EXHIBIT 10.15
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT - REVOLVING LOANS
DATED AS OF NOVEMBER 30, 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")
CRDE CORP. ("ACQUISITION SUBSIDIARY")
ARIZONA HOME HEALTH CARE/PRIVATE DUTY, INC. ("AHHC")
CARE PROS STAFFING, INC. ("CARE PROS")
AS BORROWER
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1. DEFINITIONS.............................................................................................2
(a) Defined Terms..................................................................................2
(b) Accounting Terms...............................................................................2
(c) Terms Defined in UCC...........................................................................2
(d) Other Definitional Provisions; Construction....................................................3
(e) References to Agreements, Enactments, Etc......................................................3
2. LOANS...................................................................................................3
(a) Revolving Loans................................................................................3
(b) Notes..........................................................................................5
3. [LEFT BLANK]............................................................................................5
4. INTEREST, FEES AND CHARGES..............................................................................5
(a) Interest Rate..................................................................................5
(b) Fees and Charges...............................................................................6
(c) Maximum Interest...............................................................................7
5. COLLATERAL..............................................................................................7
(a) Grant of Security Interest to Lender...........................................................7
(b) Other Security.................................................................................8
(c) Possessory Collateral..........................................................................8
(d) Electronic Chattel Paper.......................................................................8
(e) Letter-of-Credit Rights........................................................................8
(f) Third-Party Collateral.........................................................................9
(g) Deposit Account................................................................................9
(h) Insurance Proceeds.............................................................................9
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.................................9
7. POSSESSION OF COLLATERAL AND RELATED MATTERS...........................................................10
8. COLLECTIONS............................................................................................10
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES...........................................12
(a) Borrowing Base Reports........................................................................12
(b) Monthly Reports...............................................................................12
(c) Financial Statements..........................................................................12
(d) Annual Projections............................................................................13
(e) Explanation of Budgets and Projections........................................................13
(f) Invoices and Billing Statements...............................................................13
(g) Obligor Financial Statements and Tax Returns..................................................13
(h) Other Information.............................................................................13
(i) Post-Closing Review...........................................................................13
(j) Public Reporting..............................................................................14
10. TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE..................................................14
11. REPRESENTATIONS AND WARRANTIES.........................................................................15
(a) Financial Statements and Other Information....................................................15
(b) Locations; Certain Collateral.................................................................15
(c) Loans by Borrower.............................................................................15
(d) Accounts......................................................................................16
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(e) Liens.........................................................................................16
(f) Organization, Authority and No Conflict.......................................................16
(g) Litigation....................................................................................16
(h) Compliance with Laws and Maintenance of Permits...............................................16
(i) Affiliate Transactions........................................................................17
(j) Names and Trade Names.........................................................................17
(k) Equipment.....................................................................................17
(l) Enforceability................................................................................17
(m) Solvency......................................................................................17
(n) Indebtedness..................................................................................17
(o) Margin Security and Use of Proceeds...........................................................17
(p) Parent, Subsidiaries and Affiliates...........................................................17
(q) No Defaults...................................................................................18
(r) Employee Matters..............................................................................18
(s) Intellectual Property.........................................................................18
(t) Environmental Matters.........................................................................18
(u) ERISA Matters.................................................................................18
(v) Eligible Accounts.............................................................................19
(w) Reimbursement.................................................................................21
(x) Compliance with Healthcare Regulations........................................................21
(y) Immigration Matters...........................................................................21
(z) Licenses, Permits, etc........................................................................21
(aa) Collective Enterprise.........................................................................21
(bb) Acquisition...................................................................................22
(cc) Certain Financial Information.................................................................22
12. AFFIRMATIVE COVENANTS..................................................................................22
(a) Maintenance of Records........................................................................22
(b) Notices.......................................................................................22
(c) Compliance with Laws and Maintenance of Permits...............................................24
(d) Inspection and Audits.........................................................................24
(e) Insurance.....................................................................................25
(f) Collateral....................................................................................26
(g) Use of Proceeds...............................................................................26
(h) Taxes.........................................................................................26
(i) Intellectual Property.........................................................................26
(j) Staffing Contracts............................................................................27
(k) Billing and Collection System.................................................................27
(l) Integration of Systems........................................................................27
(m) Subordination Agreement.......................................................................27
13. NEGATIVE COVENANTS.....................................................................................27
(a) Indebtedness..................................................................................27
(b) Liens.........................................................................................28
(c) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary
Course of Business............................................................................28
(d) Dividends and Distributions...................................................................29
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(e) Investments; Loans............................................................................30
(f) Fundamental Changes, Line of Business.........................................................30
(g) Equipment.....................................................................................30
(h) Affiliate Transactions........................................................................30
(i) Settling of Accounts..........................................................................30
(j) Restricted Payments...........................................................................31
(k) Restricted Locations..........................................................................31
14. FINANCIAL COVENANTS....................................................................................31
(a) Tangible Net Worth............................................................................31
(b) Senior Debt Service Coverage Ratio............................................................32
