**EXHIBIT 10.35**

 

**AMENDED AND RESTATEDLOAN AND SECURITY AGREEMENT – TERM LOAN**

 

**DATED AS OF MAY 16, 2005**

 

**BETWEEN**

 

**BRIDGE OPPORTUNITY FINANCE, LLC**

 

**AS LENDER,**

 

**AND**

 

**CRDENTIA CORP. (“CRDENTIA”)BAKER ANDERSON CHRISTIE, INC.(“BAKER”)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. (“CRDE”)ARIZONA HOME HEALTH CARE/PRIVATE DUTY, INC. (“AHHC”)CARE PROS STAFFING, INC. (“CARE PROS”)HIP HOLDING, INC. (“HIP”)HEALTH INDUSTRY PROFESSIONALS, L.L.C. (“HIP LLC”)TRAVMED USA, INC. (“TRAVMED”)PRIME STAFF, LP (“PRIME STAFF”)MINT MEDICAL STAFFING ODESSA, LP (“MMSO”)GHS ACQUISITION CORPORATION (“GHS”)**

 

**AS BORROWER**

 

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**TABLE OFCONTENTS**

 
| 1.     | DEFINITIONS                                                              |                                        |
|--------|--------------------------------------------------------------------------|---------------------------------------------|
|   |                                                                     |                                        |   |
|   | (a)                                                                      | Defined  Terms                              |   |
|   |                                                                     |                                        |   |
|   | (b)                                                                      | Accounting  Terms                           |   |
|   |                                                                     |                                        |   |
|   | (c)                                                                      | Terms  Defined in UCC                       |   |
|   |                                                                     |                                        |   |
|   | (d)                                                                      | Other Definitional Provisions; Construction |   |
|   |                                                                     |                                        |   |
|   | (e)                                                                      | References to Agreements, Enactments, Etc.  |   |
|   |                                                                     |                                        |   |
| 2.     | LOANS                                                                    |                                        |
|   |                                                                     |                                        |   |
|   | (a)                                                                      | Term Loan                                   |   |
|   |                                                                     |                                        |   |
|   | (b)                                                                      | Permitted  Acquisitions                     |   |
|   |                                                                     |                                        |   |
|   | (c)                                                                      | Repayments                                  |   |
|   |                                                                     |                                        |   |
|   | (d)                                                                      | Notes                                       |   |
|   |                                                                     |                                        |   |
| 3.     | WARRANTS                                                                 |                                        |
|   |                                                                     |                                        |   |
| 4.     | INTEREST, FEES AND CHARGES                                               |                                        |
|   |                                                                     |                                        |   |
|   | (a)                                                                      | Interest  Rate                              |   |
|   |                                                                     |                                        |   |
|   | (b)                                                                      | Fees  and Charges                           |   |
|   |                                                                     |                                        |   |
|   | (c)                                                                      | Maximum  Interest                           |   |
|   |                                                                     |                                        |   |
| 5.     | COLLATERAL                                                               |                                        |
|   |                                                                     |                                        |   |
|   | (a)                                                                      | Grant of Security Interest to Lender        |   |
|   |                                                                     |                                        |   |
|   | (b)                                                                      | Other  Security                             |   |
|   |                                                                     |                                        |   |
|   | (c)                                                                      | Possessory  Collateral                      |   |
|   |                                                                     |                                        |   |
|   | (d)                                                                      | Electronic  Chattel Paper                   |   |
|   |                                                                     |                                        |   |
|   | (e)                                                                      | Letter-of-Credit  Rights                    |   |
|   |                                                                     |                                        |   |
|   | (f)                                                                      | Third-Party  Collateral                     |   |
|   |                                                                     |                                        |   |
|   | (g)                                                                      | Deposit  Account                            |   |
|   |                                                                     |                                        |   |
|   | (h)                                                                      | Insurance  Proceeds                         |   |
|   |                                                                     |                                        |   |
| 6.     | PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS  THEREIN |                                        |
|   |                                                                     |                                        |   |
| 7.     | POSSESSION OF COLLATERAL AND RELATED MATTERS                             |                                        |
|   |                                                                     |                                        |   |
| 8.     | COLLECTIONS                                                              |                                        |

 

i

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| 9.     | COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES |                                            |
|--------|--------------------------------------------------------------|-------------------------------------------------|
|   |                                                         |                                            |   |
|   | (a)                                                          | Borrowing  Base Reports                         |   |
|   |                                                         |                                            |   |
|   | (b)                                                          | Monthly  Reports                                |   |
|   |                                                         |                                            |   |
|   | (c)                                                          | Financial  Statements                           |   |
|   |                                                         |                                            |   |
|   | (d)                                                          | Annual  Projections                             |   |
|   |                                                         |                                            |   |
|   | (e)                                                          | Explanation of Budgets and Projections          |   |
|   |                                                         |                                            |   |
|   | (f)                                                          | Invoices and Billing Statements                 |   |
|   |                                                         |                                            |   |
|   | (g)                                                          | Obligor Financial Statements and Tax Returns    |   |
|   |                                                         |                                            |   |
|   | (h)                                                          | Other  Information                              |   |
|   |                                                         |                                            |   |
|   | (i)                                                          | Post-Closing  Review                            |   |
|   |                                                         |                                            |   |
|   | (j)                                                          | Public  Reporting                               |   |
|   |                                                         |                                            |   |
| 10.    | TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE        |                                            |
|   |                                                         |                                            |   |
| 11.    | REPRESENTATIONS AND WARRANTIES                               |                                            |
|   |                                                         |                                            |   |
|   | (a)                                                          | Financial Statements and Other Information      |   |
|   |                                                         |                                            |   |
|   | (b)                                                          | Locations; Certain Collateral                   |   |
|   |                                                         |                                            |   |
|   | (c)                                                          | Loans  by Borrower                              |   |
|   |                                                         |                                            |   |
|   | (d)                                                          | [Left  Blank]                                   |   |
|   |                                                         |                                            |   |
|   | (e)                                                          | Liens                                           |   |
|   |                                                         |                                            |   |
|   | (f)                                                          | Organization, Authority and No Conflict         |   |
|   |                                                         |                                            |   |
|   | (g)                                                          | Litigation                                      |   |
|   |                                                         |                                            |   |
|   | (h)                                                          | Compliance with Laws and Maintenance of Permits |   |
|   |                                                         |                                            |   |
|   | (i)                                                          | Affiliate  Transactions                         |   |
|   |                                                         |                                            |   |
|   | (j)                                                          | Names  and Trade Names                          |   |
|   |                                                         |                                            |   |
|   | (k)                                                          | Equipment                                       |   |
|   |                                                         |                                            |   |
|   | (l)                                                          | Enforceability                                  |   |
|   |                                                         |                                            |   |
|   | (m)                                                          | Solvency                                        |   |
|   |                                                         |                                            |   |
|   | (n)                                                          | Indebtedness                                    |   |
|   |                                                         |                                            |   |
|   | (o)                                                          | Margin Security and Use of Proceeds             |   |
|   |                                                         |                                            |   |
|   | (p)                                                          | Parent, Subsidiaries and Affiliates             |   |

 

ii

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|   | (q)                   | No  Defaults                                                                                               |   |
|--------|-----------------------|------------------------------------------------------------------------------------------------------------|--------|
|   |                  |                                                                                                       |   |
|   | (r)                   | Employee  Matters                                                                                          |   |
|   |                  |                                                                                                       |   |
|   | (s)                   | Intellectual  Property                                                                                     |   |
|   |                  |                                                                                                       |   |
|   | (t)                   | Environmental  Matters                                                                                     |   |
|   |                  |                                                                                                       |   |
|   | (u)                   | ERISA  Matters                                                                                             |   |
|   |                  |                                                                                                       |   |
|   | (v)                   | Reimbursement                                                                                              |   |
|   |                  |                                                                                                       |   |
|   | (w)                   | Compliance with Healthcare Regulations                                                                     |   |
|   |                  |                                                                                                       |   |
|   | (x)                   | Immigration  Matters                                                                                       |   |
|   |                  |                                                                                                       |   |
|   | (y)                   | Licenses,  Permits, etc.                                                                                   |   |
|   |                  |                                                                                                       |   |
|   | (z)                   | Collective  Enterprise                                                                                     |   |
|   |                  |                                                                                                       |   |
|   | (aa)                  | Acquisition                                                                                                |   |
|   |                  |                                                                                                       |   |
|   | (bb)                  | Certain Financial Information                                                                              |   |
|   |                  |                                                                                                       |   |
| 12.    | AFFIRMATIVE COVENANTS |                                                                                                       |
|   |                  |                                                                                                       |   |
|   | (a)                   | Maintenance  of Records                                                                                    |   |
|   |                  |                                                                                                       |   |
|   | (b)                   | Notices                                                                                                    |   |
|   |                  |                                                                                                       |   |
|   | (c)                   | Compliance with Laws and Maintenance of  Permits                                                           |   |
|   |                  |                                                                                                       |   |
|   | (d)                   | Inspection and Audits                                                                                      |   |
|   |                  |                                                                                                       |   |
|   | (e)                   | Insurance                                                                                                  |   |
|   |                  |                                                                                                       |   |
|   | (f)                   | Collateral                                                                                                 |   |
|   |                  |                                                                                                       |   |
|   | (g)                   | Use of Proceeds                                                                                            |   |
|   |                  |                                                                                                       |   |
|   | (h)                   | Taxes                                                                                                      |   |
|   |                  |                                                                                                       |   |
|   | (i)                   | Intellectual Property                                                                                      |   |
|   |                  |                                                                                                       |   |
|   | (j)                   | Staffing Contracts                                                                                         |   |
|   |                  |                                                                                                       |   |
|   | (k)                   | Billing and Collection System Access                                                                       |   |
|   |                  |                                                                                                       |   |
| 13.    | NEGATIVE COVENANTS    |                                                                                                       |
|   |                  |                                                                                                       |   |
|   | (a)                   | Indebtedness                                                                                               |   |
|   |                  |                                                                                                       |   |
|   | (b)                   | Liens                                                                                                      |   |
|   |                  |                                                                                                       |   |
|   | (c)                   | Mergers, Sales, Acquisitions, Subsidiaries  and Other Transactions Outside the Ordinary Course of Business |   |
|   |                  |                                                                                                       |   |
|   | (d)                   | Dividends and Distributions                                                                                |   |

 

iii

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|   | (e)                 | Investments; Loans                                                               |   |
|--------|---------------------|----------------------------------------------------------------------------------|--------|
|   |                |                                                                             |   |
|   | (f)                 | Fundamental Changes, Line of Business                                            |   |
|   |                |                                                                             |   |
|   | (g)                 | Equipment                                                                        |   |
|   |                |                                                                             |   |
|   | (h)                 | Affiliate Transactions                                                           |   |
|   |                |                                                                             |   |
|   | (i)                 | Settling of Accounts                                                             |   |
|   |                |                                                                             |   |
|   | (j)                 | Restricted Payments                                                              |   |
|   |                |                                                                             |   |
|   | (k)                 | Restricted Locations                                                             |   |
|   |                |                                                                             |   |
|   | (l)                 | Payments to Travmed                                                              |   |
|   |                |                                                                             |   |
| 14.    | FINANCIAL COVENANTS |                                                                             |
|   |                |                                                                             |   |
|   | (a)                 | Tangible Net Worth                                                               |   |
|   |                |                                                                             |   |
|   | (b)                 | Senior Debt Service Coverage Ratio                                               |   |
|   |                |                                                                             |   |
|   | (c)                 | Minimum EBITDA                                                                   |   |
|   |                |                                                                             |   |
|   | (d)                 | Term Loan Debt Leverage Ratio                                                    |   |
|   |                |                                                                             |   |
|   | (e)                 | Capital Expenditure Limitations                                                  |   |
|   |                |                                                                             |   |
|   | (f)                 | Operating Lease Obligations                                                      |   |
|   |                |                                                                             |   |
| 15.    | DEFAULT             |                                                                             |
|   |                |                                                                             |   |
|   | (a)                 | Payment                                                                          |   |
|   |                |                                                                             |   |
|   | (b)                 | Breach of This Agreement, the Other  Agreements and the Revolving Loan Agreement |   |
|   |                |                                                                             |   |
|   | (c)                 | Breach of Subordination Agreement                                                |   |
|   |                |                                                                             |   |
|   | (d)                 | Breaches of Other Obligations                                                    |   |
|   |                |                                                                             |   |
|   | (e)                 | Breach of Representations and Warranties                                         |   |
|   |                |                                                                             |   |
|   | (f)                 | Loss of Collateral                                                               |   |
|   |                |                                                                             |   |
|   | (g)                 | Levy, Seizure or Attachment                                                      |   |
|   |                |                                                                             |   |
|   | (h)                 | Bankruptcy or Similar Proceedings                                                |   |
|   |                |                                                                             |   |
|   | (i)                 | Appointment of Receiver                                                          |   |
|   |                |                                                                             |   |
|   | (j)                 | Judgment                                                                         |   |
|   |                |                                                                             |   |
|   | (k)                 | Default or Revocation of Guaranty                                                |   |
|   |                |                                                                             |   |
|   | (l)                 | Change of Ownership/Management                                                   |   |
|   |                |                                                                             |   |
|   | (m)                 | Material Adverse Change                                                          |   |

 

iv

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|   | (n)                                                     | Governmental Authorizations                                   |   |
|--------|---------------------------------------------------------|---------------------------------------------------------------|--------|
|   |                                                    |                                                          |   |
|   | (o)                                                     | Failure to Maintain Third-Party Payroll Tax  Service Provider |   |
|   |                                                    |                                                          |   |
|   | (p)                                                     | [Intentionally Deleted]                                       |   |
|   |                                                    |                                                          |   |
|   | (q)                                                     | Breach of Certain Obligations                                 |   |
|   |                                                    |                                                          |   |
| 16.    | REMEDIES UPON AN EVENT OF DEFAULT                       |                                                          |
|   |                                                    |                                                          |   |
| 17.    | CONDITIONS PRECEDENT                                    |                                                          |
|   |                                                    |                                                          |   |
| 18.    | JOINT AND SEVERAL LIABILITY                             |                                                          |
|   |                                                    |                                                          |   |
| 19.    | RELEASES; INDEMNITIES                                   |                                                          |
|   |                                                    |                                                          |   |
| 20.    | NOTICE                                                  |                                                          |
|   |                                                    |                                                          |   |
| 21.    | CHOICE OF GOVERNING LAW; CONSTRUCTION;  FORUM SELECTION |                                                          |
|   |                                                    |                                                          |   |
| 22.    | MODIFICATION AND BENEFIT OF AGREEMENT                   |                                                          |
|   |                                                    |                                                          |   |
| 23.    | HEADINGS OF SUBDIVISIONS                                |                                                          |
|   |                                                    |                                                          |   |
| 24.    | POWER OF ATTORNEY                                       |                                                          |
|   |                                                    |                                                          |   |
| 25.    | CONFIDENTIALITY                                         |                                                          |
|   |                                                    |                                                          |   |
| 26.    | BROKERAGE FEES                                          |                                                          |
|   |                                                    |                                                          |   |
| 27.    | PUBLICITY                                               |                                                          |
|   |                                                    |                                                          |   |
| 28.    | LIMITATION OF ACTIONS                                   |                                                          |
|   |                                                    |                                                          |   |
| 29.    | LIABILITY                                               |                                                          |
|   |                                                    |                                                          |   |
| 30.    | COUNTERPARTS                                            |                                                          |
|   |                                                    |                                                          |   |
| 31.    | ELECTRONIC SUBMISSIONS                                  |                                                          |
|   |                                                    |                                                          |   |
| 32.    | WAIVER OF JURY TRIAL; OTHER WAIVERS                     |                                                          |
|   |                                                    |                                                          |   |
| 33.    | AMENDMENT AND RESTATEMENT                               |                                                          |

 

v

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| ANNEX 1 - DEFINITIONS                                                    |   |
|--------------------------------------------------------------------------|--------|
|                                                                     |   |
| EXHIBIT A –  COMPLIANCE CERTIFICATE                            |   |
|                                                                     |   |
| EXHIBIT B – CLOSING CHECKLIST                                  |   |
|                                                                     |   |
| EXHIBIT C – INFORMATION CERTIFICATE                            |   |
|                                                                     |   |
| EXHIBIT D – FORM OF SUBORDINATION  AGREEMENT              |   |
|                                                                     |   |
| 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(v) – GOVERNMENT REIMBURSEMENT PROGRAM MATTERS |   |
|                                                                     |   |
| SCHEDULE 11(y) – LICENSES AND PERMITS                          |   |

 

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**AMENDED AND RESTATEDLOAN AND SECURITY AGREEMENT – TERM LOAN**

 

THIS AMENDED AND RESTATEDLOAN AND SECURITY AGREEMENT – TERM LOAN (as amended, modified or supplementedfrom time to time, this “**Agreement**”)made this 16th day of May, 2005 by and between BRIDGE OPPORTUNITY FINANCE, LLC(“**Lender**”), Crdentia Corp., aDelaware corporation (“Crdentia”), Baker Anderson Christie, Inc., aCalifornia corporation (“Baker”), Nurses Network, Inc., a Californiacorporation (“Nurses Network”), New Age Staffing, Inc., a Delawarecorporation (“New Age”), PSR Nurses, Ltd., a Texas limited partnership (“PSRLtd.”), PSR Nurse Recruiting, Inc., a Texas corporation (“PSR Recruiting”),PSR Nurses Holdings Corp., a Texas corporation (“PSR Holding”), CRDE Corp., aDelaware corporation (“CRDE”), Arizona Home Health Care/Private Duty, Inc.,an Arizona corporation (“AHHC”), Care Pros Staffing, Inc., a Texascorporation (“Care Pros”), HIP Holding, Inc., a Delaware corporation (“HIP”),Health Industry Professionals, L.L.C., a Michigan limited liability company (“HIPLLC”), Travmed USA, Inc., a North Carolina corporation (“Travmed”), GHSAcquisition Corporation, a Delaware corporation (“GHS”), Prime Staff, LP, aTexas limited partnership (“Prime Staff”), and Mint Medical Staffing Odessa,LP, a Texas limited partnership (“MMSO”; and together with Crdentia, Baker,Nurses Network, New Age, PSR Ltd., PSR Recruiting, PSR Holding, CRDE, AHHC,Care Pros, HIP, HIP LLC, Travmed, GHS and Prime Staff, each referred toindividually and collectively, as “**Borrower**”),each, having its principal place of business at 14114 Dallas Parkway, Suite 600,Dallas, Texas 75254.

