising out of premises liability, personal injury and advertising injury;

 

(D)       pollution liability coverage for sudden and accidental pollution;

 

(E)       for extension of such coverage to include liability for the operation of non-owned motor vehicles;

 

(F)       specific coverage for Tenant’s indemnification obligations under this Lease (but neither this provision nor such coverage shall be deemed to limit any of Tenant’s obligations under this Lease);

 

(G)        that Tenant’s commercial general liability insurance is provided on a primary and non-contributory basis;

 

(H)       that Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time are named as additional insureds by an endorsement provided on ISO Form 2026 (1185) or its equivalent, without modification, or such other endorsement as is acceptable to Landlord, acting reasonably; and

 

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(I)       for waiver of subrogation in favor of Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time.

 

(ii)       Automobile liability insurance covering all motor vehicles owned, leased, or licensed by Tenant, covering injury to or death of one or more persons or damage to or destruction of property, with a minimum limit of liability of $3,000,000.00 for each accident.

 

(iii)       Workers compensation insurance in accordance with the requirements of all applicable Laws, and employers liability insurance with limits of at least $1,000,000.00, with such workers compensation insurance and employers liability insurance providing for waiver of subrogation in favor of Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time.

 

(iv)       Umbrella excess liability insurance in a minimum amount of $10,000,000.00, on a following form basis over the insurance described in clauses (i) through (iii), above.

 

(v)       Special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all personal property and trade fixtures owned by or within the care, custody or control of Tenant, with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such property, without co-insurance provisions, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to-time) named as additional insured(s). Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage;

 

(vi)       Until such time, if any, as Landlord elects to carry property insurance for the buildings and improvements located on the Leased Premises, special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all buildings and improvements (including fixtures) located on the Leased Premises, with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such buildings and improvements, and in all events sufficient at all times to avoid causing the insured to be or become a co-insurer, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to-time) named as loss payee(s) and additional insured(s). Notwithstanding the foregoing, the insurance policy(ies) required by this sub-section may insure the building on an actual cash value basis during those portions of the Term for which Landlord has provided prior consent to the policy(ies) providing coverage on such basis. Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage;

 

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(vii)       business interruption insurance covering all of Tenant’s obligations under this Lease with respect to the payment of Rent for a period of at least eighteen (18) months.

 

(viii)       Such other insurance policies, such other endorsements, such other deductibles, and/or such other insurance policy limits as may from time to time be reasonably required by Landlord, provided that, at the time, such other insurance policies, endorsements, deductibles, and/or insurance policy limits are commonly carried for premises and/or buildings or improvements similar in construction, design, general location, use, operation, and occupancy to those located on or appurtenant to the Leased Premises or for operations similar to those conducted on or from the Leased Premises.

 

(b)       Without limiting the exculpatory provisions of this Lease, each policy of property insurance maintained by Tenant under this Lease shall contain waivers of subrogation in favor of Landlord and all other Releasees.

 

(c)       All insurance required to be obtained and maintained by Tenant pursuant to this Section must be with insurers authorized to transact insurance business and cover risks in the State of Maine and that are rated "A-" or better by A.M. Best Company, Inc. or other insurance companies of recognized responsibility acceptable to Landlord, acting reasonably.

 

(d)       The policies of insurance required to be maintained by Tenant under this Lease shall be endorsed to require that each policy will not be cancelled or materially changed without at least thirty (30) days prior written notice to Landlord.

 

(e)       Tenant shall deliver to Landlord copies of each policy of insurance (including all endorsements) required to be maintained by Tenant under this Lease or such other evidence of each such policy of insurance (and all required endorsements) as is acceptable to Landlord, acting reasonably.

 

(f)       If Tenant fails to obtain, maintain and/or pay for the insurance required by this Lease at the times and for the amounts and duration specified herein, Landlord has the right, but not the obligation, at any time and from time to time, to obtain such insurance and/or pay the premiums for such insurance, without limiting any other rights or remedies available to Landlord for such failure. In such event, Tenant shall repay Landlord, immediately upon demand, all sums so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith (including reasonable attorneys’ fees), all without prejudice to any other rights or remedies available to Landlord.

 

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(g)       Landlord shall have the right, at any time during the Term, to elect, by giving written notice to Tenant, to carry property insurance for the buildings and improvements located on the Leased Premises, in which event, Tenant shall pay to Landlord the amount of all premiums for such property insurance procured and maintained by Landlord with respect to the Real Property. Tenant shall pay such amounts to Landlord in estimated monthly installments, with the actual amount of incurred by Landlord for such premiums being reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated premiums exceeds the actual premiums for such annual period (provided Tenant is not then in breach of this Lease), or Tenant paying to Landlord the amount by which the actual premiums for such annual period exceeds the estimated payments made by Tenant to Landlord.

 

(h)       Tenant acknowledges and agrees that such property insurance as Landlord elects to purchase with respect to the Real Property shall be for the sole benefit of Landlord and that such insurance shall not cover any personal property, trade fixtures, leasehold improvements, or other property or appurtenances owned by or within the care, custody, or control of Tenant, or otherwise located in the Leased Premises (collectively, “Tenant’s Property”) and that in the event of damage to or loss of any of Tenant’s Property, neither Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), nor any of the shareholders, members, directors, managers, officers, employees, or agents of Landlord or any such mortgagee(s) (each in the singular “Releasee”, and in the plural, “Releasees”) shall have any obligation to repair or replace the same. Notwithstanding any exception to Tenant’s indemnification obligations under this Lease, Tenant does hereby expressly release all Releasees of and from, and agrees to indemnify, hold harmless, and defend Releasees from and against, any and all claims for damages to or loss of any of Tenant’s Property, regardless of the cause thereof, including, damage or loss due to any Releasee’s negligence.

 

(i)       Tenant shall indemnify and hold all Releasees harmless and, if requested by Landlord, defend such Releasee(s) with counsel reasonably satisfactory to Landlord, from and against any and all liabilities, losses, claims, causes of action, damages, costs, and expenses (including reasonable attorney’s fees) incurred by or threatened against any Releasee arising out of (i) any occurrence on the Leased Premises or the use of the Leased Premises by Tenant, its employees, agents, licensees, or invitees, except to the extent caused by the negligence or willful misconduct of Landlord (but such exception shall not apply to limit the application of sub-section (h) of this Section); or (ii) Tenant’s breach of any provision of this Lease. Tenant agrees that the foregoing agreement to indemnify, defend, and hold harmless extends to liabilities, losses, claims, causes of action, damages, costs and expenses (including reasonable attorney’s fees) arising out of claims of Tenant's employees without regard to any immunity, statutory or otherwise, including any immunity under the workers compensation Laws of Maine or any other applicable jurisdiction, which immunity Tenant hereby waives, but only for the purposes of Tenant’s obligations to the Releasees under this sub-section. Tenant's obligations under this sub-section shall survive the termination of this Lease.

 

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16.       Hazardous Materials. Tenant covenants and agrees that Tenant will not permit any Hazardous Substances (as hereafter defined) to be stored, generated, or released from the Leased Premises, other than Hazardous Substances incidental to Tenant’s use, maintenance, and operation of the Leased Premises for the Permitted Use provided that Tenant shall store, generate, handle, and dispose of all such Hazardous Substances in full compliance with all applicable laws. Tenant hereby covenants and agrees to indemnify, hold harmless, and, if requested by Landlord, defend, Landlord from and from and against any and all demands, claims, causes, of action, losses, liabilities, damages, fines, costs, and expenses (including reasonable attorneys’ fees, court costs and clean-up costs) that may arise out of any Hazardous Substances located at or generated or released from the Leased Premises, irrespective of whether first occurring prior to or after the Commencement Date. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state Laws regulating pollution or contamination of the environment The obligations of Tenant under this Section shall survive the termination of this Lease.

 

17.       Right to Enter. Tenant agrees to permit Landlord or its duly authorized agents to enter on the Leased Premises during Tenant's normal business hours, with reasonable prior notice, to examine the condition of said Leased Premises, exercise any rights of Landlord under this Lease, and/or to show the same to prospective tenants, lenders, or purchasers, provided such access to the Leased Premises shall not unnecessarily interfere with Tenant's use of the Leased Premises or the conduct of Tenant's business activities thereon. Notwithstanding the foregoing, Landlord shall have the right (but not the obligation) to enter the Leased Premises without prior notice in the event of an emergency in which prior notice is not practicable in the circumstances.

 

18.       Total or Partial Destruction.

 

(a)       In the event the improvements on the Real Property (including any Building Systems) are damaged or destroyed by fire or other peril (a “Casualty”), Tenant shall give Landlord notice of such Casualty as soon as reasonably possible after the Casualty. Landlord shall have the right to elect whether to have such improvements rebuilt or restored. In the event that Landlord elects not to have the improvements rebuilt or restored, and the nature of the Casualty is such as would, absent such rebuilding or restoration, materially impair Tenant’s ability to use and occupy such Leased Premises in substantially the same manner as they were used prior to the Casualty, this Lease shall terminate effective as of the date of the Casualty. In the event that Landlord elects to have the improvements rebuilt or restored, this Lease shall remain in effect without reduction or abatement of Rent, and the following provisions shall apply:

 

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(i)       Landlord shall, with reasonable promptness rebuild or restore such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements, provided, however, that in no event shall Landlord be obligated to expend for any such rebuilding or restoration an amount in excess of the insurance proceeds actually collected by Landlord on account of the Casualty, less the costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in collecting such proceeds.

 

(ii)       Notwithstanding the preceding clause (i), Landlord shall have the right to elect, by giving written notice to Tenant, to have Tenant rebuild or restore the Leased Premises, in which event Tenant shall, with reasonable promptness, and in all events within twelve (12) months of the date of Landlord’s election notice, rebuild or restore such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements. The selection of all engineers, architects, and contractors engaged in connection with such rebuilding or restoration and all plans and specifications for such rebuilding or restoration, shall be subject to review and approval by Landlord. In the event that Landlord makes the election to have Tenant rebuild or restore as provided in this clause (ii), all proceeds payable by reason of any Casualty under all applicable policies of insurance (whether Tenant is carrying such insurance, or Landlord has elected to do so as provided in this Lease) shall be paid to Landlord or its mortgagee, and such proceeds will be held by Landlord or its mortgagee in an interest-bearing account and, provided Tenant is not in breach of this Lease, shall be made available for rebuilding or restoring the improvements, and shall be paid by Landlord (or such mortgagee) from time- to-time during the progress of construction for the costs of such reconstruction or repair, all subject to and in accordance with reasonable terms, conditions, and construction disbursement procedures specified by Landlord and/or such mortgagee. Any excess proceeds of insurance (and accrued interest) remaining after the completion of the restoration or reconstruction of the Leased Premises shall be paid to Landlord.

 

(b)       (Reserved.)