(c) Minimum EBITDA................................................................................32
(d) Acquisition Subsidiary Debt Service Coverage Ratio............................................33
(e) Acquisition Subsidiary Debt Leverage Ratio....................................................34
(f) Acquisition Subsidiary Term Loan Debt Leverage Ratio..........................................34
(g) Capital Expenditure Limitations...............................................................34
(h) Operating Lease Obligations...................................................................34
(i) Financial Reporting Consolidation.............................................................35
15. DEFAULT................................................................................................35
(a) Payment.......................................................................................35
(b) Breach of This Agreement, the Other Agreements and the Term Loan Agreement....................35
(c) Breach of Subordination Agreement.............................................................35
(d) Breaches of Other Obligations.................................................................35
(e) Breach of Representations and Warranties......................................................36
(f) Loss of Collateral............................................................................36
(g) Levy, Seizure or Attachment...................................................................36
(h) Bankruptcy or Similar Proceedings.............................................................36
(i) Appointment of Receiver.......................................................................36
(j) Judgment......................................................................................36
(k) Default or Revocation of Guaranty; Subordination Agreement....................................36
(l) Change of Ownership/Management................................................................37
(m) Material Adverse Change.......................................................................37
(n) Governmental Authorizations...................................................................37
(o) Lockbox Account Instructions..................................................................37
(p) Failure to Maintain Third-Party Payroll Tax Service Provider..................................37
16. REMEDIES UPON AN EVENT OF DEFAULT......................................................................37
17. CONDITIONS PRECEDENT...................................................................................38
18. JOINT AND SEVERAL LIABILITY............................................................................40
19. RELEASES; INDEMNITIES..................................................................................43
20. NOTICE.................................................................................................43
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.................................................44
22. MODIFICATION AND BENEFIT OF AGREEMENT..................................................................44
23. HEADINGS OF SUBDIVISIONS...............................................................................45
24. POWER OF ATTORNEY......................................................................................45
25. CONFIDENTIALITY........................................................................................45
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26. BROKERAGE FEES.........................................................................................45
27. PUBLICITY..............................................................................................45
28. LIMITATION OF ACTIONS..................................................................................46
29. LIABILITY..............................................................................................46
30. COUNTERPARTS...........................................................................................46
31. ELECTRONIC SUBMISSIONS.................................................................................47
32. WAIVER OF JURY TRIAL; OTHER WAIVERS....................................................................47
33. AMENDMENT AND RESTATEMENT..............................................................................48
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
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as amended,
modified or supplemented from time to time, this "Agreement") is made this 30th
day of November, 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"; and together with Crdentia, ▇▇▇▇▇, Nurses
Network, New Age, PSR Ltd., and PSR Recruiting, each a "Crdentia Proper
Borrower"), CRDE Corp. ("Acquisition Subsidiary"), Arizona Home Health
Care/Private Duty, Inc. ("AHHC"), Care Pros Staffing, Inc. ("Care Pros; and
together with CRDE and AHHC, each a "New Borrower") each, having its principal
place of business at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(Crdentia Proper Borrowers and New Borrowers are referred to individually and
collectively as "Borrower").
W I T N E S S E T H:
WHEREAS, Crdentia Proper Borrowers and Lender entered into that certain
Loan and Security Agreement - Revolving Loans dated as of June 16, 2004 (the
"Original Loan Agreement");
WHEREAS, Crdentia has formed Acquisition Subsidiary, a wholly owned
Subsidiary of Crdentia, to facilitate certain Permitted Acquisitions;
WHEREAS, Crdentia formed AHHC Acquisition Corporation ("AHHC
Acquisition") and CPS Acquisition Corporation ("CPS Acquisition"), each a wholly
owned Subsidiary of Acquisition Subsidiary, for purposes of acquiring certain
Targets;
WHEREAS, pursuant to that certain Agreement and Plan of Reorganization
dated as of August 31, 2004 by and among Crdentia, Acquisition Subsidiary, AHHC
Acquisition, AHHC, and the former shareholders of AHHC, AHHC Acquisition merged
with and into AHHC with AHHC being the surviving entity;
WHEREAS, pursuant to that certain Agreement and Plan of Reorganization
dated as of August 31, 2004, by and among Crdentia, Acquisition Subsidiary, CPS
Acquisition, Care Pros and the former shareholders of Care Pros, Care Pros
merged with and into CPS Acquisition with CPS Acquisition being the surviving
entity and immediately upon such merger changed its name to "Care Pros Staffing,
Inc.";
WHEREAS, Borrower has, as of August 31, 2004, 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;
WHEREAS, Borrower and Lender desire to amend and restate the Original
Loan Agreement to provide for, among other things, the addition of the New
Borrowers as additional Borrowers hereunder;
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WHEREAS, the Borrowers and Lender desire to amend and restate the
Original Loan Agreement upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) 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 Original Closing Date. 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
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.
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(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 Agreement, the provisions of this
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.
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
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(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
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
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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. The Revolving Loans and all other
Obligations shall be repaid on the last day of the Term.
(b) 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.
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(b) Fees and Charges.
(i) Closing Fee: Borrower has paid to Lender a closing fee of
one hundred fifty thousand dollars ($150,000).
(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.
(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
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("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.
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 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 (y) 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 9-406, 9-407, 9-408 or 9-409 of the
Uniform Commercial Code of any relevant jurisdiction.
7
(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.
(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 (not including, however, any
equity interests of any Borrower pledged by Crdentia to BOF under the Pledge
Agreement), 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.
8
(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 and BOF, executed by the financial institution at which such account
is maintained, and shall take such other actions as Lender and BOF may jointly
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.
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.
9
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.
(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.
10
(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
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.
11
(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 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 (except where such calculations otherwise
require), 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 the Crdentia Proper Borrowers on a Crdentia Proper Consolidated
Basis and of the Acquisition Subsidiary and its Subsidiaries on an Acquisition
Subsidiary Consolidated Basis, 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 for the
Crdentia Proper Borrowers on a Crdentia Proper Consolidated Basis and of the
Acquisition Subsidiary and its Subsidiaries on an Acquisition Subsidiary
Consolidated Basis, 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 financial statements of the Borrowers on a consolidated
basis, and unaudited financial statements of the Crdentia Proper Borrowers on a
Crdentia Proper Consolidated Basis and of the Acquisition Subsidiary and its
Subsidiaries on an Acquisition Subsidiary Consolidated Basis, with an
unqualified opinion as to the audited financial statements 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.
