EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT - REVOLVING LOANS
DATED AS OF JUNE 16, 2004
BETWEEN
BRIDGE HEALTHCARE FINANCE, LLC
AS LENDER,
AND
CRDENTIA CORP. ("CRDENTIA")
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.("▇▇▇▇▇")
NURSES NETWORK, INC.("NURSES NETWORK")
NEW AGE STAFFING, INC. ("NEW AGE")
PSR NURSES, LTD. ("PSR LTD.")
PSR NURSE RECRUITING, INC. ("PSR RECRUITING")
PSR NURSES HOLDINGS CORP. ("PSR HOLDING"),
AS BORROWER
TABLE OF CONTENTS
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1. DEFINITIONS...........................................................1
2. LOANS.................................................................3
(a) Revolving Loans..............................................3
(c) Notes........................................................5
4. INTEREST, FEES AND CHARGES............................................5
(a) Interest Rate................................................5
(b) Fees and Charges.............................................5
(c) Maximum Interest.............................................6
5. COLLATERAL............................................................7
(a) Grant of Security Interest to Lender.........................7
(b) Other Security...............................................7
(c) Possessory Collateral........................................8
(d) Electronic Chattel Paper.....................................8
(e) Letter-of-Credit Rights......................................8
(f) Third-Party Collateral.......................................8
(g) Deposit Account..............................................8
(h) Insurance Proceeds...........................................8
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN...............................................................9
7. POSSESSION OF COLLATERAL AND RELATED MATTERS..........................9
8. COLLECTIONS...........................................................9
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.........11
(a) Borrowing Base Reports......................................11
(b) Monthly Reports.............................................11
(c) Financial Statements........................................12
(d) Annual Projections..........................................12
(e) Explanation of Budgets and Projections......................12
(f) Invoices and Billing Statements.............................12
(g) Obligor Financial Statements and Tax Returns................12
(h) Other Information...........................................13
(i) Post-Closing Review.........................................13
(j) Public Reporting............................................13
TABLE OF CONTENTS
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10. TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE................13
11. REPRESENTATIONS AND WARRANTIES.......................................14
(a) Financial Statements and Other Information..................14
(b) Locations; Certain Collateral...............................14
(c) Loans by Borrower...........................................15
(d) Accounts....................................................15
(e) Liens.......................................................15
(f) Organization, Authority and No Conflict.....................15
(g) Litigation..................................................16
(h) Compliance with Laws and Maintenance of Permits.............16
(i) Affiliate Transactions......................................16
(j) Names and Trade Names.......................................16
(k) Equipment...................................................16
(l) Enforceability..............................................16
(m) Solvency....................................................16
(n) Indebtedness................................................17
(o) Margin Security and Use of Proceeds.........................17
(p) Parent, Subsidiaries and Affiliates.........................17
(q) No Defaults.................................................17
(r) Employee Matters............................................17
(s) Intellectual Property.......................................17
(t) Environmental Matters.......................................17
(u) ERISA Matters...............................................18
(v) Eligible Accounts...........................................18
(w) Reimbursement; .............................................20
(x) Compliance with Healthcare Regulations......................20
(y) Immigration Matters.........................................20
(z) Licenses, Permits, etc......................................20
(aa) Collective Enterprise.......................................21
TABLE OF CONTENTS
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12. AFFIRMATIVE COVENANTS................................................21
(a) Maintenance of Records......................................21
(b) Notices.....................................................21
(c) Compliance with Laws and Maintenance of Permits.............23
(d) Inspection and Audits.......................................23
(e) Insurance...................................................24
(f) Collateral..................................................25
(g) Use of Proceeds.............................................25
(h) Taxes.......................................................25
(i) Intellectual Property.......................................25
(j) Staffing Contracts..........................................26
(k) Billing and Collection System...............................26
13. NEGATIVE COVENANTS...................................................26
(a) Indebtedness................................................26
(b) Liens.......................................................26
(c) Mergers, Sales, Acquisitions, Subsidiaries and Other
Transactions Outside the Ordinary Course of Business........26
(d) Dividends and Distributions.................................28
(e) Investments; Loans..........................................28
(f) Fundamental Changes, Line of Business.......................28
(g) Equipment...................................................28
(h) Affiliate Transactions......................................29
(i) Settling of Accounts........................................29
(j) Restricted Payments.........................................29
14. FINANCIAL COVENANTS..................................................29
(a) Tangible Net Worth..........................................30
(c) Minimum EBITDA..............................................31
(d) Capital Expenditure Limitations.............................31
(e) Operating Lease Obligations.................................31
15. DEFAULT..............................................................31
(a) Payment.....................................................31
(b) Breach of This Agreement, the Other Agreements and the
Term Loan Agreement.........................................31
(c) Breach of Subordination Agreement...........................32
TABLE OF CONTENTS
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(d) Breaches of Other Obligations...............................32
(e) Breach of Representations and Warranties....................32
(f) Loss of Collateral..........................................32
(g) Levy, Seizure or Attachment.................................32
(h) Bankruptcy or Similar Proceedings...........................32
(i) Appointment of Receiver.....................................32
(j) Judgment....................................................33
(k) Default or Revocation of Guaranty...........................33
(l) Change of Ownership/Management..............................33
(m) Material Adverse Change.....................................33
(n) Governmental Authorizations.................................33
(o) Lockbox Account Instructions................................33
(p) Failure to Maintain Third-Party Payroll Tax Service
Provider....................................................34
16. REMEDIES UPON AN EVENT OF DEFAULT....................................34
17. CONDITIONS PRECEDENT.................................................34
18. JOINT AND SEVERAL LIABILITY..........................................36
19. RELEASES; INDEMNITIES................................................39
20. NOTICE...............................................................39
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION...............40
22. MODIFICATION AND BENEFIT OF AGREEMENT................................40
23. HEADINGS OF SUBDIVISIONS.............................................41
24. POWER OF ATTORNEY....................................................41
25. CONFIDENTIALITY......................................................41
26. BROKERAGE FEES.......................................................41
27. PUBLICITY............................................................41
28. LIMITATION OF ACTIONS................................................42
29. LIABILITY............................................................42
30. COUNTERPARTS.........................................................42
31. ELECTRONIC SUBMISSIONS...............................................43
32. WAIVER OF JURY TRIAL; OTHER WAIVERS..................................43
ANNEX 1 - DEFINITIONS
EXHIBIT A - BORROWING BASE CERTIFICATE
EXHIBIT B - COMPLIANCE CERTIFICATE
EXHIBIT C - CLOSING CHECKLIST
EXHIBIT D - INFORMATION CERTIFICATE
EXHIBIT E - NOTICE OF BORROWING
SCHEDULE 1 - PERMITTED LIENS
SCHEDULE 11(b) - BUSINESS AND COLLATERAL LOCATIONS
SCHEDULE 11(b) - CERTAIN COLLATERAL
SCHEDULE 11(g) - LITIGATION
SCHEDULE 11(i) - AFFILIATE TRANSACTIONS
SCHEDULE 11(j) - NAMES & TRADE NAMES
SCHEDULE 11(n) - INDEBTEDNESS
SCHEDULE 11(p) - PARENT, SUBSIDIARIES AND AFFILIATES
SCHEDULE 11(q) - DEFAULTS
SCHEDULE 11(t) - ENVIRONMENTAL MATTERS
SCHEDULE 11(z) - LICENSES AND PERMITS
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented
from time to time, this "AGREEMENT") made this 16th day of June, 2004 by and
between BRIDGE HEALTHCARE FINANCE, LLC ("LENDER"), and Crdentia Corp.
("Crdentia"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.("▇▇▇▇▇"), Nurses Network,
Inc.("Nurses Network"), New Age Staffing, Inc. ("New Age"), PSR Nurses, Ltd.
("PSR Ltd."), PSR Nurse Recruiting, Inc. ("PSR Recruiting"), PSR Nurses Holdings
Corp. ("PSR Holding") each, having its principal place of business at ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("BORROWER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower may, from time to time, request Loans from Lender,
and the parties wish to provide for the terms and conditions upon which such
Loans or other financial accommodations, if made by Lender, shall be made;
WHEREAS, Borrower has, as of the date hereof, entered into that certain
Loan and Security Agreement - Term Loan with Bridge Opportunity Finance, LLC,
which Term Loan shall be secured by a second priority security interest in the
Collateral;
NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) hereafter made to Borrower by Lender, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS.
(a) DEFINED TERMS. For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth in
ANNEX I attached hereto and made a part hereof.
(b) ACCOUNTING TERMS. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with GAAP. Calculations and determinations
of financial and accounting terms used and not otherwise specifically defined
hereunder and the preparation of financial statements to be furnished to the
Lender pursuant hereto shall be made and prepared, both as to classification of
items and as to amount, in accordance with GAAP as used in the preparation of
the financial statements of the Borrower on the date of this Agreement. If any
changes in accounting principles or practices from those used in the preparation
of the financial statements are hereafter occasioned by the promulgation of
rules, regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or any successor thereto or agencies with similar functions), which
results in a material change in the method of accounting in the financial
statements required to be furnished to the Lender hereunder or in the
calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of the
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Borrower will be the same after such changes as they were before such changes;
and, if the parties fail to agree on the amendment of such provisions, the
Borrower will furnish financial statements in accordance with such changes but
shall provide calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes.
(c) TERMS DEFINED IN UCC. The terms "ACCOUNT", "ACCOUNT
DEBTOR", "CERTIFICATED SECURITY", "CHATTEL PAPER", "COMMERCIAL TORT CLAIM",
"DEPOSIT ACCOUNT", "DOCUMENT", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT",
"FINANCIAL ASSET", "FIXTURE", "GENERAL INTANGIBLE", "GOODS",
"HEALTH-CARE-INSURANCE RECEIVABLES", "INSTRUMENT", "INVENTORY", "INVESTMENT
PROPERTY", "LETTER-OF-CREDIT RIGHT", "PAYMENT INTANGIBLE", "PROCEEDS",
"SECURITY", "SECURITIES ACCOUNT", "SECURITY ENTITLEMENT", "SOFTWARE",
"SUPPORTING OBLIGATION", "TANGIBLE CHATTEL PAPER" and "UNCERTIFICATED SECURITY"
shall have the respective meanings assigned to such terms in the UCC. All other
capitalized words and phrases used herein and not otherwise specifically defined
shall have the respective meanings assigned to such terms in the UCC, to the
extent the same are used or defined therein.
(d) OTHER DEFINITIONAL PROVISIONS; CONSTRUCTION. Whenever the
context so requires, the neuter gender includes the masculine and feminine, the
single number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
references to Article, Section, Subsection, Annex, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified. The word
"including" shall mean "including, without limitation". An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in accordance with SECTION 32(E) hereof. References in this Agreement to any
party shall include such party's successors and permitted assigns. References to
any "Section" shall be a reference to such Section of this Agreement unless
otherwise stated. To the extent any of the provisions of the Other Agreements
are inconsistent with the terms of this Loan Agreement, the provisions of this
Loan Agreement shall govern. This Agreement and the Other Agreements are the
result of negotiations among and have been reviewed by counsel to the Lender,
Borrower and any other parties thereto, are product of all parties and,
accordingly, they shall not be construed against the Lender.
(e) REFERENCES TO AGREEMENTS, ENACTMENTS, ETC. Unless
otherwise expressly provided herein, (i) references to agreements (including
this Agreement) and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments, restatements, supplements and other modifications are not
prohibited by the terms of this Agreement or any Other Agreement, and (ii)
references to any statute or regulation shall be construed as including all
statutory and regulatory provisions amending, replacing, supplementing or
interpreting such statute or regulation.
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2. LOANS.
(a) Revolving Loans. Subject to the terms and conditions of
this Agreement and the Other Agreements, during the Term, Lender shall, absent a
Default or an Event of Default, make revolving loans and advances (the
"REVOLVING LOANS") in an amount up to the sum of the following sublimits (the
"REVOLVING BORROWING BASE AMOUNT"):
(i) Up to eighty five percent (85%), or such lesser
percentage as determined by Lender in its sole discretion
exercised in good faith, of Borrowers' Eligible Accounts (as
such Borrowers exist as of the Closing Date); provided that
such advance rate shall be reduced by one (1) percentage point
for each whole or partial percentage point by which Dilution
(as determined by Lender in good faith based on the results of
the most recent twelve (12) month period for which Lender has
conducted a field audit of Borrower) exceeds five percent
(5%); PLUS
(ii) Accounts that are unbilled and aged less than
seven (7) days from the date that the applicable Staffing
Services were rendered or delivered not to exceed an aggregate
amount of $250,000 at any time, provided that Lender
determines that satisfactory documentation exists to generate
valid invoices for such unbilled Eligible Accounts; MINUS
(iii) such reserves against Eligible Accounts as
Lender elects, in its good faith credit judgment, determined
in good faith, to establish, increase, or decrease from time
to time;
provided that the Revolving Borrowing Base Amount shall in no event exceed
Fifteen Million Dollars ($15,000,000) (the "MAXIMUM REVOLVING LOAN LIMIT")
except as such amount may be increased or decreased by Lender, in its sole
discretion.
The aggregate unpaid principal balance of the Revolving Loans shall not at any
time exceed the lesser of the (x) Revolving Borrowing Base Amount and (y) the
Maximum Revolving Loan Limit. If at any time the amount of outstanding Revolving
Loans exceeds either the Revolving Borrowing Base Amount or the Maximum
Revolving Loan Limit, or any portion of the Revolving Loans exceeds any
applicable sublimit within the Revolving Borrowing Base Amount, Borrowers shall
immediately, and without the necessity of demand by Lender, pay to Lender such
amount as may be necessary to eliminate such excess and Lender shall apply such
payment to the Obligations in such order as Lender shall determine in its sole
discretion.
Subject to the terms and conditions of this Agreement,
Revolving Loans shall be made against the Revolving Borrowing Base Amount. The
Revolving Borrowing Base Amount shall be determined by Lender (including the
eligibility of Accounts) based on the most recent Borrowing Base Certificate
delivered to Lender in accordance with this Agreement and such other information
as may be available to Lender. Without limiting any other rights and remedies of
Lender hereunder or under the other Loan Documents, the Revolving Loans shall be
subject to Lender's continuing right to withhold from the Revolving Borrowing
Base Amount reserves, and to increase and decrease such reserves from time to
time, if and to the extent that in Lender's good faith credit judgment such
reserves are necessary, including to protect Lender's interest in the Collateral
or to protect Lender against possible non-payment of Accounts for any reason by
Account Debtors or possible diminution of the value of any Collateral or
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possible non-payment of any of the Obligations or for any taxes or customs
duties or in respect of any state of facts which may constitute an Event of
Default. Lender may, at its option, implement reserves by designating as
ineligible a sufficient amount of Accounts which would otherwise be Eligible
Accounts, so as to reduce the Revolving Borrowing Base Amount by the amount of
the intended reserves. Lender, in its discretion, may further adjust the
Revolving Borrowing Base Amount by applying percentages (known as "liquidity
factors") to Eligible Accounts by payor class based upon Borrower's actual
recent collection history for each such payor class. Such liquidity factors may
be adjusted by Lender from time to time as warranted by Lender's underwriting
practices and procedures and using its discretion.
Borrower hereby authorizes Lender, in its sole discretion, to
charge any of Borrower's accounts or advance Revolving Loans to make any
payments of principal, interest, fees, costs or expenses required to be made
under this Agreement or the Other Agreements.
A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: Borrowing Agent may give Lender
same-day notice, no later than 11:00 a.m. Central time on such day, of its
request for a Revolving Loan by submitting a Notice of Borrowing, in which
notice Borrowing Agent shall specify the amount of the proposed borrowing and
the proposed borrowing date; provided, however, that no such request may be made
at a time when there exists an Event of Default or an event which, with the
passage of time or giving of notice, will become an Event of Default. In the
event that Borrower maintains a controlled disbursement account with Lender,
each check presented for payment against such controlled disbursement account
and any other charge or request for payment against such controlled disbursement
account shall constitute a request for a Revolving Loan. Borrowing Agent's
Notice of Borrowing shall be accompanied with a certificate, on a form
designated by Lender and in substance satisfactory to Lender, certifying the
amount of the Borrowing Base and providing such backup information as Lender
shall deem necessary. Lender may from time to time change the form of such
Borrowing Base Certificate and/or Notice of Borrowing and shall at all times
have the right to request a separate Borrowing Base Certificate from each entity
constituting the Borrower. As an accommodation to Borrower, Lender may permit
electronic transmittal of instructions, authorizations, agreements or reports to
Lender by Borrower. Unless Borrower specifically directs Lender in writing not
to accept or act upon telephonic or electronic communications from Borrower,
Lender shall have no liability to Borrower for any loss or damage suffered by
Borrower as a result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by Borrower, and Lender shall have no duty to verify the origin
of any such communication or the authority of the Person sending it.
Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Loan requested by Borrowing Agent, or deemed to be
requested by Borrowing Agent, as follows: the proceeds of each Revolving Loan
requested under SECTION 2(a) shall be disbursed by Lender in lawful money of the
United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrowing Agent, and in the case of each subsequent borrowing, by
wire transfer or Automated Clearing House (ACH) transfer to such bank account as
may be agreed upon by Borrowing Agent and Lender from time to time, or elsewhere
if pursuant to a written direction from Borrowing Agent.
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(b) The Revolving Loans and all other Obligations shall be
repaid on the last day of the Term.
(c) Notes. The Loans shall, in Lender's sole discretion, be
evidenced by one or more promissory notes in form and substance satisfactory to
Lender. However, if such Loans are not so evidenced, such Loans may be evidenced
solely by entries upon the books and records maintained by Lender.
3. [LEFT BLANK]
4. INTEREST, FEES AND CHARGES.
(a) Interest Rate.
Each Revolving Loan shall bear interest at the rate of three
percent (3.0%) per annum in excess of the Prime Rate in effect from time to
time, which rate shall not be less than nine and one-half percent (9.5%), all
such interest to be payable on the first Business Day of each month in arrears.
Said rate of interest shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the effective date of each
such change in the Prime Rate. Upon the occurrence of an Event of Default and
during the continuance thereof, each Loan shall bear interest at the rate of
four percent (4%) per annum in excess of the interest rate otherwise payable
thereon, which interest shall be payable on demand. All interest shall be
calculated on the basis of a 360-day year.
(b) Fees and Charges.
(i) CLOSING FEE: Borrower shall pay to Lender a
closing fee of One Hundred Fifty Thousand Dollars ($150,000),
which fee shall be fully earned on the Closing Date and
payable as follows: (x) $50,000 on the Closing Date, and (y)
$10,000 on Friday of each week after the Closing Date
beginning on June 25, 2004 until the remaining $100,000
balance due after the Closing Date has been paid in full or
until the consummation of the first Permitted Acquisition upon
which date any remaining balance shall be paid.
(ii) UNUSED LINE FEE: Borrower shall pay to Lender an
unused line fee of one-half percent (0.50%) per annum of the
difference between the Maximum Revolving Loan Limit and the
average daily balance of the Revolving Loans for each month,
which fee shall be fully earned by Lender and payable monthly
in arrears on the first Business Day of each month. Said fee
shall be calculated on the basis of a 360-day year.
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(iii) COLLATERAL MONITORING FEE: On the first
Business Day of each calendar month following the Closing
Date, Borrower shall pay Lender a monthly collateral
monitoring fee of Four Thousand and No/100 Dollars ($4,000)
with respect to the Revolving Loans (pro rated for the first
month, if it is a partial month), which fee shall be deemed
earned at the beginning of each month.
(iv) COSTS AND EXPENSES: Borrower shall reimburse
Lender for all reasonable costs and expenses, including,
without limitation, legal expenses and reasonable attorneys'
fees (whether for internal or outside counsel), incurred by
Lender in connection with the (i) documentation and
consummation of this transaction and any other transactions
between Borrower and Lender, including, without limitation,
Uniform Commercial Code and other public record searches and
filings, overnight courier or other express or messenger
delivery, appraisal costs and surveys (ii) collection,
protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Obligations; and (iv)
administration and enforcement of any of Lender's rights under
this Agreement or any Other Agreement. Borrower shall also pay
all normal service charges with respect to all accounts
maintained by Borrower with Lender and any additional services
requested by Borrower from Lender. All such costs, expenses
and charges shall, if owed to Lender, be reimbursed by Lender
and, in such event or in the event such costs and expenses are
owed to Lender, shall constitute Obligations hereunder, shall
be payable by Borrower to Lender on demand and, until paid,
shall bear interest at the highest rate then applicable to
Loans hereunder.
(v) CAPITAL ADEQUACY CHARGE. If Lender shall have
determined that the adoption of any law, rule or regulation
regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by Lender
with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank
or governmental authority enacted after the date hereof, does
or shall have the effect of reducing the rate of return on
such party's capital as a consequence of its obligations
hereunder to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking
into consideration Lender's policies with respect to capital
adequacy) by a material amount, then, from time to time after
submission by Lender to Borrower of a written demand therefor
("CAPITAL ADEQUACY DEMAND") together with the certificate
described below, Borrower shall pay to Lender such additional
amount or amounts ("CAPITAL ADEQUACY CHARGE") as will
compensate Lender for such reduction, such Capital Adequacy
Demand to be made with reasonable promptness following such
determination. A certificate of Lender claiming entitlement to
payment as set forth above shall be deemed presumptively
correct in the absence of manifest error. Such certificate
shall set forth the nature of the occurrence giving rise to
such reduction, the amount of the Capital Adequacy Charge to
be paid to Lender, and the method by which such amount was
determined. In determining such amount, Lender may use any
reasonable averaging and attribution method, applied on a
non-discriminatory basis.
(c) Maximum Interest. It is the intent of the parties that the
rate of interest and other charges to Borrower under this Agreement and the
Other Agreements shall be lawful; therefore, if for any reason the interest or
other charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Lender may
lawfully charge Borrower, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to Borrower.
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5. COLLATERAL.
(a) GRANT OF SECURITY INTEREST TO LENDER. As security for the
payment of all Loans now or in the future made by Lender to Borrower hereunder
and for the payment or other satisfaction of all other Obligations, Borrower
hereby assigns to Lender and grants to Lender a first priority security interest
(subject only to Liens of BOF and other Permitted Liens) in the following
property of Borrower, whether now or hereafter owned, existing, acquired or
arising and wherever now or hereafter located: (a) all Accounts (whether or not
Eligible Accounts) and all Goods whose sale, lease or other disposition by
Borrower has given rise to Accounts and have been returned to, or repossessed or
stopped in transit by, Borrower; (b) all Chattel Paper, Instruments, Documents
and General Intangibles (including, without limitation, all Intellectual
Property, licenses, software, franchises, tax refund claims, claims against
carriers and shippers, guarantee claims, contract rights, Payment Intangibles,
security interests, security deposits and rights to indemnification); (c) all
Inventory; (d) all Goods (other than Inventory), including, without limitation,
Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all Deposit
Accounts, bank accounts, deposits and cash; (g) all Letter-of-Credit Rights; (h)
Commercial Tort Claims listed on SCHEDULE 11(B) hereto from time to time; (i)
any other property of Borrower now or hereafter in the possession, custody or
control of Lender or any agent or any parent, affiliate or subsidiary of Lender
or any participant with Lender in the Loans, for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise);
and (j) all additions and accessions to, substitutions for, and replacements,
products and Proceeds of the foregoing property, including, without limitation,
proceeds of all insurance policies insuring the foregoing property, and all of
Borrower's books and records relating to any of the foregoing and to Borrower's
business. The foregoing notwithstanding, the Collateral shall not be deemed to
include any right, title, interest, claim or demand of Borrower in and to any
agreement, document, license or instrument which relates to the foregoing
Collateral to the extent such agreement, document, license or instrument is not
assignable or capable of being encumbered as a matter of law or under the terms
of the agreement, document or instrument applicable thereto or such grant would
result in a breach of the terms of such agreement, document, license, or
instrument (but, in each case, solely to the extent that any such restriction
shall be enforceable under applicable law) without the consent of the applicable
party thereto, and, in each case, only to the extent that any such term would
not be rendered ineffective pursuant to Section 9406, 9407, 9408 or 9409 of the
Uniform Commercial Code of any relevant jurisdiction.
(b) OTHER SECURITY. Lender, in its sole discretion, without
waiving or releasing any obligation, liability or duty of Borrower under this
Agreement or the Other Agreements or any Event of Default, may at any time or
times hereafter, but shall not be obligated to, pay, acquire or accept an
assignment of any Lien asserted by any Person in, upon or against the
Collateral, provided, that Lender may take such actions with respect to
Permitted Liens only after the occurrence and during the continuance of an Event
of Default. All sums paid by Lender in respect thereof and all costs, fees and
expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall constitute
Obligations payable by Borrower to Lender on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
7
(c) POSSESSORY COLLATERAL. Immediately upon Borrower's receipt
of any portion of the Collateral evidenced by an agreement, Instrument or
Document, including, without limitation, any Tangible Chattel Paper and any
Investment Property consisting of Certificated Securities, Borrower shall
deliver the original thereof to Lender together with an appropriate endorsement
or other specific evidence of assignment thereof to Lender (in form and
substance acceptable to Lender). If an endorsement or assignment of any such
items shall not be made for any reason, Lender is hereby irrevocably authorized,
as Borrower's attorney and agent-in-fact, to endorse or assign the same on
Borrower's behalf.