 

W I T N E S SE T H:

 

WHEREAS, Borrower may,from time to time, request certain Term Loans from Lender in connection withcertain Permitted Acquisitions, and the parties wish to provide for the termsand conditions upon which such Term Loans or other financial accommodations, ifmade by Lender, shall be made, which Term Loans shall be secured by a secondpriority security interest in all assets of Borrower (except for all of theequity interests of each direct and indirect Subsidiary of Crdentia, which hasbeen pledged to Lender as a first priority security interest pursuant to theterms of the Pledge Agreement);

 

WHEREAS, Crdentia, Baker,Nurses Network, New Age, PSR Ltd., PSR Recruiting, PSR Holding, CRDE, AHHC andCare Pros (the “Original Borrowers”) entered into that certain Loan andSecurity Agreement – Term Loan, dated as of August 31, 2004 (the “OriginalLoan Agreement”);

 

WHEREAS, the OriginalBorrowers entered into that certain Loan and Security Agreement – RevolvingLoans, dated as of June 16, 2004 (as amended, restated, supplemented orotherwise modified from time to time, the “Revolving Loan Agreement”) withBridge Healthcare Finance, LLC, secured by a first priority security interestin all assets of Borrower (except for all of the equity interests of eachdirect and indirect Subsidiary of Crdentia, which has been pledged to Lenderpursuant to the terms of the Pledge Agreement);

 

WHEREAS, Crdentia formed CRDE,a wholly owned Subsidiary of Crdentia, to facilitate certain PermittedAcquisitions. Crdentia formed AHHC Acquisition Corporation 

 

1

----

 

(“AHHC Acquisition”)and CPS Acquisition Corporation (“CPS Acquisition”), each a wholly ownedSubsidiary of CRDE, for purposes of acquiring AHHC and Care Pros.  Pursuant to that certain Agreement and Planof Reorganization dated as of August 31, 2004 by and among Crdentia, CRDE,AHHC Acquisition, AHHC, and the former shareholders of AHHC, AHHC Acquisitionmerged with and into AHHC with AHHC being the surviving entity.  Pursuant to that certain Agreement and Planof Reorganization dated as of August 31, 2004, by and among Crdentia,CRDE, CPS Acquisition, Care Pros and the former shareholders of Care Pros, CarePros merged with and into CPS Acquisition with CPS Acquisition being thesurviving entity and immediately upon such merger changed its name to “CarePros Staffing, Inc.”;

 

WHEREAS, after theOriginal Loan Agreement was originally executed, the Original Borrowers agreedto amend the Original Loan Agreement pursuant to the terms of that certainFirst Amendment to Loan and Security Agreement – Term Loans dated as of November 30,2004 (the “First Term Loan Amendment”);

 

WHEREAS, Crdentia formedHIP Acquisition Corporation, a wholly owned Subsidiary of CRDE, to acquire HIPand HIP LLC through merger.  HIP LLC is awholly owned Subsidiary of HIP.  Pursuantto that certain Agreement and Plan of Reorganization (“HIP Merger Agreement”)dated as of March 29, 2005 by and among Crdentia, HIP AcquisitionCorporation, HIP, and certain shareholders of HIP, HIP merged with and into HIPAcquisition Corporation with HIP Acquisition Corporation being the survivingentity and immediately upon such merger HIP Acquisition Corporation changed itsname to “HIP Holding, Inc.” (the “HIP Acquisition”).  Immediately after the HIP Acquisition,Crdentia contributed all of its equity interests in HIP to CRDE.  As a result of the HIP Acquisition and contributionof equity interests by Crdentia, HIP LLC is a wholly owned subsidiary of HIPand HIP is wholly owned subsidiary of CRDE;

 

WHEREAS, Crdentia formedTravmed Acquisition Corporation, a wholly owned Subsidiary of CRDE, to acquireTravmed through merger.  Pursuant to thatAgreement and Plan of Reorganization (“Travmed Merger Agreement”) dated datedas of March 29, 2005 by and among Crdentia, CRDE, Travmed AcquisitionCorporation, Travmed and certain shareholders of Travmed, Travmed AcquisitionCorporation merged with and into Travmed, with Travmed being the survivingentity (the “Travmed Acquisition”).  As aresult of the Travmed Acquisition, Travmed is wholly owned subsidiary of CRDE;

 

WHEREAS, as a result ofthe HIP Acquisition and Travmed Acquisition, Original Borrowers, HIP, HIP LLC,Travmed and Lender agreed to further amend the Original Loan Agreement pursuantto the terms of that certain Amendment No. 2, Joinder and Consent to Loanand Security Agreement-Term Loans, dated March 29, 2005 (the “Second TermLoan Amendment”), to provide for, among other things, the addition of HIP, HIPLLC and Travmed as additional Borrowers to the Original Loan Agreement;

 

WHEREAS, as a result ofthe HIP Acquisition and Travmed Acquisition, Original Borrowers, HIP, HIP LLC,Travmed and Lender agreed to amend the Original Loan Agreement pursuant to theterms of that certain Amendment No. 2, Joinder and Consent to Loan andSecurity Agreement – Term Loans, dated March 29, 2005, to provide for,among other things, the addition of HIP, HIP LLC and Travmed as additionalBorrowers to the Loan Agreement;

 

2

----

 

WHEREAS, Crdentia formedGHS, a wholly owned Subsidiary of CRDE, to acquire all of the equity interestsof Prime Staff and MMSO.  Pursuant tothat certain Equity Purchase Agreement (the “Prime Staff Purchase Agreement”)dated as of May 5, 2005, by and among Crdentia, CRDE, GHS, Prime Staff, Inc.,a Delaware corporation (“Prime, Inc.”), Prime Staff GP, LLC, a Delawarelimited liability company (“PSGP”), Prime Caid Management, Inc., a Texascorporation (“Prime Caid”), Mint Medical, LLC, a Delaware limited liabilitycompany (“MM”),  Mint Medical GP, LLC, aDelaware limited liability company (“MMGP”; and together with Prime, Inc.,PSGP and MM, each a “Seller” and collectively, the “Prime Staff Sellers”),Mint Management, Inc., a Texas corporation (“MMI”), and Tony M.Brown, the Prime Staff Sellers sold to GHS and CRDE, and GHS and CRDE purchasedall of the equity interests in each of Prime Staff and MMSO (collectively, the “PrimeStaff Acquisition”).  As a result of thePrime Staff Purchase Agreement and the Prime Staff Acquisition, CRDE owns allof the general partnership interests of both Prime Staff and MMSO and GHS ownsall of the limited partnership interests of both Prime Staff and MMSO;

 

WHEREAS, as a result ofthe Prime Staff Purchase Agreement and the Prime Staff Acquisition, Borrowerand Lender agreed to further amend the Original Loan Agreement pursuant to theterms of that certain Amendment No. 3, Joinder and Consent to Loan andSecurity Agreement – Term Loans, dated May 5, 2005 (the “Third Term LoanAmendment”), to provide for, among other things, the addition of GHS, PrimeStaff and MMSO as additional Borrowers to the Original Loan Agreement; and

 

WHEREAS, the Borrowersand Lender desire to amend and restate the Original Loan Agreement, as amendedby the First Term Loan Amendment, the Second Term Loan Amendment and the ThirdTerm Loan Amendment, upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, inconsideration of any Term Loan hereafter made to Borrower by Lender, and forother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged by Borrower, the parties agree that the Original LoanAgreement, as amended by the First Term Loan Amendment, the Second Term LoanAmendment and the Third Term Loan Amendment, is hereby amended and restated toread in full as follows:

 

1.                                       DEFINITIONS.

 

(a)                                  Defined Terms.  For the purposes of this Agreement, thefollowing capitalized words and phrases shall have the meanings set forth in Annex Iattached hereto and made a part hereof.

 

(b)                                 Accounting Terms.  Any accounting terms used in this Agreementwhich are not specifically defined herein shall have the meanings customarilygiven them in accordance with GAAP. Calculations and determinations of financial and accounting terms usedand not otherwise specifically defined hereunder and the preparation offinancial statements to be furnished to the Lender pursuant hereto shall bemade and prepared, both as to classification of items and as to amount, inaccordance with GAAP as used in the preparation of the financial statements ofthe Borrower on the Original Closing Date. If any changes in accounting principles or practices from those used inthe preparation of the financial statements are hereafter 

 

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occasionedby the promulgation of rules, regulations, pronouncements and opinions by orrequired by the Financial Accounting Standards Board or the American Instituteof Certified Public Accountants (or any successor thereto or agencies withsimilar functions), which results in a material change in the method ofaccounting in the financial statements required to be furnished to the Lenderhereunder or in the calculation of financial covenants, standards or termscontained in this Agreement, the parties hereto agree to enter into good faithnegotiations to amend such provisions so as equitably to reflect such changesto the end that the criteria for evaluating the financial condition andperformance of the Borrower will be the same after such changes as they werebefore such changes; and, if the parties fail to agree on the amendment of suchprovisions, the Borrower will furnish financial statements in accordance withsuch changes but shall provide calculations for all financial covenants,perform all financial covenants and otherwise observe all financial standardsand terms in accordance with applicable accounting principles and practices ineffect immediately prior to such changes.

 

(c)                                  Terms Defined in UCC.  The terms “**Account**”,“**Account Debtor**”, “**Certificated Security**”, “**Chattel Paper**”, “**Commercial Tort Claim**”, “**DepositAccount**”, “**Document**”, “**Electronic Chattel Paper**”, “**Equipment**”, “**Financial Asset**”, “**Fixture**”,“**General Intangible**”, “**Goods**”, “**Health-Care-InsuranceReceivables**”, “**Instrument**”,“**Inventory**”, “**Investment Property**”, “**Letter-of-Credit Right**”, “**Payment Intangible**”, “**Proceeds**”, “**Security**”, “**SecuritiesAccount**”, “**Security Entitlement**”,“**Software**”, “**Supporting Obligation**”, “**Tangible Chattel Paper**” and “**Uncertificated Security**” shall have therespective meanings assigned to such terms in the UCC.  All other capitalized words and phrases usedherein and not otherwise specifically defined shall have the respectivemeanings assigned to such terms in the UCC, to the extent the same are used ordefined therein.

 

(d)                                 Other Definitional Provisions; Construction.  Whenever the context so requires, the neutergender includes the masculine and feminine, the single number includes theplural, and vice versa, and in particular the word “Borrower” shall be soconstrued.  The words “hereof”, “herein”and “hereunder” and words of similar import when used in this Agreement shallrefer to this Agreement as a whole and not to any particular provision of thisAgreement, and references to Article, Section, Subsection, Annex, Schedule, Exhibit andlike references are references to this Agreement unless otherwisespecified.  The word “including” shallmean “including, without limitation”.  AnEvent of Default shall “continue” or be “continuing” until such Event ofDefault has been waived in accordance with Section 32(e) hereof.  References in this Agreement to any partyshall include such party’s successors and permitted assigns.  References to any “Section” shall be areference to such Section of this Agreement unless otherwise stated.  To the extent any of the provisions of theOther Agreements are inconsistent with the terms of this Agreement, theprovisions of this Agreement shall govern. This Agreement and the Other Agreements are the result of negotiationsamong and have been reviewed by counsel to the Lender, Borrower and any otherparties thereto, are product of all parties and, accordingly, they shall not beconstrued against the Lender.

 

(e)                                  Referencesto Agreements, Enactments, Etc. Unless otherwise expressly provided herein, (i) references toagreements (including this Agreement) and other contractual instruments shallbe deemed to include all subsequent amendments and other modifications thereto,but only to the extent such amendments, restatements, supplements and othermodifications are not prohibited by the terms of this Agreement or any OtherAgreement, and 

 

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(ii) referencesto any statute or regulation shall be construed as including all statutory andregulatory provisions amending, replacing, supplementing or interpreting suchstatute or regulation.

 

2.                                       LOANS.

 

(a)                                  TermLoan.  Subject to the terms andconditions of this Agreement and the Other Agreements, Lender shall make one ormore term loans to Borrower (individually and collectively, the “**Term Loan**”) provided that (i) eachTerm Loan be for a minimum amount of Five Hundred Thousand Dollars ($500,000),and (ii) the aggregate principal amount of all Term Loans may not exceed$10,000,000 in the aggregate outstanding at any time.

 

(b)                                 PermittedAcquisitions.  In connection with anyAcquisition approved in writing by Lender in its sole discretion, any Term Loanin connection therewith shall be made subject to the satisfaction of thefollowing conditions precedent thereto (each, a “**Permitted Acquisition**”): (A) the Borrower shall have: (x) a coverage ratio of EBITDA toDebt Service of at least 1.5 to 1.0, (y) a ratio of Senior Debt to EBITDAof not more than 4.0 to 1.0, and (z) a ratio of Term Loan Debt to EBITDAof not more than 2.5 to 1.0;****(B) Borrowersare in compliance, and shall be on the date of the consummation of suchproposed Acquisition, with all financial covenants set forth in Section 14hereof; (C) pro forma financial projections, prepared by the Borrower ingood faith for the period from the date of the consummation of such proposedAcquisition to the date which is one year thereafter, shall reflect that theBorrowers shall be in compliance with all financial covenants set forth in Section 14hereof; (D) Excess Availability of the Borrowers shall be an amountmutually agreed upon between Lender and Borrower but in no event less than$250,000 after giving effect to the proposed Acquisition; (E) the Targetentity to be acquired in such Acquisition shall become a new Borrower hereunderin accordance with the provisions and requirements of Section 13(c)(ii) hereof;(F) any Indebtedness to be issued by any Borrower in respect of suchAcquisition (other than Indebtedness under the Revolving Loan Agreement) shallbe Subordinated Debt subject to Subordination Agreements in form and substancesatisfactory to Lender including, without limitation, payment blockage rightsand indefinite standstill on remedies; (G) Lender shall have reviewed andfound satisfactory all Acquisition Documents in respect thereof prior toBorrower entering into any such Acquisition Documents; (H) no Default orEvent of Default exists as of the proposed date of the Acquisition or wouldresult after giving effect thereto; (I) Crdentia shall deliver to Lender acertificate of an officer of Crdentia certifying compliance with the foregoing,(J) Borrower shall deliver to Lender any other due diligence reasonablyrequested by the Lender in connection with an Acquisition or Target, including,without limitation collateral, cash-flow, and operational audits, andbackground checks on Target’s management, in each case to the reasonablesatisfaction to the Lender; and (K) Borrower shall establish and maintain aseparate Lockbox with a Lockbox Bank for receivables from Account Debtors ofCRDE in accordance with the requirements of the Term Loan Agreement and thisAgreement, and Borrower shall execute with such Lockbox Bank a lockboxagreement, blocked account agreement, and such other agreements related to thelockbox arrangements, in each case in form and substance acceptable to theLender.

 

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(c)                                  Repayments.

 

(i)                                     Theprincipal outstanding balance of the Term Loan shall be repaid at the end ofthe Term.  If any such payment due dateis not a Business Day, then such payment may be made on the next succeedingBusiness Day and such extension of time shall be included in the computation ofthe amount of interest and fees due hereunder.

 

(ii)                                  MandatoryPrepayments of the Term Loan.

 

(1)                                  Salesof Assets.  Upon receipt of theproceeds of the sale or other disposition of any Equipment or real property ofBorrower which is subject to a mortgage in favor of Lender, or if any of theEquipment or real property subject to such mortgage is damaged, destroyed ortaken by condemnation in whole or in part, the proceeds thereof, in any case,in excess of $15,000 individually, or in excess of $50,000 in the aggregate, inany Fiscal Year shall be paid by Borrower to Lender as a mandatory prepaymentof the Term Loan, such payment to be applied against the remaining installmentsof principal in the inverse order of their maturities until repaid in full, andthen against the other Obligations, as determined by Lender, in its solediscretion.