 

(c)       Tenant shall be responsible for all insurance deductibles applicable to any Casualty affecting any of the improvements on the Real Property (including Building Systems).

 

(d)       The provisions of this Section shall be subject and subordinate to the provisions of any mortgage now or hereafter placed upon the Real Property and the requirements of any mortgagee holding such mortgage.

 

19.       Condemnation.

 

(a)       “Condemnation” means any taking of title to or any interest in the Leased Premises or any part thereof or any other property used in connection with the Leased Premises (including for ingress, egress, parking, septic service, water supply or other services or utilities) by exercise of any right of eminent domain by, or by any similar proceeding or act of, any person having the power and legal authority to do so (or by purchase in lieu thereof). For the purposes of this definition, the effective date of any Condemnation shall be deemed to be the later of: (i) the date when title to the Leased Premises or part thereof or such other property is transferred by such proceeding or act of the condemning authority, and (ii) the date when Tenant o is no longer permitted to occupy the Leased Premises or to use such other property.

 

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(b)       “Substantial Condemnation” means any Condemnation that affects all or a substantial portion of the Leased Premises or any Condemnation that has or is reasonably likely to have a materially adverse effect on any business operations then being conducted on the Leased Premises. Tenant may waive its right to treat as a Substantial Condemnation any Condemnation that would otherwise qualify as such.

 

(c)       “Insubstantial Condemnation” means any Condemnation that is not a Substantial Condemnation.

 

(d)       If a Substantial Condemnation occurs, this Lease shall terminate upon the effective date of the Substantial Condemnation.

 

(e)       If an Insubstantial Condemnation occurs, then this Lease shall continue in full force and effect without reduction or abatement of Rent.

 

(f)       In the event of any Condemnation, Landlord shall be entitled to receive and retain the amounts awarded for the Leased Premises, and Tenant shall be entitled to receive and retain any amounts which may be specifically awarded to it in any such condemnation proceedings because of its business loss or the taking of its trade fixtures, furniture, or other property.

 

20.       Force Majeure. In any case where either party is required to perform any act pursuant to this Lease, except for Tenant’s monetary obligations hereunder, the time for the performance thereof shall be extended by a period of time equal to the period of any delay caused by or resulting from an act of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of energy or labor, government regulations, or delays caused by one party to the other, whether such period be designated by a fixed date, a fixed time, or as a reasonable date or time.

 

21.       Quiet Enjoyment. Tenant, on paying the Rent and performing and observing the covenants in this Lease, may hold and enjoy the Leased Premises for the Term without unreasonably interference from any person claiming by, through, or under Landlord, subject and subordinate to all provisions of this Lease.

 

22.       Default.

 

(a)       In the event that:

 

(i)       Tenant shall fail to pay when due the Rent or any other sums payable hereunder when due and such failure remains uncured for five (5) days after Landlord delivers a default notice to Tenant for such failure to pay rent; or

 

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(ii)       any petition in bankruptcy shall be filed by Tenant or any guarantor hereof or other petition or proceeding shall be filed or commenced by Tenant or any guarantor hereof to declare Tenant insolvent, or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations, or Tenant or any such guarantor admits its inability to pay its debts, or Tenant or any such guarantor makes an assignment for the benefit of creditors; or

 

(iii)       any bankruptcy petition or proceeding shall be filed against Tenant or any guarantor hereof or to otherwise declare Tenant or any guarantor hereof bankrupt or insolvent or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations or a receiver, trustee or other similar type of appointment or court appointee or nominee is appointed for Tenant or any such guarantor or any of the property of Tenant or any such guarantor, and such petition, appointment or proceeding is not dismissed within sixty (60) days after it is commenced; or

 

(iv)       the leasehold interest of Tenant is levied upon or attached by process of law, including the filing of any mechanic’s lien, and such levy, lien, or attachment is not dissolved within thirty (30) days after it is made; or

 

(v)       Tenant shall abandon the Leased Premises during the Lease Term; or

 

(vi)       Tenant shall assign this Lease or sublet any portion of the Leased Premises, or attempt to do either of the foregoing, in violation of this Lease; or

 

(vii)       Tenant violates or fails to observe or comply with any Laws applicable to the Leased Premises, Tenant’s use thereof, or Tenant's operations, activities or conduct of business at or from the Leased Premises; or

 

(viii)       any other event, occurrence, act, or omission described in any provision of this Lease as constituting a “default” or an “Event of Default” occurs;

 

(ix)       Tenant shall neglect or fail to perform or observe any of the other covenants, terms, provisions or conditions contained in this Lease and, if the neglect or failure is capable of being cured, such neglect or failure continues for more than thirty (30) days after written notice thereof (provided, however, that if such neglect or failure is capable of being cured, but is not capable of being cured within said thirty (30) day period, then Tenant shall have such additional period of time, not to exceed an additional sixty (60) days, as is reasonably necessary to cure the same provided Tenant commences to cure within said thirty (30) day period and diligently and continuously prosecutes the cure to completion); or

 

(x)       there is a default by Tenant under (A) that certain Lease Agreement of even or near date herewith between Tenant and 300 Park Street, LLC pertaining to property located in the Town of Paris, County of Oxford, and State of Maine; and/or (B) that certain Lease Agreement of even or near date herewith between Tenant and 56 Mechanic Falls Road, LLC, pertaining to property located in the Town of Oxford, County of Oxford, and State of Maine, and any such default continues beyond the expiration of applicable notice and cure periods (if any), then, and in any of said cases (notwithstanding any license of any former breach of covenant or waiver of the benefit hereof or consent in a former instance), and without limitation of any other remedies that might be available to Landlord under this Lease, at law, or in equity, Landlord lawfully may, immediately or at any time thereafter, terminate this Lease by sending written notice of termination to Tenant, or, subject to compliance with applicable Laws, enter into and upon the Leased Premises or any part thereof in the name of the whole and repossess the same as of its former estate, and expel Tenant and those claiming through or under it and remove it or their effects without being deemed guilty of any manner of trespass, in each case without prejudice to any rights or remedies which might otherwise be available to Landlord for collection of Rent and other damages for breach of covenant, and upon entry as aforesaid or upon sending of such notice, this Lease shall terminate.

 

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(b)       Without limiting other remedies of Landlord at law or in equity for any breach of or on account of termination of this Lease, Tenant covenants that in case of such termination under sub-section (a) of this Section, Tenant shall pay to Landlord the unpaid Rent owed to Landlord through the time of termination, plus interest thereon at the rate of 18% per annum from the date the same was due until paid; and (ii) at the election of Landlord, either:

 

(1)       the present value of a sum which, at the time of such termination of this Lease is equal to (A) the aggregate of the Rent which would have been payable by Tenant for the period commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant; minus (B) the fair market rental value of the Leased Premises (after deducting reasonable projections for Landlord’s costs and expenses of re-letting the Leased Premises, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant); or

 

(2)       for the period of time commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant hereunder, the difference, if any, between the Rent which would have been due had there been no such termination and the amount being received by Landlord as rent from a replacement Tenant of Leased Premises, if any. In addition, Tenant shall pay to Landlord all costs and expenses of such re-letting, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant.

 

(c)       If Tenant shall default in the performance or observance of any covenant, agreement, or condition in this Lease contained on its part to be performed or observed and shall not cure any such default as provided herein, Landlord may, at its option, without waiving any claim for damages or any other right or remedy for breach of this Lease, at any time thereafter, cure such default. Any amount paid or any liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant, and Tenant agrees to immediately reimburse Landlord therefor, as additional Rent.

 

(d)       Tenant shall pay all reasonable attorneys’ fees incurred by Landlord in connection with the enforcement of Tenant’s obligations under this Lease.

 

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(e)       Landlord shall in no event be in default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to perform, or failed diligently to attempt to perform, such obligations within thirty (30) days or such additional time as is reasonably required to correct any such default after notice by Tenant to Landlord properly specifying wherein Landlord has failed to perform any such obligation.

 

(f)       In no event shall Landlord be liable to Tenant for incidental, consequential, or punitive damages in connection with any matter arising out of this Lease or the Leased Premises. Without in any way limiting or impairing the effect of the other provisions of this Lease, Tenant shall neither assert nor seek to enforce any claim arising out of this Lease or out of the use or occupancy of the Leased Premises against Landlord, its shareholders, directors, officers, employees, or agents, or any of its or their assets other than the value of Landlord’s interest in the Leased Premises and Tenant agrees to look solely to such interest and insurance coverage for the satisfaction of any claim arising out of this Lease or out of the use or occupancy of the Leased Premises.

 

23.       Sale or Mortgage; Estoppel; Subordination.

 

(a)       Nothing contained in this Lease shall limit Landlord's right to sell, mortgage, or otherwise encumber its fee interest in the Leased Premises, or affect Landlord's right to assign this Lease or the Rent payable under this Lease, whether as further security under a fee mortgage or otherwise. Any such assignment of this Lease or of the Rent payable under this Lease shall be honored by Tenant.

 

(b)       In the event Landlord shall sell, transfer, or otherwise convey the Leased Premises, Landlord, upon the written assumption by the transferee of the obligations arising hereunder after the date of such transfer, shall be entirely freed and relieved of all covenants and obligations of Landlord hereunder. Nothing in the preceding sentence shall be construed to impair Tenant’s leasehold interest under this Lease so long as Tenant performs and observes the covenants and terms of this Lease on its part to be performed and observed.

 

(c)       This Lease shall, at Landlord’s option, be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Leased Premises, and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Leased Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the Rent and observe and perform all of the provisions of this Lease. If any mortgagee, trustee, or ground lessor shall elect to have this Lease made prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust, or ground lease or the date of recording thereof. Tenant agrees to execute any documents required to effectuate an attornment, a subordination, or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Tenant's failure to execute such documents within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder.

 

-17-

 

(d)       At any time, and from time to time, upon the written request of Landlord or any mortgagee or prospective purchaser of the Leased Premises, Tenant, within ten (10) business days after such written request, agrees to execute, acknowledge and deliver to Landlord and/or mortgagee, without charge, an estoppel certificate which shall contain (i) a certification that this Lease is unmodified and in full force and effect or, if modified, a statement of the nature of any such modification and a certification that this Lease, as so modified, is in full force and effect; (ii) a certification of the date to which the Rent payable by Tenant are paid (including any payments in advance); (iii) a certification that Tenant is not in default hereunder and that there are not, to Tenant's knowledge, any uncured events of default on the part of Landlord hereunder, or a specification of such events of default if any are claimed by Tenant; and (iv) such other commercially reasonable certifications as are identified in such request. Tenant's failure to deliver such estoppel certificate within the time frame set forth above shall, at Landlord’s option, constitute an Event of Default hereunder and shall, at Landlord’s option, be conclusive proof that this Lease is in full force and effect without modification except as may be represented by Landlord, that there are no uncured defaults in Landlord's performance of Landlord's obligations under this Lease, and that not more than one month's Rent has been paid in advance.