12
(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 each of the Crdentia Proper Borrowers and the Acquisition Subsidiary on
a separate basis, 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.
(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) days after 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").
13
(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 of the Original Loan Agreement until June 16, 2007 (the
"Term"), unless earlier terminated by the terms of this Agreement.
(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.
(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 Original 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
14
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 Original 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 the Original Closing Date, 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, 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 Original 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.
15
(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.
(g) Litigation. Except as disclosed to Lender on Schedule 11(g)
hereto, as of the Original 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.
16
(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.
(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 Schedule 11(n) hereto describes all
Indebtedness of the Borrower existing as of the Original Closing Date,
including, without limitation, 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.
17
(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 Original 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
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.
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(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;
(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;
19
(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 (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.
20
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
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 Closing Date, 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.
21
(bb) Acquisition. The Closing Date Permitted Acquisitions have been
consummated pursuant to the terms of the Acquisition Documents related thereto
and in compliance with all applicable laws. Borrower has provided to Lender
complete copies of the Acquisition Documents, including all schedules, exhibits
and disclosure letters referred to therein or delivered pursuant thereto, if
any, and all amendments thereto, waivers relating thereto and other side letters
or agreements affecting the term thereof. None of such agreements and documents
has been amended or supplemented, nor have any of the provisions thereof been
waived by the parties thereto, except pursuant to a written agreement or
agreement which has heretofore been delivered to the Lender.
(cc) Certain Financial Information. The following have been
delivered to Lender as of the Original Closing Date: (i) internally prepared
financial statements of Borrower for the most recent month end and (ii)
projections in form and detail satisfactory to Lender giving effect to each
Permitted Acquisition.
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 (except for the covenant
specifically waived by Lender pursuant to the terms of that certain Specific
Waiver of Default to Loan and Security Agreement dated as of November 4, 2004):
(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 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.
22
(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).
23
(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.
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.
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(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 and
BOF. 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 and BOF, as their interests appear. 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 and BOF, as their interests may
appear, 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 and BOF, as their
interests may appear. 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.
25
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
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.
26
(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.
(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.
(l) Integration of Systems. Within thirty (30) days after the
Closing Date, Borrower shall fully integrate the accounting and billing systems
of Care Pros Staffing, Inc. and Arizona Home Health Care / Private Duty, Inc.
onto the Crdentia accounting and billing system. Within sixty (60) days of the
Closing Date, Borrower shall have integrated the Closing Date Permitted
Acquisitions into Borrower's accounting system and general ledger.
(m) Subordination Agreement. On or before November 30, 2004,
Borrower shall use its commercially reasonable efforts to deliver to Lender a
Subordination Agreement executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, in form and substance
acceptable to Lender, with respect to the Indebtedness (i) under that certain
convertible subordinated promissory note dated December 2, 2003 in the original
principal amount of $2,525,000 made payable to Professional Staffing Services,
Inc. and (ii) under that certain convertible subordinated promissory note dated
December 2, 2003 in the original principal amount of $200,000 made payable to
Professional Staffing Services, Inc. and Nursing Services Registry of Savannah,
Inc.
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 for Borrowed Money
other than the Loans and the Term Loans 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.
27
(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 Crdentia Proper Borrower may merge with and into Crdentia so
long as Crdentia is the surviving entity, and (ii) any Crdentia Proper Borrower
other than Crdentia may merge with another Crdentia Proper Borrower other than
Crdentia, (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 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 the equity interests of such new Subsidiary 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
Acquisition Subsidiary shall have, on a pro forma basis, independent and
separate from the Crdentia Proper Borrowers: (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) 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 shall be in compliance with all
financial covenants set forth in Section 14 hereof; (D) Excess Availability of
the Crdentia Proper 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; (E) the amount of (i) the revolving borrowing base
attributable to the Acquisition Subsidiary, as determined by the Lender in its
good faith credit judgment, less (ii) the sum of the outstanding Revolving Loans
attributable to Acquisition Subsidiary, shall be an amount mutually agreed upon
between Lender and Borrower; (F) the Target entity to be acquired in such
Acquisition shall be a separate, independent Subsidiary of Acquisition
Subsidiary or merged with and into Acquisition Subsidiary as of the date of such
acquisition; (G) 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 Section 2(a) hereof) which is
calculated separate and independent from the Crdentia Proper Borrowers with
respect to any Revolving Loans thereafter advanced to such new Borrower; (H) any
28
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; (I) Lender shall have reviewed and found
satisfactory all Acquisition Documents in respect thereof prior to Borrower
entering into any such Acquisition Documents; (J) no Default or Event of Default
exists as of the proposed date of the Acquisition or would result after giving
effect thereto; (K) Crdentia shall deliver to Lender a certificate of an officer
of Crdentia certifying compliance with the foregoing, (L) Borrower shall deliver
to Lender any other due diligence reasonably requested by the Lender in
connection with an Acquisition or Target, including, without limitation
collateral, cash-flow, and operational audits, and background checks on Target's
management, in each case to the reasonable satisfaction to the Lender; and (M)
Borrower shall establish and maintain a separate Lockbox with a Lockbox Bank for
receivables from Account Debtors of Acquisition Subsidiary in accordance with
the requirements of the Term Loan Agreement and this Agreement, and Borrower
shall execute with such Lockbox Bank a lockbox agreement, blocked account
agreement, and such other agreements related to the lockbox arrangements, in
each case in form and substance acceptable to the Lender.