(d) ELECTRONIC CHATTEL PAPER. To the extent that Borrower
obtains or maintains any Electronic Chattel Paper, Borrower shall create, store
and assign the record or records comprising the Electronic Chattel Paper in such
a manner that (i) a single authoritative copy of the record or records exists
which is unique, identifiable and, except as otherwise provided in clauses (iv),
(v) and (vi) below, unalterable, (ii) the authoritative copy identifies Lender
as the assignee of the record or records, (iii) the authoritative copy is
communicated to and maintained by the Lender or its designated custodian, (iv)
copies or revisions that add or change an identified assignee of the
authoritative copy can only be made with the participation of Lender, (v) each
copy of the authoritative copy and any copy of a copy is readily identifiable as
a copy that is not the authoritative copy and (vi) any revision of the
authoritative copy is readily identifiable as an authorized or unauthorized
revision.
(e) LETTER-OF-CREDIT RIGHTS. If Borrower at any time is a
beneficiary under a letter of credit now or hereafter issued in favor of
Borrower, at the request and option of Lender, Borrower shall, pursuant to an
agreement in form and substance satisfactory to Lender, either (i) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to Lender of the proceeds of any drawing under the letter of credit,
or (ii) arrange for Lender to become the transferee beneficiary of the letter of
credit, with Lender agreeing, in each case, that the proceeds of any drawing
under the letter to credit are to be applied as provided in this Agreement.
(f) THIRD-PARTY COLLATERAL. If Borrower shall at any time hold
or acquire an interest in Collateral in the possession of a third party (other
than Certificated Securities and Goods covered by a Document), Borrower shall
promptly obtain an acknowledgment from the third party that it is holding such
Collateral for the benefit of the Lender.
(g) DEPOSIT ACCOUNT. Borrower shall deliver to Lender, with
respect to each Deposit Account maintained by Borrower now or hereafter (other
than with Lender) and that is permitted hereby, upon obtaining an interest in
such Deposit Account, a deposit account control agreement in form and substance
satisfactory to Lender, executed by the financial institution at which such
account is maintained, and shall take such other actions as Lender may request
to ensure that Lender's security interest in such account is perfected by
control as such term is used in UCC Section 9-104.
(h) INSURANCE PROCEEDS. The net proceeds of any casualty
insurance insuring the Collateral, after deducting all costs and expenses
(including attorneys' fees) of collection, shall be applied, at Lender's option,
either toward replacing or restoring the Collateral, in a manner and on terms
satisfactory to Lender, or, at Lender's discretion after the occurrence and
during the continuance of an Event of Default, towards payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be applied
in such manner as Lender may elect. In no event shall such application relieve
Borrower from payment in full of all installments of principal and interest
which thereafter become due in the order of maturity thereof.
8
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.
Borrower shall, at Lender's request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements, documents
and other agreements and instruments (and pay the cost of filing or recording
the same in all public offices deemed necessary or desirable by Lender) and do
such other acts and things or cause third parties to do such other acts and
things as Lender may deem necessary or desirable in its sole discretion in order
to establish and maintain a valid, attached and perfected security interest in
the Collateral in favor of Lender (free and clear of all other Liens, except
Permitted Liens) to secure payment of the Obligations, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute and
file such financing statements, documents and other agreements and instruments
and do such other acts and things as may be necessary to preserve and perfect
Lender's security interest in the Collateral. Borrower further agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement shall be sufficient as a financing statement. Borrower
further ratifies and confirms the prior filing by Lender of any and all
financing statements which identify the Borrower as debtor, Lender as secured
party and any or all Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until otherwise notified by Lender following the occurrence of an Event
of Default, Borrower shall have the right, except as otherwise provided in this
Agreement, in the ordinary course of Borrower's business, to (a) sell, lease or
furnish under contracts of service any of Borrower's assets in the ordinary
course of business; (b) use and consume any raw materials, work in process or
other materials normally held by Borrower for such purpose; (c) dispose of
obsolete or unuseful Equipment or other property or assets so long as all of the
proceeds thereof are used for the replacement or substitution of such Equipment
or other property or assets, or, if not so replaced or substituted within ninety
(90) days, paid to Lender for application to the Obligations (except for such
proceeds which are required to be delivered to the holder of a Permitted Lien
which is prior in right of payment); provided, however, that a sale in the
ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete, of a debt owed by Borrower, other than a debt
secured by a Permitted Lien; (d) transfer assets to any other Borrower or
Subsidiary which is a Borrower; (e) lease or sublease property; (f) sell or
dispose of assets for its fair market value in an amount not to exceed $50,000
in the aggregate in any fiscal year; and (g) sell or dispose of other assets
with a book value of less than $50,000 in any fiscal year.
8. COLLECTIONS.
9
(a) Borrower shall establish and maintain a lockbox (the
"LOCKBOX") with a United States depository institution designated from time to
time by Lender (the "LOCKBOX BANK"), subject to the provisions of this Agreement
for receivables from Account Debtors. Borrower shall execute with the Lockbox
Bank a lockbox agreement for the Account Debtor Collection Lockbox Account in
form and substance acceptable to Lender, and such other agreements related to
such lockbox agreement as Lender may require. Borrower shall ensure that all
collections of Accounts on which Account Debtors are obligated are paid directly
into the Lockbox for deposit into the Account Debtor Collection Lockbox Account,
and that all funds deposited into the Account Debtor Collection Lockbox Account
are immediately transferred into a depository account owned by the Lender (the
"CONCENTRATION ACCOUNT").
(b) Notwithstanding anything in any lockbox agreement to the
contrary, Borrower agrees that it shall be liable for any fees and charges in
effect from time to time and charged by the Lockbox Bank in connection with the
Lockboxes and Lockbox Accounts, and that Lender shall have no liability
therefor. Borrower further acknowledges and agrees that, to the extent such fees
and charges are not paid by Borrower directly but are satisfied using
collections in the Lockbox Accounts, such fees and charges shall be deemed to be
Revolving Credit Loans made by Lender hereunder and, to the extent that the
payment of such fees or charges by Borrower as provided herein results in any
overadvance under this Agreement, Borrower agrees to immediately (upon notice)
repay to Lender the amount of such overadvance. Borrower agrees to indemnify and
hold Lender harmless from any and all liabilities, claims, losses and demands
whatsoever, including reasonable attorneys' fees and expenses, arising from or
relating to actions of Lender or the Lockbox Bank pursuant to this Section 2.3
or any lockbox agreement, other than if such liability, claim, loss or demand
arises due to the gross negligence or willful misconduct of Lender or the
Lockbox Bank, as determined by a court of competent jurisdiction.
(c) Borrower agrees that all payments made to the
Concentration Account or otherwise received by Lender, whether in respect of the
Accounts or as Proceeds of other Collateral or otherwise (except for proceeds of
Collateral which are required to be delivered to the holder of a Permitted Lien
which is prior in right of payment and insurance proceeds applied pursuant to
Section 5(h)), will be applied on account of the Obligations in accordance with
the terms of this Agreement.
(d) Subject to all applicable law, Lender may, at any time and
from time to time after the occurrence and during the continuance of an Event of
Default, whether before or after notification to any Account Debtor and whether
before or after the maturity of any of the Obligations, (i) enforce collection
of any of Borrower's Accounts or other amounts owed to Borrower by suit or
otherwise; (ii) exercise all of Borrower's rights and remedies with respect to
proceedings brought to collect any Accounts or other amounts owed to Borrower;
(iii) surrender, release or exchange all or any part of any Accounts or other
amounts owed to Borrower, or compromise or extend or renew for any period
(whether or not longer than the original period) any Indebtedness thereunder;
(iv) sell or assign any Account of Borrower or other amount owed to Borrower
upon such terms, for such amount and at such time or times as Lender deems
advisable; (v) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or other similar document against any Account Debtor or other Person
obligated to Borrower; and (vi) do all other acts and things which are
necessary, in Lender's sole discretion, to fulfill Borrower's obligations under
10
this Agreement and the Other Agreements and to allow Lender to collect the
Accounts or other amounts owed to Borrower. In addition to any other provision
hereof, Lender may at any time, after the occurrence and during the continuance
of an Event of Default, at Borrower's expense, notify Account Debtors to make
payment directly to Lender of any amounts due or to become due thereunder (and
once such notice has been given to an Account Debtor, Borrower shall not give
any contrary instructions to such Account Debtor during the continuance of an
Event of Default without Lender's prior written consent).
(e) For purposes of calculating interest and fees, Lender
shall, within three (3) Business Days after receipt by Lender at its office in
Chicago, Illinois of (i) checks and (ii) cash or other immediately available
funds from collections of items of payment and Proceeds of any Collateral, apply
the whole or any part of such collections or Proceeds against the Obligations in
such order as Lender shall determine in its sole discretion. For purposes of
determining the amount of Loans available for borrowing purposes, checks and
cash or other immediately available funds from collections of items of payment
and Proceeds of any Collateral shall be applied in whole or in part against the
Obligations, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
(f) On a monthly basis, Lender shall deliver to Borrower an
account statement showing all Loans, charges and payments which shall be deemed
final, binding and conclusive upon Borrower unless Borrower notifies Lender in
writing, specifying any error therein, within thirty (30) days of the date such
account statement is sent to Borrower, and any such notice shall only constitute
an objection to the items specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) BORROWING BASE REPORTS. Borrower shall deliver to Lender
an executed Borrowing Base Certificate in the form of EXHIBIT A at least once
each week, and otherwise, from time to time, to the extent requested by Lender,
and, in any event, in connection with any Revolving Loan request of Borrower,
which Borrowing Base Certificate shall be accompanied by copies of Borrower's
sales journal, cash receipts journal and credit memo journal, which journal
shall report contractual allowances made by Borrower, for the relevant period.
Such Borrowing Base Certificate shall reflect the activity of Borrower with
respect to Accounts for the immediately preceding week, and shall be in a form
and with such specificity as is satisfactory to Lender and shall contain such
additional information concerning Accounts and other Collateral as may be
requested by Lender, including, without limitation, but only if specifically
requested by Lender, copies of all invoices prepared in connection with such
Accounts, and evidence of the payment of state and federal payroll taxes.
(b) MONTHLY REPORTS. Borrower shall deliver to Lender, in
addition to any other reports, as soon as practicable and in any event: (i)
within fifteen (15) days after the end of each month, (A) a detailed trial
balance of Borrower's Accounts aged by Account Debtor or payor per date of
invoice, in form and substance reasonably satisfactory to Lender, including,
without limitation, the names and addresses of all Account Debtors of Borrower,
and (B) a summary and detail of accounts payable (such Accounts and accounts
11
payable divided into such time intervals as Lender may require in its sole
discretion), including a listing of any held checks; and (ii) within fifteen
(15) days after the end of each month, (x) completed Account Debtor
reconciliation form, in a format provided by Lender, and (y) a text file
containing a list of Borrower's Accounts aged by payor per date of service,
including, without limitation, the names and addresses of all Account Debtors of
Borrower.
(c) FINANCIAL STATEMENTS. Borrower shall deliver to Lender the
following financial information, all of which shall be prepared in accordance
with GAAP consistently applied, and shall be accompanied by a certificate in the
form of EXHIBIT B hereto, which compliance certificate shall include a
calculation of all financial covenants contained in this Agreement, including
the financial tests set forth in Section 13(j)(iii): (i) no later than fifteen
(15) days after each calendar month, copies of internally prepared financial
statements, including, without limitation, balance sheets and statements of
income, retained earnings and cash flow of Borrower, certified by the Chief
Financial Officer of Borrower; (ii) no later than forty-five (45) days after the
end of each of the first three quarters of Borrower's Fiscal Year, copies of
internally prepared financial statements, including, without limitation, balance
sheets, statements of income, retained earnings, cash flows and reconciliation
of surplus, certified by the Chief Financial Officer of Borrower; and (iii) no
later than ninety (90) days after the end of each of Borrower's Fiscal Years,
audited annual consolidated and consolidating financial statements with an
unqualified opinion by independent certified public accountants selected by
Borrower and reasonably satisfactory to Lender. The report of such accounts
shall be accompanied by copies of any management letters sent to the Borrower by
such accountants.
(d) ANNUAL PROJECTIONS. As soon as practicable and in any
event not less than thirty (30) days prior to the beginning of each Fiscal Year,
Borrower shall deliver to Lender projected balance sheets, statements of income
and cash flow for Borrower, for each of the twelve (12) months during such
Fiscal Year, which shall include the assumptions used therein, together with
appropriate supporting details as reasonably requested by Lender.
(e) EXPLANATION OF BUDGETS AND PROJECTIONS. In conjunction
with the delivery of the annual presentation of projections or budgets referred
to in SUBSECTION 9(D) above, Borrower shall deliver a letter signed by the
President or a Vice President of Borrower and by the Treasurer or Chief
Financial Officer of Borrower, describing, comparing and analyzing, in detail,
all changes and developments between the anticipated financial results included
in such projections or budgets and the historical financial statements of
Borrower.
(f) INVOICES AND BILLING STATEMENTS. Promptly following
request therefor by Lender, Borrower shall provide copies of sales journals,
cash receipt journals, and deposit slips, copies of service invoices, customer
statements and credit memoranda issued, remittance advices and reports, evidence
of billing and copies of shipping and delivery documents, each as applicable to
Borrower.
(g) OBLIGOR FINANCIAL STATEMENTS AND TAX RETURNS. Borrower
shall cause each Obligor to deliver to Lender such Obligor's annual financial
statement (in form acceptable to Lender) and a copy of such Obligor's federal
income tax return with respect to the corresponding year, in each case on the
date when such tax return is due or, if earlier, on the date when available.
12
(h) OTHER INFORMATION. Promptly following request therefor by
Lender, such other business or financial data, reports, appraisals and
projections as Lender may reasonably request. This may include, without
limitation, a monthly certificate from the President and Chief Financial Officer
of Borrower showing Borrower's compliance with each of the financial covenants
set forth in this Agreement, and stating whether any Event of Default has
occurred or event that, with giving of notice or the passage of time, or both,
would constitute an Event of Default, and if so, the steps being taken to
prevent or cure such Event of Default.
(i) POST-CLOSING REVIEW. Within thirty (30) after the Closing
Date or any Permitted Acquisition, Lender shall conduct (or a firm, consultant,
advisor or other third party hired by the Lender), at Borrower's cost, a
post-closing audit and review, which post-closing review shall include (whether
conducted after the Closing Date or after a Permitted Acquisition), without
limitation, (i) a review of the books, records and accounting systems of
Borrower, (ii) a review and final verification of all add-backs used in
determining the final pro forma financial statements of Borrower, and (iii) a
review of healthcare regulatory compliance matters ("POST-CLOSING REVIEW").
(j) PUBLIC REPORTING. Promptly upon the filing thereof, each
Borrower shall deliver to Lender copies of all registration statements and
annual, quarterly, monthly or other regular reports which such Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission, as well
as promptly providing to Lender copies of any reports and proxy statements
delivered to its shareholders.
10. TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE.
(a) This Agreement shall be in effect for a period of three
(3) years from the date hereof until June 16, 2007 (the "TERM").
(b) If this Agreement expires, then (i) Lender shall not make
any additional Loans on or after the date identified as the date on which the
Obligations are to be repaid; and (ii) this Agreement shall terminate on the
date thereafter that the Obligations are paid in full. At such time as Borrower
has repaid all of the Obligations and this Agreement has terminated, Borrower
shall deliver to Lender an indemnification of Lender, in form and substance
satisfactory to Lender, for checks which Lender has credited to Borrower's
account, but which subsequently are dishonored for any reason or for automatic
clearinghouse or wire transfers not yet posted to Borrower's account.
(c) Borrower may terminate this Agreement at any time but only
upon sixty (60) days prior written notice and prepayment of all Obligations.
(d) Any prepayment and termination of the Revolving Loan by
Borrower shall also be accompanied by a prepayment fee, equal to the Make Whole
Amount. The following definitions shall apply:
(i) "MAKE WHOLE AMOUNT" means the amount determined
by discounting the Remaining Payment Amount to the date of the
prepayment of the Revolving Loan, at a discount factor equal
to the Loan Yield.
13
(ii) "REMAINING PAYMENT AMOUNT" means the sum of
amount of the average outstanding balance of the Revolving
Loans during the period from the date of the initial Loan
advance hereunder through the date of prepayment.
(iii) "LOAN YIELD" means the percentage yield earned
by Lender during the period from the initial Loan advance
hereunder through the date of prepayment.
(e) Notwithstanding the foregoing, Borrower may prepay all of
the Obligations without payment of a prepayment fee, upon written notice to
Lender, if, (i) on or before the first anniversary of the Closing Date (which
notice must be given within forty-five (45) days after such anniversary date),
Lender has not amended this Agreement such that the effective annual rate of
interest ("all-in"; taking into account Loan-related fees paid to Lender)
together with the Collateral monitoring fee and unused line fee with respect to
Revolving Loans, is reduced to a rate equal to the greater of (x) the Prime Rate
(subject to fluctuations) PLUS three percent (3%) and (y) nine and one-half
percent (9.5%), or (ii) at any time during the Term, and so long as no Default
or Event of Default has occurred, (A) Lender reduces the advance rate for
Eligible Accounts (as set forth in Section 2(a)(i) hereto) to an advance rate of
less than eighty-five percent (85%) for a period in excess of 30 days, or (B)
Lender reduces the Maximum Revolving Loan Limit to an amount less than
$15,000,000 for a period in excess of 30 days, or (C) BOF fails to fund a Term
Loan within 12 months of the Closing Date (clauses (i) and (ii) above,
collectively, the "PREPAYMENT FEE EXCEPTIONS").
11. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this SECTION 11 or
elsewhere) shall be true at the time of Borrower's execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Obligations and
termination of this Agreement, and shall be remade by Borrower at the time each
Loan is made pursuant to this Agreement, provided, that representations and
warranties made as of a particular date shall be true and correct as of such
date.
(a) FINANCIAL STATEMENTS AND OTHER INFORMation. The financial
statements and other information delivered or to be delivered by Crdentia to
Lender at or prior to the date of this Agreement fairly present in all material
respects the financial condition of Borrowers, and there has been no material
adverse change in the financial condition, the operations or any other status of
Borrowers, taken as a whole, since the date of the financial statements
delivered to Lender most recently prior to the date of this Agreement. All
written information now or heretofore furnished by Borrower to Lender is true
and correct in all material respects as of the date with respect to which such
information was furnished, other than budgets and projections, which represent
Borrowers' good faith estimate of the matters contained therein.
(b) LOCATIONS; CERTAIN COLLATERAL. The office where Borrower
keeps its books, records and accounts (or copies thereof) concerning the
Collateral, Borrower's principal place of business and all of Borrower's other
places of business, locations of Collateral and post office boxes and locations
of bank accounts are as set forth in SCHEDULE 11(b) and at other locations
within the continental United States of which Lender has been advised by
Borrower in accordance with SUBSECTION 12(B)(I). The Collateral, including,
14
without limitation, the Equipment (except any part thereof which Borrower shall
have advised Lender in writing consists of Collateral normally used in more than
one state) is kept, or, in the case of vehicles, based, only at the addresses
set forth on SCHEDULE 11(b), and at other locations within the continental
United States of which Lender has been advised by Borrower in writing in
accordance with SUBSECTION 12(b)(i) hereof. SCHEDULE 11(b) hereto contains a
complete listing of all of the following assets of Borrower as of the Closing
Date (a) Intellectual Property which is subject to registration statutes and
licenses of Intellectual Property to which Borrower is a party (whether as
licensor or licensee), (b) Instruments (other than Instruments deposited for
collection in the ordinary course of business), (c) Deposit Accounts, (d)
Investment Property, (e) Letter-of-Credit Rights, (f) Chattel Paper, (g)
Documents, (h) Commercial Tort Claims, (i) Collateral which is subject to
certificate of title statutes, and (j) tangible Collateral located with any
bailee, warehousemen or other third parties.
(c) LOANS BY BORROWER. Borrower has not made any loans or
advances to any Affiliate or other Person except for advances authorized
hereunder to employees, officers and directors of Borrower for travel and other
expenses arising in the ordinary course of Borrower's business.
(d) ACCOUNTS. Each Account which Borrower shall, expressly or
by implication, request Lender to classify as an Eligible Account shall, as of
the time such request is made, conform in all respects to the requirements of
such classification as set forth in the definition of "Eligible Account" as set
forth herein and as otherwise established by Lender from time to time.
(e) LIENs. Borrower is the lawful owner of all Collateral now
purportedly owned or hereafter purportedly acquired by Borrower, free from all
Liens, other than the Permitted Liens.
(f) ORGANIZATION, AUTHORITY AND NO CONFLICT. Borrower is a
corporation or limited partnership, duly organized, validly existing and in good
standing in the State of its organization, its state organizational
identification number is as set forth on the Information Certificate and
Borrower is duly qualified and in good standing in all states where the nature
and extent of the business transacted by it or the ownership of its assets makes
such qualification necessary or, if Borrower is not so qualified, Borrower may
cure any such failure without losing any of its rights, incurring any Liens or
material penalties, or otherwise affecting Lender's rights. Borrower has the
right and power and is duly authorized and empowered to enter into, execute and
deliver this Agreement and the Other Agreements and perform its obligations
hereunder and thereunder. Borrower's execution, delivery and performance of this
Agreement and the Other Agreements do not conflict with the provisions of the
organizational documents of Borrower, any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, except for conflicts with agreements, contracts or other
documents which would not have a Material Adverse Effect on Borrower, and
Borrower's execution, delivery and performance of this Agreement and the Other
Agreements shall not result in the imposition of any Lien upon any of Borrower's
property (other than Permitted Liens) under any existing indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument by
which Borrower or any of its property may be bound or affected.
15
(g) LITIGATION. Except as disclosed to Lender on SCHEDULE
11(g) hereto, as of the Closing Date there are no actions or proceedings which
are pending or, to the best of Borrower's knowledge, threatened in writing
against Borrower, which are, reasonably likely to have a Material Adverse Effect
on Borrower.
(h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower
has obtained all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on Borrower. Borrower is in compliance in all material respects
with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental
Laws and statutes, orders, regulations, rules and ordinances relating to taxes,
employer and employee contributions and similar items, securities, ERISA or
employee health and safety) the failure to comply with which would have a
Material Adverse Effect on Borrower.
(i) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE
11(i) hereto or as permitted pursuant to SUBSECTION 11(c) and SUBSECTION 13(h)
hereof, Borrower is not conducting, permitting or suffering to be conducted,
transactions with any Affiliate other than transactions with Affiliates for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to Borrower than the terms upon
which such transactions would have been made had they been made to or with a
Person that is not an Affiliate.
(j) NAMES AND TRADE NAMES. Borrower's name, for the past five
years, has always been as set forth on the first page of this Agreement and
Borrower uses no trade names, assumed names, fictitious names or division names
in the operation of its business, except as set forth on SCHEDULE 11(j) hereto.
(k) EQUIPMENT. Except for Permitted Liens, Borrower has good
and indefeasible and merchantable title to and ownership of all Equipment. No
Equipment is a Fixture to real estate unless such real estate is owned by
Borrower and is subject to a mortgage in favor of Lender or, if such real estate
is leased, is subject to a landlord's agreement in favor of Lender on terms
acceptable to Lender, or an accession to other personal property unless such
personal property is subject to a first priority Lien in favor of Lender.
(l) ENFORCEABILITY. This Agreement and the Other Agreements to
which Borrower is a party are the legal, valid and binding obligations of
Borrower and are enforceable against Borrower in accordance with their
respective terms.
(m) SOLVENCY. Borrowers on a consolidated basis are, after
giving effect to the transactions contemplated hereby, solvent, able to pay
their debts as they become due, have capital sufficient to carry on their
business, now own property having a value both at fair valuation and at present
fair saleable value greater than the amount required to pay their debts, and
will not be rendered insolvent by the execution and delivery of this Agreement
or any of the Other Agreements or by completion of the transactions contemplated
hereunder or thereunder.
16
(n) INDEBTEDNESS. Except as set forth on SCHEDULE 11(n)
hereto, Borrower is not obligated (directly or indirectly) for any Indebtedness
other than the Loans and Indebtedness to BOF and any Indebtedness permitted
under Section 13(a).
(o) MARGIN SECURITY AND USE OF PROCEEDS. Borrower does not own
any margin securities, and none of the proceeds of the Loans hereunder shall be
used for the purpose of purchasing or carrying any margin securities or for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase any margin securities or for any other purpose not permitted by
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
(p) PARENT, SUBSIDIARIES AND AFFILIATES. Except as set forth
on SCHEDULE 11(p) hereto or as otherwise permitted hereunder, including under
Section 13(c) hereof, Borrower has no Parents, Subsidiaries or other Affiliates,
nor is Borrower engaged in any joint venture or partnership with any other
Person.
(q) NO DEFAULTS. Except as set forth on Schedule 11(q) hereto,
Borrower is not in default under any material contract, lease or commitment to
which it is a party or by which it is bound, nor does Borrower know of any
dispute regarding any contract, lease or commitment which would have, in either
case, a Material Adverse Effect on Borrower.
(r) EMPLOYEE MATTERS. As of the Closing Date, there are no
controversies pending or threatened between Borrower and any of its employees,
agents or independent contractors, other than employee grievances arising in the
ordinary course of business which would not, in the aggregate, have a Material
Adverse Effect on Borrower, and Borrower is in compliance with all federal and
state laws respecting employment and employment terms, conditions and practices
except for such noncompliance which would not have a Material Adverse Effect on
Borrower.
(s) INTELLECTUAL PROPERTY. Borrower possesses adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue to conduct its
business as heretofore conducted by it except to the extent that the failure to
possess such items would not have a Material Adverse Effect on Borrower.