 

(2)                                  ExcessCash Flow.  Five (5) days afterreceipt by Lender of Borrower’s internally prepared quarterly financialstatements pursuant to Section 9(c)(ii) hereof, commencing with thecalendar quarter ended September 30, 2005, Borrower shall make a mandatoryprepayment of the Term Loan in an amount equal to fifty percent (50%) of Borrower’s“Excess Cash Flow” (as described below) for the calendar quarter just ended,such prepayment to be applied against the remaining installments of principalin the inverse order of their maturities, such mandatory prepayments tocontinue until the date on which the Term Loan shall be repaid in full.  In addition, within ten (10) days afterreceipt of Borrower’s Fiscal Year-end audited financial statements for eachFiscal Year of Borrower, or required by Section 9(c)(iii) hereof,commencing with Borrower’s fiscal year ending December 31, 2005, Borrowershall make a mandatory prepayment of the Term Loan in any amount necessary tosatisfy any discrepancy between the actual Excess Cash Flow payments receivedon a quarterly basis for such Fiscal Year, and the amount required herein ascalculated pursuant to the audited financial statements for such FiscalYear.  For purposes hereof, “Excess CashFlow” shall mean for each of Borrower’s Fiscal Years, Borrower’s EBITDA forsuch period, minus Borrower’s cash taxes paid during such period, minusactual principal and interest payments made with respect to Borrowed Moneyduring such period, minus Borrower’s legal, consulting and accountingexpenses in connection with Permitted Acquisitions, if any, for such period (butonly to the extent permitted by Lender and only to the extent not previouslydeducted from net income in the calculation of EBITDA), minus allunfinanced Capital Expenditures by Borrower during such period.

 

(d)                                 Notes.  The Term Loan shall, in Lender’s solediscretion, be evidenced by one or more promissory notes in form and substancesatisfactory to Lender.  However, if such

 

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TermLoans are not so evidenced, such Term Loans may be evidenced solely by entriesupon the books and records maintained by Lender.

 

3.                                       WARRANTS.

 

As additionalconsideration for Lender entering into this Agreement and making the creditfacilities available to Borrower as contemplated hereby, Crdentia agrees toissue to Lender warrants to purchase shares of common stock of Crdentia equalto, in the aggregate, twelve percent (12%) of the common stock of Crdentia inaccordance with the provisions of Section 12 to the Warrant Agreement, asfollows:

 

(a)                                  Concurrentlywith the execution of this Agreement and the making by Lender of an initialTerm Loan to Borrower in the aggregate principal amount of $2,697,801.75,Crdentia will enter into the Warrant Agreement and, pursuant thereto, willissue Lender a Warrant Certificate evidencing Lender’s right to purchase threeand 24/100 percent (3.24%) of the common stock of Crdentia, at an exerciseprice per warrant of an amount provided in the Warrant Agreement.

 

(b)                                 Concurrentlywith the funding by Lender of each additional Term Loan to Borrower, with theaggregate principal amount of such additional Term Loans not to exceed$7,500,000, Crdentia will issue to Lender one or more additional WarrantCertificates representing the right to purchase up to an additional eight and76/100 percent (8.76%) of the common stock of Crdentia in accordance with theprovisions of Section 12 to the Warrant Agreement.  The Warrant Certificate percentage of eachadditional Warrant Certificate shall be determined on a pro rata basis relativeto the amount of each such additional Term Loan.  The exercise price for each additionalWarrant Certificate shall be determined as provided in the Warrant Agreement.

 

4.                                       INTEREST, FEES AND CHARGES.

 

(a)                                  InterestRate.

 

The Term Loan shall bearinterest at the rate of fifteen and one-quarter percent (15.25%) per annum, allsuch interest to be payable on the first Business Day of each month inarrears.  Upon the occurrence of an Eventof Default and during the continuance thereof, the Term Loan shall bearinterest at the rate of four percent (4%) per annum in excess of the interestrate otherwise payable thereon, which interest shall be payable on demand.  All interest shall be calculated on the basisof a 360-day year.

 

(b)                                 Feesand Charges.

 

(i)                                     ClosingFee:  Borrower shall pay to Lender aclosing fee of one and one-half percent (1.5%) of the principal amount of eachTerm Loan funded hereunder, which fees shall be fully earned and payable on thedate of disbursement of such Term Loan hereunder.

 

(ii)                                  CollateralMonitoring Fee:  On the firstBusiness Day of each calendar month following the Original Closing Date,Borrower shall pay Lender a 

 

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collateralmonitoring fee of Three Thousand and No/100 Dollars ($3,000) with respect tothe Term Loan (pro rated for the first month, if it is a partial month), whichfee shall be deemed earned at the beginning of each month; provided however,that Borrower agrees and acknowledges that such collateral monitoring fee shallbe increased, on a pro rata basis, in the event that, at any time or from timeto time, the aggregate amount of principal outstanding in respect of the TermLoan exceeds $2,500,000, which increase shall be in the amount of $1,000 permonth for each increment or partial increment of $500,000 of Term Loanprincipal in excess of $2,500,000, which collateral monitoring fee hereundershall not exceed, in any event, an aggregate of $5,000 per month.

 

(iii)                               Costsand Expenses: Borrower shall reimburse Lender for all reasonable costs andexpenses, including, without limitation, legal expenses and reasonableattorneys’ fees (whether for internal or outside counsel), incurred by Lenderin connection with the (i) documentation and consummation of thistransaction and any other transactions between Borrower and Lender, including,without limitation, Uniform Commercial Code and other public record searchesand filings, overnight courier or other express or messenger delivery,appraisal costs and surveys; (ii) collection, protection or enforcement ofany rights in or to the Collateral; (iii) collection of any Obligations;and (iv) administration and enforcement of any of Lender’s rights underthis Agreement or any Other Agreement. Borrower shall also pay all normal service charges with respect to allaccounts maintained by Borrower with Lender and any additional servicesrequested by Borrower from Lender.  Allsuch costs, expenses and charges shall, if owed to Lender, be reimbursed byLender and, in such event or in the event such costs and expenses are owed toLender, shall constitute Obligations hereunder, shall be payable by Borrower toLender on demand and, until paid, shall bear interest at the highest rate thenapplicable to Term Loans hereunder.

 

(iv)                              CapitalAdequacy Charge.  If Lender shall havedetermined that the adoption of any law, rule or regulation regardingcapital adequacy, or any change therein or in the interpretation or applicationthereof, or compliance by Lender with any request or directive regardingcapital adequacy (whether or not having the force of law) from any central bankor governmental authority enacted after the Original Closing Date, does orshall have the effect of reducing the rate of return on such party’s capital asa consequence of its obligations hereunder to a level below that which Lendercould have achieved but for such adoption, change or compliance (taking intoconsideration Lender’s policies with respect to capital adequacy) by a materialamount, then, from time to time after submission by Lender to Borrower of awritten demand therefor (“**Capital AdequacyDemand**”) together with the certificate described below, Borrowershall pay to Lender such additional amount or amounts (“**Capital Adequacy Charge**”) as willcompensate Lender for such reduction, such Capital Adequacy Demand to be madewith reasonable promptness following such determination.  A certificate of Lender claiming entitlementto payment as set forth above shall be deemed presumptively correct in theabsence of manifest error.  Suchcertificate shall set forth the nature of the occurrence giving rise to suchreduction, the amount of the Capital Adequacy Charge to be paid to Lender, andthe method by which such amount was determined. In determining such amount, Lender may use any reasonable averaging andattribution method, applied on a non-discriminatory basis.

 

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(c)                                  MaximumInterest.  It is the intent of theparties that the rate of interest and other charges to Borrower under thisAgreement and the Other Agreements shall be lawful; therefore, if for anyreason the interest or other charges payable under this Agreement are found bya court of competent jurisdiction, in a final determination, to exceed thelimit which Lender may lawfully charge Borrower, then the obligation to payinterest and other charges shall automatically be reduced to such limit and, ifany amount in excess of such limit shall have been paid, then such amount shallbe refunded to Borrower.

 

5.                                       COLLATERAL.

 

(a)                                  Grantof Security Interest to Lender.  Assecurity for the payment of all Term Loans now or in the future made by Lenderto Borrower hereunder and for the payment or other satisfaction of all otherObligations, Borrower hereby assigns to Lender and grants to Lender acontinuing security interest (subject only to Liens of BHF and other PermittedLiens) in the following property of Borrower, whether now or hereafter owned,existing, acquired or arising and wherever now or hereafter located:  (i) all Accounts and all Goods whosesale, lease or other disposition by Borrower has given rise to Accounts andhave been returned to, or repossessed or stopped in transit by, Borrower; (ii) allChattel 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 andrights to indemnification); (iii) all Inventory; (iv) all Goods(other than Inventory), including, without limitation, Equipment, vehicles andFixtures; (v) all Investment Property; (vi) all Deposit Accounts,bank accounts, deposits and cash; (vii) all Letter-of-Credit Rights; (viii) CommercialTort Claims listed on Schedule 11(b) hereto from time to time;(ix) any other property of Borrower now or hereafter in the possession,custody or control of Lender or any agent or any parent, affiliate orsubsidiary of Lender or any participant with Lender in the Term Loans, for anypurpose (whether for safekeeping, deposit, collection, custody, pledge,transmission or otherwise); and (x) all additions and accessions to,substitutions for, and replacements, products and Proceeds of the foregoingproperty, including, without limitation, proceeds of all insurance policiesinsuring the foregoing property, and all of Borrower’s books and recordsrelating to any of the foregoing and to Borrower’s business.  Theforegoing notwithstanding, the Collateral shall not be deemed toinclude any right, title, interest, claim or demand of Borrower in and toany agreement, document, license or instrument which relates to the foregoingCollateral to the extent such agreement, document, license or instrument is notassignable or capable of being encumbered as a matter of law or under the termsof the agreement, document or instrument applicable thereto or such grant wouldresult in a breach of the terms of such agreement, document, license, orinstrument (but, in each case, solely to the extent that any such restrictionshall be enforceable under applicable law) without the consent of theapplicable party thereto, and, in each case, only to the extent that any suchterm would not be rendered ineffective pursuant to Section 9-406, 9-407, 9-408or 9-409 of the Uniform Commercial Code of any relevant jurisdiction.

 

(b)                                 OtherSecurity.  Lender, in its solediscretion, without waiving or releasing any obligation, liability or duty ofBorrower 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, acquireor accept an assignment of any Lien asserted by any Person in, upon or againstthe 

 

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Collateral,provided, that Lender may take such actions with respect to Permitted Liensonly after the occurrence and during the continuance of an Event ofDefault.  All sums paid by Lender inrespect thereof and all costs, fees and expenses including, without limitation,reasonable attorney fees, all court costs and all other charges relatingthereto incurred by Lender shall constitute Obligations payable by Borrower toLender on demand and, until paid, shall bear interest at the highest rate thenapplicable to Term Loans hereunder.

 

(c)                                  PossessoryCollateral.  Immediately uponBorrower’s receipt of any portion of the Collateral evidenced by an agreement,Instrument or Document, including, without limitation, any Tangible ChattelPaper and any Investment Property consisting of Certificated Securities,Borrower shall deliver the original thereof (i) to BHF, to hold pursuantto the terms of the Revolving Loan Agreement (other than equity interests ofany Borrower pledged by Crdentia to Lender under the Pledge Agreement, whichshall be delivered to Lender pursuant to the terms of the Pledge Agreement), or(ii) to the extent the Revolving Loan Agreement has been terminated, toLender together with an appropriate endorsement or other specific evidence ofassignment thereof to Lender (in form and substance acceptable to Lender).  If an endorsement or assignment of any suchitems shall not be made for any reason, Lender is hereby irrevocablyauthorized, as Borrower’s attorney and agent-in-fact, to endorse or assign thesame on Borrower’s behalf.

 

(d)                                 ElectronicChattel Paper.  To the extent thatBorrower obtains or maintains any Electronic Chattel Paper, Borrower shall (i) complywith Section 5(e) of the Revolving Loan Agreement, or (ii) tothe extent the Revolving Loan Agreement has been terminated, create, store andassign the record or records comprising the Electronic Chattel Paper in such amanner that (i) a single authoritative copy of the record or recordsexists which is unique, identifiable and, except as otherwise provided in clauses(iv), (v) and (vi) below, unalterable, (ii) the authoritativecopy identifies Lender as the assignee of the record or records, (iii) theauthoritative copy is communicated to and maintained by the Lender or itsdesignated custodian, (iv) copies or revisions that add or change anidentified assignee of the authoritative copy can only be made with theparticipation of Lender, (v) each copy of the authoritative copy and anycopy of a copy is readily identifiable as a copy that is not the authoritativecopy and (vi) any revision of the authoritative copy is readilyidentifiable as an authorized or unauthorized revision.

 

(e)                                  Letter-of-CreditRights.  If Borrower at any time is abeneficiary under a letter of credit now or hereafter issued in favor of Borrower,at the request and option of Lender, Borrower shall (i) comply with Section 5(e) ofthe Revolving Loan Agreement, or (ii) to the extent the Revolving LoanAgreement has been terminated, pursuant to an agreement in form and substancesatisfactory to Lender, either (i) arrange for the issuer and anyconfirmer of such letter of credit to consent to an assignment to Lender of theproceeds of any drawing under the letter of credit, or (ii) arrange forLender to become the transferee beneficiary of the letter of credit, withLender agreeing, in each case, that the proceeds of any drawing under theletter to credit are to be applied as provided in this Agreement.

 

(f)                                    Third-PartyCollateral.  If Borrower shall at anytime hold or acquire an interest in Collateral in the possession of a thirdparty (other than Certificated Securities and Goods covered by a Document),Borrower shall (subject to the rights of BHF therein) promptly 

 

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obtainan acknowledgment from the third party that it is holding such Collateral forthe benefit of BHF and the Lender.

 

(g)                                 Deposit Account.  Borrower shall upon the request of Lenderdeliver to Lender (subject to the rights of BHF therein), with respect to eachDeposit Account maintained by Borrower now or hereafter (other than withLender) and that is permitted hereby, upon obtaining an interest in suchDeposit Account, a deposit account control agreement in form and substancesatisfactory to BHF and the Lender, executed by the financial institution atwhich such account is maintained, and shall take such other actions as BHF andthe Lender may jointly request to ensure that Lender’s security interest insuch account is perfected by control as such term is used in UCC Section 9-104.

 

(h)                                 Insurance Proceeds. The netproceeds of any casualty insurance insuring the Collateral, after deducting allcosts and expenses (including attorneys’ fees) of collection, shall be applied,at Lender’s option (subject to the rights of BHF and the use of such proceedsto first repay all Revolving Loan Obligations), either toward replacing orrestoring the Collateral, in a manner and on terms satisfactory to Lender, or,at Lender’s discretion after the occurrence and during the continuance of anEvent of Default, towards payment of the Obligations.  Any proceeds applied to the payment ofObligations shall be applied in such manner as Lender may elect.  In no event shall such application relieveBorrower from payment in full of all installments of principal and interestwhich thereafter become due in the order of maturity thereof.

 

6.                                       PRESERVATIONOF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.

 

Subject to the rights ofBHF therein, Borrower shall, at Lender’s request, at any time and from time totime, authenticate, execute and deliver to Lender such financing statements,documents and other agreements and instruments (and pay the cost of filing orrecording the same in all public offices deemed necessary or desirable byLender) and do such other acts and things or cause third parties to do suchother acts and things as Lender may deem necessary or desirable in its solediscretion in order to establish and maintain a valid, attached and perfectedsecurity interest in the Collateral in favor of Lender (free and clear of allother Liens, except the Liens in favor of BHF and other Permitted Liens) tosecure payment of the Obligations, and in order to facilitate the collection ofthe Collateral.  Subject to the rights ofBHF in the Collateral, Borrower irrevocably hereby makes, constitutes andappoints Lender (and all Persons designated by Lender for that purpose) asBorrower’s true and lawful attorney and agent-in-fact to execute and file suchfinancing statements, documents and other agreements and instruments and dosuch other acts and things as may be necessary to preserve and perfect Lender’ssecurity interest in the Collateral. Borrower further agrees that a carbon, photographic, photostatic orother reproduction of this Agreement or of a financing statement shall besufficient as a financing statement. Borrower further ratifies and confirms the prior filing by Lender of anyand all financing statements which identify the Borrower as debtor, Lender assecured party and any or all Collateral as collateral.  Notwithstanding the foregoing, if at any timeBHF issues to the Borrower an instruction with respect to the Collateral or BHF’srights thereunder, Borrower may, and the Lender hereby authorizes and instructsthe Borrower to, follow such instruction of BHF, notwithstanding any conflictthat may exist with respect to the Lender’s rights in such Collateral, 

 

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the Borrower’sobligations hereunder or the Lender’s instructions with respect thereto, and theBorrower’s actions in response to such instructions of BHF shall not constitutea Default or Event of Default hereunder, so long as such compliance with BHF’sinstructions do not constitute a Default or Event of Default under theRevolving Loan Agreement.

 

7.                                       POSSESSIONOF COLLATERAL AND RELATED MATTERS.

 

Until otherwise notifiedby Lender following the occurrence of an Event of Default, Borrower shall havethe right, except as otherwise provided in this Agreement, in the ordinarycourse of Borrower’s business, to (a) sell, lease or furnish undercontracts of service any of Borrower’s assets in the ordinary course ofbusiness; (b) use and consume any raw materials, work in process or othermaterials normally held by Borrower for such purpose; (c) dispose ofobsolete or unuseful Equipment or other property or assets so long as all ofthe proceeds thereof are used for the replacement or substitution of suchEquipment or other property or assets, or, if not so replaced or substitutedwithin 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 aPermitted Lien which is prior in right of payment); provided, however, that asale in the ordinary course of business shall not include any transfer or salein satisfaction, partial or complete, of a debt owed by Borrower, other than adebt secured by a Permitted Lien; (d) transfer assets to any otherBorrower or Subsidiary which is a Borrower; (e) lease or subleaseproperty; (f) sell or dispose of assets for its fair market value in anamount not to exceed $50,000 in the aggregate in any fiscal year; and (g) sellor dispose of other assets with a book value of less than $50,000 in any fiscalyear.