(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 stock dividends to holders of
its Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred
Stock and Series C Preferred Stock.
29
(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.
(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.
30
(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, or (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.
(k) Restricted Locations. Borrower shall not move any of its books
or records or any of its other assets of any kind to its offices located at (i)
▇▇▇▇ ▇. ▇▇▇▇ ▇▇. #▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or (ii) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ #▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
14. FINANCIAL COVENANTS.
Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below:
(a) Tangible Net Worth. Borrower's Tangible Net Worth, on a Crdentia
Proper Consolidated Basis, 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) $(1,500,000) at all times from the Closing Date through
September 30, 2004, (ii) $0 at all times from October 1, 2004 through October
31, 2004, and (ii) thereafter, from the last day of each fiscal quarter of the
Crdentia Proper Borrowers through the day prior to the last day of each
immediately succeeding fiscal quarter of the Crdentia Proper Borrowers, the
Minimum Tangible Net Worth during the immediately preceding period plus
seventy-five percent (75%) of the Crdentia Proper Borrowers' net income (but
without reduction for any net loss) for the Fiscal Year ending on the first day
of such period as reflected on the Crdentia Proper Borrowers' audited year end
financial statement; and "Tangible Net Worth" being defined for purposes of this
Subsection as the Crdentia Proper Borrowers' shareholders' equity (including
retained earnings) less the book value of all intangible assets of the Crdentia
Proper Borrowers as determined solely by Lender on a consistent basis plus the
amount of any Subordinated Debt of the Crdentia Proper Borrowers, all as
determined under GAAP applied on a basis consistent with the financial statement
dated March 31, 2004 except as set forth herein;
31
(b) Senior Debt Service Coverage Ratio. As of the last day of each
applicable period, the ratio of the Borrower's Operating Cash Flow, on a
Crdentia Proper Consolidated Basis, to Borrower's Senior Debt Service, on a
Crdentia Proper Consolidated Basis, 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 1/31/05 1.00 to 1.00 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 2/28/05 1.00 to 1.00 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 3/31/05 1.00 to 1.00 Trailing 3 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 4/30/05 1.00 to 1.00 Trailing 4 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 5/31/05 1.00 to 1.00 Trailing 5 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 6/30/05 1.25 to 1.00 Trailing 6 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 7/31/05 1.25 to 1.00 Trailing 7 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 8/31/05 1.25 to 1.00 Trailing 8 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 9/30/05 1.25 to 1.00 Trailing 9 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 10/31/05 1.25 to 1.00 Trailing 10 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 11/30/05 1.25 to 1.00 Trailing 11 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 12/31/05 1.25 to 1.00 Trailing 12 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 3/31/06 and each quarter 1.25 to 1.00 Trailing 12 months
thereafter
------------------------------- ---------------------------- ---------------------------- ----------------------------
32
(c) Minimum EBITDA. Borrower shall not permit EBITDA (which
calculation shall include for the months ended 8/31/04 through 12/31/04 any
payment made by MedCap Partners L.P. pursuant to the terms of Makewell
Agreement), on a Crdentia Proper Consolidated Basis, to be less than the amount
set forth below for the corresponding period set forth below:
------------------------------- ---------------------------- ---------------------------- ----------------------------
Time Frame Date Tested Minimum EBITDA Based on
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 8/31/04 $(151,662) Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 9/30/04 $(83,271) Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 10/31/04 $(28,059) Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 11/30/04 $1,875 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 12/31/04 $39,212 Monthly
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 3/31/05 $82,501 Trailing 3 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 6/30/05 $99,393 Trailing 6 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 9/30/05 $158,708 Trailing months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 12/31/05 $219,897 Trailing 12 months
------------------------------- ---------------------------- ---------------------------- ----------------------------
Notwithstanding the foregoing, (i) to the extent that the Crdentia Proper
Borrowers maintain 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(b) above, the Crdentia Proper Borrowers 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) Acquisition Subsidiary Debt Service Coverage Ratio. Commencing
on the last day of the first fiscal quarter following the first Permitted
Acquisition, and continuing quarterly thereafter, Borrower shall not permit the
ratio of (i) Acquisition Subsidiary EBITDA to (ii) scheduled payments of
interest and fees, to the extent carried as interest expense on Acquisition
Subsidiary's consolidated financial statements, with respect to Acquisition
Subsidiary Debt (and, if the period of measurement is less than 12 months,
determined on an annualized basis), to be less than the amount set forth below
for the corresponding period set forth below:
33
------------------------------- ---------------------------- ---------------------------- ----------------------------
Acquisition Subsidiary ▇▇▇
Time Frame Date Tested Service Coverage Ratio Based on
---------- ----------- ---------------------- --------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Last day of the first 1.50 to 1.00 Trailing 3 months
Fiscal Quarter following
the first Permitted
Acquisition
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 6 months
Thereafter
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 9 months
Thereafter
------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Each Fiscal Quarter 1.50 to 1.00 Trailing 12 months
Thereafter
------------------------------- ---------------------------- ---------------------------- ----------------------------
(e) Acquisition Subsidiary Debt Leverage Ratio. Commencing on the
last day of the first fiscal quarter following the first Permitted Acquisition,
and continuing quarterly thereafter, Borrower shall not permit the ratio of
Acquisition Subsidiary Debt to Acquisition Subsidiary EBITDA to be more than the
following:
Period Date Tested Coverage Based on:
------------------------- ------------------------------ ----------- ------------------
Quarterly Last day of the first fiscal 4.0 to 1.0 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 12 months
(f) Acquisition Subsidiary Term Loan Debt Leverage Ratio. Commencing
on the last day of the first fiscal quarter following the first Permitted
Acquisition, and continuing quarterly thereafter, Borrower shall not permit the
ratio of Acquisition Subsidiary Term Loan Debt to Acquisition Subsidiary EBITDA
to be more than the following:
Period Date Tested Coverage Based on:
------------------------- ------------------------------ ----------- ------------------
Quarterly Last day of the first fiscal 2.50 to 1 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 2.50 to 1 Trailing 12 months
34
(g) 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.