 

(e)       If Landlord desires to finance, refinance, or sell the Leased Premises, Tenant hereby agrees to deliver to any lender or purchaser designated by Landlord, and cause any guarantor to so deliver, such financial statements and other financial information pertaining to Tenant and such guarantor as may be reasonably required by such lender or purchaser. Tenant's failure to provide such information or cause such information to be provided within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder.

 

24.       Notices. Any notice, request, demand, approval or consent given or required to be given under this Lease shall be, unless otherwise stated, in writing and shall be deemed to have been given (i) when hand delivered to the other party; or (ii) on the day on which the same shall have been mailed by United States registered or certified mail, return receipt requested, with all postage prepaid, or by Federal Express or similar nationally-recognized overnight courier service that provides evidence of delivery, to the address of the party to receive such notice as set forth in the preamble hereof, provided that either party may, by such manner of notice, add or substitute one or more persons or addresses for provision of such notice.

 

25.       Tenant Representations.

 

(a)       Neither Tenant nor any key personnel of Tenant nor any of Tenant’s underlying beneficial owners have engaged in any dealings or transactions, directly or indirectly, (i) in contravention of any U.S., international or other anti-money laundering regulations or conventions, including without limitation the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. §1 et seq., as amended), any foreign asset control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 and the regulations promulgated thereunder (collectively, the “Patriot Act”), or any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”); or (ii) in contravention of Executive Order No. 13224 issued by the President of the United States on September 24, 2001 (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), as may be amended or supplemented from time to time (“Executive Order 13224”); or (iii) on behalf of terrorists or terrorist organizations, including those persons or entities that are included on any relevant lists maintained by the United Nations, North Atlantic Treaty Organization, Organization of Economic Cooperation and Development, OFAC, Financial Action Task Force, U.S. Securities & Exchange Commission, U.S. Federal Bureau of Investigation, U.S. Central Intelligence Agency, U.S. Internal Revenue Service, or any country or organization, all as may be amended from time to time.

 

-18-

 

(b)       Neither Tenant nor any key personnel of Tenant nor any of the underlying beneficial owners of Tenant is or will be a person or entity (i) that is listed in the Annex to or is otherwise subject to the provisions of Executive Order 13224; or (ii) whose name appears on OFAC’s most current list of “Specially Designated Nationals and Blocked Persons,” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in Executive Order 13224; or (iv) who has been associated with or is otherwise affiliated with any entity or person listed above.

 

(c)       Tenant represents that it has all requisite power and authority to enter into this Lease and the person executing this Lease on behalf of Tenant represents that he or she has all requisite power and authority to do so.

 

26.       Miscellaneous Provisions.

 

(a)       Invalidity of Particular Provisions. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by applicable Laws.

 

(b)       Governing Law. This Lease, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Lease, shall be governed by and enforced in accordance with the internal Laws of the State of Maine, including its statutes of limitations, without regard or reference to conflicts of law principles.

 

(c)       Interpretation. Whenever the word “include,” “includes,” or “including” is used in this Lease, it is deemed to be followed by the words “without limitation.” The terms “this Lease,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Lease as a whole and not to any particular section of this Lease unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Lease. Whenever in this Lease provision is made for the doing of any act by any party, it is understood and agreed that said act shall be done by such party at its own cost and expense, unless a contrary intent is expressed.

 

-19-

 

(d)       Entire Agreement; Binding Effect. All negotiations, considerations, representations, and understandings between Landlord and Tenant are incorporated herein and may be modified or altered only by agreement in writing between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change, or modify any of the provisions hereof. All rights, obligations and liabilities contained herein given to, or imposed upon, Landlord and Tenant shall extend to and bind the several respective administrators, trustees, receivers, legal representatives, successors, heirs and permitted assigns of Landlord and Tenant. If the “Tenant” under this Lease consists of more than one person or entity, each such person and/or entity shall be bound jointly and severally by the terms, covenants and agreements herein and jointly and severally liable for all obligations arising hereunder.

 

(e)       Language. Words of any gender used in this instrument shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

 

(f)       Recording; Notice of Lease. Landlord and Tenant agree that this Lease shall not be recorded. The parties agree that at the request of either party, they will execute, acknowledge, and deliver a notice or memorandum of this Lease in recordable form for recording in the Oxford County Registry of Deeds. The requesting party shall bear the expense of recording such notice or memorandum. The Memorandum of Lease shall not be construed to vary the terms and conditions hereof. Landlord and Tenant also agree that, upon the request of either party, they will execute, acknowledge, and deliver a commercially reasonable instrument in recordable form with respect to the termination date of this Lease.

 

(g)       Timeliness of Landlord’s Notices. Landlord's failure during the Lease Term to prepare or deliver any of the statements, notices, or bills, or invoices for any sum payable by Tenant under this Lease shall not in any way cause Landlord to forfeit or surrender its rights to collect any amount that may have become due and owing from Tenant during the Lease Term.

 

(h)       Waiver of Jury Trial. Tenant, for itself and its heirs, successors, and assigns, does hereby WAIVE THE RIGHT TO A TRIAL BY JURY in any action or proceeding based upon, or related to, the subject matter of this Lease. This waiver is knowingly, intentionally, and voluntarily made by Tenant and Tenant acknowledges that neither Landlord nor any person acting on behalf of Landlord has made any representations of fact to induce this waiver of trial by jury or in any way to modify or nullify its effect. Tenant further acknowledges that it has been represented (or has had the opportunity to be represented) in the signing of this Lease and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. Tenant further acknowledges that it has read and understands the meaning and ramifications of this waiver provision.

 

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27.       (Reserved.)

 

[Signature Page(s) and Guaranty Follow]

 

-21-

 

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized undersigned representatives as an instrument under seal as of the day and year first written above.

 

WITNESS:   LANDLORD:
    947 Waterford Road, LLC
       
    By: /s/ David Noble
    Name:  David Noble
    Title: President

 

-22-

 

 

 

    TENANT:
    KBS Builders, Inc.
       
    By: /s/ Daniel M. Koch
    Printed Name:  Daniel M. Koch
    Its: President

 

GUARANTY

 

For value received, and in consideration of and as an inducement to Landlord to enter into the foregoing Lease (the “Lease”) with Tenant, the undersigned, ATRM Holdings, Inc. (“Guarantor”), does hereby unconditionally guaranty to Landlord the complete and due performance and observation of each and every agreement, covenant, term, and condition of the Lease to be performed or observed by Tenant, including, without limitation, the payment of all Rent required under the Lease. The validity of this Guaranty and the obligations of the Guarantor hereunder shall not be terminated, affected, or impaired by reason of the granting by the Landlord of any indulgences to the Tenant. This Guaranty shall remain and continue in full force and effect with respect to any and all renewals, modifications, or extensions of the Lease, irrespective of whether Guarantor shall have received any notice of or consented to such renewal, modification, or extension. The liability of the Guarantor hereunder shall be primary, and in any right of action that shall accrue to the Landlord under the Lease or applicable law, the Landlord may proceed against Guarantor without having commenced any action against or having obtained any judgment against Tenant and/or may proceed against Guarantor and Tenant, jointly and severally. Guarantor hereby waives all guaranty and suretyship defenses. All of the terms and provisions of this Guaranty shall inure to the benefit of the successors and assigns of the Landlord and shall be binding upon the successors and assigns of Guarantor. Capitalized terms that are used, but not defined, in this Guaranty shall have the meaning ascribed thereto in the Lease.

 

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an instrument under seal as of the date of the Lease.

 

    GUARANTOR:
    ATRM Holdings, Inc.
       
    By: /s/ Daniel M. Koch
    Printed Name:  Daniel M. Koch
    Its: President and Chief Executive Officer

 

-23-

 

List of Exhibits

 

Exhibit A – Description of the Leased Premises

 

Exhibit B – Base Rent if Tenant does not give a timely Rent Commencement Extension Notice

 

Exhibit C – Base Rent if Tenant does give a timely Rent Commencement Extension Notice

 

-24-

 

EXHIBIT A

 

(Description of Leased Premises)

 

*

 

 

EXHIBIT B

 

(Base Rent if Tenant does not give a timely Rent Commencement Extension Notice)

 

Months Annual Rental Rate Monthly Installment

Commencement Date

through

June 30, 2019

$0.00

 

$0.00

 

July 1, 2019

through

March 31, 2020

$108,900.00

(Annual Rate)

 

$9,075.00

 

April 1, 2020

through

March 31, 2021

$111,078.00

 

$9,256.50

 

April 1, 2021

through

March 31, 2022

$113,299.56

 

$9,441.63

 

April 1, 2022

through

March 31, 2023

$115,565.55

 

$9,630.46

 

April 1, 2023

through

March 31, 2024

$117,876.86

 

$9,823.07

 

April 1, 2024

through

March 31, 2025

$120,234.40

 

$10,019.53

 

April 1, 2025

through

March 31, 2026

$122,639.09

 

$10,219.92

 

April 1, 2026

through

March 31, 2027

$125,091.87

 

$10,424.32

 

April 1, 2027

through

March 31, 2028

$127,593.71

 

$10,632.81

 

April 1, 2028

through

March 31, 2029

$130,145.58

 

$10,845.47

 

 

 

EXHIBIT C

 

(Base Rent if Tenant does give a timely Rent Commencement Extension Notice)

 

Months Annual Base Rent Monthly Installment

Commencement Date

through

September 30, 2019

$0.00

 

$0.00

 

October 1, 2019

through

March 31, 2020

$118,800.00

(Annual Rate)

$9,900.00

 

April 1, 2020

through

March 31, 2021

$121,176.00

 

$10,098.00

 

April 1, 2021

through

March 31, 2022

$123,599.52

 

$10,299.96

 

April 1, 2022

through

March 31, 2023

$126,071.51

 

$10,505.96

 

April 1, 2023

through

March 31, 2024

$128,592.94

 

$10,716.08

 

April 1, 2024

through

March 31, 2025

$131,164.80

 

$10,930.40

 

April 1, 2025

through

March 31, 2026

$133,788.10

 

$11,149.01

 

April 1, 2026

through

March 31, 2027

$136,463.86

 

$11,371.99

 

April 1, 2027

through

March 31, 2028

$139,193.14

 

$11,599.43

 

April 1, 2028

through

March 31, 2029

$141,977.00

 

$11,831.42

 

 

  

Exhibit 10.5

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Lease”) is made this 3rd day of April, 2019 (the “Commencement Date”), by and between 300 Park Street, LLC, a Delaware limited liability company with a mailing address of 53 Forest Avenue, Old Greenwich, Connecticut 06870 (“Landlord”), and KBS Builders, Inc., a Delaware corporation with a mailing address of 300 Park Street, Paris, Maine 04271 (“Tenant”). The parties hereby agree as follows:

 

LEASE INFORMATION AND DEFINITIONS

 

The following information and definitions are incorporated into and made a part of this Lease:

 

Leased Premises:

The “Leased Premises” means certain land located in the Town of Paris, County of Oxford, and State of Maine, and being more particularly described on Exhibit A, attached hereto and made a part hereof, together with all improvements thereon and all rights and easements appurtenant thereto (the “Real Property”), together with certain personal property consisting of the Personal Property (as that term is defined in the Purchase and Sale Agreement of even or near date between Tenant, as seller, and Landlord, as purchaser, and more particularly listed on Exhibit A-1, attached hereto and made a part hereof (the “Leased Personal Property”).