 

8.                                       COLLECTIONS.

 

(a)                                  Uponrequest of Lender and consent of BHF, and consistent with the terms of Section 8of the Revolving Loan Agreement, Borrower shall establish and maintain aseparate lockbox (the “**Lockbox**”)with a United States depository institution designated from time to time byLender (the “**Lockbox Bank**”),subject to the provisions of this Agreement for receivables from AccountDebtors of CRDE.  Borrower shall executewith the Lockbox Bank a lockbox agreement for the CRDE Account DebtorCollection Lockbox Account in form and substance acceptable to Lender, and suchother agreements related to such lockbox agreement as Lender may require.  Borrower shall ensure that all collections ofAccounts on which Account Debtors of CRDE are obligated are paid directly intothe Lockbox for deposit into the CRDE Account Debtor Collection LockboxAccount, and that all funds deposited into the CRDE Account Debtor CollectionLockbox Account are immediately transferred into the Concentration Accountdescribed in Section 8 of the Revolving Loan Agreement.

 

(b)                                 IntentionallyDeleted.

 

(c)                                  Notwithstandinganything in any lockbox agreement to the contrary, Borrower agrees that itshall be liable for any fees and charges in effect from time to time andcharged by the Lockbox Bank in connection with the Lockboxes and LockboxAccounts, and that Lender shall have no liability therefor.  Borrower further acknowledges and agreesthat, to the extent such fees and charges are not paid by Borrower directly butare satisfied using collections in the Lockbox Accounts, such fees and chargesshall be deemed to be Revolving 

 

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Loansmade by Lender under the Revolving Loan Agreement.  Borrower agrees to indemnify and hold Lenderharmless from any and all liabilities, claims, losses and demands whatsoever,including reasonable attorneys’ fees and expenses, arising from or relating toactions of Lender or the Lockbox Bank pursuant to this Section 8 or anylockbox agreement, other than if such liability, claim, loss or demand arisesdue to the gross negligence or willful misconduct of Lender or the LockboxBank, as determined by a court of competent jurisdiction.

 

(d)                                 Subject to all applicable law and all rightsof BHF, Lender may, at any time and from time to time after the occurrence andduring the continuance of an Event of Default, whether before or afternotification to any Account Debtor and whether before or after the maturity ofany of the Obligations, (i) enforce collection of any of Borrower’sAccounts or other amounts owed to Borrower by suit or otherwise; (ii) exerciseall of Borrower’s rights and remedies with respect to proceedings brought tocollect any Accounts or other amounts owed to Borrower; (iii) surrender,release or exchange all or any part of any Accounts or other amounts owed toBorrower, or compromise or extend or renew for any period (whether or notlonger than the original period) any Indebtedness thereunder; (iv) sellor assign any Account of Borrower or other amount owed to Borrower upon suchterms, 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 othersimilar document against any Account Debtor or other Person obligated toBorrower; and (vi) do all other acts and things which are necessary, inLender’s sole discretion, to fulfill Borrower’s obligations under thisAgreement and the Other Agreements and to allow Lender to collect the Accountsor other amounts owed to Borrower. Subject to the rights of BHF, addition to any other provision hereof,Lender may at any time, after the occurrence and during the continuance of anEvent of Default, at Borrower’s expense, notify Account Debtors to make paymentdirectly to Lender of any amounts due or to become due thereunder (and oncesuch notice has been given to an Account Debtor, Borrower shall not give anycontrary instructions to such Account Debtor during the continuance of an Eventof Default without Lender’s prior written consent).

 

(e)                                  On a monthly basis, Lender shall deliver toBorrower an account statement showing all Loans, charges and payments whichshall be deemed final, binding and conclusive upon Borrower unless Borrowernotifies Lender in writing, specifying any error therein, within thirty (30)days of the date such account statement is sent to Borrower, and any suchnotice shall only constitute an objection to the items specifically identified.

 

9.                                       COLLATERAL,AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

 

(a)                                  BorrowingBase Reports.  To the extentrequested by Lender from time to time Borrower shall deliver to Lender theBorrowing Base Certificate delivered to BHF in respect of the RevolvingObligations.

 

(b)                                 MonthlyReports.  After the Revolving LoanAgreement has been terminated, Borrower shall deliver to Lender, in addition toany other reports, as soon as practicable and in any event within fifteen(15) days after the end of each month, (A) a detailed trial balance ofBorrower’s Accounts aged by Account Debtor or payor per date of invoice, inform and substance reasonably satisfactory to Lender, including, withoutlimitation, the names 

 

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andaddresses of all Account Debtors of Borrower, and (B) a summary and detailof accounts payable (such Accounts and accounts payable divided into such timeintervals as Lender may require in its sole discretion), including a listing ofany held checks.  Prior to thetermination of the Revolving Loan Agreement, Borrower shall deliver to Lenderany monthly report delivered to BHF in respect of the Revolving Obligations asrequested from time to time by Lender.

 

(c)                                  FinancialStatements.  Borrower shall deliverto Lender the following financial information, all of which shall be preparedin accordance with GAAP consistently applied (except where such calculationsotherwise require), and shall be accompanied by a certificate in the form of Exhibit Ahereto, which compliance certificate shall include a calculation of allfinancial covenants contained in this Agreement, including the financial testsset forth in Section 13(j)(iii):  (i) nolater than fifteen (15) days after each calendar month, copies of internallyprepared financial statements, including, without limitation, balance sheetsand statements of income, retained earnings and cash flow of (A) CRDE and (B) theBorrowers, in each case certified by the Chief Financial Officer of Borrower; (ii) nolater than forty-five (45) days after the end of each of the first threequarters of Borrower’s Fiscal Year, copies of internally prepared financialstatements, including, without limitation, balance sheets, statements ofincome, retained earnings, cash flows and reconciliation of surplus forBorrower on a consolidated basis, certified by the Chief Financial Officer ofBorrower; and (iii) no later than ninety (90) days after the end of eachof Borrower’s Fiscal Years, audited annual financial statements of Borrower ona consolidated basis, with an unqualified opinion as to the audited financialstatements by independent certified public accountants selected by Borrower andreasonably satisfactory to Lender.  Thereport of such accounts shall be accompanied by copies of any managementletters sent to the Borrower by such accountants.

 

(d)                                 AnnualProjections.  As soon as practicableand in any event not less than thirty (30) days prior to the beginning of eachFiscal Year, Borrower shall deliver to Lender projected balance sheets,statements of income and cash flow for Borrower on a consolidated basis, foreach of the twelve (12) months during such Fiscal Year, which shall include theassumptions used therein, together with appropriate supporting details asreasonably requested by Lender.

 

(e)                                  Explanationof Budgets and Projections.  Inconjunction with the delivery of the annual presentation of projections orbudgets referred to in Subsection 9(d) above, Borrower shalldeliver a letter signed by the President or a Vice President of Borrower and bythe Treasurer or Chief Financial Officer of Borrower, describing, comparing andanalyzing, in detail, all changes and developments between the anticipatedfinancial results included in such projections or budgets and the historicalfinancial statements of Borrower.

 

(f)                                    Invoices and Billing Statements.  After the Revolving Loan Agreement has beenterminated, promptly following request therefor by Lender, Borrower shallprovide 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 anddelivery documents, each as applicable to Borrower.

 

(g)                                 Obligor Financial Statements and Tax Returns.  Borrower shall cause each Obligor to deliverto Lender such Obligor’s annual financial statement (in form acceptable to 

 

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Lender)and a copy of such Obligor’s federal income tax return with respect to thecorresponding year, in each case on the date when such tax return is due or, ifearlier, on the date when available.

 

(h)                                 OtherInformation.  Promptly followingrequest therefor by Lender, such other business or financial data, reports,appraisals and projections as Lender may reasonably request.  This may include, without limitation, amonthly certificate from the President and Chief Financial Officer of Borrowershowing Borrower’s compliance with each of the financial covenants set forth inthis Agreement, and stating whether any Event of Default has occurred or eventthat, with giving of notice or the passage of time, or both, would constitutean Event of Default, and if so, the steps being taken to prevent or cure suchEvent of Default.

 

(i)                                     Post-Closing Review.  Within thirty (30) days after any PermittedAcquisition, Lender shall conduct (or a firm, consultant, advisor or otherthird party hired by the Lender), at Borrower’s cost, a post-closing audit andreview, which post-closing review shall include (whether conducted after theOriginal Closing Date or after a Permitted Acquisition), without limitation, (i) areview of the books, records and accounting systems of Borrower, (ii) areview and final verification of all add-backs used in determining the finalpro forma financial statements of Borrower, and (iii) a review ofhealthcare regulatory compliance matters (“**Post-ClosingReview**”).

 

(j)                                     PublicReporting.  Promptly upon the filingthereof, each Borrower shall deliver to Lender copies of all registrationstatements and annual, quarterly, monthly or other regular reports which suchBorrower or any of its Subsidiaries files with the Securities and ExchangeCommission, as well as promptly providing to Lender copies of any reports andproxy statements delivered to its shareholders.

 

10.                                 TERMINATION;AUTOMATIC RENEWAL; EARLY TERMINATION FEE.

 

(a)                                  ThisAgreement shall be in effect from the Original Closing Date until June 16,2007 (the “Term”), unlessearlier terminated in accordance with the provisions of this Agreement;provided that all Obligations shall be due and payable upon the termination,whether by acceleration or maturity, of the Revolving Loan Agreement with BHF,unless otherwise provided herein.

 

(b)                                 Ifthis Agreement expires, then (i) Lender shall not make any additional TermLoans on or after the date identified as the date on which the Obligations areto be repaid; and (ii) this Agreement shall terminate on the datethereafter that the Obligations are paid in full.  At such time as Borrower has repaid all ofthe Obligations and this Agreement has terminated, Borrower shall deliver toLender an indemnification of Lender, in form and substance satisfactory toLender, for checks which Lender has credited to Borrower’s account, but whichsubsequently are dishonored for any reason or for automatic clearinghouse orwire transfers not yet posted to Borrower’s account.

 

(c)                                  Borrowermay terminate this Agreement at any time but only upon sixty (60) days priorwritten notice and prepayment of all Obligations.  In the event that the Term Loan (other thanas a result of a mandatory prepayment pursuant to subsection 2(c))or 

 

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RevolvingLoans (except in respect of the circumstances described in Section 10(e) ofthe Revolving Loan Agreement) are prepaid by Borrower for any reason prior to theexpiration of the Term, the entire principal balance, together with all accruedand unpaid interest on any Term Loans then outstanding, shall be immediatelydue and payable on the effective date of such termination, together with theMake Whole Amount and all other Obligations of Borrower.

 

(d)                                 Anyprepayment of the Term Loan (other than a mandatory prepayment made pursuant tothe prepayment provisions described in Section 2(c) hereof) shallalso be accompanied by a prepayment fee, equal to the Make Whole Amount.  The following definitions shall apply:

 

(i)                                     “MakeWhole Amount” means the positive difference, if any, between (x) theRemaining Payment Amount immediately prior to any prepayment of that portion ofthe Term Loan which is being prepaid and (y) the principal balance of theTerm Loan being prepaid as of the date of any such prepayment; and

 

(ii)                                  “RemainingPayment Amount” means the sum of (x) amount of each future and unpaidscheduled payment of principal and interest on the Term Loan, that would be dueon or after the date of a prepayment of the Term Loan if no payment of the TermLoan were made prior to the end of the Term, plus (y) the amount ofall Term Loan related fees which would have been earned by Lender from the dateof prepayment through the end of the Term if no payment of the Term Loan weremade prior to the end of the Term.

 

Lender shall provideBorrower with a written calculation of the Make Whole Amount due from Borrowerhereunder, which calculation shall be presumptively correct absent manifesterror.

 

(e)                                  Borrowermay prepay all of the Term Loan Obligations, without payment of a prepaymentfee, upon written notice to Lender within sixty (60) days after the end of thefirst year of the Term, if Lender does not fund any new Term Loan (beyond theinitial Term Loan funding) during the first twelve (12) months of the Termhereof, provided that no Default or Event of Default then exists.

 

(f)                                    Notwithstandinganything in this Agreement to the contrary, if the funding obligations of BHFunder the Revolving Loan Agreement terminates for any reason (whether byvoluntary termination by Borrowers, by reason of the occurrence of an Event ofDefault or otherwise) prior to the expiration of the Term of this Agreement,the entire principal balance, together with accrued and unpaid interest on anyObligations under this Agreement and all Revolving Loan Obligations thenoutstanding, including, without limitation, a prepayment fee equal to (i) theMake Whole Amount due under this Agreement, and (ii) the Make Whole Amountdue under the Revolving Loan Agreement, shall be immediately due and payable onthe effective date of such termination. Notwithstanding the foregoing, in the event that Borrower prepays theRevolving Loan Obligations under the Revolving Loan Agreement solely as aresult of the circumstances described in Section 10(e) of theRevolving Loan Agreement, the prepayment of the Obligations under thisAgreement shall be prepaid without payment of any prepayment fee, and Borrowershall not have to pay (I) a prepayment fee equal to the Make 

 

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WholeAmount under this Agreement, nor (II) a prepayment fee equal to the Make WholeAmount under the Revolving Loan Agreement.

 

11.                                 REPRESENTATIONSAND WARRANTIES.

 

Borrower herebyrepresents and warrants to Lender, which representations and warranties(whether appearing in this Section 11 or elsewhere) shall be trueat the time of the Original Closing Date, shall remain true until the repaymentin full and satisfaction of all the Obligations and termination of thisAgreement, and shall be remade by Borrower at the time each Term Loan is madepursuant to this Agreement, provided, that representations and warranties madeas of a particular date shall be true and correct as of such date.

 

(a)                                  FinancialStatements and Other Information. The financial statements and other information delivered or to bedelivered by Crdentia to Lender on the Original Closing Date fairly present inall material respects the financial condition of Borrowers, and there has beenno material adverse change in the financial condition, the operations or anyother status of Borrowers, taken as a whole, since the date of the financialstatements delivered to Lender most recently prior to the date of thisAgreement.  All written information nowor heretofore furnished by Borrower to Lender is true and correct in allmaterial respects as of the date with respect to which such information wasfurnished, other than budgets and projections, which represent Borrowers’ goodfaith estimate of the matters contained therein.

 

(b)                                 Locations;Certain Collateral.  The office whereBorrower keeps its books, records and accounts (or copies thereof) concerningthe Collateral, Borrower’s principal place of business and all of Borrower’sother places of business, locations of Collateral and post office boxes andlocations of bank accounts are as set forth in Schedule 11(b) andat other locations within the continental United States of which Lender hasbeen advised by Borrower in accordance with Subsection 12(b)(i).  The Collateral, including, withoutlimitation, the Equipment (except any part thereof which Borrower shall haveadvised Lender in writing consists of Collateral normally used in more than onestate) is kept, or, in the case of vehicles, based, only at the addresses setforth on Schedule 11(b), and at other locations within thecontinental United States of which Lender has been advised by Borrower inwriting in accordance with Subsection 12(b)(i) hereof.  Schedule 11(b) heretocontains a complete listing of all of the following assets of Borrower as of May 5,2005: (a) Intellectual Property which is subject to registration statutesand licenses of Intellectual Property to which Borrower is a party (whether aslicensor or licensee), (b) Instruments (other than Instruments depositedfor collection in the ordinary course of business), (c) Deposit Accounts, (d) InvestmentProperty, (e) Letter-of-Credit Rights, (f) Chattel Paper, (g) Documents,(h) Commercial Tort Claims, (i) Collateral which is subject tocertificate of title statutes, and (j) tangible Collateral located withany bailee, warehousemen or other third parties.

 

(c)                                  Loansby Borrower.  Borrower has not madeany loans or advances to any Affiliate or other Person except for advancesauthorized hereunder to employees, officers and directors of Borrower fortravel and other expenses arising in the ordinary course of Borrower’sbusiness.

 

(d)                                 [LeftBlank].

 

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(e)                                  Liens.  Borrower is the lawful owner of allCollateral now purportedly owned or hereafter purportedly acquired by Borrower,free from all Liens, other than the Liens in favor of BHF and other PermittedLiens.

 

(f)                                    Organization,Authority and No Conflict.  Borroweris a corporation or limited partnership, duly organized, validly existing andin good standing in the State of its organization, its state organizationalidentification number is as set forth on the Information Certificate andBorrower is duly qualified and in good standing in all states where the natureand extent of the business transacted by it or the ownership of its assetsmakes such qualification necessary or, if Borrower is not so qualified,Borrower may cure any such failure without losing any of its rights, incurringany Liens or material penalties, or otherwise affecting Lender’s rights.  Borrower has the right and power and is dulyauthorized and empowered to enter into, execute and deliver this Agreement andthe Other Agreements and perform its obligations hereunder and thereunder.  Borrower’s execution, delivery andperformance of this Agreement and the Other Agreements do not conflict with theprovisions of the organizational documents of Borrower, any statute,regulation, ordinance or rule of law, or any agreement, contract or otherdocument which may now or hereafter be binding on Borrower, except forconflicts with agreements, contracts or other documents which would not have aMaterial Adverse Effect on Borrower, and Borrower’s execution, delivery andperformance of this Agreement and the Other Agreements shall not result in theimposition of any Lien upon any of Borrower’s property (other than PermittedLiens) under any existing indenture, mortgage, deed of trust, loan or creditagreement or other agreement or instrument by which Borrower or any of itsproperty may be bound or affected.