(h) Operating Lease Obligations. Borrower shall not incur operating
lease obligations requiring payments in excess of $300,000 in the aggregate
during any Fiscal Year of Borrower.
(i) Financial Reporting Consolidation. Lender, in its sole
discretion, will consider permitting a consolidation of Crdentia, Acquisition
Subsidiary, and each of their direct and indirect Subsidiaries for purposes of
financial reporting and financial covenant tests under this Agreement; provided
that, (i) the Borrower's Senior Debt Service Coverage Ratio (determined on a
Crdentia Proper Consolidated Basis) as set forth under Section 14(b) of this
Agreement is 1.25 to 1.00 or greater for a period of six (6) consecutive months,
(ii) the Acquisition Subsidiary Debt Service Coverage Ratio as set forth under
Section 14(d) of this Agreement is 1.50 to 1.00 or greater for a period of six
(6) consecutive months, (iii) the Acquisition Subsidiary Debt Leverage Ratio as
set forth in Section 14(e) of this Agreement is no more than 4.0 to 1.0 for six
(6) consecutive months, (iv) the Acquisition Subsidiary Term Loan Debt Leverage
Ratio as set forth in Section 14(f) of this Agreement is no more than 2.50 to
1.0 for six consecutive months, (v) no Event of Default, which has not been
cured or waived, exists, (vi) Borrower, on a Crdentia Proper Consolidated Basis,
has Excess Availability of at least $250,000, and (vii) Lender is satisfied with
the Operating Cash Flow of all Borrowers, on a consolidated basis, based upon
the completion of a cash flow audit of Borrowers.
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 Sections 12(b)(ii) and (v)
of 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).
(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.
35
(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
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.
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(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, and (iii) ▇▇▇▇ ▇▇▇▇▇ 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
(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.
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(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:
(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"), or any
supplement thereto pertaining to a Permitted Acquisition 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;
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(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 Original Closing
Date will be performed and paid in full from the proceeds of the initial
advances under the initial Loans on the Original 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);
(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;
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(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.
(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.
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(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
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.
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(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,
44
remedies, powers or duties hereunder and thereunder. Borrower hereby consents to
Lender's sale, assignment, transfer, pledge or other disposition, at any time
and from 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.
46
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.
47
(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.
33. AMENDMENT AND RESTATEMENT. This agreement is intended to amend the
Original Agreement, without novation, and, solely for the convenience of
reference, to restate it. All Revolving Loans outstanding under the Original
Credit Agreement shall be Revolving Loans outstanding hereunder. The parties
acknowledge and agree that any reference to the "Loan Agreement" in the other
Loan Documents shall mean and be references to the Original Loan Agreement, as
amended and restated by this Agreement.
SIGNATURE PAGES FOLLOW
48
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
(Signature Page to First Amendment 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
CRDE CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
ARIZONA HOME HEALTH CARE/PRIVATE
DUTY, INC., an Arizona corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Signature Page to Loan and Security Agreement
CARE PROS STAFFING, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
(Signature Page to First Amendment to Loan and Security Agreement)
BRIDGE OPPORTUNITY FINANCE, LLC, a
Delaware limited
liability company, as Lender
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
ANNEX I-DEFINED TERMS
"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 Government 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.
"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.
"Acquisition Subsidiary" shall mean CRDE Corp., the Subsidiary of
Crdentia formed to hold all Target entities acquired in Permitted Acquisitions,
and shall mean, collectively, CRDE Corp. and each of its direct or indirect
subsidiaries.
"Acquisition Subsidiary Consolidated Basis" shall mean the financial
reporting by Acquisition Subsidiary and all of its direct or indirect
subsidiaries, on a consolidated basis.
"Acquisition Subsidiary Debt" shall mean and include, collectively (a)
the outstanding Revolving Loans to Acquisition Subsidiary, plus (b) the
aggregate principal amount of the Term Loan then outstanding, plus (c) all
Capitalized Lease Obligations of Acquisition Subsidiary, plus (d) all other
Indebtedness for Borrowed Money of Acquisition Subsidiary, excluding the
Subordinated Debt.
"Acquisition Subsidiary EBITDA" shall mean, with respect to any period,
Acquisition Subsidiary's, on an Acquisition Subsidiary 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. In the event that the period
of measurement is less than 12 months, the Acquisition Subsidiary EBITDA shall
be determined on an annualized basis. Upon each Permitted Acquisition and the
addition of a Target to the consolidated financial reporting of the Acquisition
Subsidiary, the portion of the Acquisition Subsidiary EBITDA attributable to the
Target shall be calculated on an annualized basis, until such Target has been a
part of the Acquisition Subsidiary for 12 months.
Annex I - 1
"Acquisition Subsidiary Excess Availability" shall mean, as of any date
of determination by Lender, the excess, if any, of the Revolving Borrowing Base
Amount attributable to the Acquisition Subsidiary less the sum of the
outstanding Revolving Loans to the Acquisition Subsidiary, as of the close of
business on such date and assuming, for purposes of calculation, that all
accounts payable of the Acquisition Subsidiary 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.