(t) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
11(t) hereto, Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any Environmental Law, or any license, permit,
certificate, approval or similar authorization thereunder, and the operations of
the Borrower comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder. There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any other
Person, nor is any pending or, to the best of the Borrower's knowledge,
threatened with respect to any non-compliance with or violation of the
requirements of any Environmental Law by the Borrower or the release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
17
matter which would have a Material Adverse Effect on Borrower or its business,
operations or assets or any properties at which the Borrower has transported,
stored or disposed of any Hazardous Materials. Borrower has no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(u) ERISA MATTERS. Borrower has paid and discharged all
obligations and liabilities arising under ERISA of a character which, if unpaid
or unperformed, might result in the imposition of a Lien against any of its
properties or assets.
(v) ELIGIBLE ACCOUNTS. With respect to each Account, as of the
date such Account is created and included as an Eligible Account:
(i) all documents and agreements relating to the
Account requested by Lender have been delivered to Lender with
respect to such Account and such documents are true and
correct in all material respects;
(ii) the Account is genuine and in all respects what
it purports to be and is not evidenced by a judgment;
(iii) the Account is for a liquidated amount maturing
as stated in a duplicate claim or invoice covering such sale
or rendition of Staffing Services;
(iv) the Account is not subject to any offset, Lien
(other than a Lien of Lender or a Permitted Lien), recoupment,
deduction, defense, dispute, counterclaim or any other adverse
condition or adjustment of any kind (in each case other that
any such item that is taken into account in determining the
net amount of such Account) that is known to Borrower as
existing or asserted, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for
any reason;
(v) there are no facts, events or occurrences which
in any way impair the validity or enforceability of any
Accounts or tend to reduce the amount payable thereunder from
the face amount of the claim or invoice and statements
delivered to Lender with respect thereto other than
adjustments made by Borrower in the ordinary course of
business;
(vi) to the knowledge of the Borrower, the Account
Debtor under the Account had the capacity to contract at the
time any contract or other document giving rise to the Account
was executed;
(vii) with the exceptions of Accounts described in
Section 2(a)(ii), the Account has been billed and forwarded to
the Account Debtor for payment in accordance with applicable
laws and compliance and conformance in all material respects
with any and requisite procedures, requirements and
regulations governing payment by such Account Debtor with
respect to such Account;
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(viii) Borrower has obtained and currently has all
licenses, permits and authorizations that are necessary in the
generation of such Accounts;
(ix) Lender has a perfected, first-priority security
interest in such Account to secure the Obligations;
(x) the aging of such Eligible Account, as reflected
in the information submitted to Lender, reflects the age of
such Eligible Account from the date of service and not from
the date of billing or any re-billing of the Eligible Account;
(xi) Borrower has not made, and will not make without
concurrent written notice provided to Lender, any agreement
with any Account Debtor for any extension of the time for
payment of the Account, any compromise or settlement for less
than the full amount thereof, any release of any Account
Debtor from liability therefor, or any deduction therefrom
except a discount or allowance for prompt or early payment
allowed by Borrower in the ordinary course of its business
consistent with its historical practices and as disclosed to
Lender in writing;
(xii) all information relating to such Account that
has been delivered to Lender is true and correct in all
material respects, such that with respect to each such Account
that has been invoiced, Borrower has delivered or is
delivering to the Account Debtor all requested supporting
claim documents and all information set forth in the invoice
and supporting claim documents is true, complete and correct
in all material respects;
(xiii) such Account is (i) payable in the amount
identified by Borrower; or, (ii) to the knowledge of Borrower
the legally enforceable obligation of such Account Debtor, and
(iii) an account receivable or general intangible within the
meaning of the UCC of the state in which Borrower is "located"
(within the meaning of such term in the UCC);
(xiv) no such Account (i) after giving effect to the
provisions of the UCC, requires the approval of any third
person for such Account to be assigned to Lender hereunder, or
(ii) is past, or within 120 days of, the statutory limit for
collection applicable to the Account Debtor;
(xv) Borrower does not have any guaranty of, letter
of credit support for, or collateral security for, such
Account, other than any such guaranty, letter of credit or
collateral security to which Lender has a Lien;
(xvi) the fees and charges charged for the services
constituting the basis for such Account were when rendered and
are currently consistent with (i) the usual, customary and
reasonable fees charged by Borrower or (ii) pursuant to
negotiated fee contracts, or imposed fee schedules, with or by
the applicable Account Debtors;
(xvii) if requested by Lender, a copy of each related
contract and provider agreement to which Borrower is a party
has been delivered to Lender unless Borrower shall have, prior
to the related funding date, certified to Lender that such
delivery is prohibited by the terms of the contract or by law,
and the circumstances of such prohibition; and
19
(xviii) such Account was (or if unbilled, will be
(nothing herein implying any obligation of Lender to make
advances in respect of unbilled Accounts other than as
provided in Section 2(a)(ii))) in any event billed no later
than thirty (30) days after the date the services or goods
giving rise to such Account were rendered or provided, as
applicable, and each ▇▇▇▇ (other than bills delivered prior to
the date that the lockbox agreements are in effect), contains
an express direction requiring the Account Debtor to remit
payments to the applicable lockbox linked to the applicable
Account Debtor Collection Lockbox Account.
If a breach of any of the representations or warranties contained
herein relating to an Account may, in the reasonable credit judgment of Lender
have a Material Adverse Effect upon the validity, legality or collectibility of
such Account, then such Account shall no longer be deemed an "Eligible Account"
as defined in Section 1(a) hereof.
(w) REIMBURSEMENT; . Borrower has provided to Lender copies of
all service contracts with Account Debtors, to the extent required by the
Lender. Borrower is in compliance in all material respects with such contracts
and is entitled to reimbursement under such contracts.
(x) COMPLIANCE WITH HEALTHCARE REGULATIONS.
(i) Borrower is not subject to compliance with any
Healthcare Regulations, including without limitation, the
Federal Anti-Kickback Statute (42 U.S.C. ss. 1320a-7b), the
False Claims Act (31 U.S.C. ▇▇.▇▇. 3729 et seq.), the Health
Insurance Portability and Accountability Act of 1996 (Pub. L.
No. 104-191, 110 Stat. 1936 (1996)) and the federal physician
self-referral laws (42 U.S.C. ss. 1395nn);
(ii) Borrower has obtained all necessary licenses and
accreditations to operate its business as now conducted, and
currently is in compliance with all statutory and regulatory
requirements applicable to it, the failure of which would have
a Material Adverse Effect upon Borrower; and
(iii) All persons providing professional health care
services for or on behalf of Borrower (either as an employee
or independent contractor) are appropriately licensed in every
jurisdiction in which they hold themselves out as professional
health care providers.
(y) IMMIGRATION MATTERS. Borrower has complied with applicable
United States immigration law requirements, including without limitation the
Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (Pub. L. No.
104-193), as such laws apply to Borrower's recruitment of international
temporary professional health care service providers.
(z) LICENSES, PERMITS, ETC. Borrower has all necessary
federal, state and local licenses, permits, registrations, certifications and
other approvals required in order to conduct any healthcare activity in which it
is currently engaged; the failure of Borrower to have such licenses, permits,
registrations, certifications and other approvals would have a Material Adverse
Effect on the Borrower and any Person that provides any healthcare services for
or on behalf of Borrower (either as an employee or independent contractor) holds
20
the required federal, state and local licenses that are necessary to legally
perform such services and are not suspended or limited in any way; and, except
as set forth on Schedule 11(z) hereto, Borrower is in good standing with the
respective governmental, quasi-governmental and other third party payors and
regulatory agencies that are involved in such healthcare activities.
(aa) COLLECTIVE ENTERPRISE. Borrowers are engaged in the
businesses of providing staffing in the healthcare industry as of the date
hereof, as well as in certain other businesses. These operations require
financing on a basis such that the credit supplied can be made available from
time to time to Borrowers, as required for the continued successful operation of
Borrowers taken as a whole. Borrowers have requested the Lender make credit
available hereunder primarily for the purposes of SUBSECTION 12(g) and generally
for the purposes of financing the operations of Borrowers. Each Borrower expects
to derive benefit (and the Board of Directors of each Borrower has determined
that such Borrower may reasonably be expected to derive benefit), directly or
indirectly, from a portion of the credit extended by Lender hereunder, both in
its separate capacity and as a member of the group of companies, since the
successful operation and condition of each Borrower is dependent on the
continued successful performance of the functions of the group as a whole. Each
Borrower acknowledges that, but for the agreement of each of the other Borrowers
to execute and deliver this Agreement, Lender would not have made available the
credit facilities established hereby on the terms set forth herein.
12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Obligations and
termination of this Agreement, unless Borrower obtains Lender's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower covenants and agrees as follows:
(a) MAINTENANCE OF RECORDS. Borrower shall at all times keep
accurate and complete books, records and accounts with respect to all of
Borrower's business activities, in accordance with sound accounting practices
and GAAP consistently applied, and shall keep such books, records and accounts,
and any copies thereof, only at the addresses indicated for such purpose on
SCHEDULE 11(b) or such other location that is notified to Lender in writing.
(b) NOTICES. Borrower shall:
(i) LOCATIONS. Promptly (but in no event less than
ten (10) days prior to the occurrence thereof) notify Lender
of the proposed opening of any new place of business or new
location of Collateral, the closing of any existing place of
business or location of Collateral, any change of in the
location of Borrower's books, records and accounts (or copies
thereof), the opening or closing of any post office box, the
opening or closing of any bank account or, if any of the
Collateral consists of Goods of a type normally used in more
than one state, the use of any such Goods in any state other
than a state in which Borrower has previously advised Lender
that such Goods will be used.
21
(ii) ELIGIBLE ACCOUNTS. Promptly upon becoming aware
thereof (but in no event later than three (3) days after so
becoming aware), notify Lender if any Account identified by
Borrower to Lender as an Eligible Account becomes ineligible
for any reason.
(iii) LITIGATION AND PROCEEDINGS. Promptly upon
becoming aware thereof (but in no event later than three (3)
days after so becoming aware), notify Lender of (i) any
actions or proceedings that are greater than $50,000,
individually or in the aggregate, which are pending or
threatened against Borrower and (ii) any Commercial Tort
Claims of Borrower which may arise which involve an amount in
controversy in excess of Fifty Thousand and No/100 Dollars
($50,000.00), which notice shall constitute Borrower's
authorization to amend SCHEDULE 11(B) to add such Commercial
Tort Claim.
(iv) NAMES AND TRADE NAMES. Notify Lender within ten
(10) days of the change of its name or the use of any trade
name, assumed name, fictitious name or division name not
previously disclosed to Lender in writing.
(v) ERISA MATTERS. Promptly notify Lender of (x) the
occurrence of any "reportable event" (as defined in ERISA)
which might result in the termination by the Pension Benefit
Guaranty Corporation (the "PBGC") of any employee benefit plan
("PLAN") covering any officers or employees of the Borrower,
any benefits of which are, or are required to be, guaranteed
by the PBGC, (y) receipt of any notice from the PBGC of its
intention to seek termination of any Plan or appointment of a
trustee therefor or (z) its intention to terminate or withdraw
from any Plan.
(vi) ENVIRONMENTAL MATTERS. Immediately notify Lender
upon becoming aware of any investigation, proceeding,
complaint, order, directive, claim, citation or notice with
respect to any noncompliance with or violation of the
requirements of any Environmental Law by Borrower or the
generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter
which affects Borrower or its business operations or assets or
any properties at which Borrower has transported, stored or
disposed of any Hazardous Materials unless the foregoing could
not reasonably be expected to have a Material Adverse Effect
on Borrower.
(vii) DEFAULT; MATERIAL ADVERSE CHANGE. Promptly
advise Lender of any material adverse change in the business,
property, assets, prospects, operations or condition,
financial or otherwise, of Borrower, the occurrence of any
Default or Event of Default hereunder or the occurrence of any
event which, if uncured, will become an Event of Default after
notice or lapse of time (or both).
(viii) SUBORDINATED DEBT. Promptly advise Lender of
any default or any event which, with the giving of notice or
lapse of time, or both, would constitute a default, under any
subordination agreement relative to Subordinated Debt, or any
agreement, instrument or document evidencing or relating to
any Subordinated Debt, and a certificate of a authorized
officer of Borrower specifying the nature thereof and
Borrower's proposed response thereto, in reasonable detail.
22
All of the foregoing notices shall be provided by Borrower to Lender in writing.
(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower
shall maintain all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on Borrower, and Borrower shall remain in compliance with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, Environmental Laws and
statutes, orders, regulations, rules and ordinances relating to taxes, employer
and employee contributions and similar items, securities, ERISA or employee
health and safety) the failure with which to comply would have a Material
Adverse Effect on Borrower. Following any determination by Lender that there is
noncompliance, or any condition which requires any action by or on behalf of
Borrower in order to avoid noncompliance, with any Environmental Law, at
Borrower's expense, cause an independent environmental engineer acceptable to
Lender to conduct such tests of the relevant site(s) as are appropriate and
prepare and deliver a report setting forth the results of such tests, a proposed
plan for remediation and an estimate of the costs thereof.
(d) INSPECTION AND AUDITS. Upon five (5) Business Days prior
written notice so long as no Default or Event of Default exists, Borrower shall
permit Lender, or any Persons designated by it, to call at Borrower's places of
business at any reasonable times during normal business hours and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Borrower's business as Lender may consider
reasonable under the circumstances. Borrower shall furnish to Lender such
information relevant to Lender's rights under this Agreement and the Other
Agreements as Lender shall at any time and from time to time request. Lender,
through its officers, employees or agents, shall have the right, at any time and
from time to time, in Lender's name, to verify the validity, amount or any other
matter relating to any of Borrower's Accounts, by mail, telephone, telecopy,
electronic mail or otherwise, provided that, prior to the occurrence of an Event
of Default, Lender shall conduct such verification in the name of a nominee of
Lender or in Borrower's name. Borrower authorizes Lender to discuss the affairs,
finances and business of Borrower with any officers, employees or directors of
Borrower or with its Parent or any Affiliate or the officers, employees or
directors of its Parent or any Affiliate, and to discuss the financial condition
of Borrower with Borrower's independent public accountants, which shall be
attended by a representative of Borrower. Any such discussions shall be without
liability to Lender or to Borrower's independent public accountants. Borrower
shall pay to Lender all customary fees (currently Eight Hundred Fifty and No/100
Dollars ($850.00) per person, per day) and all reasonable costs and
out-of-pocket expenses incurred by Lender in the exercise of its rights
hereunder, and all of such fees, costs and expenses shall constitute Obligations
hereunder, shall be payable on demand and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder; PROVIDED, HOWEVER, that so
long as no Event of Default has occurred, Borrower shall not pay for more than
four (4) audits in any Fiscal Year, except for (i) a one-time spot check within
60 days of the Closing Date, or (ii) any audits of a Target in connection with a
proposed Acquisition.
23
(e) INSURANCE. Borrower shall:
(i) Keep the Collateral properly housed and insured
for the full insurable value thereof against loss or damage by
fire, theft, explosion, sprinklers, collision (in the case of
motor vehicles) and such other risks as are customarily
insured against by Persons engaged in businesses similar to
that of Borrower, with such companies, in such amounts, with
such deductibles and under policies in such form as shall be
reasonably satisfactory to Lender. Certificates of insurance
or, if requested by Lender, original (or certified) copies of
such policies of insurance have been or shall be, within
ninety (90) days of the date hereof, delivered to Lender,
together with evidence of payment of all premiums therefor,
and shall contain an endorsement, in form and substance
acceptable to Lender, showing loss under such insurance
policies payable to Lender. Such endorsement, or an
independent instrument furnished to Lender, shall provide that
the insurance company shall give Lender at least thirty (30)
days' written notice before any such policy of insurance is
altered or canceled (ten (10) days for non-payment of
premiums) and that no act, whether willful or negligent, or
default of Borrower or any other Person shall affect the right
of Lender to recover under such policy of insurance in case of
loss or damage. In addition, Borrower shall cause to be
executed and delivered to Lender an assignment of proceeds of
its business interruption insurance policies. Borrower hereby
directs all insurers under all policies of insurance to pay
all proceeds payable thereunder directly to Lender. Borrower
irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) for
the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of Borrower on
any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and making all
determinations and decisions with respect to such policies of
insurance, provided however, that if no Event of Default shall
have occurred and is continuing, Borrower may make, settle and
adjust claims involving less than $100,000.00 in the aggregate
without Lender's consent.
(ii) Maintain, at its expense, such public liability
and third-party property damage insurance as is customary for
Persons engaged in businesses similar to that of Borrower with
such companies and in such amounts with such deductibles and
under policies in such form as shall be reasonably
satisfactory to Lender and certificates of insurance or, if
requested by Lender, original (or certified) copies of such
policies have been or shall be, within ninety (90) days after
the date hereof, delivered to Lender, together with evidence
of payment of all premiums therefor; each such policy shall
contain an endorsement showing Lender as additional insured
thereunder and providing that the insurance company shall give
Lender at least thirty (30) days' written notice before any
such policy shall be altered or canceled.
If Borrower at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay any premium relating
thereto, then Lender, without waiving or releasing any obligation or default by
Borrower hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Lender deems advisable. Such insurance, if
24
obtained by Lender, may, but need not, protect Borrower's interests or pay any
claim made by or against Borrower with respect to the Collateral. Such insurance
may be more expensive than the cost of insurance Borrower may be able to obtain
on its own and may be cancelled only upon Borrower providing evidence that it
has obtained the insurance as required above. All sums disbursed by Lender in
connection with any such actions, including, without limitation, court costs,
expenses, other charges relating thereto and reasonable attorneys' fees, shall
constitute Loans hereunder, shall be payable on demand by Borrower to Lender
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder.
(f) COLLATERAl. Borrower shall keep the Collateral in good
condition, repair and order and shall make all necessary repairs to the
Equipment and replacements thereof so that the operating efficiency and the
value thereof shall at all times be preserved and maintained in all material
respects. Borrower shall permit Lender to examine any of the Collateral at any
time during normal business hours (so long as no Default or Event of Default
exists) and wherever the Collateral may be located and, Borrower shall, promptly
upon request therefor by Lender, deliver to Lender any and all evidence of
ownership of any of the Collateral. Borrower shall, at the request of Lender,
indicate on its records concerning the Collateral a notation, in form
satisfactory to Lender, of the security interest of Lender hereunder. If, prior
to the termination of this Agreement, Borrower shall obtain rights to any new
Collateral of the type described in the last sentence of SUBSECTION 11(b),
Borrower shall notify Lender in writing (with reasonable detail) of such changes
at least once every thirty (30) days. Borrower hereby authorizes Lender to
unilaterally modify this Agreement by amending SCHEDULE 11(b) to include any
such Collateral. Notwithstanding the foregoing, Borrower hereby agrees that
Lender's security interest shall extend to all such Collateral, regardless of
whether Lender actually amends SCHEDULE 11(b).
(g) USE OF PROCEEDS. All monies and other property obtained by
Borrower from Lender pursuant to this Agreement shall be used solely for
business purposes of Borrower.
(h) TAXES. Borrower and any other Obligor shall file all
required tax returns and pay all of its taxes when due, subject to any
extensions granted by the applicable taxing authority, including, without
limitation, taxes imposed by federal, state or municipal agencies, and shall
cause any Liens for taxes to be promptly released; provided, that Obligor shall
have the right to contest the payment of such taxes in good faith by appropriate
proceedings so long as (i) the amount so contested is shown on Obligor's
financial statements; and (ii) the contesting of any such payment does not
impair the enforceability, validity or priority of the Lender's Liens. If
Obligor fails to pay any such taxes and in the absence of any such contest by
Obligor, Lender may (but shall be under no obligation to) advance and pay any
sums required to pay any such taxes and/or to secure the release of any Lien
therefor, and any sums so advanced by Lender shall constitute Loans hereunder,
shall be payable by Obligor to Lender on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(i) INTELLECTUAL PROPERTY. Borrower shall maintain adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue its business as
heretofore conducted by it or as hereafter conducted by it unless the failure to
maintain any of the foregoing could not reasonably be expected to have a
Material Adverse Effect on Borrower.
25
(j) STAFFING CONTRACTS. Borrower shall promptly provide true
and complete copies to Lender of all material staffing or similar contracts and,
to the extent requested by Lender, deliver to Lender a collateral assignment
agreement with respect to such contracts.
(k) BILLING AND COLLECTION SYSTEM. After the Closing Date and,
if feasible based on Borrower's accounting system, Borrower shall provide
electronic access to Lender to its billing and collection system, on a read-only
basis, for purposes of permitting Lender to inspect and verify billing and
collections transactions and related data in connection with the Collateral,
from time to time.
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Obligations and
termination of this Agreement, unless Borrower obtains Lender's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
(a) INDEBTEDNESS. Borrower shall not create, incur, assume or
become obligated (directly or indirectly), for any Indebtedness other than the
Loans and the Term Loan of BOF, except that Borrower may (i) maintain its
present Indebtedness listed on SCHEDULE 11(n) hereto; and (ii) incur purchase
money Indebtedness or Capital Lease Obligations in connection with Capital
Expenditures permitted pursuant to SECTION 14 hereof. Borrower shall not incur
any Subordinated Debt without the prior written consent of Lender (which shall
include an indefinite standstill of remedies and payment blockage rights during
any Event of Default), nor during the existence of an Event of Default, make any
payment of any part or all of any Subordinated Debt or take any other action or
omit to take any other action in respect of any Subordinated Debt, except in
accordance with any subordination agreement relative thereto or the
subordination provisions thereof or hereof, or grant any Liens on any of its
assets to secure such Subordinated Debt, or amend or modify any agreement,
instrument or document evidencing or relating to any Subordinated Debt after
Lender consents thereto.
(b) LIENS. Borrower shall not grant or permit to exist
(voluntarily or involuntarily) any Lien on any of its assets, other than
Permitted Liens.
(c) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
(i) Borrower shall not, without the prior written
consent of Lender: (A) enter into any merger or consolidation;
PROVIDED that (i) any Borrower which -------- is a Borrower as
of the Closing Date may merge with and into Crdentia so long
as Crdentia is the surviving entity, and (ii) any Borrower
other than Crdentia which is a Borrower as of the Closing Date
may merge with another Borrower other than Crdentia which is a
Borrower as of the Closing Date, (B) change the state of
Borrower's organization or enter into any transaction which
has the effect of changing Borrower's state of organization,
except in connection with a merger permitted in clause (A)
above; (C) sell, lease or otherwise dispose of any of its
assets other than in the ordinary course of business or as
permitted under Section 7; (D) purchase the stock, other
equity interests or all or a material portion of the assets of
any Person or division of such Person; or (E) enter into any
other transaction outside the ordinary course of Borrower's
26
business, including, without limitation, any purchase,
redemption or retirement of any shares of any class of its
stock or any other equity interest, and any issuance of any
shares of, or warrants or other rights to receive or purchase
any shares of, any class of its stock or any other equity
interest, subject to clause (iii) below.
(ii) Borrower shall not form any new Subsidiaries or
enter into any joint ventures or partnerships with any other
Person, without the prior written consent of Lender unless (A)
Crdentia (or such other Borrower) pledges all of its equity
interests therein to Lender, and (B) such entity enters into a
joinder agreement or similar agreement in which such entity
becomes a party to this Agreement, jointly and severally
liable for the Obligations and pledges to Lender all of its
assets as Collateral hereunder.
(iii) Notwithstanding the foregoing, Crdentia may
enter into certain Permitted Acquisitions with the prior
written consent of Lender in its sole discretion. A permitted
acquisition ("PERMITTED ACQUISITION") shall mean an
Acquisition which satisfies each of the following conditions:
(A) the Target shall have, on a pro forma basis, independent
and separate from the existing Borrowers hereunder: (x) a
coverage ratio of Target Pro Forma EBITDA to Target Pro Forma
Debt Service of at least 1.5 to 1.0, (y) a ratio of Target Pro
Forma Senior Debt to Target Pro Forma EBITDA of not more than
4.0 to 1.0, and (z) a ratio of Target Pro Forma Term Loan Debt
to Target Pro Forma EBITDA of not more than 2.5 to 1.0; (B)
Borrowers are in compliance, and shall be on the date of the
consummation of such proposed Acquisition, with all financial
covenants set forth in Section 14 hereof; (C) on a pro forma
basis, as if the proposed Acquisition had occurred, the Senior
Debt Service Coverage Ratio of the Borrowers, on a
consolidated basis after giving effect to such proposed
Acquisition, equals or exceeds the required level set for the
Borrowers in Section 14(b) hereof; (D) pro forma financial
projections, prepared by the Borrower in good faith for the
period from the date of the consummation of such proposed
Acquisition to the date which is one year thereafter, shall
reflect that the Borrowers, on a consolidated basis, shall be
in compliance with all financial covenants set forth in
Section 14 hereof; (E) Excess Availability of Borrowers shall
be an amount mutually agreed upon between Lender and Borrower
but in no event less than $250,000 after giving effect to the
proposed Acquisition; (F) the amount of (i) the revolving
borrowing base attributable to Target, as determined by the
Lender in its good faith credit judgment, LESS (ii) the sum of
the outstanding loans attributable to Target, shall be an
amount mutually agreed upon between Lender and Borrower; (G)
the Target entity to be acquired in such Acquisition shall be
a separate, independent Subsidiary of Crdentia; (H) the Target
entity to be acquired in such Acquisition shall become a new
Borrower hereunder in accordance with the provisions and
requirements of Section 13(c)(ii) hereof, and shall be subject
to a Revolving Borrowing Base Amount calculation (pursuant to
27
Section 2(a) hereof) which is calculated separate and
independent from the existing Borrowers hereunder with respect
to any Revolving Loans thereafter advanced to such new
Borrower; (I) any Indebtedness to be issued by any Borrower in
respect of such Acquisition shall be Subordinated Debt subject
to Subordination Agreements in form and substance satisfactory
to Lender including, without limitation, payment blockage
rights and indefinite standstill on remedies; (J) Lender shall
have reviewed and found satisfactory all Acquisition Documents
in respect thereof prior to Borrower entering into any such
Acquisition Documents; (K) no Default or Event of Default
exists as of the proposed date of the Acquisition or would
result after giving effect thereto; and (L) Crdentia shall
deliver to Lender a certificate of an officer of Crdentia
certifying compliance with the foregoing.