 

Term:

The “Term” means:

 

(a)        an “Initial Term,” being a period commencing on the Commencement Date and ending at 5:00 p.m. on March 31, 2029, subject to adjustment and earlier termination as provided in the Lease; and

 

(b)        if Tenant duly exercises its option to extend the term of this Lease for one or both Extension Terms as provided in the Lease, then also each such Extension Term for which Tenant has duly exercised such option.

   
Extension Terms:

The Extension Terms shall be two (2) separate, consecutive sixty (60) month periods (hereinafter referred to as "First Extension Term” and the “Second Extension Term,” respectively, and also referred to in the singular as an “Extension Term” and in the plural as the “Extension Terms”), all on the terms and conditions set forth in the Lease.

 

 

 

Rent Commencement Date:

Tenant’s obligations to pay Base Rent shall commence on July 1, 2019 (the “Rent Commencement Date”), provided, however, that Tenant shall have the right, exercisable only by giving written notice to Landlord prior to May 1, 2019 (the “Rent Commencement Extension Notice”), to elect to defer the Rent Commencement Date until October 1, 2019.

 

Base Rent:

(a)       In the event that Tenant does not give Landlord a timely Rent Commencement Extension Notice as provided herein, the Base Rent for the Leased Premises during the Initial Term shall be as set forth on Exhibit B, attached hereto and made a part hereof.

 

 

(b)       In the event that Tenant gives Landlord a timely Rent Commencement Extension Notice as provided herein, the Base Rent for the Leased Premises during the Initial Term shall be as set forth on Exhibit C, attached hereto and made a part hereof.

 

(c)       The Base Rent for the Leased Premises for each year of each Extension Term shall be shall be an amount which is equal to 100% of the prevailing market rates in effect at the time of Tenant’ s exercise of its extension right for property comparable to the Leased Premises in the vicinity of the Leased Premises (and, for clarity, shall include annual escalators consistent with such prevailing market), all as determined by a licensed commercial real estate broker or appraiser doing business in the greater Portland, Maine vicinity and chosen by Landlord, but in no event shall Base Rent for any year of any Extension Term be less than the Base Rent payable for the immediately preceding year of the Term.

 

   
Rent:

The term “Rent” means Base Rent and all other sums payable by Tenant under this Lease.

 

Taxes:

Without limiting the “net” nature of this Lease as provided in herein, Tenant shall pay all Taxes (as defined in this Lease).

 

Utilities:

Without limiting the “net” nature of this Lease as provided herein, Tenant shall contract for and pay for all Utilities (as defined in this Lease).

 

Operating Expenses; Maintenance and Repairs:

Without limiting the “net” nature of this Lease as provided herein, Tenant shall pay 100% of all costs and expenses associated with the use, occupancy, operation, maintenance, repair, and/or replacement of the Leased Premises.

 

 

-2-

 

Permitted Use:

 

Subject in all events to the terms and conditions of the Lease, the Leased Premises shall be used only for purposes of a facility for the manufacture of modular homes and other components of modular home construction and associated administrative and general business offices of Tenant in connection therewith.

 

1.       Leased Premises. Landlord leases to Tenant, in consideration of the Rent to be paid by Tenant and subject to the terms and conditions set forth herein, the Leased Premises. Tenant acknowledges that Tenant was the owner of the Leased Premises prior to the Commencement Date and has conveyed the Leased Premises to Landlord on the Commencement Date. Accordingly, Tenant agrees that Tenant accepts and is leasing the Leased Premises in their “as is” condition.

 

2.       Commencement and Term. The term of this Lease shall commence on the Commencement Date and shall be the Lease Term, unless earlier terminated or extended by mutual agreement of the parties or as otherwise provided in this Lease.

 

3.       Rent; Net Lease.

 

(a)       Tenant covenants and agrees to pay to Landlord at its address as set forth in the preamble to this Lease or at such other place as Landlord shall from time to time designate in writing, during the Lease Term, the Base Rent, without holdback or set-off, in advance, commencing on the Rent Commencement Date and continuing thereafter on the first day of each calendar month during the Lease Term. All other items of Rent shall be paid, without holdback or set-off, in accordance with the terms of this Lease. If any payment of Rent is received by Landlord more than five (5) days after the date when such payment is due, a late charge of five percent (5%) of the past due payment shall be assessed, due and payable immediately and without notice.

 

(b)       Landlord and Tenant acknowledge and agree that this Lease is intended to constitute, and shall constitute, an absolutely ‘net” Lease such that the Rent shall provide Landlord with a “net” return for the Term, free of all expenses and charges with respect to the Leased Premises, all of which shall be Tenant’s responsibility. Accordingly, Tenant shall pay as additional Rent and discharge, at the times specified herein, or if no time is specified, before failure to pay the same shall give rise to any interest or penalty or create any risk of lien or forfeiture, each and every item of expense, of every kind and nature whatsoever, foreseen or unforeseen, ordinary or extraordinary, related to or arising from the Leased Premises, or by reason of, or in any manner connected with or arising from, the development, leasing, operation, management, maintenance, repair, replacement, use, and/or occupancy of the Leased Premises.

 

4.       (Reserved.)

 

5.       (Reserved.)

 

-3-

 

6.       Permitted Use; Compliance with Laws.

 

(a)       Tenant agrees to use and occupy the Leased Premises for the Permitted Use, and for no other purpose without the written consent of Landlord, and further agrees not to use the Leased Premises for any purpose deemed extra hazardous or not covered by insurance. Tenant acknowledges and agrees that Landlord shall have the right to adopt reasonable rules and regulations for the use and/or occupancy of the Leased Premises and Tenant agrees that it shall at all times observe and comply with such rules and regulations.

 

(b)       Tenant agrees to abide by and comply with all Laws (as hereafter defined) applicable to the Leased Premises and/or the use or occupancy of the Leased Premises. It is the responsibility of Tenant to determine all zoning information and secure all necessary permits, licenses, and approvals for Tenant’s use and occupancy of the Leased Premises. Without limiting the generality of the foregoing, Tenant agrees to maintain in full force and effect, during the Lease Term, at Tenant’s cost and expense, all permits, licenses, registrations, and approvals required under applicable Laws for the use and/or occupancy of the Leased Premises. Without limiting the “AS IS” nature of this Lease, Tenant acknowledges and agrees that Landlord has not made and is not making any representations or warranties as to the suitability of, or the ability to obtain any permits or approvals for, Tenant’s intended use of the Leased Premises.

 

(c)       As used in this Lease, the term “Laws” means all federal, state, municipal or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

 

7.       Taxes.

 

(a)       Tenant shall be responsible for the prompt payment of all taxes, levies, betterments, and assessments, and governmental impositions of every kind or nature, whether now existing or hereafter created, general or special, ordinary or extraordinary, foreseen or unforeseen, that may be charged, assessed, laid, levied, or imposed upon, or become a lien or liens against, the Leased Premises (including the Real Property and the Leased Personal Property) or this Lease, including any amount that Landlord may be required to pay to any governmental authority as sales tax, gross receipt tax, or any tax of like nature specifically measured as a percentage of, or fraction of, or other factors based upon the all or any portion of the Rent payable hereunder (whether in lieu of, or in addition to the current system of real estate taxation) (all amounts payable under this Section being referred to herein as “Taxes”).

 

(b)       Tenant shall pay all Taxes, at Landlord’s option, either (i) to Landlord as additional Rent in estimated monthly installments, with the actual amount of Taxes reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated Taxes exceeds the actual Taxes for such annual period (provided Tenant is not then in breach of this Lease), or Tenant paying to Landlord the amount by which the actual Taxes for such annual period exceeds the estimated payments made by Tenant to Landlord; or (ii) to Landlord within thirty (30) days after Landlord makes demand therefor, with copies of any bills for Taxes; or (iii) directly to the taxing authority, in which event Tenant shall provide to Landlord evidence of the prompt payment of all Taxes prior to the date the same are due without the accrual of any interest on such Taxes.

 

-4-

 

8.       Utilities.

 

(a)       Tenant shall make arrangements for, and pay on or before the date the same become due, all charges for or relating to gas, oil, electricity, water, sewer, septic, telecommunications, and all other services used at or supplied to the Leased Premises (collectively, “Utilities”).

 

(b)       Landlord shall in no way be liable for any loss, expense, or damage (whether direct or indirect) that Tenant may sustain or incur by reason of any change, failure, interference, disruption, interruption, or defect in the supply or character of any Utilities serving the Leased Premises, regardless of its duration, or if the quantity or character of Utilities become unavailable to the Leased Premises or no longer suitable for Tenant’s requirements. Additionally, any such change, failure, interference, disruption, interruption, defect, unavailability, or unsuitability mentioned in this Section shall not: (i) constitute an actual or constructive eviction of Tenant, in whole or in part; (ii) entitle Tenant to any abatement or diminution of Rent, or any other costs due from Tenant pursuant to this Lease; (iii) relieve or release Tenant from any of its obligations under this Lease; or (iv) entitle Tenant to terminate this Lease.

 

9.       Operation, Maintenance and Repairs.

 

(a)       Tenant agrees that from and after the Commencement Date, Tenant will keep neat and clean and maintain in good and safe order, condition and repair, and in compliance with all Laws the entirety of the Leased Premises, including any and all alterations or improvements to the Leased Premises occurring after the date of this Lease. Tenant agrees to pay the costs for cleaning and janitorial services relating to the Leased Premises (including trash removal and trash hauling), which services shall be provided or caused to be provided by Tenant. Tenant shall be responsible for the plowing, shoveling, and treatment of snow and ice and all grounds keeping, including all landscaping and sweeping of pavement and other hardscaped surfaces. Tenant shall be responsible for all items of maintenance and all repairs to and replacements (except as otherwise provided in Section 18) of all buildings and improvements and all Building Systems (as hereafter defined), and all foundations, structural supports, walls, ceilings, windows (including plate glass), siding, roof structure, roofing materials, doors, plate glass, driveways, parking areas, fences and signs located in, on or at the Leased Premises) that the Leased Premises may require from time to time during the Term, whether interior or exterior, structural or non-structural, ordinary or extra-ordinary, foreseen or unforeseen, all to keep the Leased Premises in good and safe order, condition, and repairs, and in at least as good condition as the Leased Premises are in on the Commencement Date. The term “Building Systems” means all heating systems, ventilating systems, air conditioning systems, fire alarm systems, sprinkler systems, and other life safety systems, septic systems, water supply systems (including any water treatment or filtration systems), plumbing systems, electrical systems, storm water management facilities, and all other systems located at or serving the Real Property.