 

(g)                                 Litigation.  Except as disclosed to Lender on Schedule 11(g) hereto,as of May 5, 2005, there are no actions or proceedings which are pendingor, to the best of Borrower’s knowledge, threatened in writing againstBorrower, which are, reasonably likely to have a Material Adverse Effect onBorrower.

 

(h)                                 Compliancewith Laws and Maintenance of Permits. Borrower has obtained all governmental consents, franchises,certificates, licenses, authorizations, approvals and permits, the lack ofwhich would have a Material Adverse Effect on Borrower.  Borrower is in compliance in all materialrespects 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 ordinancesrelating to taxes, employer and employee contributions and similar items,securities, ERISA or employee health and safety) the failure to comply withwhich would have a Material Adverse Effect on Borrower.

 

(i)                                     AffiliateTransactions.  Except as set forth onSchedule 11(i) hereto or as permitted pursuant to Subsection 11(c) andSubsection 13(h) hereof, Borrower is not conducting,permitting or suffering to be conducted, transactions with any Affiliate otherthan transactions with Affiliates for the purchase or sale of Inventory orservices in the ordinary course of business pursuant to terms that are no lessfavorable to Borrower than the terms upon which such transactions would havebeen made had they been made to or with a Person that is not an Affiliate.

 

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(j)                                     Namesand Trade Names.  Borrower’s name,for the past five years, has always been as set forth on the first page ofthis Agreement and Borrower uses no trade names, assumed names, fictitiousnames or division names in the operation of its business, except as set forthon Schedule 11(j) hereto.

 

(k)                                  Equipment.  Except for Liens in favor of BHF and otherPermitted Liens, Borrower has good and indefeasible and merchantable title toand ownership of all Equipment.  NoEquipment is a Fixture to real estate unless such real estate is owned by Borrowerand is subject to a mortgage in favor of Lender (subject to the rights of BHF)or, if such real estate is leased, is subject to a landlord’s agreement infavor of (subject to the rights of BHF) Lender on terms acceptable to Lender,or an accession to other personal property unless such personal property issubject to a second priority Lien in favor of Lender (subject to the rights ofBHF).

 

(l)                                     Enforceability.  This Agreement and the Other Agreements towhich Borrower is a party are the legal, valid and binding obligations ofBorrower and are enforceable against Borrower in accordance with theirrespective terms.

 

(m)                               Solvency.  Borrowers on a consolidated basis are, aftergiving effect to the transactions contemplated hereby, solvent, able to paytheir debts as they become due, have capital sufficient to carry on theirbusiness, now own property having a value both at fair valuation and at presentfair saleable value greater than the amount required to pay their debts, andwill not be rendered insolvent by the execution and delivery of this Agreementor any of the Other Agreements or by completion of the transactionscontemplated hereunder or thereunder.

 

(n)                                 Indebtedness.  Except as set forth on Schedule 11(n)hereto, Borrower is not obligated (directly or indirectly) for any Indebtednessother than the Loans and Indebtedness to BHF, and Schedule 11(n)hereto describes all Indebtedness of the Borrower existing as of May 5,2005, including, without limitation, any Indebtedness permitted under Section 13(a).

 

(o)                                 MarginSecurity and Use of Proceeds. Borrower does not own any margin securities, and none of the proceeds ofthe Term Loans hereunder shall be used for the purpose of purchasing orcarrying any margin securities or for the purpose of reducing or retiring anyIndebtedness which was originally incurred to purchase any margin securities orfor any other purpose not permitted by Regulation U of the Board ofGovernors of the Federal Reserve System as in effect from time to time.

 

(p)                                 Parent,Subsidiaries and Affiliates.  Exceptas set forth on Schedule 11(p) hereto or as otherwise permittedhereunder, including under Section 13(c) hereof, Borrower has noParents, Subsidiaries or other Affiliates, nor is Borrower engaged in any jointventure or partnership with any other Person.

 

(q)                                 NoDefaults.  Except as set forth on Schedule 11(q)hereto, Borrower is not in default under any material contract, lease orcommitment to which it is a party or by which it is bound, nor does Borrowerknow of any dispute regarding any contract, lease or commitment which wouldhave, in either case, a Material Adverse Effect on Borrower.

 

(r)                                    EmployeeMatters.  As of the Closing Date,there are no controversies pending or threatened between Borrower and any ofits employees, agents or independent 

 

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contractors,other than employee grievances arising in the ordinary course of business whichwould not, in the aggregate, have a Material Adverse Effect on Borrower, andBorrower is in compliance with all federal and state laws respecting employmentand employment terms, conditions and practices except for such noncompliancewhich would not have a Material Adverse Effect on Borrower.

 

(s)                                  IntellectualProperty.  Borrower possesses adequatelicenses, patents, patent applications, copyrights, service marks, trademarks,trademark applications, tradestyles and trade names to continue to conduct itsbusiness as heretofore conducted by it except to the extent that the failure topossess such items would not have a Material Adverse Effect on Borrower.

 

(t)                                    EnvironmentalMatters.  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 oroff its premises (whether or not owned by it) in any manner which at any timeviolates in any material respect any Environmental Law, or any license, permit,certificate, approval or similar authorization thereunder, and the operationsof the Borrower comply in all material respects with all Environmental Laws andall licenses, permits, certificates, approvals and similar authorizationsthereunder.  There has been noinvestigation, proceeding, complaint, order, directive, claim, citation ornotice by any governmental authority or any other Person, nor is any pendingor, to the best of the Borrower’s knowledge, threatened with respect to anynon-compliance with or violation of the requirements of any Environmental Lawby the Borrower or the release, spill or discharge, threatened or actual, ofany Hazardous Materials or the generation, use, storage, treatment,transportation, manufacture, handling, production or disposal of any HazardousMaterials or any other environmental, health or safety matter which would havea Material Adverse Effect on Borrower or its business, operations or assets orany properties at which the Borrower has transported, stored or disposed of anyHazardous Materials.  Borrower has nomaterial liability (contingent or otherwise) in connection with a release,spill or discharge, threatened or actual, of any Hazardous Materials or thegeneration, use, storage, treatment, transportation, manufacture, handling,production or disposal of any Hazardous Materials.

 

(u)                                 ERISAMatters.  Borrower has paid anddischarged all obligations and liabilities arising under ERISA of a characterwhich, if unpaid or unperformed, might result in the imposition of a Lienagainst any of its properties or assets.

 

(v)                                 Reimbursement.  Borrower has provided to Lender copies of allservice contracts with Account Debtors, to the extent required by theLender.  Borrower is in compliance in allmaterial respects with such contracts and is entitled to reimbursement undersuch contracts.

 

(w)                               Compliance with Healthcare Regulations.

 

(i)                                     Borroweris not subject to compliance with any Healthcare Regulations, including withoutlimitation, the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), theFalse Claims Act (31 U.S.C. §§ 3729 et seq.), the Health InsurancePortability 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. § 1395nn);

 

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(ii)                                  Borrowerhas obtained all necessary licenses and accreditations to operate its businessas now conducted, and currently is in compliance with all statutory andregulatory requirements applicable to it, the failure of which would have aMaterial Adverse Effect upon Borrower; and

 

(iii)                               Allpersons providing professional health care services for or on behalf ofBorrower (either as an employee or independent contractor) are appropriatelylicensed in every jurisdiction in which they hold themselves out asprofessional health care providers.

 

(x)                                   Immigration Matters. Borrower has complied with applicable United States immigration lawrequirements, including without limitation the Illegal Immigration Reform andImmigrant Responsibility Act of 1996 (Pub. L. No. 104-193), as such lawsapply to Borrower’s recruitment of international temporary professional healthcare service providers.

 

(y)                                 Licenses, Permits, etc.  Borrower has all necessary federal, state andlocal licenses, permits, registrations, certifications and other approvalsrequired in order to conduct any healthcare activity in which it is currentlyengaged; the failure of Borrower to have such licenses, permits, registrations,certifications and other approvals would have a Material Adverse Effect on theBorrower and any Person that provides any healthcare services for or on behalfof Borrower (either as an employee or independent contractor) holds therequired federal, state and local licenses that are necessary to legallyperform such services and are not suspended or limited in any way; and, exceptas set forth on Schedule 11(y) hereto, Borrower is in good standing withthe respective governmental, quasi-governmental and other third party payorsand regulatory agencies that are involved in such healthcare activities.

 

(z)                                   CollectiveEnterprise.  Borrowers are engaged inthe businesses of providing staffing in the healthcare industry as of theClosing Date, as well as in certain other businesses.  These operations require financing on a basissuch that the credit supplied can be made available from time to time toBorrowers, as required for the continued successful operation of Borrowerstaken as a whole.  Borrowers haverequested the Lender make credit available hereunder primarily for the purposesof Subsection 12(g) and generally for the purposes offinancing the operations of Borrowers. Each Borrower expects to derive benefit (and the Board of Directors ofeach Borrower has determined that such Borrower may reasonably be expected toderive benefit), directly or indirectly, from a portion of the credit extendedby Lender hereunder, both in its separate capacity and as a member of the groupof companies, since the successful operation and condition of each Borrower isdependent on the continued successful performance of the functions of the groupas a whole.  Each Borrower acknowledgesthat, but for the agreement of each of the other Borrowers to execute anddeliver this Agreement, Lender would not have made available the creditfacilities established hereby on the terms set forth herein.

 

(aa)                            Acquisition.  Each Acquisition has beenconsummated pursuant to the terms of the applicable Acquisition Documents andin compliance with all applicable laws. Borrower has provided to Lender complete copies of the AcquisitionDocuments, including all schedules, exhibits and disclosure letters referred totherein or delivered pursuant thereto, if any, and all amendments thereto,waivers relating thereto and other side letters or agreements 

 

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affecting the term thereof.  None of such agreements and documents hasbeen amended or supplemented, nor have any of the provisions thereof beenwaived by the parties thereto, except pursuant to a written agreement oragreement which has heretofore been delivered to the Lender.

 

(bb)                          Certain Financial Information.  Thefollowing have been delivered to Lender as of the Original Closing Date:  (i) internally prepared financialstatements of Borrower for the most recent month end and (ii) projectionsin form and detail satisfactory to Lender giving effect to each PermittedAcquisition.

 

12.                                 AFFIRMATIVECOVENANTS.

 

Until payment andsatisfaction in full of all Obligations and termination of this Agreement,unless Borrower obtains Lender’s prior written consent waiving or modifying anyof Borrower’s covenants hereunder in any specific instance, Borrower covenantsand agrees as follows:

 

(a)                                  Maintenanceof Records.  Borrower shall at alltimes keep accurate and complete books, records and accounts with respect toall of Borrower’s business activities, in accordance with sound accountingpractices and GAAP consistently applied, and shall keep such books, records andaccounts, and any copies thereof, only at the addresses indicated for suchpurpose on Schedule 11(b) or such other location that isnotified to Lender in writing.

 

(b)                                 Notices.  Borrower shall:

 

(i)                                     Locations.  Promptly (but in no event less than ten (10) daysprior to the occurrence thereof) notify Lender of the proposed opening of anynew place of business or new location of Collateral, the closing of anyexisting place of business or location of Collateral, any change of thelocation of Borrower’s books, records and accounts (or copies thereof), theopening or closing of any post office box, the opening or closing of any bankaccount or, if any of the Collateral consists of Goods of a type normally usedin more than one state, the use of any such Goods in any state other than astate in which Borrower has previously advised Lender that such Goods will beused.

 

(ii)                                  Litigationand Proceedings.  Promptly uponbecoming aware thereof (but in no event later than three (3) days after sobecoming aware), notify Lender of (i) any actions or proceedings that aregreater than $50,000, individually or in the aggregate, which are pending orthreatened against Borrower and (ii) any Commercial Tort Claims ofBorrower which may arise which involve an amount in controversy in excess ofFifty Thousand and No/100 Dollars ($50,000.00), which notice shall constituteBorrower’s authorization to amend Schedule 11(b) to add suchCommercial Tort Claim

 

(iii)                               Namesand Trade Names.  Notify Lenderwithin ten (10) days of the change of its name or the use of any tradename, assumed name, fictitious name or division name not previously disclosedto Lender in writing.

 

(iv)                              ERISAMatters.  Promptly notify Lender of(x) the occurrence of any “reportable event” (as defined in ERISA) whichmight result in the termination by the Pension Benefit Guaranty Corporation(the “**PBGC**”) of any employee benefitplan 

 

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(“**Plan**”) covering any officers or employeesof the Borrower, any benefits of which are, or are required to be, guaranteedby the PBGC, (y) receipt of any notice from the PBGC of its intention toseek termination of any Plan or appointment of a trustee therefor or(z) its intention to terminate or withdraw from any Plan.

 

(v)                                 EnvironmentalMatters.  Immediately notify Lenderupon becoming aware of any investigation, proceeding, complaint, order,directive, claim, citation or notice with respect to any noncompliance with orviolation of the requirements of any Environmental Law by Borrower or thegeneration, 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 orassets or any properties at which Borrower has transported, stored or disposedof any Hazardous Materials unless the foregoing could not reasonably beexpected to have a Material Adverse Effect on Borrower.

 

(vi)                              Default;Material Adverse Change.  Promptlyadvise Lender of any material adverse change in the business, property, assets,prospects, operations or condition, financial or otherwise, of Borrower, theoccurrence of any Default or Event of Default hereunder or the occurrence ofany event which, if uncured, will become an Event of Default after notice orlapse of time (or both).

 

(vii)                           SubordinatedDebt.  Promptly advise Lender of anydefault or any event which, with the giving of notice or lapse of time, orboth, would constitute a default, under any subordination agreement relative toSubordinated Debt, or any agreement, instrument or document evidencing orrelating to any Subordinated Debt, and a certificate of a authorized officer ofBorrower specifying the nature thereof and Borrower’s proposed responsethereto, in reasonable detail; provided that Borrower shall immediatelyadvise Lender of a Travmed Subordinated Debt Default.

 

All of the foregoing notices shall be provided by Borrower to Lender inwriting.

 

(c)                                  Compliancewith Laws and Maintenance of Permits. Borrower shall maintain all governmental consents, franchises,certificates, licenses, authorizations, approvals and permits, the lack ofwhich would have a Material Adverse Effect on Borrower, and Borrower shallremain in compliance with all applicable federal, state, local and foreignstatutes, orders, regulations, rules and ordinances (including, withoutlimitation, Environmental Laws and statutes, orders, regulations, rules andordinances relating to taxes, employer and employee contributions and similaritems, securities, ERISA or employee health and safety) the failure with whichto comply would have a Material Adverse Effect on Borrower.  Following any determination by Lender thatthere is noncompliance, or any condition which requires any action by or onbehalf of Borrower in order to avoid noncompliance, with any Environmental Law,at Borrower’s expense, cause an independent environmental engineer acceptableto Lender to conduct such tests of the relevant site(s) as are appropriate andprepare and deliver a report setting forth the results of such tests, aproposed plan for remediation and an estimate of the costs thereof.

 

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(d)                                 Inspectionand Audits.  Upon five (5) BusinessDays 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 atBorrower’s places of business at any reasonable times during normal businesshours and, without hindrance or delay, to inspect the Collateral and toinspect, audit, check and make extracts from Borrower’s books, records,journals, orders, receipts and any correspondence and other data relating toBorrower’s business, the Collateral or any transactions between the partieshereto, and shall have the right to make such verification concerning Borrower’sbusiness as Lender may consider reasonable under the circumstances.  Borrower shall furnish to Lender suchinformation relevant to Lender’s rights under this Agreement and the OtherAgreements as Lender shall at any time and from time to time request.  Lender, through its officers, employees oragents, shall have the right, at any time and from time to time, in Lender’sname, to verify the validity, amount or any other matter relating to any ofBorrower’s Accounts, by mail, telephone, telecopy, electronic mail orotherwise, 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 inBorrower’s name.  Borrower authorizesLender to discuss the affairs, finances and business of Borrower with anyofficers, employees or directors of Borrower or with its Parent or anyAffiliate or the officers, employees or directors of its Parent or anyAffiliate, and to discuss the financial condition of Borrower with Borrower’sindependent public accountants, which shall be attended by a representative ofBorrower.  Any such discussions shall bewithout liability to Lender or to Borrower’s independent publicaccountants.  Borrower shall pay toLender all customary fees (currently Eight Hundred Fifty and No/100 Dollars($850.00) per person, per day) and all reasonable costs and out-of-pocketexpenses incurred by Lender in the exercise of its rights hereunder, and all ofsuch fees, costs and expenses shall constitute Obligations hereunder, shall bepayable on demand and, until paid, shall bear interest at the highest rate thenapplicable to Term Loans hereunder; provided, however, that solong as no Event of Default has occurred, Borrower shall not pay for more thanfour (4) audits in any Fiscal Year, except for any audits of a Target inconnection with a proposed Acquisition.