(d) DIVIDENDS AND DISTRIBUTIONS. No Borrower shall declare or
pay any dividend or other distribution (whether in cash or in kind) on any class
of its stock (if Borrower is a corporation) or on account of any equity interest
in Borrower (if Borrower is a partnership, limited liability company or other
type of entity) to any Person; PROVIDED, THAT (i) any Borrower may pay a
dividend or other distribution (whether in cash or in kind) on any class of its
stock (if Borrower is a corporation) or on account of any equity interest in
Borrower (if Borrower is a partnership, limited liability company or other type
of entity) to Crdentia to pay professional fees, franchise taxes and other
ordinary course of business operating expenses incurred by Crdentia solely in
its capacity as parent corporation of Borrower, (ii) any Borrower which exists
as of the Closing Date may pay a dividend or other distribution (whether in cash
or in kind) on any class of its stock (if Borrower is a corporation) or on
account of any equity interest in Borrower (if Borrower is a partnership,
limited liability company or other type of entity) to another Borrower, (iii)
any Borrower which is not a Borrower as of the Closing Date may pay a dividend
or other distribution to Borrower (whether in cash or in kind) on any class of
its stock (if Borrower is a corporation) or on account of any equity interest in
Borrower (if Borrower is a partnership, limited liability company or other type
of entity) so long as (x) no Default or Event of Default exists or results from
such dividend or distribution, (y) Borrowers shall be in compliance with all
financial covenants set forth in SECTION 14 hereof, and (z) Borrower has
$250,000 of Excess Availability after giving effect to such dividend or other
distribution, and (iv) Crdentia may pay customary dividends or other
distributions (whether in cash or in kind) to holders of its Series A Preferred
Stock.
(e) INVESTMENTS; LOANS. Borrower shall not purchase or
otherwise acquire, or contract to purchase or otherwise acquire, the obligations
or stock of any Person, other than investments in the stock of a Borrower,
investments in connection with Permitted Acquisitions under Section 13(c)(iii),
direct obligations of the United States or of any State of the United States or
political subdivision thereof, obligations insured by the Federal Deposit
Insurance Corporation and obligations unconditionally guaranteed by the United
States or of any State of the United States or political subdivision thereof;
nor shall Borrower lend or otherwise advance funds to any Person except for
advances made to employees, officers and directors for travel and other expenses
and extensions of credit to customers arising in the ordinary course of
business.
(f) FUNDAMENTAL CHANGES, LINE OF BUSINESS. Borrower shall not
enter into a new line of business materially different from Borrower's current
business. Borrower further agrees that no Borrower shall amend its
organizational documents or change its Fiscal Year if such actions (i) would
have a Material Adverse Effect on the Borrower; (ii) would affect the
obligations of Borrower to Lender; or (iii) would affect the interpretation of
any of the terms of this Agreement or the Other Agreements unless Lender has
provided written consent after receiving not less than thirty (30) days' prior
written notice of such actions.
(g) EQUIPMENT. Borrower shall not (i) permit any Equipment to
become a Fixture to real property unless such real property is owned by Borrower
and is subject to a mortgage in favor of Lender or, if such real estate is
leased, is subject to a landlord's agreement in favor of Lender on terms
acceptable to Lender, or (ii) permit any Equipment to become an accession to any
other personal property unless such personal property is subject to a first
priority Lien in favor of Lender.
28
(h) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE
11(i) hereto or as permitted pursuant to SUBSECTION 11(c) hereof, Borrower shall
not conduct, permit or suffer to be conducted, transactions with Affiliates
other than (i) investments by Affiliates in a Borrower; (ii) the provision of
employment, management and consulting services approved by Borrower's
compensation committee; and (iii) other transactions for the purchase or sale of
Inventory or services in the ordinary course of business pursuant to terms that
are no less favorable to Borrower than the terms upon which such transactions
would have been made had they been made to or with a Person that is not an
Affiliate.
(i) SETTLING OF ACCOUNTS. Borrower will not make without
concurrent written notice provided to Lender, any agreement with any Account
Debtor for any extension of the time for payment of the Account, any compromise
or settlement for less than the full amount thereof, any release of any Account
Debtor from liability therefore, or any deduction therefrom except a discount or
allowance for prompt or early payment allowed by Borrower in the ordinary course
of its business consistent with its historical practices and as disclosed to
Lender in writing; PROVIDED, that following the occurrence and during the
continuance of a Default an Event of Default, Borrower shall not settle or
adjust any Account without the consent of Lender.
(j) RESTRICTED PAYMENTS. Until the termination of this
Agreement, Borrower shall not make any direct or indirect payment or prepayment,
in cash, in kind, or otherwise, with respect to the following Indebtedness,
except as provided in clauses (i), (ii) and (iii) below:
(i) SELLER NOTES. Scheduled payments of principal and
interest under any Seller Note or other instrument of
Subordinated Debt may be paid if, and only to the extent that,
at the time of any such payment no Event of Default then
exists or would result from the making of such payment; and
(ii) MANAGEMENT/ADVISORY FEES. Scheduled payments in
respect of any management fees, advisory fees or similar fees
payable by any Borrower to any other Borrower may be paid if,
and only to the extent that, at the time of any such payment
no Event of Default described in this Agreement then exists or
would result from the making of such payment.
(iii) SUBORDINATED DEBT. Scheduled payments in
respect of Subordinated Debt may be made only if either: (a)
the Borrower has Excess Availability of $500,000, (b) the
Borrower (in the aggregate) have a ratio of Operating Cash
Flow to Total Debt Service of at least 1.00 to 1.00 as a
result of such Subordinated Debt payment, or (c) such payment
is made from the Subordination Debt Capital Contribution.
14. FINANCIAL COVENANTS.
Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below:
29
(a) TANGIBLE NET WORTH. Borrower's Tangible Net Worth shall
not at any time be less than the Minimum Tangible Net Worth; "MINIMUM TANGIBLE
NET WORTH" being defined for purposes of this Subsection as (i) $(6,000,000) at
all times from the date hereof through September 30, 2004 and (ii) thereafter,
from the last day of each fiscal quarter of Borrower through the day prior to
the last day of each immediately succeeding fiscal quarter of Borrower, the
Minimum Tangible Net Worth during the immediately preceding period plus
seventy-five percent (75%) of Borrower's net income (but without reduction for
any net loss) for the Fiscal Year ending on the first day of such period as
reflected on Borrower's audited year end financial statement; and "Tangible Net
Worth" being defined for purposes of this Subsection as Borrower's shareholders'
equity (including retained earnings) LESS the book value of all intangible
assets as determined solely by Lender on a consistent basis PLUS the amount of
any debt subordinated to Lender, all as determined under GAAP applied on a basis
consistent with the financial statement dated March 31, 2004 except as set forth
herein;
(b) SENIOR DEBT SERVICE COVERAGE RATIO. As of the last day of
each applicable period, the ratio of Borrower's Operating Cash Flow to
Borrower's Senior Debt Service for each period set forth below (which ratio
shall be tested as of the last day of each such period) must be at least the
following:
------------------------------- ---------------------------- ---------------------------- ----------------------------
Senior Debt Service
Time Frame Date Tested Coverage Ratio Based On
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 7/31/04 0.25 to 1.00 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 8/31/04 1.00 to 1.00 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 9/30/04 1.50 to 1.00 Trailing 3 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 10/31/04 1.50 to 1.00 Trailing 6 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 11/30/04 1.50 to 1.00 Trailing 6 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 12/31/04 1.50 to 1.00 Trailing 12 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 3/31/04 and each quarter 1.50 to 1.00 Trailing 12 months
thereafter
------------------------------- ---------------------------- ---------------------------- ----------------------------
30
(c) MINIMUM EBITDA. Borrower shall not permit EBITDA to be
less than the amount set forth below for the corresponding period set forth
below:
PERIOD MINIMUM EBITDA
------ --------------
For the month ended 6/30/04 $(49,675)
For the month ended 7/31/04 $7,046
For the month ended 8/31/04 $59,360
For the month ended 9/30/04 $111,093
For the month ended 10/31/04 $172,931
For the month ended 11/30/04 $218,418
For the month ended 12/31/04 and for each month ended
thereafter $251,566
Notwithstanding the foregoing, to the extent Borrower maintains a
Senior Debt Service Coverage Ratio of 1.50 to 1.00 or greater as determined at
the end of any measuring period as set forth in SECTION 14(a) above, Borrower
shall not be required to maintain minimum EBITDA as set forth in this Section
for such corresponding month and during the continuance of such compliance.
(d) CAPITAL EXPENDITURE LIMITATIONS. Borrowers shall not make
any Capital Expenditures if, after giving effect to such Capital Expenditure,
the aggregate cost of all such fixed assets purchased or otherwise acquired
would exceed $200,000 during any Fiscal Year.
(e) OPERATING LEASE OBLIGATIONS. Borrower shall not incur
operating lease obligations requiring payments in excess of $100,000 in the
aggregate during any Fiscal Year of Borrower.
15. DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" by Borrower hereunder:
(a) PAYMENT. The failure of any Obligor to pay when due,
declared due, or demanded by Lender, any of the Obligations or the Term Loan
Obligations.
(b) BREACH OF THIS AGREEMENT, THE OTHER AGREEMENTS AND THE
TERM LOAN AGREEMENT. The failure of any Obligor to perform, keep or observe any
of the covenants, conditions, promises, agreements or obligations of such
Obligor under this Agreement or any of the Other Agreements or the Term Loan
Agreement; provided that (i) any such failure by Borrower under SUBSECTIONS
12(b)(i), (iv), (v) and 12(i) of this Agreement (or the Term Loan Agreement)
shall not constitute an Event of Default hereunder until the fifteenth (15th)
day following the occurrence thereof, and (ii) any such failure by Borrower
under SUBSECTIONS 12(b)(iii) and (vi) of this Agreement (or the Term Loan
Agreement) shall not constitute an Event of Default hereunder until the fifth
(5th) day following the occurrence thereof (including any grace periods
thereto).
31
(c) BREACH OF SUBORDINATION AGREEMENT The failure of any
Person to perform, keep or observe any of the covenants, conditions, promises,
agreements or obligations of such Person under any Subordination Agreement.
(d) BREACHES OF OTHER OBLIGATIONS. The failure of Obligor to
pay when due or within any applicable grace period any obligation of Obligor in
excess of $100,000 (other than its Obligations under this Agreement) for the
payment of Indebtedness, other than Subordinated Debt that is not paid when due
to the operation of the requirements of subordination hereunder, or the becoming
due and payable, or declaration to be due any payable, of such obligation before
the expressed maturity of the obligation, or the occurrence of an event that,
with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;
(e) BREACH OF REPRESENTATIONS AND WARRANTIES. The making or
furnishing by any Obligor to Lender of any representation, warranty,
certificate, schedule, report or other communication within or in connection
with this Agreement or the Other Agreements, or in connection with any other
agreement between such Obligor and Lender which is untrue or misleading in any
material respect as of the date made.
(f) LOSS OF COLLATERAL. The loss, theft, damage or destruction
of any of the Collateral in an amount in excess of $100,000 in excess of
insurance in the aggregate for all such events during any year of the Term as
determined by Lender in its reasonable discretion determined in good faith, or
(except as permitted hereby) sale, lease or furnishing under a contract of
service of, any of the Collateral.
(g) LEVY, SEIZURE OR ATTACHMENT. The making or any attempt by
any Person to make any levy, seizure or attachment upon any of the Collateral
with a value in excess of $100,000.
(h) BANKRUPTCY OR SIMILAR PROCEEDINGS. The commencement of any
proceedings in bankruptcy by or against any Obligor or for the liquidation or
reorganization of any Obligor, or alleging that such Obligor is insolvent or
unable to pay its debts as they mature, or for the readjustment or arrangement
of any Obligor's debts, whether under the United States Bankruptcy Code or under
any other law, whether state or federal, now or hereafter existing, for the
relief of debtors, or the commencement of any analogous statutory or
non-statutory proceedings involving any Obligor; provided, however, that if such
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such proceedings are not
dismissed within forty-five (45) days after the commencement of such
proceedings, though Lender shall have no obligation to make Loans or issue
Letters of Credit to Borrower during such forty-five (45) day period or, if
earlier, until such proceedings are dismissed.
(i) APPOINTMENT OF RECEIVER. The appointment of a receiver or
trustee for any Obligor, for any of the Collateral or for any substantial part
of any Obligor's assets or the institution of any proceedings for the
dissolution, or the full or partial liquidation, or the merger or consolidation,
of any Obligor which is a corporation, limited liability company or a
partnership; provided, however, that, if such appointment or commencement of
32
proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such appointment is not revoked or such
proceedings are not dismissed within forty-five (45) days after the commencement
of such proceedings, though Lender shall have no obligation to make Loans or
issue Letters of Credit to Borrower during such forty-five (45) day period or,
if earlier, until such proceedings are dismissed.
(j) JUDGMENT. The entry of any judgments or orders aggregating
in excess of confirmed insurance coverage in an amount of $100,000 or more
against any Obligor which remain unsatisfied or undischarged and in effect for
thirty (30) days after such entry without a stay of enforcement or execution.
(k) DEFAULT OR REVOCATION OF GUARANTY; SUBORDINATION
AGREEMENT. The occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Lender pursuant to which such Person has guaranteed to Lender the
payment of all or any of the Obligations, has granted Lender a Lien upon some or
all of such Person's real and/or personal property to secure the payment of all
or any of the Obligations or has subordinated indebtedness in whole or in part
to the Obligations.
(l) CHANGE OF OWNERSHIP/MANAGEMENT. If any of the following
events occurs: (i) ▇▇▇ ▇▇▇▇▇▇ shall cease to be (x) the owner of 1,000,000
shares of the issued and outstanding capital stock of Crdentia, and (y) the
Chief Executive Officer of Crdentia at any time, (ii) ▇▇▇ ▇▇▇▇▇▇▇▇ shall cease
to be the President of the Borrower at any time, (iii) ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall cease
to be the Chief Financial Officer of the Borrower at any time, and (iv) ▇▇▇▇
▇▇▇▇▇ shall cease to be a director of the Borrower at any time, unless Borrower
has received Lender's written consent for a replacement of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇, as applicable, within 30 days of such
notification (such consent not to be unreasonably withheld).
(m) MATERIAL ADVERSE CHANGE. Any material adverse change in
the Collateral, business, property, assets, prospects, operations or condition,
financial or otherwise of any Obligor, as determined by Lender in its sole
judgment or the occurrence of any event which, in Lender's sole judgment, could
have a Material Adverse Effect.
(n) GOVERNMENTAL AUTHORIZATIONS. A Governmental Authority
shall have revoked any Governmental Authorization of Borrower that results in
the cessation of business;
(o) LOCKBOX ACCOUNT INSTRUCTIONS. Any instruction or agreement
regarding an Account Debtor Collection Lockbox Account, or related lockbox is
amended or terminated without the written consent of Lender, or if Borrower
fails, within five (5) Business Days of receipt, to forward proceeds of Accounts
to the applicable lockbox account, or if Borrower directs any Account Debtor to
make a payment in respect of any such Account to any place or account other than
the applicable Account Debtor Collection Lockbox Account or Lockbox and such
directions are not reversed within five (5) Business Days; and/or
33
(p) FAILURE TO MAINTAIN THIRD-PARTY PAYROLL TAX SERVICE
PROVIDER. The failure to maintain a contractual relationship with a payroll tax
service provider, acceptable to Lender, at any time.
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence and during the continuance of an Event
of Default described in SUBSECTION 15(G) hereof, all of the Obligations shall
immediately and automatically become due and payable, without notice of any
kind. Upon the occurrence of any other Default or Event of Default, all
Obligations may, at the option of Lender, and without demand, notice or legal
process of any kind, be declared, and immediately shall become, due and payable.
(b) Upon the occurrence and during the continuance of a
Default or an Event of Default, Lender may exercise from time to time any rights
and remedies available to it under the Uniform Commercial Code and any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all of
Lender's rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Lender may, without notice, demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which it already
has possession), wherever it may be found, and for that purpose may pursue the
same wherever it may be found and, may enter onto any of Borrower's premises
where any of the Collateral may be, and search for, take possession of, remove,
keep and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Lender shall have the right to store the same at any of
Borrower's premises without cost to Lender. At Lender's request, Borrower shall,
at Borrower's expense, assemble the Collateral and make it available to Lender
at one or more places to be designated by Lender and reasonably convenient to
Lender and Borrower. Borrower recognizes that if Borrower fails to perform,
observe or discharge any of its Obligations under this Agreement or the Other
Agreements, no remedy at law will provide adequate relief to Lender, and agrees
that Lender shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages. Any notification
of intended disposition of any of the Collateral required by law will be deemed
to be a reasonable authenticated notification of disposition if given at least
ten (10) days prior to such disposition and such notice shall (i) describe
Lender and Borrower, (ii) describe the Collateral that is the subject of the
intended disposition, (iii) state the method of the intended disposition, (iv)
state that Borrower is entitled to an accounting of the Obligations and state
the charge, if any, for an accounting and (v) state the time and place of any
public disposition or the time after which any private sale is to be made.
Lender may disclaim any warranties that might arise in connection with the sale,
lease or other disposition of the Collateral and has no obligation to provide
any warranties at such time. Any Proceeds of any disposition by Lender of any of
the Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys' fees, and any balance of such Proceeds may be applied by
Lender toward the payment of such of the Obligations, and in such order of
application as Lender may from time to time elect.
17. CONDITIONS PRECEDENT.
The obligation of Lender to fund the initial Revolving Loan is subject
to the satisfaction or waiver on or before the date hereof, of the following
conditions precedent:
34
(a) Lender shall have received four (4) originals of each of
the agreements (other than the Subordination Agreements and the Account Control
Agreements for the deposit accounts listed therein), opinions, reports,
approvals, consents, certificates and other documents set forth on the closing
document list attached hereto as EXHIBIT C (the "CLOSING DOCUMENT LIST") in each
case in form and substance satisfactory to Lender (other than Notes, of which
Lender shall receive one (1) original) executed by Borrower and other required
Persons, as applicable;
(b) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered under this Agreement, including without limitation an initial
Borrowing Base Certificate calculating the Borrowing Base;
(c) All of the obligations of Borrower to any prior lender
(other than Subordinated Debt) as in effect immediately prior to the Closing
Date will be performed and paid in full from the proceeds of the initial
advances under the initial Loans on the Closing Date and all Liens of any such
prior lender on any property of Borrower in respect thereof will be terminated
immediately upon such payment;
(d) Lender shall have received evidence satisfactory to it
that the insurance policies required under SECTION 5 are in full force and
effect, together with written evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender as required under such
section;
(e) Lender shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the Closing Document List in each case in form and substance
satisfactory to Lender;
(f) Since March 31, 2004, no event shall have occurred which
has had or could reasonably be expected to have a Material Adverse Effect on any
Obligor, as determined by Lender in its reasonable credit judgment, determined
in good faith;
(g) Lender shall have received payment in full of all fees and
expenses payable to it by Borrower or any other Person in connection herewith,
on or before disbursement of the initial Loans hereunder, including, without
limitation, payment of all underwriting fees as agreed to by the parties;
(h) Lender shall have determined that immediately after giving
effect to (A) the making of the initial Loans, and (B) the payment of all fees
due upon such date and (C) the payment or reimbursement by Borrower of Lender
for all closing costs and expenses incurred in connection with the transactions
contemplated hereby, Borrower has Excess Availability of not less than Five
Hundred Thousand Dollars ($500,000); PROVIDED that on the Closing Date (and for
purposes of the Closing Date calculation only) the calculation for determining
Excess Availability shall include all of Borrowers' cash on deposit in
Borrowers' deposit accounts;
35
(i) The Obligors shall have executed and delivered to Lender
all such other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby;
(j) Lender shall have reviewed and found acceptable, in its
sole discretion, a third-party background check on ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇;
(k) Lender shall have reviewed the results of, and found such
results acceptable, in its sole discretion, a takedown audit including
verification of payment of all due and owing taxes;
(l) Lender shall have received the results of a roll-forward
"take-over" audit, which shall be satisfactory to Lender in its sole discretion;
(m) There is no material default in any of the Borrower's
obligations under any contract to which Borrower is a party;
(n) Borrower shall be in compliance with all applicable laws;
(o) Lender shall have received an opinion from Borrower's
counsel, in form and substance reasonably acceptable to the Lender;
(p) Borrower shall have established and maintained in its name
all Lockboxes as set forth in Section 8 to the satisfaction of the Lender and
Borrower shall have delivered to Lender, with respect to each Deposit Account
maintained by Borrower, a deposit account control agreement in form and
substance satisfactory to the Lender, executed by the financial institution at
which such Deposit Account is maintained;
(q) Borrower shall have delivered all due diligence materials
to the Lender as Lender has requested;
(r) Lender shall have received an executed Collection
Custodial Agreement from an officer of the Borrowers in form and substance
acceptable to Lender;
(s) BOF shall have received (i) the Term Loan Agreement, and
(ii) the Warrant Agreement, fully executed and each in form and substance
satisfactory to BOF;
(t) Crdentia shall have received on or before the Closing Date
a cash capital contribution in the amount of $1,250,000;
(u) Lender shall have received satisfactory evidence that
Borrower has secured the services of a third-party payroll tax service provider.
18. JOINT AND SEVERAL LIABILITY.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
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(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Lender shall not
incur liability to Borrowers as a result thereof. To induce Lender to do so and
in consideration thereof, each Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all liabilities, expenses, losses,
damages and claims of damage or injury asserted against Lender by any Person
arising from or incurred by reason of the handling of the financing arrangements
of Borrowers as provided herein, reliance by Lender on any request or
instruction from Borrowing Agent or any other action taken by Lender with
respect to this Section 18 except due to willful misconduct or gross (not mere)
negligence by the indemnified party.
(c) Notwithstanding anything to the contrary contained herein,
all Obligations of each Borrower hereunder shall be joint and several
obligations of Borrowers.
(d) Notwithstanding any provisions of this Agreement to the
contrary, it is intended that the joint and several nature of the Obligations of
Borrowers, and the liens and security interests granted by Borrowers to secure
the Obligations, not constitute a "Fraudulent Conveyance" (as defined below).
Consequently, Lender and Borrowers agree that if the Obligations of a Borrower,
or any liens or security interests 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 and
security interests securing such Obligations shall be valid and enforceable only
to the maximum extent that would not cause such Obligations or such lien or
security interest 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 Chapter 11 of Title II of the United
States Code (11 U.S.C. ss. 101, et seq.), as amended (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.
(e) Each Borrower assumes responsibility for keeping itself
informed of the financial condition of the each other Borrower, and any and all
endorsers and/or guarantors of any instrument or document evidencing all or any
part of such other Borrower's Obligations, and of all other circumstances
bearing upon the risk of nonpayment by such other Borrowers of their Obligations
and each Borrower agrees that Lender shall not have any duty to advise such
Borrower of information known to Lender regarding such condition or any such
circumstances or to undertake any investigation not a part of its regular
business routine. If Lender, in its sole discretion, undertakes at any time or
from time to time to provide any such information to a Borrower, Lender shall
not be under any obligation to update any such information or to provide any
such information to such Borrower on any subsequent occasion.
(f) Lender is hereby authorized, without notice or demand and
without affecting the liability of a Borrower hereunder, to, at any time and
from time to time, (i) renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to, a Borrower's Obligations or
otherwise modify, amend or change the terms of any promissory note or other
agreement, document or instrument now or hereafter executed by a Borrower and
37
delivered to Lender; (ii) accept partial payments on a Borrower's Obligations;
(iii) take and hold security or collateral for the payment of a Borrower's
Obligations hereunder or for the payment of any guaranties of a Borrower's
Obligations or other liabilities of a Borrower and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as Lender, in its sole
discretion, may determine; and (v) settle, release, compromise, collect or
otherwise liquidate a Borrower's Obligations and any security or collateral
therefor in any manner, without affecting or impairing the obligations of the
other Borrowers. Lender shall have the exclusive right to determine the time and
manner of application of any payments or credits, whether received from a
Borrower or any other source, and such determination shall be binding on such
Borrower. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of a Borrower's Obligations as Lender shall
determine in its sole discretion without affecting the validity or
enforceability of the Obligations of the other Borrowers.
(g) Each Borrower hereby agrees that, except as hereinafter
provided, its obligations hereunder shall be unconditional, irrespective of (i)
the absence of any attempt to collect a Borrower's Obligations from any Borrower
or any guarantor or other action to enforce the same; (ii) the waiver or consent
by Lender with respect to any provision of any instrument evidencing Borrowers'
Obligations, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrowers' Obligations;
(iv) the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Lender's election in any such proceeding
of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any
borrowing or grant of a security interest by any Borrower as
debtor-in-possession under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender's claim(s) for repayment of any of Borrowers' Obligations; or (vii) any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(h) Until the Obligations of Lender have been paid in full, no
payment made by or for the account of a Borrower, including, without
limitations, (i) a payment made by such Borrower on behalf of another Borrower's
Obligations or (ii) a payment made by any other person under any guaranty, shall
entitle such Borrower, by subrogation or otherwise, to any payment from such
other Borrower or from or out of such other Borrower's property and such
Borrower shall not exercise any right or remedy against such other Borrower or
any property of such other Borrower by reason of any performance of such
Borrower of its joint and several obligations hereunder.