 

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(b)       Without limiting the generality of sub-section (a) of this Section, Tenant shall procure and maintain, with qualified vendors reasonably acceptable to Landlord, contracts providing for periodic inspections and maintenance of the heating, ventilating, and air conditioning (HVAC) systems, fire alarm, sprinkler, and life safety systems, the septic system (if any), the crane(s) and related appurtenances in the building, and the Hundegger saw, at such intervals as are reasonably required by Landlord, but in all events at least annually.

 

10.       Alterations, Renovations and Improvements. Tenant shall not make any alterations, renovations or improvements to the Leased Premises without obtaining Landlord’s prior written consent to the plans and specifications therefor and the contractor(s) to be retained by Tenant to perform such work, which shall not be unreasonably withheld, conditioned, or delayed in the case of cosmetic renovations that do not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, but otherwise shall be in Landlord’s sole discretion. Prior to any contractor or subcontractor (of any tier) providing or furnishing any labor, materials, or services in connection with any alterations, renovations, or improvements, Tenant shall obtain and furnish to Landlord the name and address of each such contractor and subcontractor. In addition, prior to any such labor, materials, or services being provided or furnished, Tenant shall furnish to Landlord a mechanic’s lien waiver and notice to prevent lien in a form prescribed by Landlord, duly executed by each such contractor or subcontractor who will furnish or provide labor, materials, and/or services. Tenant shall ensure that all such alterations, renovations and improvements are performed in a good and workmanlike and in compliance with all applicable Laws. In the event any lien is filed against the Leased Premises in connection with or arising out of any work performed at or materials, labor or other services supplied to the Leased Premises, Tenant shall cause the same to be discharged within thirty (30) days after such lien is filed. Tenant shall indemnify and hold Landlord harmless from and against all claims, demands, liabilities, liens, losses, costs and expenses (including reasonable attorneys’ fees) which may arise or be incurred by Landlord as a direct or indirect result of or in connection with such alterations, renovations and improvements, and Tenant shall be responsible for all costs, liabilities, and expenses arising out of such alterations, renovations and/or improvements. All alterations, renovations and improvements which may be made or installed by or on behalf of Tenant upon the Leased Premises and which in any manner are attached to the floors, walls or ceilings shall, at Landlord's option, remain upon the Leased Premises, and, upon termination of this Lease, shall be surrendered with the Leased Premises as a part thereof without disturbance, molestation or injury, provided, however, that Tenant’s furniture, equipment, other personal property, and trade fixtures (which, for avoidance of doubt, shall in no event include the Leased Personal Property or the crane(s) or related appurtenances located at the Leased Premises) may be removed by Tenant from the Leased Premises upon the expiration or termination of this Lease, subject to the provisions relating to removal thereof as provided in this Lease.

 

11.       Signs. Tenant shall have the right to maintain the existing signage at the Real Property as of the Commencement Date and shall have the right to install additional signage that does not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, provided, however, that all signage shall be at Tenant’s sole cost and expense, and shall comply with all applicable Laws.

 

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12.       Surrender; Holdover. Tenant shall vacate and surrender the Leased Premises to Landlord at the expiration or sooner termination of the Lease Term and the same shall be in the same condition as Tenant is required to maintain the same during the Lease Term, free of all of Tenant’s personal property except as may otherwise be provided herein, “broom clean,” and otherwise in accordance with the provisions of the Lease. Tenant shall have no right to holdover beyond the expiration of the Lease Term. If Tenant continues to occupy the Leased Premises after the end of the Lease Term, such continued occupancy shall be deemed a tenancy-at-sufferance even if Landlord accepts any payment from Tenant, but in the event that a court of competent jurisdiction deems such acceptance of a payment to constitute acceptance of “rent”, such acceptance shall create no rights in Tenant beyond a tenancy-at-will under the terms and conditions stated herein but at a Base Rent rate equal to one hundred fifty percent (150%) of the Base Rent applicable immediately preceding the end of the Lease Term, plus all additional Rent, until (i) Tenant shall vacate the Leased Premises; (ii) the termination of the tenancy-at-will; or (iii) Landlord shall give notice of a different rental amount. Nothing contained in this Section shall be deemed to (a) constitute consent by Landlord to such occupancy or holdover by Tenant; (b) confer any rights on Tenant as more than a tenant-at-sufferance or, if Landlord accepts any rental payments applicable to such period of holding over, a tenant-at-will; or (c) relieve Tenant from liability for damages suffered by Landlord as a result of such holding over.

 

13.       Removal of Tenant’s Property. Tenant’s trade fixtures, personal property, furniture and equipment, other than those items which are to remain or which Landlord elects to have remain at the Leased Premises as provided in Section 10 of this Lease, may be removed by Tenant at the termination of this Lease, provided (a) Tenant is not then be breach of any provision of this Lease; (b) such removal shall not cause any material damage to any portion of the Leased Premises, and any other damage created by such removal shall be repaired by Tenant at Tenant's expense prior to the expiration of the Lease Term to at least as good condition as existed when possession of the Leased Premises was delivered to Tenant; and (c) such removal shall be made before the termination of the Lease Term.

 

14.       Subletting and Assignment. Tenant shall not assign this Lease, in whole or in part, or sublet the Leased Premises or any portion thereof, or encumber the leasehold interest created by this Lease in any manner (including the creation of any security interest in or other pledge of or lien upon the Leased Personal Property) without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion during the first twenty-four full calendar months of the Term, and thereafter will not be unreasonably withheld. No assignment or sublease shall operate to release Tenant from any of its obligations under this Lease. Each sublease of the Leased Premises or any portion thereof must contain a release of and waiver of claims against Landlord and the other Releasees (as that term is defined in this Lease), in form and content acceptable to Landlord, and must require the subtenant’s property insurer to issue in favor of Landlord and the other Releasees waiver of subrogation rights endorsements to all policies of property insurance carried in connection with the Leased Premises and the contents thereof. Every transfer by levy or sale on execution, or other legal process, every transfer in bankruptcy, every transfer by merger, consolidation, or by operation of Law, every transfer of a controlling interest in Tenant, and every transfer under any compulsory procedure or order of court shall be deemed to constitute an “assignment” within the meaning of this Lease. Any attempted assignment or sublease in violation of this Section shall, at Landlord’s option, be void and shall constitute a default under this Lease. Consent by Landlord to an assignment or sublease in one instance shall not operate to release the requirement that consent from Landlord be obtained for any further or subsequent assignment or sublease. Tenant shall pay all fees and expenses, including reasonable attorneys’ fees, incurred by Landlord in connection with any proposed subletting or assignment, irrespective of whether Landlord’s consent is in fact granted.

 

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15.       Indemnification and Insurance.

 

(a)       Tenant agrees to maintain in full force during the Lease Term insurance as follows:

 

(i)        commercial general liability insurance, written on an occurrence basis, with a deductible in an amount not to exceed $10,000.00, and providing:

 

(A)        minimum limits of (y) $1,000,000.00 per occurrence with $3,000,000.00 annual aggregate limit for bodily injury (including death) and property damage; and (z) $3,000,000.00 in the annual aggregate with respect to products and completed operations;

 

(B)        coverage for damages arising out of bodily injury (including death) sustained by any person or persons or arising out of damage to or destruction of property;

 

(C)       coverage for damages arising out of premises liability, personal injury and advertising injury;

 

(D)       pollution liability coverage for sudden and accidental pollution;

 

(E)       for extension of such coverage to include liability for the operation of non-owned motor vehicles;

 

(F)       specific coverage for Tenant’s indemnification obligations under this Lease (but neither this provision nor such coverage shall be deemed to limit any of Tenant’s obligations under this Lease);

 

(G)        that Tenant’s commercial general liability insurance is provided on a primary and non-contributory basis;

 

(H)       that Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time are named as additional insureds by an endorsement provided on ISO Form 2026 (1185) or its equivalent, without modification, or such other endorsement as is acceptable to Landlord, acting reasonably; and

 

(I)       for waiver of subrogation in favor of Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time.

 

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(ii)       Automobile liability insurance covering all motor vehicles owned, leased, or licensed by Tenant, covering injury to or death of one or more persons or damage to or destruction of property, with a minimum limit of liability of $3,000,000.00 for each accident.

 

(iii)       Workers compensation insurance in accordance with the requirements of all applicable Laws, and employers liability insurance with limits of at least $1,000,000.00, with such workers compensation insurance and employers liability insurance providing for waiver of subrogation in favor of Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time.

 

(iv)       Umbrella excess liability insurance in a minimum amount of $10,000,000.00, on a following form basis over the insurance described in clauses (i) through (iii), above.

 

(v)       Special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all personal property and trade fixtures owned by or within the care, custody or control of Tenant (including the Leased Personal Property), with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such property, without co-insurance provisions, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to-time) named as loss payee(s) with respect to the Leased Personal Property and additional insured(s). Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage;

 

(vi)       Until such time, if any, as Landlord elects to carry property insurance for the buildings and improvements located on the Leased Premises, special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all buildings and improvements (including fixtures) located on the Leased Premises, with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such buildings and improvements, and in all events sufficient at all times to avoid causing the insured to be or become a co-insurer, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to-time) named as loss payee(s) and additional insured(s). Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage;

 

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(vii)       business interruption insurance covering all of Tenant’s obligations under this Lease with respect to the payment of Rent for a period of at least eighteen (18) months.

 

(viii)       Such other insurance policies, such other endorsements, such other deductibles, and/or such other insurance policy limits as may from time to time be reasonably required by Landlord, provided that, at the time, such other insurance policies, endorsements, deductibles, and/or insurance policy limits are commonly carried for premises and/or buildings or improvements similar in construction, design, general location, use, operation, and occupancy to those located on or appurtenant to the Leased Premises or for operations similar to those conducted on or from the Leased Premises.

 

(b)       Without limiting the exculpatory provisions of this Lease, each policy of property insurance maintained by Tenant under this Lease shall contain waivers of subrogation in favor of Landlord and all other Releasees.

 

(c)       All insurance required to be obtained and maintained by Tenant pursuant to this Section must be with insurers authorized to transact insurance business and cover risks in the State of Maine and that are rated "A-" or better by A.M. Best Company, Inc. or other insurance companies of recognized responsibility acceptable to Landlord, acting reasonably.