"Acquisition Subsidiary Term Loan Debt" shall mean and include,
collectively, the aggregate principal amount of the Term Loan outstanding
hereunder.
"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.
"BOF" shall mean Bridge Opportunity Finance, LLC.
"Borrower" and "Borrowers" shall mean, individually and 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.
Annex I - 2
"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.
"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, excluding
expenditures for any assets or equity interests acquired pursuant to a Permitted
Acquisition.
"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 August 31, 2004.
"Closing Date Permitted Acquisitions" shall mean the Permitted
Acquisition by Borrower of (i) Arizona Home Health Care / Private Duty, Inc. and
(ii) Care Pros Staffing, Inc.
"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).
"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.
Annex I - 3
"Crdentia Proper Borrowers" shall mean Crdentia and all of its
Subsidiaries, except for Acquisition Subsidiary and its Subsidiaries.
"Crdentia Proper Consolidated Basis" shall mean the financial reporting
by the Borrowers of Crdentia all of their Subsidiaries, except for Acquisition
Subsidiary and its Subsidiaries, on a consolidated basis.
"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, Crdentia Proper
Borrowers', on a Crdentia Proper 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 - 4
(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 - 5
(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 - 6
"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
Annex I - 7
business relating thereto and all registrations or applications for
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.
"Lockbox Bank" 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.
"Makewell Agreement" means that certain Makewell Agreement executed by
MedCap Partners L.P., a Delaware limited partnership, dated as of August 31,
2004, in favor of BOF, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"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.
Annex I - 8
"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.
"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.
"Original Closing Date" shall mean June 16, 2004.
"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 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.
"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
Annex I - 9
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
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;
(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; and (ix) Liens in favor of BOF, including the pledge by Crdentia of
all of the stock and other equity interests in each of the Subsidiaries of
Crdentia under the Pledge Agreement.
"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.
"Pledge Agreement" shall mean that certain Pledge Agreement dated as of
August 31 2004 between Crdentia and BOF, as amended, restated, supplemented or
otherwise modified from time to time.
"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.
Annex I - 10
"Senior Debt Service" means, for any period with respect to the
Crdentia Proper Borrowers, the sum of payments made or required to be made by
Borrower during such period for (i) interest only payments due on the Revolving
Loans facility, and (ii) interest and scheduled principal payments due on any
and all other Indebtedness for Borrowed Money excluding the Subordinated Debt.
"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.
"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 Original
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 the Acquisition Subsidiary
during such period for (i) interest, fees and scheduled principal payments due
on the Term Loans that will be made to the Acquisition Subsidiary in connection
with the Permitted Acquisition of such Target, and (ii) interest only payments
due on the Revolving Loans that will be made to the Acquisition Subsidiary
during such period (assuming that the maximum principal amount of Revolving
Loans will be made to the Acquisition Subsidiary during such 12-month period,
based on the Acquisition Subsidiary'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 the Acquisition Subsidiary anticipated
during such period, excluding the Subordinated Debt of the Acquisition
Subsidiary.
Annex I - 11
"Target Pro Forma EBITDA" shall mean, with respect to any period, the
Acquisition Subsidiary'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 the Acquisition Subsidiary under this
Agreement (based on the Acquisition Subsidiary's anticipated borrowing base of
Eligible Accounts), plus (b) the aggregate principal amount of the Term Loans
that will be made to the Acquisition Subsidiary in connection with the Permitted
Acquisition of Target, plus (c) all Capitalized Lease Obligations of the
Acquisition Subsidiary that are anticipated during such 12-month period, plus
(d) all other Indebtedness for Borrowed Money of the Acquisition Subsidiary,
excluding the Subordinated Debt of the Acquisition Subsidiary.
"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 the Acquisition Subsidiary 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 BOF 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) interest, fees and scheduled
principal payments due on the Term Loans, (iii) pursuant to the scheduled
Subordinated Debt payments permitted by this Agreement and the applicable
subordination agreement, and (iv) 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 - 12
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
Annex I - 1
EXHIBIT A - BORROWING BASE CERTIFICATE
FORM OF BORROWING BASE CERTIFICATE
To: Bridge Healthcare Finance, LLC
__________________________ , Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Please refer to the Amended and Restated Loan and Security Agreement
dated as of August 31, 2004, 2004 (as further amended or otherwise modified from
time to time, the "Loan Agreement") between Crdentia Corp., a Delaware
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 Amended and Restated Loan and Security Agreement-Revolving
Loans (the "Agreement") dated as of August 31, 2004, among Crdentia Corp., ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., Nurses Network, Inc., New Age Staffing, Inc., PSR
Nurses, Ltd., PSR Nurse Recruiting, Inc., PSR Nurses Holdings Corp., CRDE Corp.,
Arizona Home Health Care/Private Duty, Inc. and Care Pros Staffing, Inc.