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19. RELEASES; INDEMNITIES.
(a) To the fullest extent permitted by applicable law, in
consideration of Lender's entering into this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which Borrower hereby
acknowledges, Borrower, on its own behalf and on behalf of its successors
(including, without limitation, any receiver or trustee acting on behalf of
Borrower and any debtor-in-possession with respect to Borrower), assigns,
subsidiaries and Affiliates (collectively, the "Releasors"), hereby forever
release, discharge and acquit Lender and its parents, subsidiaries,
shareholders, Affiliates, partners, trustees, officers, employees, directors,
agents and attorneys and their respective successors, heirs and assigns
(collectively, the "Releasees") from any and all claims, demands, liabilities,
responsibilities, disputes, causes, damages, actions and causes of actions
(whether at law or in equity) indebtedness and obligations (collectively,
"Claims") of every type, kind, nature, description or character, including,
without limitation, any so-called "lender liability" claims or defenses, and
irrespective of how, why or by reason of what facts, whether such Claims have
heretofore arisen, are now existing or hereafter arise, or which could, might or
be claimed to exist, of whatever kind or nature, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, matured or unmatured,
fixed or contingent, each as though fully set forth herein at length, which may
in any way arise out of, are connected with or in any way relate to actions or
omissions which occurred on or prior to the date hereof with respect to
Borrower, this Agreement, the Obligations, any Collateral, the Prior Agreements,
any other Loan Document and any third parties liable in whole or in part for the
Obligations, other than such Claims arising out of the gross negligence or
willful misconduct of a Releasee. This provision shall survive and continue in
full force and effect whether or not Borrower shall satisfy all other provisions
of this Agreement or the Loan Documents, including payment in full of the
Obligations.
(b) Each of the Releasors further agrees to indemnify the
Releasees and hold the Releasees harmless from and against any and all such
Claims (as such term is defined in the immediately preceding paragraph) which
may be brought against any of the Releasees on behalf of any entity or Person,
including, without limitation, officers, directors, agents, trustees, creditors,
partners or shareholders of any of the Releasors, whether threatened or
initiated, asserting any claim for legal or equitable remedy under any statutes,
regulation or common law principle arising from or in connection with the
negotiation, preparation, execution, delivery, performance, administration and
enforcement of this Agreement or any other Loan Document, the Obligations, any
Collateral or the Prior Agreements, other than such Claims arising out of the
gross negligence or willful misconduct of a Releasee. The foregoing indemnity
shall survive the payment in full of the Obligations and the termination of this
Agreement and the other Loan Documents.
20. NOTICE.
All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Lender shall be sent to it
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Credit Officer, facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇, and in the case of Borrower
shall be sent to it at its principal place of business set forth on SCHEDULE
11(b) hereto or as otherwise directed by Borrower in writing. All notices shall
be deemed received upon actual receipt thereof or refusal of delivery.
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21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by Borrower to
Lender for Lender's acceptance or rejection at Lender's principal place of
business as an offer by Borrower to borrow monies from Lender now and from time
to time hereafter, and shall not be binding upon Lender or become effective
until accepted by Lender, in writing, at said place of business. If so accepted
by Lender, this Agreement and the Other Agreements shall be deemed to have been
made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE
GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If
any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Lender to accept this Agreement, Borrower irrevocably agrees
that, subject to Lender's sole and absolute election, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON
SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS
SECTION.
22. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower or such other
Person who is a party to such Other Agreement and Lender. Borrower may not sell,
assign or transfer this Agreement, or the Other Agreements or any portion
thereof, including, without limitation, Borrower's rights, titles, interest,
remedies, powers or duties hereunder and thereunder. Borrower hereby consents to
Lender's sale, assignment, transfer or other disposition, at any time and from
40
time to time hereafter, of this Agreement, or the Other Agreements, or of any
portion thereof, or to Lender granting participations in the Obligations and
related Loan Documents, including, without limitation, Lender's rights, titles,
interest, remedies, powers and/or duties. Borrower agrees that it shall execute
and deliver such documents as Lender may request in connection with the
foregoing. Borrower further consents to the pledge or collateral assignment and
grant of a security interest, by Lender, in connection with its' own financing,
including all rights, benefits, warranties, representations, covenants,
indemnities and remedies, and all proceeds of the foregoing, contained in this
Agreement and any of the Other Agreements.
23. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
24. POWER OF ATTORNEY.
Borrower acknowledges and agrees that its appointment of Lender as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Obligations are satisfied and paid in full and this Agreement is terminated.
25. CONFIDENTIALITY.
Lender hereby agrees to use commercially reasonable efforts to assure
that any and all information relating to Borrower which is (i) furnished by
Borrower to Lender (or to any affiliate of Lender); and (ii) non-public,
confidential or proprietary in nature shall be kept confidential by Lender or
such affiliate in accordance with applicable law; provided, however, that such
information and other credit information relating to Borrower may be distributed
by Lender or such affiliate to Lender's or such affiliate's directors, officers,
employees, attorneys, affiliates, assignees, participants, auditors, agents and
regulators, and upon the order of a court or other governmental agency having
jurisdiction over Lender or such affiliate, to any other party, as long as such
person or entity has been informed of Lender's confidentiality obligation
hereunder and has agreed to abide by its terms. Borrower and Lender further
agree that this provision shall survive the termination of this Agreement.
Notwithstanding the foregoing, Borrower hereby consents to Lender publishing a
tombstone or similar advertising material relating to the financing transaction
contemplated by this Agreement.
26. BROKERAGE FEES.
Borrower represents and warrants to Lender that, with respect to the
financing transaction contemplated herein, no Person (other than ▇▇▇▇ Capital
Partners, LLC) is entitled to any brokerage fee or other commission and Borrower
agrees to indemnify and hold Lender harmless against any and all such claims.
27. PUBLICITY.
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Lender is hereby authorized to issue appropriate press releases and to
cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
28. LIMITATION OF ACTIONS.
Borrower agrees that any claim or cause of action by Borrower against
Lender, or any of Lender's directors, officers, employees, agents, accountants
or attorneys, based upon, arising from, or relating to this Agreement, or any
other present or future agreement, or any other transaction contemplated hereby
or thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Lender, or by Lender's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one (1) year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based and service
of a summons and complaint on an officer of Lender or any other Person
authorized to accept service of process on behalf of Lender, within thirty (30)
days thereafter. Borrower agrees that such one-year period of time is a
reasonable and sufficient time for Borrower to investigate and act upon any such
claim or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of Lender.
This provision shall survive any termination of this Agreement or any other
agreement.
29. LIABILITY.
Neither Lender nor any Lender Affiliate shall be liable for any
indirect, special, incidental or consequential damages in connection with any
breach of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if Lender has been advised of the possibility of such
damages. Neither Lender, nor any Lender Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of Lender,
or any Lender Affiliate.
30. COUNTERPARTS.
This Agreement, any of the Other Agreements, and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed an original, but all of which
counterparts together shall constitute but one agreement.
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31. ELECTRONIC SUBMISSIONS.
Upon not less than thirty (30) days' prior written notice (the
"APPROVED ELECTRONIC FORM NOTICE"), Lender may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by this Agreement or the Other Agreements be submitted
to Lender in "APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any
reasonable terms, conditions and requirements in the applicable Approved
Electronic Forms Notice. For purposes hereof, "ELECTRONIC FORM" means e-mail,
e-mail attachments, data submitted on web-based forms or any other communication
method that delivers machine readable data or information to Lender, and
"APPROVED ELECTRONIC FORM" means an Electronic Form that has been approved in
writing by Lender (which approval has not been revoked or modified by Lender)
and sent to Borrower in an Approved Electronic Form Notice. Except as otherwise
specifically provided in the applicable Approved Electronic Form Notice, any
submissions made in an applicable Approved Electronic Form shall have the same
force and effect that the same submissions would have had if they had been
submitted in any other applicable form authorized, required or contemplated by
this Agreement or the Other Agreements.
32. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL,
ANY ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment, protest and
notice of nonpayment, and further waives the benefit of all valuation, appraisal
and exemption laws.
(c) Borrower hereby waives the benefit of any law that would
otherwise restrict or limit Lender or any affiliate of Lender in the exercise of
its right, which is hereby acknowledged and agreed to, to set-off against the
Obligations, without notice at any time hereafter, any indebtedness, matured or
unmatured, owing by Lender or such affiliate of Lender to Borrower, including,
without limitation, any deposit account at Lender or such affiliate.
(d) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF
ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE
COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON SUCH COLLATERAL, PROVIDED THAT IN THE EVENT LENDER SEEKS TO ENFORCE ITS
RIGHTS HEREUNDER BY JUDICIAL PROCESS OR SELF-HELP, LENDER SHALL PROVIDE BORROWER
WITH SUCH NOTICES AS ARE REQUIRED BY LAW.
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(e) Lender's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement or any
of the Other Agreements shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of Lender in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrower specifying such suspension or waiver.
SIGNATURE PAGES FOLLOW
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SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
CRDENTIA CORP.,
a Delaware corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.,
a California corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
NURSES NETWORK, INC.,
a California corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
NEW AGE STAFFING, INC.,
a Delaware corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
45
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT
PSR NURSES, LTD.,
a Texas limited partnership
By: PSR NURSE RECRUITING, INC.
Its: General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
PSR NURSE RECRUITING, INC.,
a Texas corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
PSR NURSES HOLDINGS CORP.,
a Texas corporation
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
46
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT
BRIDGE HEALTHCARE FINANCE, LLC,
a Delaware limited liability company
By /S/ ▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇ ▇▇▇▇▇▇
Executive Vice President/Chief
Credit Officer
47
ANNEX I-DEFINED TERMS
"ACQUISITION" shall mean the purchase by Crdentia (or another Borrower)
of all of the issued and outstanding equity interests or substantially all of
the operating assets of any Person in the healthcare staffing industry pursuant
to the Acquisition Documents.
"ACQUISITION DOCUMENTS" shall mean all agreements, instruments and
documents executed or delivered in connection with an Acquisition.
"ACCOUNT" shall mean all present and future accounts and payment
intangibles (in respect of Staffing Services), as such terms are defined in the
UCC, of Borrower, including, without limitation, all obligations for the payment
of money (including, without limitation, all amounts due and owing from
Governmental Authorities to the extent such amounts are deemed to be or
construed to be general intangibles) arising out of the sale, lease, license or
other disposition of goods or other Property or the rendering of services and
all proceeds thereof.
"ACCOUNT DEBTOR" shall mean, with respect to any Account, the Person
obligated to pay under such Account. The term "Account Debtor" specifically
includes, without limitation, any insurer or Governmental Reimbursement Program.
"ACCOUNT DEBTOR COLLECTION LOCKBOX ACCOUNT" shall mean an account or
accounts maintained at the Lockbox Bank into which all collections of Accounts
are paid directly; the Account Debtor Collection Lockbox Account shall be an
account in the name of Lender (or Borrower for the sole benefit of Lender), and
shall be the sole and exclusive property of Lender.
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, Borrower, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of Borrower, or
(iii) five percent (5%) or more of the voting control or equity interests of
which is beneficially owned or held by Borrower.
"AUTHORIZED OFFICER" shall mean, as applied to any Person, any
individual holding the position of chairman of the board (if an officer), chief
executive officer, president or one of its vice presidents (or the equivalent
thereof), and such Person's chief financial officer or treasurer.
"BORROWED MONEY" shall mean, as applied to any Person, without
duplication, (a) all Indebtedness of such Person, (b) all debt of such Person,
whether or not evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person as lessee under Capital Leases which have been or
should be recorded as liabilities on a balance sheet of such Person in
accordance with GAAP, (d) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable in the
ordinary course of business), (e) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person; provided that if such Person has not assumed or
otherwise become liable for such indebtedness, such indebtedness shall be
measured at the fair market value of such property securing such indebtedness at
the time of determination, (f) all obligations, contingent or otherwise, with
respect to the face amount of all letters of credit (whether or not drawn),
bankers' acceptances and similar obligations issued for the account of such
Person (including the Letters of Credit), (g) all hedging, swap, or similar
obligations of such Person, (h) all Contingent Liabilities of such Person and
(i) all debt of any partnership, limited liability company, or other entity
(only if such partnership, limited liability company or other entity is a
Borrower) of which such Person is a majority owner.
Annex I - 1
"BOF" shall mean Bridge Opportunity Finance, LLC.
"BORROWER" or "BORROWERS" shall mean, collectively, each of the
Borrowers named in the first paragraph hereof provided that each reference to
"Borrower" herein shall mean each Borrower individually and all Borrowers
collectively, as the context requires.
"BORROWING AGENT" shall mean Crdentia.
"BORROWING BASE CERTIFICATE" shall mean an officer's certificate, in
the form and substance agreeable to Lender, delivered by Borrower to Lender
pursuant to the terms of this Agreement.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
any day that banks in Chicago, Illinois are required or permitted to close.
"CMS" shall mean the Centers for Medicare & Medicaid Services.
"CAPITAL EXPENDITURES" shall mean with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including Capital Lease Obligations) by Borrowers during such period that
are required by GAAP, consistently applied, to be included in or reflected by
the property, plant and equipment or similar fixed asset accounts (or intangible
accounts subject to amortization) on the balance sheet of Borrowers.
"CAPITAL LEASE" shall mean, as to any Person, a lease of any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, by such Person as lessee that is, or should be, recorded as a
"capital lease" on the balance sheet of such Person prepared in accordance with
GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, indebtedness
represented by obligations under a Capital Lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CLOSING DATE" shall mean June 16, 2004.
"CLOSING DOCUMENT LIST" shall have the meaning set forth in SECTION 17
hereof.
"COLLATERAL" shall mean all of the property of Borrower described in
SECTION 5 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Lender to secure, either
directly or indirectly, repayment of any of the Obligations.
"CONCENTRATION ACCOUNT" shall have the meaning set forth in SECTION
8(a).
Annex I - 2
"CONTINGENT LIABILITY" shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to or otherwise to
invest in a debtor, or otherwise to assure a creditor against loss) any
Indebtedness, obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Contingent Liability shall (subject to any limitation set
forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the Indebtedness, obligation or other
liability guaranteed or supported thereby.
"DEFAULT" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"DERIVATIVE OBLIGATIONS" shall mean every obligation of a Person under
any forward contract, futures contract, exchange contract, swap, option or other
financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices.
"DILUTION" shall mean, with respect to any period, the percentage
obtained by dividing (i) the sum of non-cash credits against Accounts
(including, but not limited to returns, adjustments and rebates) of Borrower for
such period, plus pending or probable, but not yet applied, non-cash credits
against Accounts of Borrower for such period, as determined by Lender in its
sole discretion, by (ii) gross invoiced sales of Borrower for such period.
"EBITDA" shall mean, with respect to any period, Borrowers', on a
consolidated basis, net income after taxes for such period (excluding any
after-tax gains or losses and excluding other after-tax extraordinary gains or
losses) PLUS interest expense, income tax expense, depreciation and amortization
for such period, PLUS or MINUS any other non-cash charges or gains which have
been subtracted or added in calculating net income after taxes for such period.
"ELIGIBLE ACCOUNT" shall mean an Account arising in the ordinary course
of Borrower's business from the rendition of Staffing Services, which was
generated originally in the name of Borrower and not acquired via assignment or
otherwise from another Person that Lender, in its reasonable credit judgment,
shall deem eligible based on such considerations as Lender may from time to time
deem appropriate. Without limiting the foregoing, an Account shall NOT be deemed
to be an Eligible Account if:
(i) the Account remains unpaid for a period of one hundred
twenty (120) days past the date of invoice;
(ii) the Account Debtor has failed to pay more than fifty
percent (50%) of all of the outstanding amounts owed by the particular
Account Debtor or payor to Borrower one hundred twenty (120) days after
the dates of service for such Accounts;
(iii) the Account Debtor is an Affiliate of Borrower;
Annex I - 3
(iv) the Account does not arise out of the ordinary course of
Borrower's business, or as to which a portion, if payable by a
third-party payor or acceptable to Lender pursuant to which payment by
the account debtor or payor may be conditional;
(v) the Account Debtor is located outside of the United
States;
(vi) the Account Debtor is the United States or any
department, agency or instrumentality thereof, except to the extent
that the requirements of the Federal Assignment of Claims Act, 31
U.S.C. Section 3727;
(vii) Borrower is or may become liable to the Account Debtor
for goods sold or services rendered by the Account Debtor to Borrower;
(viii) the Account Debtor's total obligations to Borrower
exceed twenty-five percent (25%) of all Eligible Accounts, to the
extent of such excess;
(ix) the Account Debtor disputes liability with respect to the
applicable Account or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding or becomes insolvent, or fails or goes out of a
material portion of its business;
(x) the amount thereof consists of late charges or finance
charges, but only to the extent of such charges;
(xi) the amount thereof consists of a credit balance more than
one hundred twenty (120) days past due;
(xii) the face amount of any single invoice thereof exceeds
$20,000 unless accompanied by evidence of invoice relating thereto
satisfactory to Lender in its reasonable credit judgment;
(xiii) the Account Debtor is an individual or private party
not in the business of providing healthcare services (e.g. "self-pay"
individuals not covered by insurance or workers compensation);
(xiv) the amount thereof is not yet represented by an invoice
or ▇▇▇▇ issued in the name of the applicable Account Debtor, other than
as contemplated by Section 2(a)(ii);
(xv) the amount thereof is denominated in or payable with any
currency other than U. S. Dollars;
(xvi) the Account is not at all times subject to Lender's duly
perfected first priority security interest; or
Annex I - 4
(xvii) the representations and warranties with respect to such
Account set forth in Section 11(w) of this Agreement have been breached
or are no longer true and correct.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower's business or
facilities owned or operated by Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, modified or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION 15
hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination by
Lender, the excess, if any, of the lesser of (i) the Maximum Revolving Loan
Limit less the sum of the outstanding Revolving Loans and (ii) the Revolving
Borrowing Base Amount less the sum of the outstanding Revolving Loans, in each
case as of the close of business on such date and assuming, for purposes of
calculation, that all accounts payable of the Borrower which remain unpaid more
than thirty (30) days after the due dates thereof (except for professional fees
and amounts contested in good faith) as of the close of business on such date
are treated as additional Revolving Loans outstanding on such date.
"FISCAL YEAR" shall mean each twelve (12) month accounting period of
Borrower, which ends on December 31st of each year.
"GAAP" shall mean generally accepted accounting principles, using the
accrual basis of accounting and consistently applied with prior periods to the
extent required under Section 1(b); provided, however, that GAAP with respect to
any interim financial statements or reports shall be deemed subject to fiscal
year-end adjustments and footnotes made in accordance with GAAP.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration,
authorization, certificate, accreditation, plan, directive, consent order or
consent decree of or from, or notice to, any Government Authority.
"GOVERNMENT AUTHORITY" means any federal, state, District of Columbia,
municipal, national or other government, governmental department, commission,
board, bureau, court, agency or instrumentality or political subdivision thereof
or any entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.
Annex I - 5
"GOVERNMENT REIMBURSEMENT PROGRAM" shall mean (i) the Medicare program
established under the Title XVIII of the Federal Social Security Act, the
Federal Employees Health Benefit Program under 5 U.S.C. ▇▇.▇▇. 8902 et seq., the
TRICARE program established by the Department of Defense under 10 U.S.C. ▇▇.▇▇.
1071 et seq. or the Civilian Health and Medical Program of the Uniformed
Services under 10 U.S.C. ▇▇.▇▇. 1079 and 1086, (ii) the Medicaid program of any
state or the District of Columbia acting pursuant to a health plan adopted
pursuant to Title XIX of the Federal Social Security Act or (iii) any agent,
administrator, intermediary or carrier for any of the foregoing.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are, or become, regulated under any Environmental Law (including, without
limitation any that are, or become, classified as hazardous or toxic under any
Environmental Law).
"HEALTHCARE REGULATIONS" means any and all current or future Laws
relating to HMOs, healthcare service providers, Government Reimbursement
Programs, Persons engaged in the Healthcare Service Business, healthcare-related
insurance companies, or any other similar Person and any rule, regulation,
directive, order or decision promulgated or issued pursuant thereto. Healthcare
Regulations shall include the Food, Drug and Cosmetic Act (21 U.S.C. ss. 301 et
seq.), federal anti-kickback statute (42 U.S.C. ss. 1320a-7b), the False Claims
Act (31 U.S.C. ▇▇.▇▇. 3729 et seq.), the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)) and the
federal physician self-referral laws (42 U.S.C. ss. 1395nn).
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
indebtedness of such Person for borrowed money, whether or not evidenced by
bonds, debentures, notes or similar instruments, (b) all Capital Lease
Obligations of such Person, (c) all obligations of such Person to pay the
deferred purchase price of property or services (excluding trade accounts
payable in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall have
been assumed by such Person, (e) all obligations, contingent or otherwise, with
respect to the face amount of all letters of credit (whether or not drawn) and
banker's acceptances issued for the account of such Person, (f) all Derivative
Obligations of such Person, (g) all Contingent Obligations, and (h) all
liabilities of any partnership or joint venture of which such Person is a
general partner or joint venturer.
"INFORMATION CERTIFICATE" means the document attached hereto as EXHIBIT
D.
"INTELLECTUAL PROPERTY" shall mean all past, present and future: trade
secrets (including, without limitation, customer lists), know-how and other
proprietary information; trademarks, Internet domain names, service marks, trade
dress, trade names, business names, designs, logos, slogans (and all
translations, adaptations, derivations and combinations of the foregoing),
indicia and other source and/or business identifiers, and the goodwill of the
business relating thereto and all registrations or applications for
Annex I - 6
registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights; unpatented inventions (whether or not
patentable); patent applications and patents; industrial designs, industrial
design applications and registered industrial designs; license agreements
related to any of the foregoing and income therefrom; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets, computer software,
source codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to ▇▇▇ for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
"LENDER AFFILIATE" shall mean Lender's directors, officers, employees,
agents, attorneys or any other Person or entity affiliated with or representing
Lender.
"LIEN" shall mean any mortgage, pledge, claim, hypothecation, judgment
lien or similar legal process, title retention lien, or other lien or security
interest, including, without limitation, the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a lessor
under a lease of any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, that is, or should be, accounted
for as a Capital Lease.
"LOAN DOCUMENTS" shall mean this Agreement and the Other Agreements.
"LOANS" shall mean all loans and advances made by Lender to or on
behalf of Borrower hereunder.
"LOCKBOX" shall have the meaning specified in SUBSECTION 8(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, property, assets, prospects, operations or condition, financial or
otherwise, of a Person.
"MAXIMUM LOAN LIMIT" shall mean Fifteen Million and No/100
Dollars ($15,000,000).
"MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning specified in
SUBSECTION 2(a) hereof.
"NOTICE OF BORROWING" shall mean a written notice that is accompanied
by a Borrowing Base Certificate, in the form of that attached hereto as Exhibit
E, and appropriately completed by Borrowing Agent.
"OBLIGATIONS" shall mean any and all obligations, liabilities and
Indebtedness of Borrower to Lender (other than Term Loan Obligations), or to any
parent, affiliate or subsidiary of Lender, of any and every kind and nature,
howsoever created, arising or evidenced and howsoever owned, held or acquired,
whether now or hereafter existing, whether now due or to become due, whether
primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.
Annex I - 7
"OBLIGOR" shall mean Borrower and each other Person who is or shall
become primarily or secondarily liable for any of the Obligations.
"OPERATING CASH FLOW" means, for any period, Borrower's net income or
loss (excluding the effect of any extraordinary gains or losses), determined in
accordance with GAAP, PLUS or MINUS each of the following items, to the extent
deducted from or added to the revenues of Borrower in the calculation of net
income or loss: (i) depreciation; (ii) amortization and other non-cash charges;
(iii) interest and fee expenses paid or accrued; (iv) total federal and state
income tax expense determined as the accrued liability of Borrower in respect of
such period, regardless of what portion of such expense has actually been paid
by Borrower during such period; and (v) gain or loss on the sale of property,
plant or equipment of Borrower; and (vi) management fees and other fees paid to
subordinating creditors to the extent permitted hereunder, and under the
applicable subordination agreement(s), but only to the extent any such item was
expensed in the calculation of net income and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income and gains from the sale of property; and (c) all actual
Capital Expenditures made during such period and not financed.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than this Agreement and the Term Loan Agreement, including,
without limitation, guaranties, mortgages, trust deeds, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements, subordination agreements, and all other writings
heretofore, now or from time to time hereafter executed by or on behalf of
Borrower or any other Person and delivered to Lender or to any parent, affiliate
or subsidiary of Lender in connection with the Obligations or the transactions
contemplated hereby, as each of the same may be amended, modified or
supplemented from time to time.
"PBGC" shall have the meaning specified in SUBSECTION 12(b)(v) hereof.
"PARENT" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding equity of Borrower and, if Borrower is a partnership,
the general partner of Borrower.
"PBGC" shall have the meaning specified in SUBSECTION 12(b)(v) hereof.
"PERMITTED ACQUISITION" shall have the meaning specified in SECTION
13(c)(iii) hereof.