 

(e)                                  Insurance.  Borrower shall:

 

(i)                                     Keepthe Collateral properly housed and insured for the full insurable value thereofagainst loss or damage by fire, theft, explosion, sprinklers, collision (in thecase of motor vehicles) and such other risks as are customarily insured againstby Persons engaged in businesses similar to that of Borrower, with suchcompanies, in such amounts, with such deductibles and under policies in suchform as shall be reasonably satisfactory to BHF and Lender).  Certificates of insurance or, if requested byLender, original (or certified) copies of such policies of insurance have beenor shall be, within ninety (90) days after the Original Closing Date, deliveredto Lender, together with evidence of payment of all premiums therefor, andshall contain an endorsement, in form and substance acceptable to Lender,showing loss under such insurance policies payable to BHF and Lender, as theirinterests appear.  Such endorsement, oran independent instrument furnished to Lender, shall provide that the insurancecompany shall give Lender at least thirty (30) days’ written notice before anysuch policy of insurance is altered or canceled (ten (10) days fornon-payment of premiums) and that no act, whether willful or negligent, ordefault of Borrower or any other Person shall affect the right of Lender torecover under such policy of insurance in case of loss or damage.  In addition, Borrower shall cause to beexecuted and delivered to 

 

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BHF and theLender, as their interests may appear, an assignment of proceeds of itsbusiness interruption insurance policies. Borrower hereby directs all insurers under all policies of insurance topay all proceeds payable thereunder directly to BHF and the Lender, as theirinterests may appear.  Subject to therights of BHF in and to the Collateral and insurance proceeds, Borrowerirrevocably makes, constitutes and appoints Lender (and all officers, employeesor 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 ofinsurance, endorsing the name of Borrower on any check, draft, instrument orother item of payment for the proceeds of such policies of insurance and makingall determinations and decisions with respect to such policies of insurance,provided however, that if no Event of Default shall have occurred and iscontinuing, 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 insuranceas is customary for Persons engaged in businesses similar to that of Borrowerwith such companies and in such amounts with such deductibles and underpolicies in such form as shall be reasonably satisfactory to Lender andcertificates of insurance or, if requested by Lender, original (or certified)copies of such policies have been or shall be, within ninety (90) days afterthe Original Closing Date, delivered to Lender, together with evidence ofpayment of all premiums therefor; each such policy shall contain an endorsementshowing Lender as additional insured thereunder and providing that theinsurance company shall give Lender at least thirty (30) days’ written noticebefore any such policy shall be altered or canceled.

 

If Borrower at any time or times hereafter shall fail to obtain ormaintain any of the policies of insurance required above or to pay any premiumrelating thereto, then Lender, without waiving or releasing any obligation ordefault by Borrower hereunder, may (but shall be under no obligation to) obtainand maintain such policies of insurance and pay such premiums and take suchother 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 againstBorrower with respect to the Collateral. Such insurance may be more expensive than the cost of insurance Borrowermay be able to obtain on its own and may be cancelled only upon Borrowerproviding evidence that it has obtained the insurance as required above.  All sums disbursed by Lender in connectionwith any such actions, including, without limitation, court costs, expenses,other charges relating thereto and reasonable attorneys’ fees, shall constituteTerm Loans hereunder, shall be payable on demand by Borrower to Lender and,until paid, shall bear interest at the highest rate then applicable to TermLoans hereunder.

 

(f)                                    Collateral.  Borrower shall keep the Collateral in goodcondition, repair and order and shall make all necessary repairs to theEquipment and replacements thereof so that the operating efficiency and thevalue thereof shall at all times be preserved and maintained in all materialrespects.  Borrower shall permit Lenderto examine any of the Collateral at any time during normal business hours (solong as no Default or Event of Default exists) and wherever the Collateral maybe located and, Borrower shall, promptly upon request therefor by Lender,deliver to Lender any and all evidence of ownership of any of theCollateral.  Borrower shall, at therequest of Lender, indicate on its records concerning the Collateral a notation,in form 

 

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satisfactoryto Lender, of the security interest of BHF and the Lender hereunder.  If, prior to the termination of thisAgreement, Borrower shall obtain rights to any new Collateral of the typedescribed in the last sentence of Subsection 11(b), Borrower shallnotify Lender in writing (with reasonable detail) of such changes at least onceevery thirty (30) days.  Borrower herebyauthorizes Lender to unilaterally modify this Agreement by amending Schedule 11(b) toinclude any such Collateral. Notwithstanding the foregoing, Borrower hereby agrees that Lender’ssecurity interest shall extend to all such Collateral, regardless of whetherLender actually amends Schedule 11(b).

 

(g)                                 Useof Proceeds.  All monies and otherproperty obtained by Borrower from Lender pursuant to this Agreement shall beused solely for (i) payment of a portion of the purchase price for certainPermitted Acquisitions plus transaction fees and expenses related thereto, and (ii) businesspurposes of Borrower.

 

(h)                                 Taxes.  Borrower and any other Obligor shall file allrequired tax returns and pay all of its taxes when due, subject to anyextensions granted by the applicable taxing authority, including, withoutlimitation, taxes imposed by federal, state or municipal agencies, and shallcause any Liens for taxes to be promptly released; provided, that Obligor shallhave the right to contest the payment of such taxes in good faith byappropriate proceedings so long as (i) the amount so contested is shown onObligor’s financial statements; and (ii) the contesting of any suchpayment does not impair the enforceability, validity or priority of the Lender’sLiens.  If Obligor fails to pay any suchtaxes and in the absence of any such contest by Obligor, Lender may (but shallbe under no obligation to) advance and pay any sums required to pay any suchtaxes and/or to secure the release of any Lien therefor, and any sums soadvanced by Lender shall constitute Term Loans hereunder, shall be payable byObligor to Lender on demand and, until paid, shall bear interest at the highestrate then applicable to Term Loans hereunder.

 

(i)                                     IntellectualProperty.  Borrower shall maintainadequate licenses, patents, patent applications, copyrights, service marks,trademarks, trademark applications, tradestyles and trade names to continue itsbusiness as heretofore conducted by it or as hereafter conducted by it unlessthe failure to maintain any of the foregoing could not reasonably be expectedto have a Material Adverse Effect on Borrower.

 

(j)                                     StaffingContracts.  Borrower shall promptlyprovide true and complete copies to Lender of all material staffing or similarcontracts and, to the extent requested by Lender, deliver to Lender acollateral assignment agreement with respect to such contracts.

 

(k)                                  Billingand Collection System Access.  Afterthe Original Closing Date and, if feasible based on Borrower’s accountingsystem, Borrower shall provide electronic access to Lender to its billing andcollection system, on a read-only basis, for purposes of permitting Lender toinspect and verify billing and collections transactions and related data inconnection with the Collateral, from time to time.

 

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13.                                 NEGATIVECOVENANTS.

 

Until payment andsatisfaction in full of all Obligations and termination of this Agreement,unless Borrower obtains Lender’s prior written consent waiving or modifying anyof Borrower’s covenants hereunder in any specific instance, Borrower agrees asfollows:

 

(a)                                  Indebtedness.  Borrower shall not create, incur, assume orbecome obligated (directly or indirectly), for any Indebtedness for BorrowedMoney other than the Term Loans and the Revolving Loans, except that Borrowermay (i) maintain its present Indebtedness listed on Schedule 11(n)hereto; and (ii) incur purchase money Indebtedness or Capital LeaseObligations in connection with Capital Expenditures permitted pursuant to Section 14hereof.  Borrower shall not incur anySubordinated Debt without the prior written consent of Lender (which shallinclude an indefinite standstill of remedies and payment blockage rights duringany Event of Default), nor during the existence of an Event of Default, makeany payment of any part or all of any Subordinated Debt or take any otheraction or omit to take any other action in respect of any Subordinated Debt,except in accordance with any subordination agreement relative thereto or thesubordination provisions thereof or hereof, or grant any Liens on any of itsassets to secure such Subordinated Debt, or amend or modify any agreement,instrument or document evidencing or relating to any Subordinated Debt afterLender consents thereto.

 

(b)                                 Liens.  Borrower shall not grant or permit to exist(voluntarily or involuntarily) any Lien on any of its assets, other thanPermitted Liens.

 

(c)                                  Mergers,Sales, Acquisitions, Subsidiaries and Other Transactions Outside the OrdinaryCourse of Business.

 

(i)                                     Borrowershall not, without the prior written consent of Lender:  (A) enter into any merger orconsolidation; provided that (i) any Borrower (other than CRDE,AHHC, Care Pros, HIP, HIP LLC, Travmed, Prime Staff and MMSO) may merge withand into Crdentia so long as Crdentia is the surviving entity, and (ii) anyBorrower (other than CRDE, AHHC, Care Pros, HIP, HIP LLC, Travmed, Prime Staff,MMSO and Crdentia) may merge with another Borrower (other than CRDE, AHHC, CarePros, HIP, HIP LLC, Travmed, Prime Staff, MMSO and Crdentia), (B) changethe state of Borrower’s organization or enter into any transaction which hasthe effect of changing Borrower’s state of organization, except in connectionwith a merger permitted in clause (A) above; (C) sell, lease orotherwise dispose of any of its assets other than in the ordinary course ofbusiness or as permitted under Section 7; (D) purchase the stock,other equity interests or all or a material portion of the assets of any Personor division of such Person; or (E) enter into any other transactionoutside the ordinary course of Borrower’s business, including, withoutlimitation, any purchase, redemption or retirement of any shares of any classof 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 ofits stock or any other equity interest, subject to clause (iii) below.

 

(ii)                                  Borrowershall not form any new Subsidiaries or enter into any joint ventures orpartnerships with any other Person, without the prior written consent of Lenderunless (A) Crdentia (or such other Borrower) pledges all of the equityinterests of 

 

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such newSubsidiary to Lender, and (B) such entity enters into a joinder agreementor similar agreement in which such entity becomes a party to this Agreement,jointly and severally liable for the Obligations and pledges to Lender all ofits assets as Collateral hereunder.

 

(iii)                               Notwithstandingthe provisions of Section 13(c)(i)(A) above, Crdentia may enter intocertain Permitted Acquisitions with the prior written consent of Lender in itssole discretion.

 

(d)                                 Dividendsand Distributions.  No Borrower shalldeclare 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 anyequity interest in Borrower (if Borrower is a partnership, limited liabilitycompany or other type of entity) to any Person; provided,that (i) anyBorrower 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 anyequity interest in Borrower (if Borrower is a partnership, limited liabilitycompany or other type of entity) to Crdentia to pay professional fees,franchise taxes and other ordinary course of business operating expensesincurred by Crdentia solely in its capacity as parent corporation of Borrower, (ii) anyBorrower 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 anyequity interest in Borrower (if Borrower is a partnership, limited liabilitycompany or other type of entity) to another Borrower, and (iii) Crdentiamay pay customary stock dividends to holders of its Series A PreferredStock, Series B Preferred Stock, Series B-1 Preferred Stock and Series CPreferred Stock.

 

(e)                                  Investments;Loans.  Borrower shall not purchaseor otherwise acquire, or contract to purchase or otherwise acquire, theobligations or stock of any Person, other than investments in the stock of aBorrower, investments in connection with Permitted Acquisitions under Sections2(b) and 13(c)(iii), direct obligations of the United States orof any State of the United States or political subdivision thereof, obligationsinsured by the Federal Deposit Insurance Corporation and obligationsunconditionally guaranteed by the United States or of any State of the UnitedStates or political subdivision thereof; nor shall Borrower lend or otherwiseadvance funds to any Person except for advances made to employees, officers anddirectors for travel and other expenses and extensions of credit to customersarising in the ordinary course of business.

 

(f)                                    FundamentalChanges, Line of Business.  Borrowershall not enter into a new line of business materially different from Borrower’scurrent business.  Borrower furtheragrees that no Borrower shall amend its organizational documents or change itsFiscal Year if such actions (i) would have a Material Adverse Effect onthe Borrower; (ii) would affect the obligations of Borrower to Lender; or (iii) wouldaffect the interpretation of any of the terms of this Agreement or the OtherAgreements unless Lender has provided written consent after receiving not lessthan thirty (30) days’ prior written notice of such actions

 

(g)                                 Equipment.  Borrower shall not (i) permit anyEquipment to become a Fixture to real property unless such real property isowned by Borrower and is subject to a mortgage in favor of Lender or, if suchreal estate is leased, is subject to a landlord’s agreement in favor of Lenderon terms acceptable to Lender, or (ii) permit any Equipment to become an 

 

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accessionto any other personal property unless such personal property is subject to a firstpriority Lien in favor of Lender.

 

(h)                                 AffiliateTransactions.  Except as set forth onSchedule 11(i) hereto or as permitted pursuant to Subsection 11(c) hereof,Borrower shall not conduct, permit or suffer to be conducted, transactions withAffiliates other than (i) investments by Affiliates in a Borrower; (ii) theprovision of employment, management and consulting services approved byBorrower’s compensation committee; and (iii) other transactions for thepurchase or sale of Inventory or services in the ordinary course of businesspursuant to terms that are no less favorable to Borrower than the terms uponwhich such transactions would have been made had they been made to or with aPerson that is not an Affiliate.

 

(i)                                     Settlingof Accounts.  Borrower will not makewithout concurrent written notice provided to Lender, any agreement with anyAccount Debtor for any extension of the time for payment of the Account, anycompromise or settlement for less than the full amount thereof, any release ofany Account Debtor from liability therefore, or any deduction therefrom excepta discount or allowance for prompt or early payment allowed by Borrower in theordinary course of its business consistent with its historical practices and asdisclosed to Lender in writing; provided, that following the occurrenceand during the continuance of a Default an Event of Default, Borrower shall notsettle or adjust any Account without the consent of Lender.

 

(j)                                     Restricted Payments.** **Untilthe termination of this Agreement, Borrower shall not make any direct orindirect payment or prepayment, in cash, in kind, or otherwise, with respect tothe following Indebtedness, except as provided in clauses (i), (ii) and (iii) below:

 

(i)                                     SellerNotes.  Scheduled payments ofprincipal and interest under any Seller Note or other instrument ofSubordinated Debt may be paid if, and only to the extent that, at the time ofany such payment no Event of Default then exists or would result from themaking of such payment.

 

(ii)                                  Management/AdvisoryFees.  Scheduled payments in respectof any management fees, advisory fees or similar fees payable by any Borrowerto any other Borrower may be paid if, and only to the extent that, at the timeof any such payment no Event of Default described in this Agreement then existsor would result from the making of such payment.

 

(iii)                               SubordinatedDebt.  Scheduled payments in respectof Subordinated Debt may be made only if either:  (a) the Borrower has Excess Availabilityof $500,000, or (b) the Borrower is in compliance with its financialcovenants both before and after the Subordinated Debt payment.

 

(k)                                  Restricted Locations.  Borrower shall not move any of its books orrecords or any of its other assets of any kind to its offices located at (i) 3000S. 31st St. #301, Temple, Arizona 76502 or (ii) 5151 E.Broadway #1530, Tucson, Arizona 85711.

 

(l)                                     Paymentsto Travmed.  Immediately upon theoccurrence of a Travmed Subordinated Debt Default, (i) Borrower shall not,and shall not permit any Subsidiary or Affiliate to, directly or indirectly,make any payment (including the payment of any proceeds of 

 

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a Loanor the payment of proceeds of any Collateral) to Travmed, and (ii) BHFshall have no further obligation to make any Loans against the accountsreceivable of Travmed and all accounts receivable of Travmed shall beimmediately removed from the Revolving Borrowing Base Amount.

 

14.                                 FINANCIALCOVENANTS.

 

Borrower shall maintainand keep in full force and effect each of the financial covenants set forthbelow:

 

(a)                                  Tangible Net Worth.  Borrower’s Tangible Net Worth, on aconsolidated basis, shall not at any time be less than the Minimum Tangible NetWorth; “**Minimum Tangible Net Worth**”being defined for purposes of this Subsection as (i) ($5,000,000) atall times through June 30,2005, and (ii) thereafter, from the lastday of each fiscal quarter of the Borrowers through the day prior to the lastday of each immediately succeeding fiscal quarter of the Borrowers, the MinimumTangible Net Worth during the immediately preceding period plus seventy-five****percent (75%) of the Borrowers’consolidated net income (but without reduction for any net loss) for the FiscalYear ending on the first day of such period as reflected on the Borrowers’audited year end financial statement; and “Tangible Net Worth” being definedfor purposes of this Subsection as the Borrowers’ shareholders’ equity(including retained earnings) less the book value of all intangibleassets of the Borrowers as determined solely by Lender on a consistent basis plusthe amount of any Subordinated Debt of the Borrowers, all as determined on aconsolidated basis under GAAP applied on a basis consistent with the financialstatement dated March 31, 2005 except as set forth herein;

 

(b)                                 SeniorDebt Service Coverage Ratio.  As ofthe last day of each applicable period, the ratio of the Borrower’s OperatingCash Flow to Borrower’s Senior Debt Service for each period set forth below(which ratio shall be tested as of the last day of each such period) must be atleast the following:

 
| **Time Frame** | ** ** | **Date Tested**                            | ** ** | **Senior Debt Service  Coverage Ratio** | ** ** | **Based on**       |
|----------------|------------|--------------------------------------------|------------|-----------------------------------------|------------|--------------------|
| ** **     | ** ** | ** **                                 | ** ** | ** **                              | ** ** | ** **         |
| Quarterly      |       | 6/30/05                                    |       | 0.5 to 1.00                             |       | Trailing 3 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 9/30/05                                    |       | 1.00 to 1.00                            |       | Trailing 6 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 12/31/05                                   |       | 1.15 to 1.00                            |       | Trailing 9 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 3/31/06                                    |       | 1.5 to 1.00                             |       | Trailing 12 months |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | 1.5 to 1.00                             |       | Trailing 12 months |

 

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(c)                                  MinimumEBITDA.  Borrower shall not permitEBITDA of Borrower to be less than the amount set forth below for thecorresponding period set forth below:

 
| **Time Frame** | ** ** | **Date Tested**                            | ** ** | **Minimum EBITDA** | ** ** | **Based on** |
|----------------|------------|--------------------------------------------|------------|--------------------|------------|--------------|
| ** **     | ** ** | ** **                                 | ** ** | ** **         | ** ** | ** **   |
| Quarterly      |       | 6/30/05                                    |       | $                  | 100,000    |         | Trailing 3 months |
|           |       |                                       |       |               |       |         |
| Quarterly      |       | 9/30/05                                    |       | $                  | 300,000    |         | Trailing 6 months |
|           |       |                                       |       |               |       |         |
| Quarterly      |       | 12/31/05                                   |       | $                  | 600,000    |         | Trailing 9 months |
|           |       |                                       |       |               |       |         |
| Quarterly      |       | 3/31/06                                    |       | $                  | 1,000,000  |         | Trailing 12 months |
|           |       |                                       |       |               |       |         |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | $                  | 1,000,000  |         | Trailing 12 months |

 

(d)                                 TermLoan Debt Leverage Ratio.  Borrowershall not permit the ratio of Term Loan Debt to EBITDA to be more than thefollowing for each period set forth below: 

 
| **Time Frame** | ** ** | **Date  Tested**                           | ** ** | **Coverage** | ** ** | **Based  on:**     |
|----------------|------------|--------------------------------------------|------------|--------------|------------|--------------------|
| ** **     | ** ** | ** **                                 | ** ** | ** **   | ** ** | ** **         |
| Quarterly      |       | 3/31/06                                    |       | 2.70 to 1    |       | Trailing 12 Months |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | 2.50 to 1    |       | Trailing 12 Months |

 

(e)                                  CapitalExpenditure Limitations.  Borrowersshall not make any Capital Expenditures if, after giving effect to such CapitalExpenditure, the aggregate cost of all such fixed assets purchased or otherwiseacquired would exceed $500,000 during any Fiscal Year.