 

(d)       The policies of insurance required to be maintained by Tenant under this Lease shall be endorsed to require that each policy will not be cancelled or materially changed without at least thirty (30) days prior written notice to Landlord.

 

(e)       Tenant shall deliver to Landlord copies of each policy of insurance (including all endorsements) required to be maintained by Tenant under this Lease or such other evidence of each such policy of insurance (and all required endorsements) as is acceptable to Landlord, acting reasonably.

 

(f)       If Tenant fails to obtain, maintain and/or pay for the insurance required by this Lease at the times and for the amounts and duration specified herein, Landlord has the right, but not the obligation, at any time and from time to time, to obtain such insurance and/or pay the premiums for such insurance, without limiting any other rights or remedies available to Landlord for such failure. In such event, Tenant shall repay Landlord, immediately upon demand, all sums so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith (including reasonable attorneys’ fees), all without prejudice to any other rights or remedies available to Landlord.

 

(g)       Landlord shall have the right, at any time during the Term, to elect, by giving written notice to Tenant, to carry property insurance for the buildings and improvements located on the Leased Premises, in which event, Tenant shall pay to Landlord the amount of all premiums for such property insurance procured and maintained by Landlord with respect to the Real Property. Tenant shall pay such amounts to Landlord in estimated monthly installments, with the actual amount of incurred by Landlord for such premiums being reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated premiums exceeds the actual premiums for such annual period (provided Tenant is not then in breach of this Lease), or Tenant paying to Landlord the amount by which the actual premiums for such annual period exceeds the estimated payments made by Tenant to Landlord.

 

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(h)       Tenant acknowledges and agrees that such property insurance as Landlord elects to purchase with respect to the Real Property shall be for the sole benefit of Landlord and that such insurance shall not cover any personal property, trade fixtures, leasehold improvements, or other property or appurtenances owned by or within the care, custody, or control of Tenant, or otherwise located in the Leased Premises (collectively, “Tenant’s Property”) and that in the event of damage to or loss of any of Tenant’s Property, neither Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), nor any of the shareholders, members, directors, managers, officers, employees, or agents of Landlord or any such mortgagee(s) (each in the singular “Releasee”, and in the plural, “Releasees”) shall have any obligation to repair or replace the same. Notwithstanding any exception to Tenant’s indemnification obligations under this Lease, Tenant does hereby expressly release all Releasees of and from, and agrees to indemnify, hold harmless, and defend Releasees from and against, any and all claims for damages to or loss of any of Tenant’s Property, regardless of the cause thereof, including, damage or loss due to any Releasee’s negligence.

 

(i)       Tenant shall indemnify and hold all Releasees harmless and, if requested by Landlord, defend such Releasee(s) with counsel reasonably satisfactory to Landlord, from and against any and all liabilities, losses, claims, causes of action, damages, costs, and expenses (including reasonable attorney’s fees) incurred by or threatened against any Releasee arising out of (i) any occurrence on the Leased Premises or the use of the Leased Premises by Tenant, its employees, agents, licensees, or invitees, except to the extent caused by the negligence or willful misconduct of Landlord (but such exception shall not apply to limit the application of sub-section (h) of this Section); or (ii) Tenant’s breach of any provision of this Lease. Tenant agrees that the foregoing agreement to indemnify, defend, and hold harmless extends to liabilities, losses, claims, causes of action, damages, costs and expenses (including reasonable attorney’s fees) arising out of claims of Tenant's employees without regard to any immunity, statutory or otherwise, including any immunity under the workers compensation Laws of Maine or any other applicable jurisdiction, which immunity Tenant hereby waives, but only for the purposes of Tenant’s obligations to the Releasees under this sub-section. Tenant's obligations under this sub-section shall survive the termination of this Lease.

 

16.       Hazardous Materials. Tenant covenants and agrees that Tenant will not permit any Hazardous Substances (as hereafter defined) to be stored, generated, or released from the Leased Premises, other than Hazardous Substances incidental to Tenant’s use, maintenance, and operation of the Leased Premises for the Permitted Use provided that Tenant shall store, generate, handle, and dispose of all such Hazardous Substances in full compliance with all applicable laws. Tenant hereby covenants and agrees to indemnify, hold harmless, and, if requested by Landlord, defend, Landlord from and from and against any and all demands, claims, causes, of action, losses, liabilities, damages, fines, costs, and expenses (including reasonable attorneys’ fees, court costs and clean-up costs) that may arise out of any Hazardous Substances located at or generated or released from the Leased Premises, irrespective of whether first occurring prior to or after the Commencement Date. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state Laws regulating pollution or contamination of the environment The obligations of Tenant under this Section shall survive the termination of this Lease.

 

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17.       Right to Enter. Tenant agrees to permit Landlord or its duly authorized agents to enter on the Leased Premises during Tenant's normal business hours, with reasonable prior notice, to examine the condition of said Leased Premises, exercise any rights of Landlord under this Lease, and/or to show the same to prospective tenants, lenders, or purchasers, provided such access to the Leased Premises shall not unnecessarily interfere with Tenant's use of the Leased Premises or the conduct of Tenant's business activities thereon. Notwithstanding the foregoing, Landlord shall have the right (but not the obligation) to enter the Leased Premises without prior notice in the event of an emergency in which prior notice is not practicable in the circumstances.

 

18.       Total or Partial Destruction.

 

(a)       In the event the improvements on the Real Property (including any Building Systems) are damaged or destroyed by fire or other peril (a “Casualty”), Tenant shall give Landlord notice of such Casualty as soon as reasonably possible after the Casualty. Landlord shall have the right to elect whether to have such improvements rebuilt or restored. In the event that Landlord elects not to have the improvements rebuilt or restored, and the nature of the Casualty is such as would, absent such rebuilding or restoration, materially impair Tenant’s ability to use and occupy such Leased Premises in substantially the same manner as they were used prior to the Casualty, this Lease shall terminate effective as of the date of the Casualty. In the event that Landlord elects to have the improvements rebuilt or restored, this Lease shall remain in effect without reduction or abatement of Rent, and the following provisions shall apply:

 

(i)       Landlord shall, with reasonable promptness rebuild or restore such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements, provided, however, that in no event shall Landlord be obligated to expend for any such rebuilding or restoration an amount in excess of the insurance proceeds actually collected by Landlord on account of the Casualty, less the costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in collecting such proceeds.

 

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(ii)       Notwithstanding the preceding clause (i), Landlord shall have the right to elect, by giving written notice to Tenant, to have Tenant rebuild or restore the Leased Premises, in which event Tenant shall, with reasonable promptness, and in all events within twelve (12) months of the date of Landlord’s election notice, rebuild or restore such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements. The selection of all engineers, architects, and contractors engaged in connection with such rebuilding or restoration and all plans and specifications for such rebuilding or restoration, shall be subject to review and approval by Landlord. In the event that Landlord makes the election to have Tenant rebuild or restore as provided in this clause (ii), all proceeds payable by reason of any Casualty under all applicable policies of insurance (whether Tenant is carrying such insurance, or Landlord has elected to do so as provided in this Lease) shall be paid to Landlord or its mortgagee, and such proceeds will be held by Landlord or its mortgagee in an interest-bearing account and, provided Tenant is not in breach of this Lease, shall be made available for rebuilding or restoring the improvements, and shall be paid by Landlord (or such mortgagee) from time- to-time during the progress of construction for the costs of such reconstruction or repair, all subject to and in accordance with reasonable terms, conditions, and construction disbursement procedures specified by Landlord and/or such mortgagee. Any excess proceeds of insurance (and accrued interest) remaining after the completion of the restoration or reconstruction of the Leased Premises shall be paid to Landlord.

 

(b)       Loss or Damage affecting Leased Personal Property. In the event of any loss or destruction of or damage to any of the Leased Personal Property, Tenant shall, unless Landlord or its mortgagee elects to retain any proceeds of insurance allocable to such Leased Personal Property, be responsible for the repair and replacement of such lost, destroyed, or damaged Leased Personal Property, with the restored or replacement items of at least equivalent condition, quality, class, and value to the item(s) of Leased Personal Property prior to such loss, destruction, or damage. All proceeds payable under all applicable policies of insurance by reason of any loss or destruction of or damage to any Leased Personal Property shall be paid to Landlord or its mortgagee. Unless Landlord or its mortgagee elect to retain such proceeds of insurance allocable to such Leased Personal Property, such proceeds will be held by Landlord or its mortgagee in an interest-bearing account and, provided Tenant is not in breach of this Lease, shall be made available for such repair or replacement, and shall be paid out by Landlord (or such mortgagee) from time to time during the progress of the repair or replacement for the reasonable costs of such repair or replacement, all subject to and in accordance with reasonable terms, conditions, and disbursement procedures specified by Landlord and/or such mortgagee. Any excess proceeds of insurance (and accrued interest) remaining after the completion of the repair or replacement of such Leased Personal Property shall be paid to Landlord. There shall be no abatement or reduction of Rent on account of any such loss, destruction, or damage.

 

(c)       Tenant shall be responsible for all insurance deductibles applicable to any Casualty affecting any of the improvements on the Real Property (including Building Systems) and/or any loss or destruction of or damage to any of the Leased Personal Property.

 

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(d)       The provisions of this Section shall be subject and subordinate to the provisions of any mortgage now or hereafter placed upon the Real Property, the provisions of any security agreement now or hereafter affecting the Leased Personal Property, and the requirements of any mortgagee holding such mortgage or secured party holding the security interest under such security agreement.

 

19.       Condemnation.

 

(a)       “Condemnation” means any taking of title to or any interest in the Leased Premises or any part thereof or any other property used in connection with the Leased Premises (including for ingress, egress, parking, septic service, water supply or other services or utilities) by exercise of any right of eminent domain by, or by any similar proceeding or act of, any person having the power and legal authority to do so (or by purchase in lieu thereof). For the purposes of this definition, the effective date of any Condemnation shall be deemed to be the later of: (i) the date when title to the Leased Premises or part thereof or such other property is transferred by such proceeding or act of the condemning authority, and (ii) the date when Tenant o is no longer permitted to occupy the Leased Premises or to use such other property.

 

(b)       “Substantial Condemnation” means any Condemnation that affects all or a substantial portion of the Leased Premises or any Condemnation that has or is reasonably likely to have a materially adverse effect on any business operations then being conducted on the Leased Premises. Tenant may waive its right to treat as a Substantial Condemnation any Condemnation that would otherwise qualify as such.

 

(c)       “Insubstantial Condemnation” means any Condemnation that is not a Substantial Condemnation.

 

(d)       If a Substantial Condemnation occurs, this Lease shall terminate upon the effective date of the Substantial Condemnation.

 

(e)       If an Insubstantial Condemnation occurs, then this Lease shall continue in full force and effect without reduction or abatement of Rent.