"PERMITTED LIENS" shall mean (i) statutory Liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder in excess of fifteen (15) days or amounts
which are being contested in good faith and by appropriate proceedings and for
which Borrower has maintained adequate reserves; (ii) Liens in favor of Lender;
(iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on Borrower's ability to use such
Annex I - 8
real property for its intended purpose in connection with Borrower's business;
(iv) Liens in connection with purchase money indebtedness and Capital Leases
otherwise permitted pursuant to this Agreement, provided, that such Liens attach
only to the assets the purchase of which was financed by such purchase money
indebtedness or which is the subject of such Capital Leases; (v) Liens set forth
on SCHEDULE 1; (vi) Liens specifically permitted by Lender in writing; (vii)
involuntary Liens securing amounts less than $50,000 and which are released or
for which a bond acceptable to Lender in its reasonable credit judgment,
determined in good faith, has been posted within ten (10) days of its creation;
and (viii) Liens for taxes not yet due and payable or for taxes being contested
in good faith by appropriate proceedings and as to which the Borrower has
deposited with the Lender an amount sufficient in the Lender's sole discretion
to pay such taxes, together with all estimated interest and penalties in
connection therewith.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or foreign or United
States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PLAN" shall have the meaning specified in SUBSECTION 12(b)(v) hereof.
"PRIME RATE" shall mean the prime rate publicly announced by LaSalle
Bank, N.A., in effect from time to time.
"PROPERTY" shall mean, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including capital stock in, and other securities of, any
other Person.
"REVOLVING BORROWING BASE AMOUNT" shall have the meaning specified in
SUBSECTION 2(A) hereof.
"REVOLVING LOANS" shall have the meaning specified in SUBSECTION 2(a)
hereof.
"SELLER NOTES" shall mean, collectively, the notes listed on SCHEDULE
11(n) hereto and any other notes representing Subordinated Debt incurred as a
part of the purchase price of a Permitted Acquisition subject to a Subordination
Agreement acceptable to the Lender.
"SENIOR DEBT SERVICE" means, for any period, the sum of payments made
or required to be made by Borrower during such period for (i) interest, fees and
scheduled principal payments due on the Term Loans, and (ii) interest only
payments due on the Revolving Loans facility, and (iii) interest and schedule
principal payments due on any and all other Indebtedness for Borrowed Money
excluding the Subordinated Debt.
"SERVICES" means the business of providing staffing in the healthcare
industry and businesses and services reasonably related thereto.
"STAFFING SERVICES" means arranging to provide healthcare-related
staffing services, long-term care or any business or activity that is reasonably
similar thereto or a reasonable extension, development or expansion thereof or
ancillary thereto.
Annex I - 9
"SUBORDINATED DEBT" shall mean Indebtedness of Borrower or any
Subsidiary of Borrower that is subordinated to the Obligations in a manner
satisfactory to Lender, and contains terms, including, without limitation,
payment terms, satisfactory to Lender.
"SUBORDINATION AGREEMENTS" shall mean, individually and collectively,
all subordination agreements, intercreditor agreements, consent and similar
agreements among either Borrower, Lender and any holder of Indebtedness, whether
entered into on or prior to the date hereof or from time to time hereafter,
together with all modifications, amendments and restatements of any of the
foregoing, including, without limitation, the Subordination Agreements listed on
SCHEDULE 11(N) hereto in respect of the Seller Notes existing on the Closing
Date.
"SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower, or any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by Borrower or any partnership of which Borrower is a general partner.
"TANGIBLE NET WORTH" shall have the meaning specified in SUBSECTION
14(a) hereof.
"TARGET" shall mean, the entity which is the subject of an Acquisition.
"TARGET PRO FORMA DEBT SERVICE" means, for any period, the sum of
payments that will be made or required to be made by such Target during such
period for (i) interest, fees and scheduled principal payments due on the Term
Loans that will be made to such Target in connection with the Permitted
Acquisition of such Target, and (ii) interest only payments due on the Revolving
Loans that will be made to such Target during such period (assuming that the
maximum principal amount of Revolving Loans will be made to such Target during
such 12-month period, based on such Target's anticipated borrowing base of
Eligible Accounts), and (iii) interest and schedule principal payments due on
any and all other Indebtedness for Borrowed Money of Target anticipated during
such period, excluding the Subordinated Debt of Target.
"TARGET PRO FORMA EBITDA" shall mean, with respect to any period,
Target's net income after taxes for such period (excluding any after-tax gains
or losses and excluding other after-tax extraordinary gains or losses) PLUS
interest expense, income tax expense, depreciation and amortization for such
period, PLUS or MINUS any other non-cash charges or gains which have been
subtracted or added in calculating net income after taxes for such period.
"TARGET PRO FORMA SENIOR DEBT" means (a) the maximum amount of
Revolving Loans that will be made to Target under the Revolving Loan Agreement
(based on such Target's anticipated borrowing base of Eligible Accounts), PLUS
(b) the aggregate principal amount of the Term Loans that will be made to Target
in connection with the Permitted Acquisition of Target, PLUS (c) all Capitalized
Lease Obligations of Target that are anticipated during such 12-month period,
PLUS (d) all other Indebtedness for Borrowed Money of Target, excluding the
Subordinated Debt of Target.
Annex I - 10
"TARGET PRO FORMA TERM LOAN DEBT" means for the projected period from
the closing date of a Permitted Acquisition to the date that is 12 months from
such closing date, the aggregate principal amount of the Term Loan that will be
made to Target in connection with the Permitted Acquisition of Target.
"TERM" shall have the meaning specified in SECTION 10 hereof.
"TERM LOAN " shall mean that certain Term Loan of BOF to the Borrowers
pursuant to the Term Loan Agreement.
"TERM LOAN AGREEMENT" shall mean that certain Loan and Security
Agreement - Term Loan, dated as of the date hereof between Borrowers and BOF.
"TERM LOAN OBLIGATIONS" shall mean all indebtedness and obligations of
every kind and nature of Borrowers to BHF in respect of the Term Loan Agreement.
"TOTAL DEBT SERVICE" means, for any period, the sum of payments made
(or, as to clause (i) of this sentence, required to be made) by Borrower during
such period for (i) Senior Debt Service, (ii) pursuant to the scheduled
Subordinated Debt payments permitted by this Agreement and the applicable
subordination agreement, and (iii) interest and scheduled principal payments due
on any and all other Indebtedness for Borrowed Money of Borrower.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of Illinois.
Annex I - 11
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit A Borrowing Base Certificate
Exhibit B Compliance Certificate
Exhibit C Closing Checklist
Exhibit D Information Certificate
Exhibit E Notice of Borrowing
SCHEDULES
---------
Schedule 1 Permitted Liens
Schedule 11(b) Business and Collateral Locations
Schedule 11(b) Certain Collateral
Schedule 11(g) Litigation
Schedule 11(i) Affiliate Transactions
Schedule 11(j) Names & Trade Names
Schedule 11(n) Indebtedness
Schedule 11(p) Parent, Subsidiaries and Affiliates
Schedule 11(q) Defaults
Schedule 11(x) Government Reimbursement Program Matters
Schedule 11(t) Environmental Matters
Schedule 11(x) Healthcare Compliance
Schedule 11(y) Healthcare Regulatory Matters
Schedule 11(z) Licenses and Permits
Schedule 11(aa) Healthcare Authorizations
EXHIBIT A - BORROWING BASE CERTIFICATE
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
To: Bridge Healthcare Finance, LLC
___________________________________
___________________________________
___________________________________
Ladies and Gentlemen:
Please refer to the Loan and Security Agreement dated as of
____________ ___, 2004 (as amended or otherwise modified from time to time, the
"LOAN AGREEMENT") between Crdentia Corp., a _______ corporation and its
Subsidiaries (collectively, "BORROWER"), and Bridge Healthcare Finance, LLC.
This certificate (this "CERTIFICATE"), together with supporting calculations
attached hereto, is delivered to you pursuant to the terms of the Loan
Agreement. Capitalized terms used but not otherwise defined herein shall have
the same meanings herein as in the Loan Agreement.
The Borrower hereby certifies and warrants to the Bank that at the
close of business on ______________, 200__ (the "CALCULATION DATE"), the
Revolving Borrowing Base Amount was $_____________, computed as set forth on the
schedule attached hereto.
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be
executed and delivered by its officer thereunto duly authorized on ___________,
_______.
[________________________]
a _______________________
By:______________________
Its:_____________________
EXHIBIT A - 1
EXHIBIT B - COMPLIANCE CERTIFICATE
Date:
TO: Bridge Healthcare Finance, LLC, Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen and Ladies:
The undersigned Borrower hereby certifies to you the following pursuant to
Section 9(c) of the Loan and Security Agreement-Revolving Loans (the
"AGREEMENT") dated as of June 16, 2004, among and Crdentia Corp., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Inc., Nurses Network, Inc., New Age Staffing, Inc., PSR Nurses, Ltd.,
PSR Nurse Recruiting, Inc., PSR Nurses Holdings Corp. (collectively, the
"BORROWER"), Bridge Healthcare Finance, LLC (the "LENDER").
1. As of , no event of default or event which with the lapse of time or
the giving of notice, or both, would become an event of default (an
"unmatured event of default") has occurred or, if such a change has
occurred, a writing attached hereto specifies the nature thereof and
the action that Borrower has taken or proposes to take with respect
thereto.
2. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrower has occurred
since [date of last Compliance Certificate/last financial statements
delivered prior to closing], or, if such a change has occurred, a
writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.
3. Borrower is in compliance with the representations, warranties and
covenants in the Agreement or, if Borrower is not in compliance with
any representations, warranties or covenants in the Agreement, a
writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.
4. As of _________________, Borrower maintains the following financial
covenants pursuant to Section 14 of the Agreement.
a. Borrower shall maintain Minimum Tangible Net Worth of not less
than (i) $(7,200,000) at all times from the date hereof
through September 30, 2004 and (ii) thereafter, from the last
day of each fiscal quarter of Borrower through the day prior
to the last day of each immediately succeeding fiscal quarter
of Borrower, the Minimum Tangible Net Worth during the
immediately preceding period plus seventy-five percent (75%)
of Borrower's net income (but without reduction for any net
loss) for the Fiscal Year ending on the first day of such
period as reflected on Borrower's audited year end financial
statement. (See attached SCHEDULE A for calculation of
Tangible Net Worth)
EXHIBIT B - 1
Compliance Yes: _____ No: _____
b. SENIOR DEBT SERVICE COVERAGE RATIO. As of the last day of each
applicable period, the ratio of Borrower's Operating Cash Flow
to Borrower's Senior Debt Service for each period set forth
below (which ratio shall be tested as of the last day of each
such period) must be at least the following: (See attached
SCHEDULE B for calculation)
---------------------------- ------------------------- --------------------------- --------------------------
Senior Debt Service
Time Frame Date Tested Coverage Ratio Based On
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 7/31/04 0.25 to 1.00 Monthly
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 8/31/04 1.00 to 1.00 Monthly
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 9/30/04 1.50 to 1.00 Trailing 3 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 10/31/04 1.50 to 1.00 Trailing 6 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 11/30/04 1.50 to 1.00 Trailing 6 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 12/31/04 1.50 to 1.00 Trailing 12 months
---------------------------- ------------------------- --------------------------- --------------------------
Quarterly 3/31/04 and each 1.50 to 1.00 Trailing 12 months
quarter thereafter
---------------------------- ------------------------- --------------------------- --------------------------
Actual Debt Service Coverage Ratio: _____ Compliance: Yes: _____ No: _____
c. MINIMUM EBITDA. Borrower shall not permit EBITDA to be less
than the amount set forth below for the corresponding period
set forth below (See attached SCHEDULE C for calculation):
PERIOD MINIMUM EBITDA
------ --------------
For the month ended 6/30/04 $(49,675)
For the month ended 7/31/-04 $7,046
For the month ended 8/31/04 $59,360
For the month ended 9/30/04 $111,093
For the month ended 10/31/04 $172,931
For the month ended 11/30/04 $218,418
For the month ended 12/31/04 and for each month
ended thereafter $251,566
EXHIBIT B - 2
Notwithstanding the foregoing, to the extent Borrower maintains a
Senior Debt Service Coverage Ratio of 1.50 to 1.00 or greater as determined at
the end of any measuring period as set forth in Section 4(b) above, Borrower
shall not be required to maintain minimum EBITDA as set forth in this Section
for such corresponding month and during the continuance of such compliance.
Compliance Yes: _____ No: _____
d. Capital Expenditure Limitation: the aggregate cost of all
fixed assets purchased or othewise acquired shall not exceed $200,000 during any
Fiscal Year.
Total Capital Expenditures (YTD): _____ Compliance: Yes: _____ No: _____
e. Operating Lease Obligations: payments made pursuant to
operating lease obligations shall not exceed $100,000 during any Fiscal Year.
Operating Lease Payments (YTD): _____ Compliance: Yes: _____ No: _____
5. As of , Borrower has the following:
a. EXCESS AVAILABILITY. Borrower's Excess Availability is
$___________. (See attached SCHEDULE D for calculation of Excess Availability)
b. TOTAL DEBT SERVICE COVERAGE RATIO. Borrowers' (in the
aggregate) ratio of Operating Cash Flow to Total Debt Service is ______ to 1.00
(See attached SCHEDULE E for calculation of Total Debt Service Coverage Ratio)
The financial statements, reports and information submitted concurrently
herewith have been prepared in accordance with generally accepted accounting
principles consistently applied and there have been no material changes in
accounting policies or financial reporting practices of Borrower since
__________________________[date of last Compliance Certificate/last financial
statements delivered prior to closing], or, if such a change has occurred, a
writing attached hereto specifies the nature thereof and the action that
Borrower has taken or proposes to take with respect thereto.
EXHIBIT B - 3
Any and all initially capitalized terms set forth in this certificate without
definition shall have the respective meanings ascribed thereto in the Agreement.
CRDENTIA CORP.
By: _________________________________
Its:_________________________________
EXHIBIT B - 4
SCHEDULE A
----------
TANGIBLE NET WORTH
------------------
TANGIBLE NET WORTH
------------------
Shareholders' equity (including retained earnings
and preferred stock) _________________________
Less: Book value of all intangible assets _________________________
Add: Amount of debt subordinated to Lender _________________________
_________________________
TANGIBLE NET WORTH _________________________
SCHEDULE B
----------
TOTAL SENIOR DEBT SERVICE COVERAGE RATIO
----------------------------------------
OPERATING CASH FLOW
-------------------
Net income (Loss) excluding extraordinary gains or losses ____________________
Add: Depreciation ____________________
Amortization and other non-cash charges ____________________
Interest and fee expenses paid or accrued ____________________
Total federal and state income tax expenses
accrued regardless of whether paid during
such period ____________________
Management fees and other fees paid to
subordinated creditors ____________________
Add/Less:
Gain or loss on the sale of property, plant or
Equipment ____________________
Subtotal ____________________
Less: Cash Capital Expenditures made during such period
All taxes paid or required to be paid during
such period and all non-cash income ____________________
TOTAL OPERATING CASH FLOW ____________________
-------------------------
SENIOR DEBT SERVICE
-------------------
Add: Interest, fees and scheduled principal payments
due on the Term Loans ____________________
Interest payments due on the Revolving Loans ____________________
Scheduled principal and interest payments made
or required to be made on all other indebtedness
of Borrower (excluding Subordinated Debt) ____________________
TOTAL SENIOR DEBT SERVICE ____________________
-------------------------
TOTAL OPERATING CASH FLOW:
TOTAL SENIOR DEBT SERVICE = _______ to 1.0
SCHEDULE C
EBITDA
------
EBITDA
Net income (Loss) (excluding any after-tax gains or
losses and excluding other after-tax extraordinary
gains or losses) _________________________
Add: Interest expense _________________________
Income tax expense _________________________
Depreciation _________________________
Amortization _________________________
Add/Less:
Other non-cash charges or gains _________________________
TOTAL EBITDA _________________________
------------
Minimum EBITDA $____________ Total EBITDA $______________
SCHEDULE D
----------
EXCESS AVAILABILITY
-------------------
EXCESS AVAILABILITY
-------------------
A. Maximum Revolving Loan Limit _________________________
B. Outstanding Revolving Loans _________________________
C. Total of A minus B. _________________________
Revolving Borrowing Base Amount _________________________
1. 85% of Eligible Accounts _________________________
2. Account unbilled/aged < 7 days _________________________
3. Reserves _________________________
D. Total of 1 plus 2 less 3 _________________________
E. Total of D less B _________________________
TOTAL OF EXCESS AVAILABILITY (lesser of C and E) _________________________
----------------------------
SCHEDULE E
----------
TOTAL SENIOR DEBT SERVICE COVERAGE RATIO
----------------------------------------
TOTAL OPERATING CASH FLOW (from Schedule B) _________________________
-------------------------
TOTAL DEBT SERVICE _________________________
------------------
Senior Debt Service (from Schedule B) _________________________
Scheduled Subordinated Debt payments
permitted under the Agreement _________________________
Interest and scheduled principal payments
due on all other Indebtedness for Borrowed Money _________________________
TOTAL DEBT SERVICE _________________________
------------------
TOTAL OPERATING CASH FLOW:
TOTAL DEBT SERVICE = ________ to 1.0
EXHIBIT C - CLOSING CHECKLIST
BRIDGE HEALTHCARE FINANCE, LLC ("BHF")
with
CRDENTIA CORP. ("CRDENTIA")
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.("▇▇▇▇▇")
NURSES NETWORK, INC.("NURSES NEWTORK")
NEW AGE STAFFING, INC. ("NEW AGE")
PSR NURSES, LTD. ("PSR LTD.")
PSR NURSE RECRUITING, INC. ("PSR RECRUITING")
PSR NURSES HOLDINGS CORP. ("PSR HOLDING"),
(COLLECTIVELY, THE "BORROWERS")
$15,000,000 Revolving Loan Facility
Document Checklist
June 16, 2004
1. DEAL TEAM
Borrower CRDENTIA CORP.
("B") ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Offier
E-Mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
-----------------------
Borrower Counsel: ▇▇▇▇▇▇▇▇ & FORESTER LLP
("BC") ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Cell: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
----------------
2
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Desktop Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Firm Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
-----------------
▇▇▇▇▇ ▇▇▇▇▇▇ ("Nate") ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
----------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
-------------------
Lender: BRIDGE HEALTHCARE FINANCE, LLC
("L") ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
---------------------
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Cel: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
----------------------
3
VEDDER, PRICE, ▇▇▇▇▇▇▇ & KAMMHOLZ, P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Dir: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
-----------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Dir: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
------------------------
▇.▇. ▇▇▇▇▇, Esq. Dir: (312)
Dir: 609-7852 E-Mail:
E-Mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Paralegal
Dir: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
----------------------------
4
2. FINANCING DOCUMENTATION RESPONSIBLE PARTY
-----------------
(a) LOAN DOCUMENTATION
(i) Loan and Security Agreement - Revolving Credit Loan
(BHF), together with: CL
(1) ANNEX I - Definitions CL
(2) Exhibit A - Borrowing Base Certificate L/B
Exhibit B - Compliance Certificate CL
Exhibit C - Closing Document List CL
Exhibit D - Information Certificate
Exhibit E - Notice of Borrowing
(3) Schedule 1 - Permitted Liens B
Schedule 11(b) - Business and Collateral B
Locations B
Schedule 11(b) - Certain Collateral B
Schedule 11(g) - Litigation B
Schedule 11(i) - Affiliate Transactions B
Schedule 11(j) - Names & Trade Names B
Schedule 11(n) - Indebtedness B
Schedule 11(p) - Parent, Subsidiaries & Affiliates B
Schedule 11(q) - Defaults B
Schedule 11(t) - Environmental Matters B
Schedule 11(z) - Licenses and Permits
(ii) $15,000,000 Revolving Note (BHF) CL
(iii) Collection Custodial Agreement CL
(iv) Pledge Agreement for each Borrower (other than
Crdentia Corp.), together with: CL
(1) Original Stock or LCC Certificates
(2) Stock or LCC Powers
(v) Accountant's Access Letter CL
(vi) Borrowing Base Certificate B
(vii) Disbursement Request CL/B
(viii) Subordination and Standstill Agreements (re: Seller
Notes) CL/B
(1) ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
(2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(3) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
5
(4) Professional Staffing Resources, Inc.
(5) Nursing Services Registry of Savannah, Inc.
(6) ▇▇▇▇▇ ▇▇▇▇▇▇
(ix) Officer's Certificate CL/B
(b) ACCOUNT DOCUMENTATION
(i) Blocked Account Agreement / Lockbox Agreement
(collection/sweep accounts) CL/B
(ii) Deposit Account Control Agreement (for accounts other
than collection accounts) for the following bank
accounts: CL/B
(1) Comerica - Account # 1892275403
(3) Legacy of Texas - Account # 888321
(5) Legacy of Texas - Account # 888339
(c) INSURANCE DOCUMENTATION
(i) Certificates of Insurance or Binders naming Bridge
Healthcare Finance, LLC and Bridge Opportunity
Finance, LLC as an "additional insured" with respect
to liability insurance and a "lender's loss payee"
with respect to casualty insurance, together with (i)
a lender's loss payee endorsement in favor of such
entities, executed by the insurance company or
authorized insurance agent and (ii) copies of the
insurance policies B/BC
(ii) Assignment of Business Interruption Insurance B/BC
(d) THIRD PARTY DOCUMENTATION
(i) Opinion Letter BC
(ii) Landlord Agreements together with, for each lease (i)
a copy of the lease, (ii) owner's name and address,
(iii) legal description of the property: CL/B
(1) ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
(iii) Payoff Letters/Authorizations to File UCC
Terminations B
(1) Comerica Bank - Payoff Letter
(2) Empire - Payoff Letter
(3) Alamo Capital Corporation - Payoff Letter
6
(4) PSR Nurses, Ltd. - Authorization to file UCC
Termination
(5) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ - Authorization to file UCC
Termination
(6) ▇▇▇▇ Factoring, Inc. - Authorization to file
UCC Termination
3. UCC, TAX LIEN AND JUDGMENTS
(i) UCC, Tax Lien and Judgment Searches CL
(ii) UCC Pre-Filing Authorization, together with UCC-1
Financing Statements B/CL
(1) Crdentia - Delaware
(2) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. - California
(3) Nurses Network, Inc. - California
(4) New Age Staffing, Inc. - Delaware
(5) PSR Nurses, Ltd. - Texas
(6) PSR Nurse Recruiting, Inc. - Texas
(7) PSR Nurses Holdings Corp. - Texas
(iii) UCC Termination Statements B
(1) Comerica Bank - (Crdentia)
(2) PSR Nurses, Ltd. - (New Age)
(3) ▇▇▇▇ Factoring, Inc. - (New Age)
(4) Alamo Capital Corporation - (PSR)
(5) ▇▇▇▇▇▇ ▇▇▇▇▇ D. - (PSR)
4. CORPORATION AUTHORIZATION
(i) Good Standing Certificates BC
(1) CRDENTIA - Delaware, California
(2) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC. - California
(3) NURSES NETWORK, INC. - California
(4) NEW AGE STAFFING, INC. - Delaware, Alabama,
California, Louisiana, Maryland, New Jersey, Rhode
Island, Texas
7
(5) PSR NURSES, LTD. - Texas, Alabama, Alaska, Arizona,
Arkansas, California, Colorado, Connecticut,
Delaware, Florida, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New
Jersey, New Mexico, New York, North Carolina, Ohio
Okalahoma, Oregon, Pennsylvania, South Carolina,
Tennessee, Utah, Vermont, Virginia, District of
Columbia, Washington, West Virginia, Wisconsin
(6) PSR NURSE RECRUITING, INC. - Texas, Florida,
Illinois, Massachusetts, Mississippi, Montana, New
Mexico, North Carolina, Oregon, District of Columbia
(7) PSR NURSES HOLDINGS CORP. - Texas
(ii) Certificate of Secretary, together with (i) Certified
Certificate/Articles of Incorporation, (ii) By-Laws,
and (iii) Borrowing resolutions BC
(1) Crdentia
(2) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
(3) Nurses Network, Inc.
(4) New Age Staffing, Inc.
(5) PSR Nurses, Ltd.
(6) PSR Nurse Recruiting, Inc.
(7) PSR Nurses Holdings Corp.
(iii) Post-Closing Agreement CL
(iv) Healthcare Related Documents B
(1) Copies of all state licenses required by
Borrowers to operate business
(2) Copies of service agreements with hospitals
and healthcare entities
(v) Information Certificate
(vi) Other Documents all
EXHIBIT D
BRIDGE HEALTHCARE FINANCE, LLC
CREDIT FACILITY
BRIDGE HEALTHCARE FINANCE, LLC
INFORMATION CERTIFICATE
Dated: June 16, 2004
PLEASE COMPLETE AND RETURN
AS SOON AS POSSIBLE TO:
(a) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. (b) Ms. ▇▇▇ ▇▇▇▇▇▇
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C. Bridge Healthcare Finance, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 53rd Floor
Tel: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Tel: ▇▇▇-▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
----------------------- e-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
---------------------
Ladies and Gentlemen:
Reference is hereby made to the proposed draft Loan and Security
Agreement of even date herewith (the "LOAN AND SECURITY AGREEMENT"; capitalized
terms used in this Information Certificate and not otherwise defined in this
Information Certificate shall have the meanings assigned thereto in the Loan and
Security Agreement) by and among Bridge Healthcare Finance, LLC ("BANK"). To
induce Bank to enter into the Loan and Security Agreement and fund the Loans
provided for thereunder, Borrower hereby provides you with the following
information regarding (collectively as the "CREDIT PARTIES" and each, a "CREDIT
Party"): Crdentia Corp., a Delaware corporation, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.,
a California corporation, Nurses Network, Inc., a California Corporation, New
Age Staffing, Inc., a Delaware corporation, PSR Nurses, Ltd., a Texas limited
partnership, PSR Nurse Recruiting, Inc., a Texas corporation and PSR Nurses
Holdings Corp., a Texas corporation and EACH PARENT ENTITY AND EACH OF ITS
DIRECT AND INDIRECT SUBSIDIARIES Borrower represents and warrants to Bank that
the information provided in this Information Certificate is true, correct and
complete as of the date hereof.