 

(f)                                    OperatingLease Obligations.  Borrower shallnot incur operating lease obligations requiring payments in excess of $700,000in the aggregate during any Fiscal Year of Borrower.

 

15.                                 DEFAULT.

 

The occurrence of any oneor more of the following events shall constitute an “Event of Default” byBorrower hereunder:

 

(a)                                  Payment.  The failure of any Obligor to pay when due,declared due, or demanded by Lender, any of the Obligations or the RevolvingLoan Obligations.

 

(b)                                 Breachof This Agreement, the Other Agreements and the Revolving Loan Agreement.  The failure of any Obligor to perform, keepor observe any of the covenants, conditions, promises, agreements orobligations of such Obligor under this Agreement or any of the Other Agreementsor the Revolving Loan Agreement; provided that (i) any such failure byBorrower under Subsections 12(b)(i), (iv), (v) and 12(i) ofthis Agreement (or the Revolving 

 

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LoanAgreement) shall not constitute an Event of Default hereunder until thefifteenth (15th) day following the occurrence thereof, and (ii) any suchfailure by Borrower under Subsections 12(b)(ii) and (v) ofthis Agreement (or Subsections 12(b)(iii) and 12(b)(vi) ofthe Revolving Loan Agreement) shall not constitute an Event of Defaulthereunder until the fifth (5th) day following the occurrence thereof (includingany grace periods thereto).

 

(c)                                  Breach of Subordination Agreement  The failure of any Person to perform, keep orobserve any of the covenants, conditions, promises, agreements or obligationsof such Person under any Subordination Agreement.

 

(d)                                 Breachesof Other Obligations.  The failure ofObligor to pay when due or within any applicable grace period any obligation ofObligor in excess of $100,000 (other than its Obligations under this Agreement)for the payment of Indebtedness, other than Subordinated Debt that is not paidwhen due to the operation of the requirements of subordination hereunder, orthe becoming due and payable, or declaration to be due any payable, of suchobligation before the expressed maturity of the obligation, or the occurrence ofan event that, with the giving of notice or lapse of time, or both, would causeany such obligation to become, or allow any such obligation to be declared tobe, due and payable;

 

(e)                                  Breachof Representations and Warranties. The making or furnishing by any Obligor to Lender of any representation,warranty, certificate, schedule, report or other communication within or inconnection with this Agreement or the Other Agreements, or in connection withany other agreement between such Obligor and Lender which is untrue ormisleading in any material respect as of the date made.

 

(f)                                    Lossof 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 anyyear of the Term as determined by Lender in its reasonable discretiondetermined in good faith, or (except as permitted hereby) sale, lease orfurnishing under a contract of service of, any of the Collateral.

 

(g)                                 Levy,Seizure or Attachment.  The making orany attempt by any Person to make any levy, seizure or attachment upon any ofthe Collateral with a value in excess of $100,000.

 

(h)                                 Bankruptcyor Similar Proceedings.  Thecommencement of any proceedings in bankruptcy by or against any Obligor or forthe liquidation or reorganization of any Obligor, or alleging that such Obligoris insolvent or unable to pay its debts as they mature, or for the readjustmentor arrangement of any Obligor’s debts, whether under the United StatesBankruptcy Code or under any other law, whether state or federal, now orhereafter existing, for the relief of debtors, or the commencement of anyanalogous statutory or non-statutory proceedings involving any Obligor;provided, however, that if such commencement of proceedings against suchObligor is involuntary, such action shall not constitute an Event of Defaultunless such proceedings are not dismissed within forty-five (45) days after thecommencement of such proceedings**,**thoughLender shall have no obligation to make Term Loans to Borrower during suchforty-five (45) day period or, if earlier, until such proceedings aredismissed.

 

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(i)                                     Appointmentof Receiver.  The appointment of areceiver or trustee for any Obligor, for any of the Collateral or for anysubstantial part of any Obligor’s assets or the institution of any proceedingsfor the dissolution, or the full or partial liquidation, or the merger orconsolidation, of any Obligor which is a corporation, limited liability companyor a partnership; provided, however, that, if such appointment or commencementof proceedings against such Obligor is involuntary, such action shall notconstitute an Event of Default unless such appointment is not revoked or suchproceedings are not dismissed within forty-five (45) days after thecommencement of such proceedings**,**thoughLender shall have no obligation to make Term Loans to Borrower during suchforty-five (45) day period or, if earlier, until such proceedings aredismissed.

 

(j)                                     Judgment.  The entry of any judgments or ordersaggregating in excess of confirmed insurance coverage in an amount of $100,000or more against any Obligor which remain unsatisfied or undischarged and ineffect for thirty (30) days after such entry without a stay of enforcement orexecution.

 

(k)                                  Defaultor Revocation of Guaranty; Subordination Agreement**.** The occurrence of an event of default under, or the revocation ortermination of, any agreement, instrument or document executed and delivered byany Person to Lender pursuant to which such Person has guaranteed to Lender thepayment of all or any of the Obligations, has granted Lender a Lien upon someor all of such Person’s real and/or personal property to secure the payment ofall or any of the Obligations or has subordinated indebtedness in whole or inpart to the Obligations.

 

(l)                                     Changeof Ownership/Management.  If any ofthe following events occurs: (i) Jim Durham shall cease to be (x) theowner of 1,000,000 shares of the issued and outstanding capital stock ofCrdentia, and (y) the Chief Executive Officer of Crdentia at any time, (ii) PamAtherton shall cease to be the President of the Borrower at any time, and (iii) FredToney shall cease to be a director of the Borrower at any time, unless Borrowerhas received Lender’s written consent for a replacement of Jim Durham, PamAtherton, or Fred Toney, as applicable, within 30 days of such notification(such consent not to be unreasonably withheld).

 

(m)                               MaterialAdverse Change.  Any material adversechange in the Collateral, business, property, assets, prospects, operations orcondition, financial or otherwise of any Obligor, as determined by Lender inits sole judgment or the occurrence of any event which, in Lender’s solejudgment, could have a Material Adverse Effect.

 

(n)                                 Governmental Authorizations.  A Government Authority shall have revoked anyGovernmental Authorization of Borrower that results in the cessation ofbusiness.

 

(o)                                 Failureto Maintain Third-Party Payroll Tax Service Provider.  The failure to maintain a contractualrelationship with a payroll tax service provider, acceptable to Lender, at anytime.

 

(p)                                 [IntentionallyDeleted]

 

(q)                                 Breachof Certain Obligations. Notwithstanding anything in Section 15(d) to the contrary, theoccurrence of a Travmed Subordinated Debt Default.

 

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16.                                 REMEDIESUPON AN EVENT OF DEFAULT.

 

(a)                                  Upon the occurrence and during thecontinuance of an Event of Default described in Subsection 15(g) hereof,all of the Obligations shall immediately and automatically become due andpayable, without notice of any kind. Upon the occurrence of any other Default or Event of Default, allObligations may, at the option of Lender, and without demand, notice or legalprocess of any kind, be declared, and immediately shall become, due andpayable.

 

(b)                                 Upon the occurrence and during thecontinuance of a Default or an Event of Default, Lender may exercise from timeto time any rights and remedies available to it under the Uniform CommercialCode and any other applicable law in addition to, and not in lieu of, anyrights and remedies expressly granted in this Agreement or in any of the OtherAgreements and all of Lender’s rights and remedies shall be cumulative andnon-exclusive to the extent permitted by law.  In particular, but not by way of limitationof the foregoing, subject to the rights of BHF, Lender may, without notice,demand or legal process of any kind, take possession of any or all of theCollateral (in addition to Collateral of which it already has possession),wherever it may be found, and for that purpose may pursue the same wherever itmay be found and, may enter onto any of Borrower’s premises where any of theCollateral may be, and search for, take possession of, remove, keep and storeany 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 premiseswithout cost to Lender.  At Lender’srequest, but subject to the rights of BHF, Borrower shall, at Borrower’sexpense, assemble the Collateral and make it available to Lender at one or moreplaces to be designated by Lender and reasonably convenient to Lender andBorrower.  Borrower recognizes that ifBorrower fails to perform, observe or discharge any of its Obligations underthis Agreement or the Other Agreements, no remedy at law will provide adequaterelief to Lender, and agrees that Lender shall be entitled to temporary andpermanent injunctive relief in any such case without the necessity of provingactual damages.  Any notification ofintended disposition of any of the Collateral required by law will be deemed tobe a reasonable authenticated notification of disposition if given at least ten(10) days prior to such disposition and such notice shall (i) describeLender and Borrower, (ii) describe the Collateral that is the subject ofthe intended disposition, (iii) state the method of the intendeddisposition, (iv) state that Borrower is entitled to an accounting of theObligations and state the charge, if any, for an accounting and (v) statethe time and place of any public disposition or the time after which anyprivate sale is to be made.  Lender maydisclaim any warranties that might arise in connection with the sale, lease orother disposition of the Collateral and has no obligation to provide anywarranties at such time.  Subject to therights of BHF, any Proceeds of any disposition by Lender of any of theCollateral may be applied by Lender to the payment of expenses in connectionwith the Collateral, including, without limitation, legal expenses andreasonable attorneys’ fees, and any balance of such Proceeds may be applied byLender toward the payment of such of the Obligations, and in such order ofapplication as Lender may from time to time elect.

 

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17.                                 CONDITIONSPRECEDENT.

 

The obligation of Lenderto enter into and perform this Agreement and to continue to make any Term Loanis subject to the satisfaction or waiver on or before the date hereof, of thefollowing conditions precedent:

 

(a)                                  Lender shall have received four (4) originalsof each of the agreements, opinions, reports, approvals, consents, certificatesand other documents set forth on the closing document list attached hereto as Exhibit B(the “**Closing Document List**”), or any supplement thereto pertaining to aPermitted Acquisition in each case in form and substance satisfactory to Lender(other than Notes, of which Lender shall receive one (1) original) executedby Borrower and other required Persons, as applicable;

 

(b)                                 Lender shall have received such financialstatements, reports, certifications, and other operational information requiredto be delivered under this Agreement, in form and substance reasonablyacceptable to Lender;

 

(c)                                  All of the obligations of Borrower to anyprior lender (other than Subordinated Debt and BHF) as in effect immediatelyprior to the Closing Date will be performed and paid in full from the proceedsof the initial advances under the initial Loans on the Closing Date and allLiens of any such prior lender on any property of Borrower in respect thereofwill be terminated immediately upon such payment;

 

(d)                                 Lender shall have received evidencesatisfactory to it that the insurance policies required under Section 5are in full force and effect, together with written evidence showing losspayable or additional insured clauses or endorsements in favor of Lender asrequired under such section;

 

(e)                                  Since March 31, 2004, no event shallhave occurred which has had or could reasonably be expected to have a MaterialAdverse Effect on any Obligor, as determined by Lender in its reasonable creditjudgment, determined in good faith;

 

(f)                                    Lender shall have received payment in full ofall fees and expenses payable to it by Borrower or any other Person inconnection herewith, on or before disbursement of the Loans hereunder,including, without limitation, payment of all underwriting fees as agreed to bythe parties;

 

(g)                                 Lender shall have reviewed the results of,and found such results acceptable, in its sole discretion, a takedown auditincluding verification of payment of all due and owing taxes;

 

(h)                                 Lender shall have received the results of anaudit of the Target of any proposed Acquisition, which shall be satisfactory toLender in its sole discretion;

 

(i)                                     Thereis no material default in any of the Borrower’s obligations under any contractto which Borrower is a party;

 

(j)                                     Borrowershall be in compliance with all applicable laws;

 

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(k)                                  Lendershall have received an opinion from Borrower’s counsel, in form and substancereasonably acceptable to the Lender in connection with any PermittedAcquisition;

 

(l)                                     Borrowershall have delivered to Lender, with respect to each Deposit Account maintainedby Borrower, a deposit account control agreement in form and substancesatisfactory to the Lender, executed by the financial institution at which suchDeposit Account is maintained;

 

(m)                               Borrowershall have delivered all due diligence materials pertaining to the Target andto Borrower to the Lender as Lender has requested;

 

(n)                                 Lendershall have reviewed general background verifications of select principals,officers and directors of the Target that will remain after the closing of anyAcquisition;

 

(o)                                 Lendershall have received the Warrant Agreement, together with the WarrantCertificate contemplated therein, fully executed by Crdentia;

 

(p)                                 Lendershall have received the following stock pledges:  (i) by Crdentia of each of its directand indirect Subsidiaries (including CRDE), and (ii) by CRDE of each ofits direct and indirect Subsidiaries;

 

(q)                                 Lendershall have received satisfactory evidence that Borrower has secured theservices of a third-party payroll tax service provider;

 

(r)                                    Lendershall have received a Subordination Agreement, in form and substance acceptableto Lender, with respect to any seller Indebtedness outstanding as of theClosing Date;

 

(s)                                  Lendershall have received an executed intercreditor agreement, in form and substanceacceptable to Lender, from the Arizona Home Health Care / Private Duty, Inc.seller with respect to the account receivables of such seller; and

 

(t)                                    Lendershall have received the Makewell Agreement, in form and substance acceptable toLender, executed by MedCap Partners L.P..

 

18.                                 JOINTAND SEVERAL LIABILITY.

 

(a)                                  EachBorrower hereby irrevocably designates Borrowing Agent to be its attorney andagent and in such capacity to borrow, sign and endorse notes, and execute anddeliver all instruments, documents, writings and further assurances now orhereafter required hereunder, on behalf of such Borrower or Borrowers, andhereby authorizes Lender to pay over or credit all loan proceeds hereunder inaccordance with the request of Borrowing Agent.

 

(b)                                 Thehandling of this credit facility as a co-borrowing facility with a borrowingagent in the manner set forth in this Agreement is solely as an accommodationto Borrowers and at their request. Lender shall not incur liability to Borrowers as a result thereof.  To induce Lender to do so and inconsideration thereof, each Borrower hereby indemnifies 

 

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Lenderand holds Lender harmless from and against any and all liabilities, expenses,losses, damages and claims of damage or injury asserted against Lender by anyPerson arising from or incurred by reason of the handling of the financingarrangements of Borrowers as provided herein, reliance by Lender on any requestor instruction from Borrowing Agent or any other action taken by Lender withrespect to this Section 18 except due to willful misconduct or gross (notmere) negligence by the indemnified party.

 

(c)                                  Notwithstandinganything to the contrary contained herein, all Obligations of each Borrowerhereunder shall be joint and several obligations of Borrowers.

 

(d)                                 Notwithstandingany provisions of this Agreement to the contrary, it is intended that the jointand several nature of the Obligations of Borrowers, and the liens and securityinterests granted by Borrowers to secure the Obligations, not constitute a “FraudulentConveyance” (as defined below). Consequently, Lender and Borrowers agree that if the Obligations of aBorrower, or any liens or security interests granted by such Borrower securingthe Obligations, would, but for the application of this sentence, constitute aFraudulent Conveyance, the Obligations of such Borrower and the liens andsecurity interests securing such Obligations shall be valid and enforceableonly to the maximum extent that would not cause such Obligations or such lienor security interest to constitute a Fraudulent Conveyance, and the Obligationsof such Borrower and this Agreement shall automatically be deemed to have beenamended accordingly.  For purposeshereof, “Fraudulent Conveyance” means a fraudulent conveyance under Section 548of Chapter 11 of Title II of the United States Code (11 U.S.C. § 101,et seq.), as amended (the “**Bankruptcy Code**”),or a fraudulent conveyance or fraudulent transfer under the applicableprovisions of any fraudulent conveyance or fraudulent transfer law or similarlaw of any state, nation or other governmental unit, as in effect from time totime.