 

(f)       In the event of any Condemnation, Landlord shall be entitled to receive and retain the amounts awarded for the Leased Premises, and Tenant shall be entitled to receive and retain any amounts which may be specifically awarded to it in any such condemnation proceedings because of its business loss or the taking of its trade fixtures, furniture, or other property.

 

20.       Force Majeure. In any case where either party is required to perform any act pursuant to this Lease, except for Tenant’s monetary obligations hereunder, the time for the performance thereof shall be extended by a period of time equal to the period of any delay caused by or resulting from an act of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of energy or labor, government regulations, or delays caused by one party to the other, whether such period be designated by a fixed date, a fixed time, or as a reasonable date or time.

 

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21.       Quiet Enjoyment. Tenant, on paying the Rent and performing and observing the covenants in this Lease, may hold and enjoy the Leased Premises for the Term without unreasonably interference from any person claiming by, through, or under Landlord, subject and subordinate to all provisions of this Lease.

 

22.       Default.

 

(a)       In the event that:

 

(i)       Tenant shall fail to pay when due the Rent or any other sums payable hereunder when due and such failure remains uncured for five (5) days after Landlord delivers a default notice to Tenant for such failure to pay rent; or

 

(ii)       any petition in bankruptcy shall be filed by Tenant or any guarantor hereof or other petition or proceeding shall be filed or commenced by Tenant or any guarantor hereof to declare Tenant insolvent, or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations, or Tenant or any such guarantor admits its inability to pay its debts, or Tenant or any such guarantor makes an assignment for the benefit of creditors; or

 

(iii)       any bankruptcy petition or proceeding shall be filed against Tenant or any guarantor hereof or to otherwise declare Tenant or any guarantor hereof bankrupt or insolvent or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations or a receiver, trustee or other similar type of appointment or court appointee or nominee is appointed for Tenant or any such guarantor or any of the property of Tenant or any such guarantor, and such petition, appointment or proceeding is not dismissed within sixty (60) days after it is commenced; or

 

(iv)       the leasehold interest of Tenant is levied upon or attached by process of law, including the filing of any mechanic’s lien, and such levy, lien, or attachment is not dissolved within thirty (30) days after it is made; or

 

(v)       Tenant shall abandon the Leased Premises during the Lease Term; or

 

(vi)       Tenant shall assign this Lease or sublet any portion of the Leased Premises, or attempt to do either of the foregoing, in violation of this Lease; or

 

(vii)       Tenant violates or fails to observe or comply with any Laws applicable to the Leased Premises, Tenant’s use thereof, or Tenant's operations, activities or conduct of business at or from the Leased Premises; or

 

(viii)       any other event, occurrence, act, or omission described in any provision of this Lease as constituting a “default” or an “Event of Default” occurs;

 

(ix)       Tenant shall neglect or fail to perform or observe any of the other covenants, terms, provisions or conditions contained in this Lease and, if the neglect or failure is capable of being cured, such neglect or failure continues for more than thirty (30) days after written notice thereof (provided, however, that if such neglect or failure is capable of being cured, but is not capable of being cured within said thirty (30) day period, then Tenant shall have such additional period of time, not to exceed an additional sixty (60) days, as is reasonably necessary to cure the same provided Tenant commences to cure within said thirty (30) day period and diligently and continuously prosecutes the cure to completion); or

 

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(x)       there is a default by Tenant under (A) that certain Lease Agreement of even or near date herewith between Tenant and 947 Waterford Road, LLC pertaining to property located in the Town of Waterford, County of Oxford, and State of Maine; and/or (B) that certain Lease Agreement of even or near date herewith between Tenant and 56 Mechanic Falls Road, LLC pertaining to property located in the Town of Oxford, County of Oxford, and State of Maine, and any such default continues beyond the expiration of applicable notice and cure periods (if any),

 

then, and in any of said cases (notwithstanding any license of any former breach of covenant or waiver of the benefit hereof or consent in a former instance), and without limitation of any other remedies that might be available to Landlord under this Lease, at law, or in equity, Landlord lawfully may, immediately or at any time thereafter, terminate this Lease by sending written notice of termination to Tenant, or, subject to compliance with applicable Laws, enter into and upon the Leased Premises or any part thereof in the name of the whole and repossess the same as of its former estate, and expel Tenant and those claiming through or under it and remove it or their effects without being deemed guilty of any manner of trespass, in each case without prejudice to any rights or remedies which might otherwise be available to Landlord for collection of Rent and other damages for breach of covenant, and upon entry as aforesaid or upon sending of such notice, this Lease shall terminate.

 

(b)       Without limiting other remedies of Landlord at law or in equity for any breach of or on account of termination of this Lease, Tenant covenants that in case of such termination under sub-section (a) of this Section, Tenant shall pay to Landlord the unpaid Rent owed to Landlord through the time of termination, plus interest thereon at the rate of 18% per annum from the date the same was due until paid; and (ii) at the election of Landlord, either:

 

(1)       the present value of a sum which, at the time of such termination of this Lease is equal to (A) the aggregate of the Rent which would have been payable by Tenant for the period commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant; minus (B) the fair market rental value of the Leased Premises (after deducting reasonable projections for Landlord’s costs and expenses of re-letting the Leased Premises, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant); or

 

(2)       for the period of time commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant hereunder, the difference, if any, between the Rent which would have been due had there been no such termination and the amount being received by Landlord as rent from a replacement Tenant of Leased Premises, if any. In addition, Tenant shall pay to Landlord all costs and expenses of such re-letting, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant.

 

-16-

 

(c)       If Tenant shall default in the performance or observance of any covenant, agreement, or condition in this Lease contained on its part to be performed or observed and shall not cure any such default as provided herein, Landlord may, at its option, without waiving any claim for damages or any other right or remedy for breach of this Lease, at any time thereafter, cure such default. Any amount paid or any liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant, and Tenant agrees to immediately reimburse Landlord therefor, as additional Rent.

 

(d)       Tenant shall pay all reasonable attorneys’ fees incurred by Landlord in connection with the enforcement of Tenant’s obligations under this Lease.

 

(e) Landlord shall in no event be in default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to perform, or failed diligently to attempt to perform, such obligations within thirty (30) days or such additional time as is reasonably required to correct any such default after notice by Tenant to Landlord properly specifying wherein Landlord has failed to perform any such obligation.

 

(f) In no event shall Landlord be liable to Tenant for incidental, consequential, or punitive damages in connection with any matter arising out of this Lease or the Leased Premises. Without in any way limiting or impairing the effect of the other provisions of this Lease, Tenant shall neither assert nor seek to enforce any claim arising out of this Lease or out of the use or occupancy of the Leased Premises against Landlord, its shareholders, directors, officers, employees, or agents, or any of its or their assets other than the value of Landlord’s interest in the Leased Premises and Tenant agrees to look solely to such interest and insurance coverage for the satisfaction of any claim arising out of this Lease or out of the use or occupancy of the Leased Premises.

 

23.       Sale or Mortgage; Estoppel; Subordination.

 

(a)       Nothing contained in this Lease shall limit Landlord's right to sell, mortgage, or otherwise encumber its fee interest in the Leased Premises, or affect Landlord's right to assign this Lease or the Rent payable under this Lease, whether as further security under a fee mortgage or otherwise. Any such assignment of this Lease or of the Rent payable under this Lease shall be honored by Tenant.

 

(b)       In the event Landlord shall sell, transfer, or otherwise convey the Leased Premises, Landlord, upon the written assumption by the transferee of the obligations arising hereunder after the date of such transfer, shall be entirely freed and relieved of all covenants and obligations of Landlord hereunder. Nothing in the preceding sentence shall be construed to impair Tenant’s leasehold interest under this Lease so long as Tenant performs and observes the covenants and terms of this Lease on its part to be performed and observed.

 

-17-

 

(c)       This Lease shall, at Landlord’s option, be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Leased Premises, and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Leased Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the Rent and observe and perform all of the provisions of this Lease. If any mortgagee, trustee, or ground lessor shall elect to have this Lease made prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust, or ground lease or the date of recording thereof. Tenant agrees to execute any documents required to effectuate an attornment, a subordination, or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Tenant's failure to execute such documents within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder.

 

(d)       At any time, and from time to time, upon the written request of Landlord or any mortgagee or prospective purchaser of the Leased Premises, Tenant, within ten (10) business days after such written request, agrees to execute, acknowledge and deliver to Landlord and/or mortgagee, without charge, an estoppel certificate which shall contain (i) a certification that this Lease is unmodified and in full force and effect or, if modified, a statement of the nature of any such modification and a certification that this Lease, as so modified, is in full force and effect; (ii) a certification of the date to which the Rent payable by Tenant are paid (including any payments in advance); (iii) a certification that Tenant is not in default hereunder and that there are not, to Tenant's knowledge, any uncured events of default on the part of Landlord hereunder, or a specification of such events of default if any are claimed by Tenant; and (iv) such other commercially reasonable certifications as are identified in such request. Tenant's failure to deliver such estoppel certificate within the time frame set forth above shall, at Landlord’s option, constitute an Event of Default hereunder and shall, at Landlord’s option, be conclusive proof that this Lease is in full force and effect without modification except as may be represented by Landlord, that there are no uncured defaults in Landlord's performance of Landlord's obligations under this Lease, and that not more than one month's Rent has been paid in advance.

 

(e)       If Landlord desires to finance, refinance, or sell the Leased Premises, Tenant hereby agrees to deliver to any lender or purchaser designated by Landlord, and cause any guarantor to so deliver, such financial statements and other financial information pertaining to Tenant and such guarantor as may be reasonably required by such lender or purchaser. Tenant's failure to provide such information or cause such information to be provided within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder.

 

24.       Notices. Any notice, request, demand, approval or consent given or required to be given under this Lease shall be, unless otherwise stated, in writing and shall be deemed to have been given (i) when hand delivered to the other party; or (ii) on the day on which the same shall have been mailed by United States registered or certified mail, return receipt requested, with all postage prepaid, or by Federal Express or similar nationally-recognized overnight courier service that provides evidence of delivery, to the address of the party to receive such notice as set forth in the preamble hereof, provided that either party may, by such manner of notice, add or substitute one or more persons or addresses for provision of such notice.

 

-18-

 

25.       Tenant Representations.

 

(a)       Neither Tenant nor any key personnel of Tenant nor any of Tenant’s underlying beneficial owners have engaged in any dealings or transactions, directly or indirectly, (i) in contravention of any U.S., international or other anti-money laundering regulations or conventions, including without limitation the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. §1 et seq., as amended), any foreign asset control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 and the regulations promulgated thereunder (collectively, the “Patriot Act”), or any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”); or (ii) in contravention of Executive Order No. 13224 issued by the President of the United States on September 24, 2001 (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), as may be amended or supplemented from time to time (“Executive Order 13224”); or (iii) on behalf of terrorists or terrorist organizations, including those persons or entities that are included on any relevant lists maintained by the United Nations, North Atlantic Treaty Organization, Organization of Economic Cooperation and Development, OFAC, Financial Action Task Force, U.S. Securities & Exchange Commission, U.S. Federal Bureau of Investigation, U.S. Central Intelligence Agency, U.S. Internal Revenue Service, or any country or organization, all as may be amended from time to time.