A. IDENTIFICATION MATTERS
1. The full, correct and current name of each Credit Party as it
appears in such Credit Party's Organizational Documents is: PLEASE SEE THE
ATTACHED SCHEDULE OF IDENTIFICATION MATTERS.
2. Each Credit Party's type of organization is:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY TYPE OF ORGANIZATION
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF IDENTIFICATION MATTERS.
------------------------------------------------------------ ---------------------------------------------------------
3. Each Credit Party's jurisdictions of organization are:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY JURISDICTION OF ORGANIZATION
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF IDENTIFICATION MATTERS.
------------------------------------------------------------ ---------------------------------------------------------
4. Each Credit Party's jurisdictions of qualification are:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY JURISDICTIONS OF QUALIFICATION
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF IDENTIFICATION MATTERS.
------------------------------------------------------------ ---------------------------------------------------------
5. Each Credit Party's organizational identification number is:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY ORGANIZATIONAL IDENTIFICATION NUMBER
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF IDENTIFICATION MATTERS.
------------------------------------------------------------ ---------------------------------------------------------
2
6. Any names of a Credit Party (as appearing in such Person's
Organizational Documents) not specified above in Item 1 that such Credit Party
has had during the 5 year period preceding the Closing Date are:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY ADDITIONAL NAMES
------------------------------------------------------------ ---------------------------------------------------------
SEE SCHEDULE 11(i) TO THE LOAN AND SECURITY AGREEMENT
DATED JUNE __, 2004 BY AND AMONG THE BANK AND THE CREDIT
PARTIES (THE "LOAN AGREEMENT").
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
B. LEGAL MATTERS
7. The officers of each Credit Party and their respective titles are:
---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY TITLE NAME
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF
LEGAL MATTERS.
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
8. The members of the Board of Directors of each Credit Party (or, if
such Credit Party is a limited partnership, the general partner or, if such
Credit Party is a limited liability company, the managers) are:
------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY BOARD OF DIRECTORS / GENERAL PARTNER / MANAGERS
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF LEGAL MATTERS.
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
9. The Affiliates of each Credit Party are as follows and, except as
set forth below, no Credit Party is party to any agreements with any such
Affiliate:
---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY AFFILIATES AGREEMENTS WITH AFFILIATES
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
PLEASE SEE THE ATTACHED SCHEDULE OF
LEGAL MATTERS.
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
3
10. A list of all of the material contracts to which any Credit Party
is a party or by which such Credit Party is bound is set forth below. For
purposes of this Item 10, the list of "material contracts" should include any
long term or significant customer agreements, long term or significant supply
agreements, real estate leases, agreements pursuant to which intellectual
property is licensed or other material licensing agreements, employment
agreements, collective bargaining agreements, management and consulting
agreements requiring payment of more than $25,000 in any year and equity
holders' agreements.
Registration rights granted pursuant to that certain Registration Rights
Agreement, dated as of December 17, 2003 by and between Crdentia Corp. and the
investors listed on SCHEDULE A thereto. See Exhibit 4.2 to Crdentia Corp.'s
report on Form 8-K filed with the SEC on December 30, 2003.
Stock Purchase Agreement, dated as of May 18, 2003, by and between Crdentia
Corp., MedCap Partners L.P. and the stockholders listed on EXHIBIT A thereto.
See Exhibit 10.1 Crdentia Corp.'s report on Form 8-K filed with the SEC on May
20, 2004.
Options to purchase 7,000,000 shares of Crdentia Corp.'s Common Stock granted to
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Crdentia Corp.'s Chairman and Chief Executive Officer, on
December 31, 2003 and a bonus agreement executed in connection therewith. See
Exhibits 10.1, 10.2 and 10.3 to the Crdentia Corp.'s report on Form 8-K filed
with the SEC on January 12, 2003.
Option to purchase up to 100,000 shares of Crdentia Corp.'s Common Stock at an
exercise price of $0.96 per share made by Crdentia Corp. to each of two members
of its Board of Directors on December 16, 2003.
Option to purchase up to 618,224 shares of Crdentia Corp.'s Common Stock at an
exercise price of $0.96 made by Crdentia Corp. to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its
President, on December 16, 2003.
Executive Employment Agreement by and between Crdentia Corp. and ▇▇. ▇▇▇▇▇▇▇▇
dated on or about December 16, 2003, pursuant to which ▇▇. ▇▇▇▇▇▇▇▇ will be
granted one or more options to purchase a number of shares of Crdentia Corp.'s
Common Stock equal to five and two hundred and ninths percent (5.209%) of that
aggregate number of (a) additional shares of Common Stock issued in connection
with any Acquisition (as defined therein), plus (b) subject to certain
limitations, the aggregate maximum number of additional shares of Common Stock,
or any warrant, option, purchase right or similar agreement or arrangement
granted in connection with such Acquisition (whether or not such shares are ever
issued but excluding any compensatory options or other equity-based incentives
granted to service providers on or after the closing date of such Acquisition.
Agreement and Plan of Reorganization, dated as of September 15, 2003, by and
among Crdentia Corp., New Age Staffing, Inc., NAS Acquisition Corporation and
the shareholders of New Age Staffing, Inc. (the "NAS Merger Agreement"). SEE
Exhibit 2.1 to the report on Form 8-K filed with the SEC on September 3, 2003.
4
Agreement and Plan of Reorganization dated as of November 4, 2003 by and among
Crdentia Corp., PSR Acquisition Corporation, PSR Holdings Acquisition
Corporation, PSR Nurse Recruiting, Inc. and PSR Nurses Holdings Corp. (the "PSR
Merger Agreement"), pursuant to which Crdentia Corp. obtained a 100% ownership
interest in PSR Nurses, Ltd. (through its acquisition of PSR Nurse Recruiting,
Inc., the sole general partner of PSR Nurses, Ltd. and PSR Nurses Holdings
Corp., the sole limited partner of PSR Nurses, Ltd.). Crdentia Corp. uses
offices leased by PSR Nurses, Ltd. as its principal executive offices, a
substantial number of Crdentia Corp.'s staff is PSR Nurses, Ltd. personnel, and
Crdentia Corp. uses some PSR Nurses, Ltd. deposit accounts. In addition,
Crdentia Corp. uses the personnel and bank accounts of several of its other
subsidiaries.
Common Stock Purchase Agreement dated May 15, 2002 by and between Crdentia Corp.
and the parties thereto. See Exhibit 10.1 to Crdentia Corp.'s report on Form 8-K
filed with the SEC on August 22, 2002.
Convertible Subordinated Promissory Note dated August 28, 2003 in the principal
amount of $50,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇▇▇▇▇▇ Trust, dated 1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇.▇. ▇▇▇▇▇▇ Community Propoerty
Trust dated 5/5/75.
Subordinated Promissory Note dated September 22, 2003 in the principal amount of
$1,650,000.00 made payable by Crdentia Corp. to ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$22,500 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$50,432 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$41,506 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $1,200,000 made payable to ▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $2,525,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $200,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
5
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $300,000 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $200,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $25,000 made payable to Health Care Investment Visions, LLC
Convertible Subordinated Promissory Note dated September 30, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, Tenants in Common.
Convertible Subordinated Promissory Note dated October 16, 2003 in the principal
amount of $120,000 made payable to Aydah Kytay
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $15,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust U/A dated
10/02/98.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Co-Trustees of the ▇▇▇▇▇▇▇▇▇ Family Trust, dated 04/03/85.
11. Except as set forth below, the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated thereby will not
violate, conflict with or cause a breach of, or result in the creation of a Lien
under, any of the agreements identified in Item 10, any Credit Party's
Organizational Documents or applicable law: NONE
12. The following consents shall have been obtained on or prior to the
Closing Date in connection with the execution and delivery of the Loan Documents
and the consummation of the transactions contemplated thereby: NONE
13. Each Credit Party's fiscal year ends on December 31 of each year.
14. The authorized equity securities of each Credit Party, and the
identity of the holders of issued equity securities with the percentage of their
fully-diluted ownership of such Credit Party, are as set forth on the
Capitalization Schedule attached hereto. Any preemptive or other outstanding
rights, warrants, options, conversion rights or similar agreements or
understandings are described on the Capitalization Schedules. IN ADDITION,
PLEASE SEE CRDENTIA CORP.'S DEFINITIVE PROXY STATEMENT ON SCHEDULE 14A FILED
WITH THE SEC ON APRIL 28, 2004.
6
15. A brief description of each Credit Party's Pension Plans is: NONE
16. During the 5 year period preceding the Closing Date neither any
Credit Party has been party to any merger, consolidation, stock acquisition or
purchase of all or a substantial portion of the assets of any Person, except:
Agreement and Plan of Reorganization, dated as of June 19,
2003, by and among Crdentia Corp., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Inc., BAC Acquisition Corporation and certain stockholders of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., as amended by that certain
Amendment No. 1 made and entered into effective as of July 31,
2003.
Agreement and Plan of Reorganization, dated as of July 16,
2003, by and among Crdentia Corp., Nurses Network, Inc., NNI
Acquisition Corporation and certain shareholders of Nurses
Network, Inc., as amended by Amendment No. 1 made and entered
into effective as of September 9, 2003.
Agreement and Plan of Reorganization, dated as of September
15, 2003, by and among Crdentia Corp., New Age Staffing, Inc.,
NAS Acquisition Corporation and the shareholders of New Age
Staffing, Inc.
Agreement and Plan of Reorganization, dated as of November 4,
2003, by and among Crdentia Corp., PSR Acquisition
Corporation, PSR Holdings Acquisition Corporation, PSR Nurse
Recruiting, Inc. and PSR Nurses Holdings Corp
C. NATURE OF OPERATIONS AND LOCATIONS
17. The following is a brief description of each Credit Party's
business:
------------------------------------------- ------------------------------------
CREDIT PARTY BUSINESS DESCRIPTION
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
All Credit Parties Healthcare staffing services
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
18. Each location at which any Credit Party maintains any books,
records, inventory, equipment or other assets is set forth in the table below,
including for each such location a street address, the approximate size, an
indication of whether the location is owned by the applicable Credit Party,
leased by the applicable Credit Party (and, if so, the name and address of the
owner of the location) or operated by a third party, such as a warehouseman or
processor (and, if so, the name and address of such third party). The chief
executive office of each Credit Party is indicated in the table below with an
asterisk (*). In addition, the legal descriptions for any leased or owned real
estate at which any Credit Party maintains any equipment are set forth on the
Real Estate Schedule attached hereto.
7
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
CREDIT PARTY ADDRESS SIZE OWNED/LEASED/OPERATED NAME AND ADDRESS OF OWNER (IF
BY THIRD PARTY LEASED) OR THIRD-PARTY OPERATOR (IF
OPERATED BY A THIRD PARTY)
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
Crdentia Corp. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 16,533 Leased Merit 99 Office Portfolio, L.P.
Dallas, TX * ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
Crdentia Corp. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, 2,487 Leased ▇▇▇▇▇ ▇▇▇▇▇▇
Suite D, 2713 ▇▇▇▇▇▇▇▇ Drive
San Francisco, CA ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
Crdentia Corp. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, 1,100 Leased Trussville Properties, Inc.
Birmingham, AL ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
Crdentia Corp. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Leased ▇▇▇▇▇▇▇ Associates, LP
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇ c/o Private Properties
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
Crdentia Corp. 1114 Seventeenth 1,170 Leased ▇▇▇ ▇▇▇▇▇ Investments
Avenue, Nashville, TN ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------- ----------------------- ----------- ---------------------- --------------------------------------
19. The addresses of any locations not specified in Item 18 where any
Credit Party has maintained inventory, books, records, equipment or other assets
during the 4 month period preceding the Closing Date are:
---------------------------------------- ---------------------------------------
CREDIT PARTY ADDRESS
---------------------------------------- ---------------------------------------
NONE
---------------------------------------- ---------------------------------------
---------------------------------------- ---------------------------------------
---------------------------------------- ---------------------------------------
---------------------------------------- ---------------------------------------
D. FINANCING MATTERS
20. No Credit Party has any Debt or any contingent obligations which
would become Debt if they were non-contingent, except for the following:
8
Subordinated Promissory Note dated September 22, 2003 in the principal amount of
$1,650,000.00 made payable by Crdentia Corp. to ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$22,500 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$50,432 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$41,506 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $1,200,000 made payable to ▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $2,525,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $200,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
Convertible Subordinated Promissory Note dated August 28, 2003 in the principal
amount of $50,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇▇▇▇▇▇ Trust, dated 1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇.▇. ▇▇▇▇▇▇ Community Property
Trust dated 5/5/75.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $300,000 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $200,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $25,000 made payable to Health Care Investment Visions, LLC
Convertible Subordinated Promissory Note dated September 30, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, Tenants in Common.
Convertible Subordinated Promissory Note dated October 16, 2003 in the principal
amount of $120,000 made payable to Aydah Kytay
9
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $15,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust U/A dated
10/02/98.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Co-Trustees of the ▇▇▇▇▇▇▇▇▇ Family Trust, dated 04/03/85.
21. Any current creditors of any Credit Party that will be refinanced
in connection with the funding of the initial Loans and any letters of credit
currently outstanding on behalf of any Credit Party (together with an indication
of whether any such letters of credit will be replaced or collateralized on the
Closing Date) are as follows:
------------------ ----------------------------- -------------------------------
CREDIT PARTY CREDITORS TO BE REFINANCED LETTERS OF CREDIT / REPLACED OR
COLLATERALIZED
------------------ ----------------------------- -------------------------------
NONE
------------------ ----------------------------- -------------------------------
------------------ ----------------------------- -------------------------------
------------------ ----------------------------- -------------------------------
------------------ ----------------------------- -------------------------------
22. Each Credit Party's assets are owned free and clear of any
consensual Liens, except for the consensual Liens set forth on the Lien Schedule
attached hereto. NONE
23. No Credit Party has made any loans to, or otherwise made any
Investments in, any other Persons, except as follows: NONE
24. No Credit Party is obligated to pay any management, consulting or
similar professional advisory fees, except:
AGREEMENT WITH LEK CONSULTING LLC
AGREEMENT WITH ▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS
SEE SCHEDULE 11(i) TO THE LOAN AND SECURITY AGREEMENT.
10
25. Any broker's or similar fees which will be owing in connection with
the consummation of the transactions contemplated by the Loan Documents are: A
FEE WILL BE OWING TO ▇▇▇▇ CAPITAL PARTNERS
E. REGULATORY MATTERS AND DISPUTES
26. Any actions, suits, judgments or proceedings pending against, or,
to Borrower's knowledge, threatened against or affecting, any Credit Party
before any court or arbitrator or any governmental body, agency or official, are
described on the Litigation Schedule attached hereto. NONE
27. All of the material licenses, permits and certificates necessary to
the operation of any Credit Party's business are:
-------------------------------------- -----------------------------------------
CREDIT PARTY LICENSES / PERMITS / CERTIFICATES
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
PLEASE SEE THE ATTACHED MATERIAL
LICENSES, PERMITS AND CERTIFICATE
SCHEDULES
-------------------------------------- -----------------------------------------
28. Any strikes or other labor disputes pending or, to Borrower's
knowledge, threatened, against any Credit Party are: NONE
29. Any notices of non-compliance received by any Credit Party from any
governmental authority during the 5 year period preceding the Closing Date with
respect to any Environmental Laws, securities laws or regulations, tax laws or
regulations, laws or regulations addressing the sale or distribution of durable
medical equipment, health and safety laws or regulations or ERISA are as
follows: NONE
F. SPECIAL COLLATERAL
30. All of the financial institutions at which any Credit Party
maintains any deposit accounts, investment accounts, securities accounts or
similar accounts, together with the account number and a description for each
such account, are:
11
-------------------------------- ------------------------------------- ------------------------- ---------------------
CREDIT PARTY FINANCIAL INSTITUTION(S) WHERE ACCOUNT NUMBERS DESCRIPTIONS OF
ACCOUNTS MAINTAINED ACCOUNTS
-------------------------------- ------------------------------------- ------------------------- ---------------------
Crdentia Corp. Comerica Bank 1892275403 Operating
-------------------------------- ------------------------------------- ------------------------- ---------------------
PSR Nurses, Ltd. Legacy Bank of Texas 888321 Payroll
-------------------------------- ------------------------------------- ------------------------- ---------------------
PSR Nurses, Ltd. Legacy Bank of Texas 888339 Operating
-------------------------------- ------------------------------------- ------------------------- ---------------------
New Age Staffing, Inc. Whitney Bank ▇▇▇-▇▇▇-▇▇▇ Operating
-------------------------------- ------------------------------------- ------------------------- ---------------------
New Age Staffing, Inc. Whitney Bank ▇▇▇-▇▇▇-▇▇▇ Payroll
-------------------------------- ------------------------------------- ------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. West American Bank ▇▇▇-▇▇▇▇▇-▇▇ Credit card clearing
-------------------------------- ------------------------------------- ------------------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. West American Bank ▇▇▇-▇▇▇▇▇-▇ Payroll
-------------------------------- ------------------------------------- ------------------------- ---------------------
Nurses Network, Inc. Bank of America 00665-04059 Operating
-------------------------------- ------------------------------------- ------------------------- ---------------------
PSR Nurses, Ltd. Bank One, N.A. 000000636694283 Operating
-------------------------------- ------------------------------------- ------------------------- ---------------------
PSR Nurses, Ltd. Bank One, N.A. 000000649350550 ATM/Debit Cards
-------------------------------- ------------------------------------- ------------------------- ---------------------
New Age Staffing, Inc. Regions Bank ▇▇-▇▇▇▇-▇▇▇▇ Payroll
-------------------------------- ------------------------------------- ------------------------- ---------------------
31. All of the items of intellectual property owned by or licensed to
any Credit Party, together with the registration or application number for each
such item of intellectual property (if registered or if an application for
registration has been submitted), are:
------------------------------- ---------------------------- ---------------------------- ----------------------------
CREDIT PARTY PATENTS / REGISTRATION OR TRADEMARKS / REGISTRATION COPYRIGHTS / REGISTRATION
APPLICATION NUMBERS OR APPLICATION NUMBERS OR APPLICATION NUMBERS
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
NONE
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
32. No Credit Party has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except: NONE
33. No Credit Party owns any equipment subject to a certificate of
title statute (including, without limitation, any motor vehicles), except: NONE
34. No Credit Party owns any assets that are of a type in which a lien
may be registered, recorded or filed under, or notice thereof given under, any
federal statute or regulation, except for the intellectual property identified
in Item 31 above and except: ▇▇▇▇
▇▇
▇▇. No Credit Party has any letter of credit rights, any interests in
commercial tort claims or any documents of title, except: NONE
G. HEALTHCARE MATTERS
36. Each Credit Party is certified for participation in the Medicare
program in the following jurisdictions:
------------------------------ ---------------------------- ----------------------------- ----------------------------
CREDIT PARTY REGION (A, B, C, D) CARRIER/INTERMEDIARY NAME SUPPLIER/PROVIDER NUMBER
------------------------------ ---------------------------- ----------------------------- ----------------------------
------------------------------ ---------------------------- ----------------------------- ----------------------------
NONE
------------------------------ ---------------------------- ----------------------------- ----------------------------
------------------------------ ---------------------------- ----------------------------- ----------------------------
------------------------------ ---------------------------- ----------------------------- ----------------------------
------------------------------ ---------------------------- ----------------------------- ----------------------------
------------------------------ ---------------------------- ----------------------------- ----------------------------
37. Each Credit Party is certified for participation in the Medicaid programs
offered by the following states:
---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY STATE MEDICAID SUPPLIER NUMBER
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
NONE
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
38. No Credit Party is accredited by a private health care organization
accreditation agency, except: NONE
39. No Credit Party has received notice of non-compliance with state or
federal laws or regulations addressing health care fraud and abuse, except: NONE
40. No Credit Party has received notice of non-compliance with any of
the regulations promulgated under the Health Insurance Portability and
Accountability Act which currently are in effect, except: NONE
13
H. CONTACT INFORMATION
41. Legal Counsel for the Company is as follows:
Name of the Firm: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
-----------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
-----------------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
Partner Handling Relationship: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
-----------------------------------
42. The Certified Public Accountant for the Company is as follows:
Name of the Firm: BDO ▇▇▇▇▇▇▇, LLP
-----------------------------------
Address: ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
Partner Handling Relationship: ▇▇▇▇▇ ▇▇▇
-----------------------------------
43. The Insurance Broker/Bank for the Corporation is as follows:
Name of the Firm: ALLIED INSURANCE COMPANY
-----------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
-----------------------------------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------
Partner Handling Relationship: ▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
-----------------------------------
E-Mail: ▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
-----------------------------------
[Signature page follows]
14
(SIGNATURE PAGE TO INFORMATION CERTIFICATE)
Bank shall be entitled to rely upon the foregoing in all respects and
the undersigned is duly authorized to execute and deliver this Information
Certificate.
Very truly yours,
Crdentia Corp.
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
Nurses Network, Inc.
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
New Age Staffing, Inc.
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
PSR Nurse Recruiting, Inc.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
15
PSR Nurses Holdings Corp.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
PSR Nurses, Ltd.
By: PSR Nurse Recruiting, Inc.
By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
16
LIST OF SCHEDULES TO
--------------------
INFORMATION CERTIFICATE
-----------------------
Schedule of Identification Matters
Schedule of Legal Matters
Schedule of Affiliates
Capitalization Schedules
Material Licenses, Permits and Certification Schedules
17
A. SCHEDULE OF IDENTIFICATION MATTERS
1. Crdentia Corp.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
Nurses Network, Inc.
New Age Staffing, Inc.
PSR Nurses, Ltd.
PSR Nurse Recruiting, Inc.
PSR Nurses Holdings Corp.
2. CREDIT PARTY TYPE OF ORGANIZATION
------------ --------------------
Crdentia Corp. Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. Corporation
Nurses Network, Inc. Corporation
New Age Staffing, Inc. Corporation
PSR Nurses, Ltd. Limited Partnership
PSR Nurse Recruiting, Inc. Corporation
PSR Nurses Holdings Corp. Corporation
3. CREDIT PARTY JURISDICTION OF ORGANIZATION
------------ ----------------------------
Crdentia Corp. Delaware
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. California
Nurses Network, Inc. California
New Age Staffing, Inc. Delaware
PSR Nurses, Ltd. Texas
PSR Nurse Recruiting, Inc. Texas
PSR Nurses Holdings Corp. Texas
4. CREDIT PARTY JURISDICTIONS OF QUALIFICATION
------------ ------------------------------
Crdentia Corp. Delaware, California
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. California
Nurses Network, Inc. California
New Age Staffing, Inc. Delaware, Alabama, California, Louisiana, Maryland,
New Jersey, Rhode Island, Texas
PSR Nurses, Ltd. Texas, Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nebraska, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, Tennessee,
Utah, Vermont, Virginia, District of Columbia,
Washington, West Virginia, Wisconsin
18
PSR Nurse Recruiting, Inc. Texas, Florida, Illinois, Massachusetts, Mississippi,
Montana, New Mexico, North Carolina, Oregon, District
of Columbia
PSR Nurses Holdings Corp. Texas
5. CREDIT PARTY ORGANIZATIONAL IDENTIFICATION NUMBER
------------ ------------------------------------
Crdentia Corp. 2811491
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. 1966662
Nurses Network, Inc. 2061673
New Age Staffing, Inc. 3696669
PSR Nurses, Ltd. 15413710
PSR Nurse Recruiting, Inc. 163624300
PSR Nurses Holdings Corp. 800246596
B. SCHEDULE OF LEGAL MATTERS
7. CREDIT PARTY TITLE NAME
------------ ----- ----
Crdentia Corp. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CFO, Secretary ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CFO, Secretary
Treasurer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Nurses Network, Inc. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CFO, Secretary
Treasurer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
New Age Staffing, Inc. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CFO, Secretary
Treasurer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
PSR Nurse Recruiting, Inc. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CFO, Secretary
Treasurer ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
PSR Nurses Holdings Corp. CEO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CFO, Secretary
Treasurer ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
8. CREDIT PARTY BOARD OF DIRECTORS/GENERAL PARTNER
------------ ----------------------------------
Crdentia Corp ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, C. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Nurses Network, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
New Age Staffing, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
PSR Nurses, Ltd. PSR Nurse Recruiting, Inc.
PSR Nurse Recruiting, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
PSR Nurses Holdings Corp. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇
▇. SCHEDULE OF AFFILIATES
----------------------
The Affiliates of each Credit Party are as follows and, except as set forth
below, no Credit Party is party to any agreements with any such Affiliate.