(collectively, the "Borrower"), and 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 a Minimum Tangible Net Worth, on a Crdentia
Proper Consolidated Basis, of (i) $(1,500,000) at all times from the
Closing Date through September 30, 2004, (ii) $0 at all time from
October 1, 2004 through October 31, 2004, and (iii) thereafter, from
the last day of each fiscal quarter of the Crdentia Proper Borrowers
through the day prior to the last day of each immediately succeeding
fiscal quarter of the Crdentia Proper Borrowers, the Minimum
Tangible Net Worth during the immediately preceding period plus
seventy-five percent (75%) of the Crdentia Proper Borrowers' net
income (but without reduction for any net loss) for the Fiscal Year
ending on the first day of such period as reflected on the Crdentia
Proper Borrowers' audited year end financial statement. (See
attached Schedule A for calculation of Tangible Net Worth)
Compliance Yes:|_| No:|_|
b. As of the last day of each applicable period, the ratio of Borrower's
Operating Cash Flow, on a Crdentia Proper Consolidated Basis, to
Borrower's Senior Debt Service, on a Crdentia Proper Consolidated Basis,
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 1/31/05 1.00 to 1.00 Monthly
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 2/28/05 1.00 to 1.00 Monthly
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 3/31/05 1.00 to 1.00 Trailing 3 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 4/30/05 1.00 to 1.00 Trailing 4 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 5/31/05 1.00 to 1.00 Trailing 5 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 6/30/05 1.25 to 1.00 Trailing 6 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 7/31/05 1.25 to 1.00 Trailing 7 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 8/31/05 1.25 to 1.00 Trailing 8 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 9/30/05 1.25 to 1.00 Trailing 9 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 10/31/05 1.25 to 1.00 Trailing 10 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 11/30/05 1.25 to 1.00 Trailing 11 months
---------------------------- ------------------------- --------------------------- --------------------------
Monthly 12/31/05 1.25 to 1.00 Trailing 12 months
---------------------------- ------------------------- --------------------------- --------------------------
Quarterly 3/31/06 and each 1.25 to 1.00 Trailing 12 months
quarter thereafter
---------------------------- ------------------------- --------------------------- --------------------------
Actual Debt Service Coverage Ratio: |_| Compliance: Yes: |_| No:|_|
c. Minimum EBITDA. Borrower shall not permit EBITDA (which calculation shall
include for the months ended 8/31/04 through 12/31/04 any payment made by
MedCap Partners L.P. pursuant to the terms of Makewell Agreement), on a
Crdentia Proper Consolidated Basis, to be less than the amount set forth
below for the corresponding period set forth below (See attached Schedule
C for calculation):
---------------------------- -------------------------- --------------------------- -------------------------
Time Frame Date Tested Minimum EBITDA Based on
---------------------------- -------------------------- --------------------------- -------------------------
Monthly 8/31/04 $(151,662) Monthly
---------------------------- -------------------------- --------------------------- -------------------------
Monthly 9/30/04 $(83,271) Monthly
---------------------------- -------------------------- --------------------------- -------------------------
Monthly 10/31/04 $(28,059) Monthly
---------------------------- -------------------------- --------------------------- -------------------------
Monthly 11/30/04 $1,875 Monthly
---------------------------- -------------------------- --------------------------- -------------------------
Monthly 12/31/04 $39,212 Monthly
---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 3/31/05 $82,501 Trailing 3 months
---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 6/30/05 $99,393 Trailing 6 months
---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 9/30/05 $158,708 Trailing months
---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 12/31/05 $219,897 Trailing 12 months
---------------------------- -------------------------- --------------------------- -------------------------
Notwithstanding the foregoing, to the extent the Crdentia Proper Borrowers
maintain 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, the Crdentia Proper Borrowers 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.
Actual Debt Service Coverage Ratio: |_| Compliance: Yes: |_| No:|_|
d. Acquisition Subsidiary Debt Service Coverage Ratio. Commencing on the
last day of the first fiscal quarter following the first Permitted
Acquisition, and continuing quarterly thereafter, Borrower shall not permit
the ratio of (i) Acquisition Subsidiary EBITDA to (ii) scheduled payments
of interest and fees, to the extent carried as interest expense on
Acquisition Subsidiary's consolidated financial statements, with respect to
Acquisition Subsidiary Debt (and, if the period of measurement is less than
12 months, determined on an annualized basis), to be less than the amount
set forth below for the corresponding period set forth below (See Schedule
D for calculation) :
---------------------------- --------------------------- -------------------------- -------------------------
Acquisition Subsidiary
Debt Service Coverage
Time Frame Date Tested Ratio Based on
---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Last day of the first 1.50 to 1.00 Trailing 3 months
Fiscal Quarter following
the first Permitted
Acquisition
---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 6 months
Thereafter
---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 9 months
Thereafter
---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Each Fiscal Quarter 1.50 to 1.00 Trailing 12 months
Thereafter
---------------------------- --------------------------- -------------------------- -------------------------
Actual Acquisition Subsidiary Debt Compliance: Yes: No:
Service Coverage Ratio: |_| |_| |_|
e. Acquisition Subsidiary Debt Leverage Ratio. Commencing on the last day
of the first fiscal quarter following the first Permitted Acquisition, and
continuing quarterly thereafter, Borrower shall not permit the ratio of
Acquisition Subsidiary Debt to Acquisition Subsidiary EBITDA to be more
than the following (See Schedule E for calculation):
Period Date Tested Coverage Based on:
----------------------- ------------------------------- ---------- --------------------
Quarterly Last day of the first fiscal 4.0 to 1.0 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 12 months
Actual Acquisition Subsidiary Debt Compliance: Yes: No:
Leverage Ratio: |_| |_| |_|
f. Acquisition Subsidiary Term Loan Debt Leverage Ratio. Commencing on the
last day of the first fiscal quarter following the first Permitted
Acquisition, and continuing quarterly thereafter, Borrower shall not permit
the ratio of Acquisition Subsidiary Term Loan Debt to Acquisition
Subsidiary EBITDA to be more than the following:
Time Frame Date Tested Coverage Based on:
----------------------- ------------------------------- ---------- --------------------
Quarterly Last day of the first fiscal 2.50 to 1 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 2.50 to 1 Trailing 12 months
Actual Acquisition Subsidiary Term Compliance: Yes: No:
Loan Debt Leverage Ratio: |_| |_| |_|
g. Capital Expenditure Limitation: the aggregate cost of all fixed assets
purchased or otherwise acquired shall not exceed $200,000 during any Fiscal
Year.