 

(b)       Neither Tenant nor any key personnel of Tenant nor any of the underlying beneficial owners of Tenant is or will be a person or entity (i) that is listed in the Annex to or is otherwise subject to the provisions of Executive Order 13224; or (ii) whose name appears on OFAC’s most current list of “Specially Designated Nationals and Blocked Persons,” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in Executive Order 13224; or (iv) who has been associated with or is otherwise affiliated with any entity or person listed above.

 

(c)       Tenant represents that it has all requisite power and authority to enter into this Lease and the person executing this Lease on behalf of Tenant represents that he or she has all requisite power and authority to do so.

 

26.       Miscellaneous Provisions.

 

(a)       Invalidity of Particular Provisions. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by applicable Laws.

 

-19-

 

(b)       Governing Law. This Lease, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Lease, shall be governed by and enforced in accordance with the internal Laws of the State of Maine, including its statutes of limitations, without regard or reference to conflicts of law principles.

 

(c)       Interpretation. Whenever the word “include,” “includes,” or “including” is used in this Lease, it is deemed to be followed by the words “without limitation.” The terms “this Lease,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Lease as a whole and not to any particular section of this Lease unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Lease. Whenever in this Lease provision is made for the doing of any act by any party, it is understood and agreed that said act shall be done by such party at its own cost and expense, unless a contrary intent is expressed.

 

(d)       Entire Agreement; Binding Effect. All negotiations, considerations, representations, and understandings between Landlord and Tenant are incorporated herein and may be modified or altered only by agreement in writing between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change, or modify any of the provisions hereof. All rights, obligations and liabilities contained herein given to, or imposed upon, Landlord and Tenant shall extend to and bind the several respective administrators, trustees, receivers, legal representatives, successors, heirs and permitted assigns of Landlord and Tenant. If the “Tenant” under this Lease consists of more than one person or entity, each such person and/or entity shall be bound jointly and severally by the terms, covenants and agreements herein and jointly and severally liable for all obligations arising hereunder.

 

(e)       Language. Words of any gender used in this instrument shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

 

(f)       Recording; Notice of Lease. Landlord and Tenant agree that this Lease shall not be recorded. The parties agree that at the request of either party, they will execute, acknowledge, and deliver a notice or memorandum of this Lease in recordable form for recording in the Oxford County Registry of Deeds. The requesting party shall bear the expense of recording such notice or memorandum. The Memorandum of Lease shall not be construed to vary the terms and conditions hereof. Landlord and Tenant also agree that, upon the request of either party, they will execute, acknowledge, and deliver a commercially reasonable instrument in recordable form with respect to the termination date of this Lease.

 

-20-

 

(g)       Timeliness of Landlord’s Notices. Landlord's failure during the Lease Term to prepare or deliver any of the statements, notices, or bills, or invoices for any sum payable by Tenant under this Lease shall not in any way cause Landlord to forfeit or surrender its rights to collect any amount that may have become due and owing from Tenant during the Lease Term.

 

(h)       Waiver of Jury Trial. Tenant, for itself and its heirs, successors, and assigns, does hereby WAIVE THE RIGHT TO A TRIAL BY JURY in any action or proceeding based upon, or related to, the subject matter of this Lease. This waiver is knowingly, intentionally, and voluntarily made by Tenant and Tenant acknowledges that neither Landlord nor any person acting on behalf of Landlord has made any representations of fact to induce this waiver of trial by jury or in any way to modify or nullify its effect. Tenant further acknowledges that it has been represented (or has had the opportunity to be represented) in the signing of this Lease and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. Tenant further acknowledges that it has read and understands the meaning and ramifications of this waiver provision.

 

27.       Additional Provisions Pertaining to Leased Personal Property.

 

(a)       Without limiting any other provision of this Lease, Tenant agrees that (i) title to the Leased Personal Property shall remain vested in Landlord; (ii) Tenant will not represent to any party that Tenant has title to the Leased Personal Property; (iii) the Leased Personal Property may not be used as collateral to secure any obligations of Tenant to any party; (iv) Tenant will not allow the Leased Personal Property to become encumbered in any way whatsoever; and (v) Tenant will not remove the Leased Personal Property from the Real Property without the written consent of Landlord. Tenant agrees that Landlord may file any financing statements or other documents Landlord deems reasonably necessary or desirable to protect or enforce its rights and interest in the Leased Personal Property and Tenant agrees to execute such documents as Landlord reasonably requests in connection therewith. In the event any of Leased Personal Property is lost, stolen, damaged, or destroyed, Tenant will be responsible for the full replacement of the same.

 

(b)       THE LEASED PERSONAL PROPERTY IS BEING PROVIDED TO TENANT IN “AS IS, WHERE IS” CONDITION, WITH ALL FAULTS. LANDLORD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY OF MERCHANTABILITY, WITH RESPECT TO THE LEASED PERSONAL PROPERTY, AND ALL SUCH WARRANTIES AND REPRESENTATIONS ARE EXPRESSLY DISCLAIMED BY LANDLORD.

 

[Signature Page(s) and Guaranty Follow]

 

-21-

 

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized undersigned representatives as an instrument under seal as of the day and year first written above.

 

WITNESS:   LANDLORD:
    300 Park Street, LLC
       
    By: /s/ David Noble
    Name:  David Noble
    Title: President

 

-22-

 

    TENANT:
    KBS Builders, Inc.
       
    By: /s/ Daniel M. Koch
    Printed Name:  Daniel M. Koch
    Its: President

 

GUARANTY

 

For value received, and in consideration of and as an inducement to Landlord to enter into the foregoing Lease (the “Lease”) with Tenant, the undersigned, ATRM Holdings, Inc. (“Guarantor”), does hereby unconditionally guaranty to Landlord the complete and due performance and observation of each and every agreement, covenant, term, and condition of the Lease to be performed or observed by Tenant, including, without limitation, the payment of all Rent required under the Lease. The validity of this Guaranty and the obligations of the Guarantor hereunder shall not be terminated, affected, or impaired by reason of the granting by the Landlord of any indulgences to the Tenant. This Guaranty shall remain and continue in full force and effect with respect to any and all renewals, modifications, or extensions of the Lease, irrespective of whether Guarantor shall have received any notice of or consented to such renewal, modification, or extension. The liability of the Guarantor hereunder shall be primary, and in any right of action that shall accrue to the Landlord under the Lease or applicable law, the Landlord may proceed against Guarantor without having commenced any action against or having obtained any judgment against Tenant and/or may proceed against Guarantor and Tenant, jointly and severally. Guarantor hereby waives all guaranty and suretyship defenses. All of the terms and provisions of this Guaranty shall inure to the benefit of the successors and assigns of the Landlord and shall be binding upon the successors and assigns of Guarantor. Capitalized terms that are used, but not defined, in this Guaranty shall have the meaning ascribed thereto in the Lease.

 

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an instrument under seal as of the date of the Lease.

 

    GUARANTOR:
    ATRM Holdings, Inc.
       
    By: /s/ Daniel M. Koch
    Printed Name:  Daniel M. Koch
    Its: President and Chief Executive Officer

 

-23-

 

List of Exhibits

 

Exhibit A – Description of the Leased Premises

 

Exhibit A-1-List of Leased Personal Property

 

Exhibit B – Base Rent if Tenant does not give a timely Rent Commencement Extension Notice

 

Exhibit C – Base Rent if Tenant does give a timely Rent Commencement Extension Notice

 

-24-

 

EXHIBIT A

 

(Description of Leased Premises)

 

*

 

 

EXHIBIT A-1

 

(Personal Property)

 

*

 

 

EXHIBIT B

(Base Rent if Tenant does not give a timely Rent Commencement Extension Notice)

 

Months Annual Base Rent (Real Property) Annual Base Rent - (Leased Personal Property)

Total

Monthly Installment of Base Rent

Commencement Date

through

June 30, 2019

$0.00

$0.00

$0.00

July 1, 2019

through

March 31, 2020

$256,850.00

(Annual Rate)

$60,302.63

(Annual Rate)

$26,429.39

April 1, 2020

through

March 31, 2021

$261,987.00

$60,302.63

$26,857.47

April 1, 2021

through

March 31, 2022

$267,226.74

$60,302.63

$27,294.11

April 1, 2022

through

March 31, 2023

$272,571.27

$60,302.63

$27,739.49

April 1, 2023

through

March 31, 2024

$278,022.70

$60,302.63 

$28,193.78

April 1, 2024

through

March 31, 2025

$283,583.15

$60,302.63

$28,657.15

April 1, 2025

through

March 31, 2026

$289,254.81

$60,302.63

$29,129.79

April 1, 2026

through

March 31, 2027

$295,039.91

$60,302.63

$29,611.88

April 1, 2027

through

March 31, 2028

$300,940.71

$60,302.63

$30,103.61

April 1, 2028

through

March 31, 2029

$306,959.52

$60,302.63

$30,605.18

 

  

 

EXHIBIT C

(Base Rent if Tenant does give a timely Rent Commencement Extension Notice) 

 

Months Annual Base Rent (Real Property) Annual Base Rent - (Leased Personal Property)

Total

Monthly Installment of Base Rent 

Commencement Date

through

September 30, 2019

$0.00

$0.00

$0.00

October 1, 2019

through

March 31, 2020

$280,200.00

(Annual Rate)

$65,784.68

(Annual Rate)

$28,832.06

April 1, 2020

through

March 31, 2021

$285,804.00

$65,784.68

$29,299.06

April 1, 2021

through

March 31, 2022

$291,520.08

$65,784.68

$29,775.40

April 1, 2022

through

March 31, 2023

$297,350.48

$65,784.68

$30,261.26

April 1, 2023

through

March 31, 2024

$303,297.49

$65,784.68

$30,756.85

April 1, 2024

through

March 31, 2025

$309,363.44

$65,784.68

$31,262.34

April 1, 2025

through

March 31, 2026

$315,550.71

$65,784.68

$31,777.95

April 1, 2026

through

March 31, 2027

$321,861.72

$65,784.68

$32,303.87

April 1, 2027

through

March 31, 2028

$328,298.95

$65,784.68

$32,840.30

April 1, 2028

through

March 31, 2029

$334,864.93

$65,784.68

$33,387.47

 

 

Exhibit 10.6

 

Execution Version

 

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.

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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.

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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.

 

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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).

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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.

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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.

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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.

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(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).

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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.

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(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;

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(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.

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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.

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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 unt