---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY AFFILIATES AGREEMENTS WITH AFFILIATES
---------------------------------------- -------------------------------------- --------------------------------------
Crdentia Corp. Parent entity None
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
Nurses Network, Inc. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
New Age Staffing, Inc. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
PSR Nurses, Ltd. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
PSR Nurse Recruiting, Inc. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
PSR Nurses Holdings Corp. Subsidiary of Crdentia Corp. None
---------------------------------------- -------------------------------------- --------------------------------------
Crdentia Corp. MedCap Partner, L.P. Subscription Agreement; Registration
Rights Agreement
---------------------------------------- -------------------------------------- --------------------------------------
20
14. CAPITALIZATION SCHEDULE
-----------------------
Schedule of ownership interests, subsidiaries
-------------------------------------- ------------------------------ ----------------------- ------------------------------
Subsidiary Stockholder and % interest Certificate number Total authorized equity
and shares/cert securities
-------------------------------------- ------------------------------ ----------------------- ------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. Crdentia Corp., 100% 1000 shares, 1000 shares authorized
cert # C-1
-------------------------------------- ------------------------------ ----------------------- ------------------------------
Nurses Network, Inc. Crdentia Corp., 100% 1000 shares, 1000 shares authorized
cert # C-1
-------------------------------------- ------------------------------ ----------------------- ------------------------------
New Age Staffing, Inc. Crdentia Corp., 100% 1000 shares, 1000 shares authorized
cert # C-1
-------------------------------------- ------------------------------ ----------------------- ------------------------------
PSR Nurse Recruiting, Inc. Crdentia Corp., 100% 1000 shares, 1000 shares authorized
cert # C-1
-------------------------------------- ------------------------------ ----------------------- ------------------------------
PSR Nurses Holdings Corp. Crdentia Corp., 100% 1000 shares, 1000 shares authorized
cert # C-1
-------------------------------------- ------------------------------ ----------------------- ------------------------------
PSR Nurses, Ltd. Crdentia Corp., 100% owner Not certificated n/a
of sole general partner PSR
Nurse Recruiting, Inc. and
100% owner of sole limited
partner PSR Nurses Holdings
Corp.
-------------------------------------- ------------------------------ ----------------------- ------------------------------
21
CRDENTIA CORP.
CAPITALIZATION TABLE
DATE NUMBER WEIGHTED TOTAL CASH ISSUED PRICE TOTAL
OF OF SHARES AVERAGE PRICE RECEIVED FOR SERVICES PER SHARES
ISSUANCE ISSUED SHARES (BSC) PAID BY COMPANY TO COMPANY SHARE OUTSTANDING COMMENTS
------------- ------------ ------------ ----------- ------------ ------------ --------- ------------ -------------------------------
1/9/1998 2,250,000 $ 225.00 $225.00 $0.0001 2,250,000 Issued to founders for services
rendered
8/31/1998 2,250,000 End of FY98
10/30/1998 2,750,000 - $- 5,000,000 Issued to four individuals for
future services
10/30/1998 (2,750,000) - $- 2,250,000 Shares cancelled
11/5/1998 500,000 25,000.00 25,000.00 $0.0500 2,750,000 Satisfy debt owed to four
individuals who rendered
services
3/3/1999 2,325,200 232.00 232.00 $0.0001 5,075,200 Satisfy debt owed to eight
individuals who rendered
services
8/31/1999 3,812,633 End of FY99
3115/2000 1,219,800 122.00 122.00 $0.0001 6,295,000 Satisfy debt owed to ten
individuals who rendered
services
4/20/2000 45,000 45,000.00 45,000.00 $1.0000 6,340,000 Sale of shares under Reg D
8/31/2000 5,654,793 6,340,000 End of FY00
10/2/2000 660,000 66.00 66.00 $0.0001 7,000,000 Issued for consulting services
(returned on 7/10/01; see below)
10/6/2000 10,000 10,000.00 5,000.00 5,000.00 $1.0000 7,010,000 Lifen received $5K cash and
$5K in services
11/8/2000 10,000 5,000.00 5,000.00 $0.5000 7,020,000 Sale of shares
11/28/2000 20,000 10,000.00 10,000.00 $0.5000 7,040,000 Sale of shares
1/2/2001 14,000 7,000.00 7,000.00 $0,5000 7,054,000 Sale of shares
1/4/2001 20,000 10,000.00 10,000.00 $0.5000 7,074,000 Sale of shares
1/22/2001 4,000 2,000.00 2,000.00 $0.5000 7,078,000 Sale of shares
1/24/2001 10,000 5,000.00 5,000.00 $0.5000 7,088,000 Sale of shares
5/2/2001 500,000 250,000.00 250,000.00 $0.5000 7,588,000 Lifen received $100K in May,
$50K ea in June, Jul. and Aug
7/10/2001 (530,000) - $- 7,058,000 Shares issued on 10/2/00
returned and cancelled (see
"Ownership History" for details)
8/31/20001 6,729,967 7,058,000 End of FY01
11/16/2001 366,000 37.00 37.00 $0.0001 7,424,000 Issued for consulting services
12/31/2001 7,193,000 7,424,000 4 Months Ended 12/31/2001
3/31/2002 7,424,000 7,424,000 1Q02
6/30/2002 7,424,000 7,424,000 2Q02
8/16/2002 574,286 402,150.00 402,150.00 $0.7003 7,998,286 Sale of stock to foreign
investor
8/16/2002 2,000,000 100,000.00 100,000.00 $0.0500 9,998,286 Sale of stock to two investors
8/31/2002 7,452,582 9,998,286 End of FY02
9/30/2002 8,683,162 9,998,286 3Q02
9/30/2002 7,848,333 9,998,286 9 m/e 9/30/02
10/22/2002 300,000 2,100.00 2,100.00 $0.007 10,298,286 Shares granted to three
directors (▇▇▇ ▇▇▇▇▇▇; ▇▇▇
▇▇▇▇▇▇▇; ▇▇▇ ▇▇▇▇▇▇
11/1/2002 399,931 2,666.67 2,666.67 $0.0067 10,2698,217 Shares granted to ▇▇▇ ▇▇▇▇▇▇▇▇
11/1/2002 299,949 2,000.00 2,000.00 40.0067 10,998,166 Shares granted to ▇▇▇▇▇▇▇▇
▇▇▇▇▇
11/30/2002 10,349,896 10,998,166 End of former 1Q03
12/31/2002 10,514,620 10,998,166 4 Months Ended 12/31/2002
12/31/2002 8,562,822 10,998,166 Calendar Year Ended 12/31/02
3/31/2003 10,998,166 10,998,166 1Q03
6/30/2003 10,998,166 10,998,166 2Q03
6/30/2003 10,998,166 10,998,166 1H03
8/6/2003 (3,048,000) 7,950,166 Return of shares by 11
investors to facilitate receipt
of financing
8/7/2003 480,000 $ 2.50 8,430,166 Issued to sellers of BAC to
Crdentia
9/23/2003 6,884,614 $ 1.30 15,314,780 Issued to sellers of NAS to
Crdentla
9/30/2003 9,981,561 15,314,780 3Q03
9/30/2003 10,655,574 15,314,780 9 m/e 9/30/03
10/2/2003 118,084 $ 2.40 15,432,864 Issued to sellers of NN to
Crdentia
11/17/2003 (181,219) 15,251,645 buy back ▇▇▇▇▇ ▇▇▇▇▇ shares
12/2/2003 3,418,789 18,670,434 Issued to sellers of PSR to
Crdentia
12/2/2003 167,623 $ 2.44 18,838,057 Issued to ▇▇▇▇▇ ▇▇▇▇▇▇ to
convert $409,000 note
12/31/2003 16,503,673 18,838,057 4Q03
12/31/2003 12,129,816 18,838,057 Calendar Year Ended 12/31/03
22
#14.1 Capitalization
Crdentia Corp.
Capitalization
In addition to the common stock outstanding at 12/31/03, as illustrated on the
enclosed Capitalization Schedule - Common, Crdentia has the following
equity-related items outstanding: (copies attached)
PREFERRED STOCK -
-----------------
Series A Convertible Preferred Stock:
O/S at 12/31/03 1,750,000 shares
O/S at 3/31/04 2,750,000 shares
- Mandatory conversion to Common at $1/share after one year
CONVERTIBLE SUBORDINATED PROMISSORY NOTES:
-----------------------------------------
O/S at 3/31/04 $910,000
- Convertible at holders option to Common after one year at
$1/share
STOCK PURCHASE RIGHT - ▇. ▇▇▇▇▇▇ - 2,767,278 shares
--------------------
- See attached copy of Stock Based Awards - Note 12 to the
12/31/03
Audited Financial Statements
STOCK OPTIONS -
---------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 12/16/03 100,000
C. ▇▇▇▇ ▇▇▇▇▇ 12/16/03 100,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 12/22/03 618,224
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 12/31/03 7,000,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 04/08/04 331,512
27. SCHEDULES OF MATERIAL LICENSES, PERMITS AND CERTIFICATES
All of the material licenses, permits and certificates necessary to the
operation of any Credit Party's business are:
------------------------------------------ ---------------------------------------------------------------------------
CREDIT PARTY LICENSES / PERMITS / CERTIFICATES
------------------------------------------ ---------------------------------------------------------------------------
Crdentia & all subs See list of qualifications to transact business - previously provided
------------------------------------------ ---------------------------------------------------------------------------
------------------------------------------ ---------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. State of California Department of Health Services License
------------------------------------------ ---------------------------------------------------------------------------
------------------------------------------ ---------------------------------------------------------------------------
PSR Nurses, Ltd. Commonwealth of Kentucky Nursing Pool License
------------------------------------------ ---------------------------------------------------------------------------
------------------------------------------ ---------------------------------------------------------------------------
PSR Nurses, Ltd. State of Maine, Temporary Nurse Agency Certification
------------------------------------------ ---------------------------------------------------------------------------
------------------------------------------ ---------------------------------------------------------------------------
PSR Nurses, Ltd. Minnesota Department of Commerce, Exemption from Employee Leasing Company
Registration Requirements
------------------------------------------ ---------------------------------------------------------------------------
CRDENTIA CORP.
EIN ▇▇-▇▇▇▇▇▇▇
AUTHORITY TO DO BUSINESS DATE WITHHOLDING
FILE ACCOUNT ISSUED ACCOUNT
------------ ------ -------
Alabama Certificate 1/12/2004 0000420723
Alaska Certificate 84517F 1/13/2004 APPLIED FOR
Arizona APPLIED FOR APPLIED FOR
Arkansas Certificate ▇▇-▇▇▇▇▇▇▇
California Prior Prior 235o9337-9
Colorado Additional Requests filed corrected name change 26-48856
notice
Connecticut Additional Requests Re-Sent App. 2/27/04
Delaware N/A NA APPLIED FOR
Dist. Of Columbia Certificate 1/27/2004 APPLIED FOR
Florida Certificate F04000000518 1/23/2004 APPLIED FOR
Georgia Certificate 0403255 1/13/2004 ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇▇ Certificate 1/13/2004 10714518
Idaho Certificate C152611 1/12/2004 002706545
Illinois Additional Requests ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ Certificate 1/12/2004 01168040330010
Iowa Certificate W00370777 1/12/2004 76-05857010018
Kansas 3600442 APPLIED FOR
Kentucky Certificate 0577088.09 1/23/2004 016865
Louisiana Certificate 35633310X 1/22/2004 APPLIED FOR
Maine Certificate 20040599F 1/26/2004 75-058570100
Maryland APPLIED FOR APPLIED FOR
Massachusetts Certificate Stamp 1/12/2004 APPLIED FOR
Michigan Certificate 2/2/2004 ▇▇-▇▇▇▇▇▇▇
Minnesota Certificate 754933-2 1/14/2004 6816306
Mississippi APPLIED FOR APPLIED FOR
Missouri Certificate F00562775 1/12/2004 18635211
Montana Certificate F42887-275901 1/26/2004 Re-sent App 2/26/04
Nebraska Certificate 1000434055 1/12/2004 ▇▇-▇▇▇▇▇▇▇
Nevada Additional Requests APPLIED FOR
New Hampshire Certificate 1/15/2004 APPLIED FOR
New Jersey Certificate 0100919390 1/12/2004 Sent Tax Booklet
New Mexico Certificate 2436111 3/4/2004 03-010122-00-0
New York Certificate 040122000609 1/22/2004 7605857014
North Carolina Certificate C200401300154 1/13/2004 600454766
North Dakota Certificate 10,371,900 1/26/2004 760585701-01
Ohio Additional Requests 52638650
Oklahoma Certificate 34048190 1/12/2004 APPLIED FOR
Oregon Certificate 195738-98 1/14/2004 01204097-1
Pennsylvania Additional Requests 91o925-085
Rhode Island Certificate 1/12/2004 Sent Temporary Forms
South Carolina Additional Requests 25455916-0
South Dakota Certificate FB028148 1/23/2004 APPLIED FOR
Tennessee Certificate 00443036 1/13/2004 APPLIED FOR
Texas Certificate 800291471 1/9/2004 APPLIED FOR
Utah Certificate Stamp 1/22/2004 Z78456
Vermont Certificate 430-760585701F-01
Virginia Certificate 0021137677
Washington Certificate ▇▇▇-▇▇▇-▇▇▇ 1/22/2004 Re-sent App.
West Virginia Certificate 62868 1/13/2004 Sent Tax Booklet
Wisconsin Certificate C058674 669555-5
Wyoming 2004-00463219 APPLIED FOR
(continued on next page)
Alabama UNEMPLOYMENT OTHER
Alaska ACCOUNT RATE ACCOUNTS
Arizona ------- ---- --------
Arkansas
California Re-Sent App. 2/27/04
Colorado APPLIED FOR
APPLIED FOR
Connecticut 000260862 3.7
Delaware 235o9337-9 3.4 & .1
Dist. Of Columbia 609213.00-1 0.0252
Florida
Georgia ▇▇-▇▇▇-▇▇ 2.4
Hawaii Must have Employees
Idaho APPLIED FOR
APPLIED FOR
Illinois 865364-04
Indiana APPLIED FOR
Iowa Must have
Employees-call
Kansas 4382541
Kentucky 519740
Louisiana Must have
Maine Employees-call
Maryland APPLIED FOR
Massachusetts Must have Employees Corp. Income Tax Acct 011840
Michigan Re-Sent App. 2/27/04
Minnesota 0212738000 1.45
Mississippi APPLIED FOR
Missouri Re-Sent App. 2/27/04
Montana APPLIED FOR
Nebraska APPLIED FOR
Nevada 84/23180/0/00 2.7
New Hampshire APPLIED FOR
New Jersey 807257
New Mexico 0301322009 3.5
New York Must have Employees
North Carolina 145590
North Dakota APPLIED FOR
Ohio APPLIED FOR
Oklahoma APPLIED FOR
Oregon 03 29 462 6 1.2 Website PIN 635326
Pennsylvania 1001973
Rhode Island Re-Sent App. 2/27/04
South Carolina ▇▇-▇▇▇▇▇▇▇
South Dakota APPLIED FOR
Tennessee 99-99941 0.03752
Texas APPLIED FOR
Utah APPLIED FOR
Vermont APPLIED FOR
Virginia Must have Employees
▇▇-▇▇▇▇▇▇-▇ 2.7
Washington C 7-384753o0 0.022
West Virginia 205 3922 contact for rate when/if empl in state
Wisconsin 0008112959 2.8
Wyoming
602-357-916-000 3.62 Workers Comp Rate .17855
APPLIED FOR contact for # & rate when/if empl in state
803202-000-7
Must have Employees
Red = Notes
Blue = Nurse currently in the State
EXHIBIT E
NOTICE OF BORROWING
Date: ______________________, 20__
To: BRIDGE HEALTHCARE FINANCE, LLC, a Delaware limited liability company
("LENDER")
This Borrowing Notice is furnished pursuant to Section 2 of that
certain Loan and Security Agreement dated as of June 16, 2004 (as amended,
modified, renewed or extended from time to time, the "AGREEMENT") among Crdentia
Corp. ("CRDENTIA"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.("▇▇▇▇▇"), Nurses Network,
Inc.("NURSES NETWORK"), New Age Staffing, Inc. ("NEW AGE"), PSR Nurses, Ltd.
("PSR LTD."), PSR Nurse Recruiting, Inc. ("PSR RECRUITING"), PSR Nurses Holdings
Corp. ("PSR HOLDING") (Crdentia, ▇▇▇▇▇, Nurses Network, New Age, PSR Ltd., PSR
Recruiting and PSR Holding each individually, and referred to collectively as,
"BORROWER") and Lender. Unless otherwise defined herein, capitalized terms used
in this Borrowing Notice have the meanings ascribed thereto in the Agreement.
Borrower hereby notifies the Lender of its request of the following
Revolving Loan:
(1) Borrowing Date of Revolving Loan (must be a Business Day):
____________
(2) Aggregate Amount of the Revolving Loan: $_________________________
The Borrower hereby represents that, as of the date of this Borrowing
Notice:
(a) There exists no Default or Event of Default and no Default or
Event of Default shall result from this Revolving Loan.
(b) The representations and warranties contained in Section 11 of
the Agreement are true and correct as of the date hereof,
except to the extent any such representation or warranty is
stated to relate solely to an earlier date.
CRDENTIA CORP.,
a Delaware corporation
By: ___________________________
Name: _________________________
Title: ________________________
SCHEDULE 1 - PERMITTED LIENS
NONE.
SCHEDULE 11(B) - BUSINESS AND COLLATERAL LOCATIONS;
CERTAIN COLLATERAL
A. Borrower's business locations (please indicate which location is the
principal place of business and at which locations originals and all
copies of Borrower's books, records and accounts are kept).
1. Principal place of business and location of originals and all
copies of books, records and accounts:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
5. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post
office boxes of Borrower. NONE
C. Bank Accounts of Borrower:
BANK (WITH ADDRESS) ACCOUNT NUMBER TYPE OF ACCOUNT
------------------- -------------- ---------------
1. Comerica Bank 1892275403 Operating
2. Legacy Bank of Texas 888321 Payroll
3. Legacy Bank of Texas 888339 Operating
4. Whitney Bank ▇▇▇-▇▇▇-▇▇▇ Operating
5. Whitney Bank ▇▇▇-▇▇▇-▇▇▇ Payroll
6. West American Bank ▇▇▇-▇▇▇▇▇-▇▇ Credit card clearing
7. West American Bank ▇▇▇-▇▇▇▇▇-▇ Payroll
8. Bank of America 00665-04059 Operating
9. Bank One, NA 000000636694283 Operating
10. Bank One, NA 000000649350550 ATM/Debit Cards
11. Regions Bank ▇▇-▇▇▇▇-▇▇▇▇ Payroll
D. Certain Collateral
a. Intellectual Property -- NONE
b. Instruments -- NONE
c. Deposit Accounts --SEE ACCOUNTS LISTED UNDER
C ABOVE
d. Investment Property - NONE
e. Letter-of-Credit Rights -- NONE
f. Chattel Paper -- NONE
g. Documents -- NONE
h. Commercial Tort Claims -- NONE
i. Certificate of Title Goods -- NONE
j. Collateral with Third Parties - NONE
SCHEDULE 11(G) - LITIGATION
NONE.
SCHEDULE 11(I) - AFFILIATE TRANSACTIONS
Registration rights granted pursuant to that certain Registration
Rights Agreement, dated as of December 17, 2003 by and between Crdentia Corp.
and the investors listed on SCHEDULE A thereto. SEE Exhibit 4.2 to Crdentia
Corp.'s report on Form 8-K filed with the SEC on December 30, 2003.
Stock Purchase Agreement, dated as of May 18, 2003, by and between
Crdentia Corp., MedCap Partners L.P. and the stockholders listed on EXHIBIT A
thereto. SEE Exhibit 10.1 Crdentia Corp.'s report on Form 8-K filed with the SEC
on May 20, 2004.
Options to purchase 7,000,000 shares of Crdentia Corp.'s Common Stock
granted to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Crdentia Corp.'s Chairman and Chief Executive
Officer, on December 31, 2003 and a bonus agreement executed in connection
therewith. SEE Exhibits 10.1, 10.2 and 10.3 to the Crdentia Corp.'s report on
Form 8-K filed with the SEC on January 12, 2003.
Option to purchase up to 100,000 shares of Crdentia Corp.'s Common
Stock at an exercise price of $0.96 per share made by Crdentia Corp. to each of
two members of its Board of Directors on December 16, 2003.
Option to purchase up to 618,224 shares of Crdentia Corp.'s Common
Stock at an exercise price of $0.96 made by Crdentia Corp. to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
its President, on December 16, 2003.
Executive Employment Agreement by and between Crdentia Corp. and ▇▇.
▇▇▇▇▇▇▇▇ dated on or about December 16, 2003, pursuant to which ▇▇. ▇▇▇▇▇▇▇▇
will be granted one or more options to purchase a number of shares of Crdentia
Corp.'s Common Stock equal to five and two hundred and ninths percent (5.209%)
of that aggregate number of (a) additional shares of Common Stock issued in
connection with any Acquisition (as defined therein), plus (b) subject to
certain limitations, the aggregate maximum number of additional shares of Common
Stock, or any warrant, option, purchase right or similar agreement or
arrangement granted in connection with such Acquisition (whether or not such
shares are ever issued but excluding any compensatory options or other
equity-based incentives granted to service providers on or after the closing
date of such Acquisition.
Agreement and Plan of Reorganization, dated as of September 15, 2003,
by and among Crdentia Corp., New Age Staffing, Inc., NAS Acquisition Corporation
and the shareholders of New Age Staffing, Inc. (the "NAS Merger Agreement"). SEE
Exhibit 2.1 to the report on Form 8-K filed with the SEC on September 3, 2003.
Agreement and Plan of Reorganization dated as of November 4, 2003 by
and among Crdentia Corp., PSR Acquisition Corporation, PSR Holdings Acquisition
Corporation, PSR Nurse Recruiting, Inc. and PSR Nurses Holdings Corp. (the "PSR
Merger Agreement"), pursuant to which Crdentia Corp. obtained a 100% ownership
interest in PSR Nurses, Ltd. (through its acquisition of PSR Nurse Recruiting,
Inc., the sole general partner of PSR Nurses, Ltd. and PSR Nurses Holdings
Corp., the sole limited partner of PSR Nurses, Ltd.). Crdentia Corp. uses
offices leased by PSR Nurses, Ltd. as its principal executive offices, a
substantial number of Crdentia Corp.'s staff is PSR Nurses, Ltd. personnel, and
Crdentia Corp. uses some PSR Nurses, Ltd. deposit accounts. In addition,
Crdentia Corp. uses the personnel and bank accounts of several of its other
subsidiaries.
Common Stock Purchase Agreement dated May 15, 2002 by and between
Crdentia Corp. and the parties thereto. SEE Exhibit 10.1 to Crdentia Corp.'s
report on Form 8-K filed with the SEC on August 22, 2002.
Convertible Subordinated Promissory Note dated August 28, 2003 in the
principal amount of $50,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇▇▇▇▇▇ Trust, dated 1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇.▇. ▇▇▇▇▇▇ Community Propoerty
Trust dated 5/5/75.
SCHEDULE 11(J) - NAMES & TRADE NAMES
------------------------------------ -------------------------------------------
BORROWER NAME AND TRADE NAMES
-------- --------------------
------------------------------------ -------------------------------------------
Crdentia Corp. Crdentia Corp.
Lifen, Inc.
Digivision International, Ltd.
------------------------------------ -------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
------------------------------------ -------------------------------------------
Nurses Network, Inc. Nurses Network, Inc.
------------------------------------ -------------------------------------------
New Age Staffing, Inc. New Age Staffing, Inc.
------------------------------------ -------------------------------------------
PSR Nurses, Ltd. PSR Nurses, Ltd.
PSR Nurses Limited Partnership
------------------------------------ -------------------------------------------
PSR Nurse Recruiting, Inc. PSR Nurse Recruiting, Inc.
------------------------------------ -------------------------------------------
PSR Nurses Holdings Corp. PSR Nurses Holdings Corp.
------------------------------------ -------------------------------------------
SCHEDULE 11(N) - INDEBTEDNESS
Subordinated Promissory Note dated September 22, 2003 in the principal amount of
$1,650,000.00 made payable by Crdentia Corp. to ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$22,500 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$50,432 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Subordinated Promissory Note dated October 2, 2003 in the principal amount of
$41,506 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $1,200,000 made payable to ▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $2,525,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
Convertible Subordinated Promissory Note dated December 2, 2003 in the principal
amount of $200,000 made payable to Professional Staffing Services, Inc. and
Nursing Services Registry of Savannah, Inc.
Convertible Subordinated Promissory Note dated August 28, 2003 in the principal
amount of $50,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇▇▇▇▇▇ Trust, dated 1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $50,000 made payable to the ▇.▇. ▇▇▇▇▇▇ Community Propoerty
Trust dated 5/5/75.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $300,000 made payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $200,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
principal amount of $25,000 made payable to Health Care Investment Visions, LLC
Convertible Subordinated Promissory Note dated September 30, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, Tenants in Common.
Convertible Subordinated Promissory Note dated October 16, 2003 in the principal
amount of $120,000 made payable to Aydah Kytay
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
Convertible Subordinated Promissory Note dated December 12, 2003 in the
principal amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $15,000 made payable to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust U/A dated
10/02/98.
Convertible Subordinated Promissory Note dated December 3, 2003 in the principal
amount of $25,000 made payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Co-Trustees of the ▇▇▇▇▇▇▇▇▇ Family Trust, dated 04/03/85.
SCHEDULE 11(P) - PARENT, SUBSIDIARIES AND AFFILIATES
Crdentia Corp., through majority stock or membership ownership,
controls the following entities:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
Nurses Network, Inc.
New Age Staffing, Inc.
PSR Nurses, Ltd.
PSR Nurse Recruiting, Inc.
PSR Nurses Holdings Corp.
Reference is made to the ownership by MedCap Partners L.P. of more than
10% of the outstanding securities of Crdentia Corp.
SCHEDULE 11(Q) - DEFAULTS
NONE.
SCHEDULE 11(T) - ENVIRONMENTAL MATTERS
NONE.
SCHEDULE 11(X) - GOVERNMENT REIMBURSEMENT PROGRAM MATTERS
NONE.
SCHEDULE 11(Z) - LICENSES AND PERMITS
Reference is made to license number NR 00000530 issued by the State of
Washington to PSR Nurses, Ltd. on March 19, 2003, which was valid until March
19, 2004.