Compliance: Yes: No:
Total Capital Expenditures (YTD): |_| |_| |_|
h. Operating Lease Obligations: payments made pursuant to operating lease
obligations shall not exceed $100,000 during any Fiscal Year.
Compliance: Yes: No:
Operating Lease Payments (YTD): |_| |_| |_|
The financial statements, reports and information submitted concurrently
herewith have been prepared in accordance with generally accepted accounting
principles consistently applied (where applicable) 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.
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:
--------------------------
Schedule A
Tangible Net Worth
Tangible Net Worth
Shareholders' equity (including retained earnings and preferred
stock) of Crdentia Proper Borrowers
-------------------------
Less: Book value of all intangible assets
-------------------------
Add: Amount of debt of Crdentia Proper Borrowers subordinated to
Lender
-------------------------
-------------------------
Tangible Net Worth
-------------------------
Schedule B
Senior Debt Service Coverage Ratio
Operating Cash Flow
Net income (Loss) of the Crdentia Proper Borrowers 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 of the
Crdentia Proper Borrowers
-------------------------
All taxes paid or required to be paid during
such period and all non-cash income of the Crdentia
Proper Borrowers
-------------------------
Total Operating Cash Flow
-------------------------
Senior Debt Service
Add: Interest due on Revolving Loans of the Crdentia
Proper Borrowers
-------------------------
-------------------------
Scheduled principal and interest payments made
or required to be made on all other indebtedness
of the Crdentia Proper Borrowers
(excluding Subordinated Debt)
-------------------------
Total Senior Debt Service
-------------------------
Total Operating Cash Flow: = to 1.0
----------
Total Senior Debt Service
Schedule C
EBITDA
EBITDA
Net income (Loss) of the Crdentia Proper Borrowers (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
-------------------------
Add: (for months ending 8/31/04 through 12/31/04 only)
Payments from MedCap Partners L.P.
Total EBITDA
-------------------------
Minimum EBITDA $____________ Total EBITDA $______________
Schedule D
Acquisition Subsidiary Debt Service Coverage Ratio
Acquisition Subsidiary EBITDA
Net income (Loss)of the Acquisition Subsidiary (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
-------------------------
Acquisition Subsidiary Debt Service
Add: Scheduled payments of interest and fees (carried as
an interest expense on Acquisition Subsidiary's
consolidated financials) with respect to:
-------------------------
Revolving Loans to Acquisition Subsidiary
Aggregate principal amount of Term Loan
Capitalized Lease Obligations of Acquisition
Subsidiary
Indebtedness for Borrowed Money of Acquisition
Subsidiary (excluding Subordinated Debt)
-------------------------
Total Acquisition Subsidiary Debt Service
-------------------------
Total Acquisition Subsidiary EBITDA to = to 1.0
----------
Acquisition Subsidiary Debt Service:
Schedule E
Acquisition Subsidiary Debt Leverage Ratio
Acquisition Subsidiary Debt
-------------------------
Outstanding Revolving Loans to Acquisition Subsidiary
-------------------------
Aggregate principal amount of Term Loan outstanding
-------------------------
Capitalized Lease Obligations of Acquisition Subsidiary
-------------------------
Indebtedness for Borrowed Money of Acquisition
Subsidiary (excluding the Subordinated Debt)
-------------------------
Acquisition Subsidiary Debt to: = to 1.0
----------
Acquisition Subsidiary EBITDA
Schedule F
Acquisition Subsidiary Term Loan Debt Leverage Ratio
Acquisition Subsidiary Term Loan Debt
Aggregate principal amount of Term Loan outstanding
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Acquisition Subsidiary EBITDA (from Schedule D)
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Acquisition Subsidiary Term Loan Debt to = to 1.0
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Acquisition Subsidiary EBITDA
EXHIBIT B - 1
SCHEDULE 1 - PERMITTED LIENS
SCHEDULE 1 - 1
SCHEDULE 11(B) - BUSINESS AND COLLATERAL LOCATIONS;
CERTAIN COLLATERAL
Attached to and made a part of that certain Loan and Security Agreement
of even date herewith between CRDENTIA CORP., a ____ corporation and its
Subsidiaries (collectively, "Borrower") and BRIDGE HEALTHCARE FINANCE, LLC
("Lender").
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.
2.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post
office boxes of Borrower. Please indicate the relationship of such
location to Borrower (i.e., public warehouse, processor, etc.).
1.
2.
C. Bank Accounts of Borrower:
Bank (with address) Account Number Type of Account
1.
2.
D. Certain Collateral
a. Intellectual Property
b. Instruments
c. Deposit Accounts
d. Investment Property
e. Letter-of-Credit Rights
f. Chattel Paper
g. Documents
SCHEDULE 11(B) - 2
SCHEDULE 11(G) - LITIGATION
h. Commercial Tort Claims
i. Certificate of Title Goods
j. Collateral with Third Parties
SCHEDULE 11(G) - 1
SCHEDULE 11(I) - AFFILIATE TRANSACTIONS
SCHEDULE 11(I) - 1
SCHEDULE 11(J) - NAMES & TRADE NAMES
SCHEDULE 11(J) - 1
SCHEDULE 11(N) - INDEBTEDNESS
SCHEDULE 11(N) - 1
SCHEDULE 11(P) - PARENT, SUBSIDIARIES AND AFFILIATES
SCHEDULE 11(P) - 1
SCHEDULE 11(X) - GOVERNMENT REIMBURSEMENT PROGRAM MATTERS
SCHEDULE 11(X) - 1