 

(e)                                  EachBorrower assumes responsibility for keeping itself informed of the financialcondition of the each other Borrower, and any and all endorsers and/orguarantors of any instrument or document evidencing all or any part of suchother Borrower’s Obligations, and of all other circumstances bearing upon therisk of nonpayment by such other Borrowers of their Obligations and eachBorrower agrees that Lender shall not have any duty to advise such Borrower ofinformation known to Lender regarding such condition or any such circumstancesor to undertake any investigation not a part of its regular businessroutine.  If Lender, in its solediscretion, undertakes at any time or from time to time to provide any suchinformation to a Borrower, Lender shall not be under any obligation to updateany such information or to provide any such information to such Borrower on anysubsequent occasion.

 

(f)                                    Lenderis hereby authorized, without notice or demand and without affecting theliability 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 termsrelating to, a Borrower’s Obligations or otherwise modify, amend or change theterms of any promissory note or other agreement, document or instrument now orhereafter executed by a Borrower and delivered to Lender; (ii) acceptpartial payments on a Borrower’s Obligations; (iii) take and hold securityor collateral for the payment of a Borrower’s Obligations hereunder or for thepayment of any guaranties of a Borrower’s Obligations or other liabilities of aBorrower and exchange, enforce, waive and release any such security orcollateral; (iv) apply such security or collateral and direct the order ormanner of sale thereof as Lender, in its sole discretion, may determine; 

 

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and (v) settle,release, compromise, collect or otherwise liquidate a Borrower’s Obligationsand any security or collateral therefor in any manner, without affecting orimpairing the obligations of the other Borrowers.  Lender shall have the exclusive right todetermine the time and manner of application of any payments or credits,whether received from a Borrower or any other source, and such determinationshall be binding on such Borrower.  Allsuch payments and credits may be applied, reversed and reapplied, in whole orin part, to any of a Borrower’s Obligations as Lender shall determine in itssole discretion without affecting the validity or enforceability of theObligations of the other Borrowers.

 

(g)                                 EachBorrower hereby agrees that, except as hereinafter provided, its obligationshereunder shall be unconditional, irrespective of (i) the absence of anyattempt to collect a Borrower’s Obligations from any Borrower or any guarantoror other action to enforce the same; (ii) the waiver or consent by Lenderwith respect to any provision of any instrument evidencing Borrowers’Obligations, or any part thereof, or any other agreement heretofore, now orhereafter executed by a Borrower and delivered to Lender; (iii) failure byLender to take any steps to perfect and maintain its security interest in, orto preserve its rights to, any security or collateral for Borrowers’Obligations; (iv) the institution of any proceeding under the BankruptcyCode, or any similar proceeding, by or against a Borrower or Lender’s electionin any such proceeding of the application of Section 1111(b)(2) ofthe Bankruptcy Code; (v) any borrowing or grant of a security interest byany Borrower as debtor-in-possession under Section 364 of the BankruptcyCode; (vi) the disallowance, under Section 502 of the BankruptcyCode, of all or any portion of Lender’s claim(s) for repayment of any ofBorrowers’ Obligations; or (vii) any other circumstance which mightotherwise constitute a legal or equitable discharge or defense of a guarantor.

 

(h)                                 Untilthe Obligations of Lender have been paid in full, no payment made by or for theaccount of a Borrower, including, without limitations, (i) a payment madeby such Borrower on behalf of another Borrower’s Obligations or (ii) apayment made by any other person under any guaranty, shall entitle suchBorrower, by subrogation or otherwise, to any payment from such other Borroweror from or out of such other Borrower’s property and such Borrower shall notexercise any right or remedy against such other Borrower or any property ofsuch other Borrower by reason of any performance of such Borrower of its jointand several obligations hereunder.

 

19.                                 RELEASES; INDEMNITIES.

 

(a)                                  Tothe fullest extent permitted by applicable law, in consideration of Lender’sentering into this Agreement, and for other good and valuable consideration,the receipt and sufficiency of which Borrower hereby acknowledges, Borrower, onits own behalf and on behalf of its successors (including, without limitation,any receiver or trustee acting on behalf of Borrower and anydebtor-in-possession with respect to Borrower), assigns, subsidiaries andAffiliates (collectively, the “Releasors”), hereby forever release, dischargeand acquit Lender and its parents, subsidiaries, shareholders, Affiliates,partners, trustees, officers, employees, directors, agents and attorneys andtheir 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, 

 

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including, withoutlimitation, any so-called “lender liability” claims or defenses, andirrespective of how, why or by reason of what facts, whether such Claims haveheretofore arisen, are now existing or hereafter arise, or which could, mightor 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 mayin any way arise out of, are connected with or in any way relate to actions oromissions which occurred on or prior to the date hereof with respect toBorrower, this Agreement, the Obligations, any Collateral, the PriorAgreements, any other Loan Document and any third parties liable in whole or inpart for the Obligations, other than such Claims arising out of the grossnegligence or willful misconduct of a Releasee. This provision shall survive and continue in full force and effectwhether or not Borrower shall satisfy all other provisions of this Agreement orthe Loan Documents, including payment in full of the Obligations.

 

(b)                                 Eachof the Releasors further agrees to indemnify the Releasees and hold theReleasees harmless from and against any and all such Claims (as such term isdefined in the immediately preceding paragraph) which may be brought againstany of the Releasees on behalf of any entity or Person, including, withoutlimitation, officers, directors, agents, trustees, creditors, partners orshareholders 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 thenegotiation, preparation, execution, delivery, performance, administration andenforcement of this Agreement or any other Loan Document, the Obligations, anyCollateral or the Prior Agreements, other than such Claims arising out of thegross negligence or willful misconduct of a Releasee.  The foregoing indemnity shall survive thepayment in full of the Obligations and the termination of this Agreement andthe other Loan Documents.

 

20.                                 NOTICE.

 

All written notices andother written communications with respect to this Agreement shall be sent byordinary, certified or overnight mail, by telecopy or delivered in person, andin the case of Lender shall be sent to it at 233 South Wacker Drive, Suite 5350,Chicago, Illinois 60606, Attention: Chief Credit Officer, facsimile number: (312) 334-4450, and in the case of Borrower shall be sent to it atits principal place of business set forth on Schedule 11(b) heretoor as otherwise directed by Borrower in writing.  All notices shall be deemed received uponactual receipt thereof or refusal of delivery.

 

21.                                 CHOICEOF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.

 

This Agreement and theOther Agreements are submitted by Borrower to Lender for Lender’s acceptance orrejection at Lender’s principal place of business as an offer by Borrower toborrow monies from Lender now and from time to time hereafter, and shall not bebinding upon Lender or become effective until accepted by Lender, in writing,at said place of business.  If soaccepted by Lender, this Agreement and the Other Agreements shall be deemed tohave been made at said place of business. **THIS AGREEMENT AND THE OTHERAGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATEOF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT,AND IN ALL OTHER RESPECTS,**

 

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**INCLUDING,WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUTEXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OFTHE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OFTHE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. **If any provision of thisAgreement shall be held to be prohibited by or invalid under applicable law,such provision shall be ineffective only to the extent of such prohibition orinvalidity, without invalidating the remainder of such provision or remainingprovisions of this Agreement.

 

To induce Lender toaccept this Agreement, Borrower irrevocably agrees that, subject to Lender’ssole and absolute election, **ALL ACTIONS ORPROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TOTHIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED INCOURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.  BORROWER HEREBY CONSENTS AND SUBMITS TO THEJURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY ANDSTATE.**  **BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALLPROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCHBORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSEDTO BORROWER AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND SERVICESO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.**  **BORROWERHEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANYLITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION.**

 

22.                                 MODIFICATIONAND BENEFIT OF AGREEMENT.

 

This Agreement and theOther Agreements may not be modified, altered or amended except by an agreementin writing signed by Borrower or such other Person who is a party to such OtherAgreement and Lender.  Borrower may notsell, assign or transfer this Agreement, or the Other Agreements or any portionthereof, including, without limitation, Borrower’s rights, titles, interest,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 totime hereafter, of this Agreement, or the Other Agreements, or of any portionthereof, or to Lender granting participations in the Obligations and relatedLoan Documents, including, without limitation, Lender’s rights, titles,interest, remedies, powers and/or duties. Borrower agrees that it shall execute and deliver such documents asLender may request in connection with the foregoing.  Borrower further consents to the pledge orcollateral assignment and grant of a security interest, by Lender, inconnection with its’ own financing, including all rights, benefits, warranties,representations, covenants, indemnities and remedies, and all proceeds of theforegoing, contained in this Agreement and any of the Other Agreements.

 

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23.                                 HEADINGSOF SUBDIVISIONS.

 

The headings ofsubdivisions in this Agreement are for convenience of reference only, and shallnot govern the interpretation of any of the provisions of this Agreement.

 

24.                                 POWEROF ATTORNEY.

 

Borrower acknowledges andagrees that its appointment of Lender as its attorney and agent-in-fact for thepurposes specified in this Agreement is an appointment coupled with an interestand shall be irrevocable until all of the Obligations are satisfied and paid infull and this Agreement is terminated.

 

25.                                 CONFIDENTIALITY.

 

Lender hereby agrees touse commercially reasonable efforts to assure that any and all informationrelating to Borrower which is (i) furnished by Borrower to Lender (or toany affiliate of Lender); and (ii) non-public, confidential or proprietaryin nature shall be kept confidential by Lender or such affiliate in accordancewith applicable law; provided, however, that such information and other creditinformation relating to Borrower may be distributed by Lender or such affiliateto Lender’s or such affiliate’s directors, officers, employees, attorneys,affiliates, assignees, participants, auditors, agents and regulators, and uponthe order of a court or other governmental agency having jurisdiction overLender or such affiliate, to any other party, as long as such person or entityhas been informed of Lender’s confidentiality obligation hereunder and hasagreed to abide by its terms.  Borrowerand Lender further agree that this provision shall survive the termination ofthis Agreement.  Notwithstanding theforegoing, Borrower hereby consents to Lender publishing a tombstone or similaradvertising material relating to the financing transaction contemplated by thisAgreement.

 

26.                                 BROKERAGE FEES.

 

Borrower represents andwarrants to Lender that, with respect to the financing transaction contemplatedherein, no Person (other than Roth Capital Partners, LLC) is entitled to anybrokerage fee or other commission and Borrower agrees to indemnify and holdLender harmless against any and all such claims.

 

27.                                 PUBLICITY.

 

Lender is hereby authorizedto issue appropriate press releases and to cause a tombstone to be publishedannouncing the consummation of this transaction and the aggregate amountthereof.

 

28.                                 LIMITATION OF ACTIONS.

 

Borrower agrees that anyclaim or cause of action by Borrower against Lender, or any of Lender’sdirectors, officers, employees, agents, accountants or attorneys, based upon,arising from, or relating to this Agreement, or any other present or futureagreement, or any other transaction contemplated hereby or thereby or relatinghereto or thereto, or any other matter, cause or thing whatsoever, whether ornot relating hereto or thereto, occurred, done, omitted or 

 

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suffered to bedone 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 orproceeding in a court of competent jurisdiction by the filing of a complaintwithin one (1) year after the first act, occurrence or omission upon whichsuch claim or cause of action, or any part thereof, is based and service of asummons and complaint on an officer of Lender or any other Person authorized toaccept service of process on behalf of Lender, within thirty (30) daysthereafter.  Borrower agrees that suchone-year period of time is a reasonable and sufficient time for Borrower toinvestigate and act upon any such claim or cause of action.  The one-year period provided herein shall notbe waived, tolled, or extended except by a specific written agreement ofLender.  This provision shall survive anytermination of this Agreement or any other agreement.

 

29.                                 LIABILITY.

 

Neither Lender nor anyLender Affiliate shall be liable for any indirect, special, incidental orconsequential damages in connection with any breach of contract, tort or otherwrong relating to this Agreement or the Obligations or the establishment,administration or collection thereof (including without limitation damages forloss of profits, business interruption, or the like), whether such damages areforeseeable or unforeseeable, even if Lender has been advised of thepossibility of such damages.  Neither Lender,nor any Lender Affiliate shall be liable for any claims, demands, losses ordamages, of any kind whatsoever, made, claimed, incurred or suffered by theBorrower through the ordinary negligence of Lender, or any Lender Affiliate.

 

30.                                 COUNTERPARTS.

 

This Agreement, any ofthe Other Agreements, and any amendments, waivers, consents or supplements maybe executed in any number of counterparts and by different parties hereto inseparate counterparts, each of which, when so executed and delivered, shall bedeemed an original, but all of which counterparts together shall constitute butone agreement.

 

31.                                 ELECTRONICSUBMISSIONS.

 

Upon not less than thirty(30) days’ prior written notice (the “**ApprovedElectronic Form Notice**”), Lender may permit or require that anyof the documents, certificates, forms, deliveries or other communications,authorized, required or contemplated by this Agreement or the Other Agreementsbe submitted to Lender in “**ApprovedElectronic Form**” (as hereafter defined), subject to any reasonableterms, conditions and requirements in the applicable Approved Electronic FormsNotice.  For purposes hereof, “**Electronic Form**” means e-mail, e-mailattachments, data submitted on web-based forms or any other communicationmethod that delivers machine readable data or information to Lender, and “**Approved Electronic Form**” means anElectronic Form that has been approved in writing by Lender (whichapproval has not been revoked or modified by Lender) and sent to Borrower in anApproved Electronic Form Notice. Except as otherwise specifically provided in the applicable ApprovedElectronic Form Notice, any submissions made in an applicable ApprovedElectronic Form shall have the same force and effect that the samesubmissions would have had if they had been submitted in any 

 

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other applicableform authorized, required or contemplated by this Agreement or the OtherAgreements.

 

32.                                 WAIVEROF JURY TRIAL; OTHER WAIVERS.

 

(a)                                  BORROWERAND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ORPROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THEOTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCTBY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUTOF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER**.  IN NO EVENTSHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVEOR CONSEQUENTIAL DAMAGES**.

 

(b)                                 Borrower hereby waives demand, presentment,protest and notice of nonpayment, and further waives the benefit of allvaluation, appraisal and exemption laws.

 

(c)                                  Borrower hereby waives the benefit of any lawthat would otherwise restrict or limit Lender or any affiliate of Lender in theexercise of its right, which is hereby acknowledged and agreed to, to set-offagainst the Obligations, without notice at any time hereafter, anyindebtedness, matured or unmatured, owing by Lender or such affiliate of Lenderto Borrower, including, without limitation, any deposit account at Lender or suchaffiliate.

 

(d)                                 BORROWERHEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THEEXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF BORROWERWITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL,PROVIDED THAT IN THE EVENT LENDER SEEKS TO ENFORCE ITS RIGHTS HEREUNDER BYJUDICIAL PROCESS OR SELF-HELP, LENDER SHALL PROVIDE BORROWER WITH SUCH NOTICESAS ARE REQUIRED BY LAW.

 

43

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(e)                                  Lender’s failure, at any time or timeshereafter, to require strict performance by Borrower of any provision of thisAgreement or any of the Other Agreements shall not waive, affect or diminishany right of Lender thereafter to demand strict compliance and performancetherewith.  Any suspension orwaiver by Lender of an Event of Default under this Agreement or any defaultunder any of the Other Agreements shall not suspend, waive or affect any otherEvent of Default under this Agreement or any other default under any of theOther Agreements, whether the same is prior or subsequent thereto and whetherof the same or of a different kind or character.  No delay on the part of Lender in theexercise of any right or remedy under this Agreement or any Other Agreementshall preclude other or further exercise thereof or the exercise of any rightor remedy.  None of the undertakings,agreements, warranties, covenants and representations of Borrower contained inthis Agreement or any of the Other Agreements and no Event of Default underthis Agreement or default under any of the Other Agreements shall be deemed tohave been suspended or waived by Lender unless such suspension or waiver is inwriting, signed by a duly authorized officer of Lender and directed to Borrowerspecifying such suspension or waiver.

 

33.                                 AMENDMENTAND RESTATEMENT.  This Agreement shallbecome effective, and shall amend and restate the Original Loan Agreement, asamended by the First Term Loan Amendment, the Second Term Loan Amendment andthe Third Term Loan Amendment, upon the execution of this Agreement by Borrowerand Lender; and from and after such effective time, (i) all referencesmade to the “this Agreement” or “the Loan Agreement” in the Loan Documents orin any other instrument or document executed and/or delivered pursuant theretoshall, without anything further, be deemed to refer to this Agreement and (ii) theOriginal Loan Agreement, as amended by the First Term Loan Amendment, theSecond Term Loan Amendment and the Third Term Loan Amendment, shall be deemedamended and restated, without novation, in its entirety hereby.  All the Other Agreements are herebyreaffirmed and shall continue in full force and effect.  Borrower acknowledges that the Term Loans andother Obligations evidenced by the Original Loan Agreement, as amended by theFirst Term Loan Amendment, the Second Term Loan Amendment and the Third TermLoan Amendment, including the Other Agreements and all the other instruments,documents and agreements executed and delivered in connection with the OriginalLoan Agreement, as amended by the First Term Loan Amendment, the Second TermLoan Amendment and the Third Term Loan Amendment, , have not been satisfied butinstead have become part of the Term Loans and Obligations under this Agreementand under the other Loan Documents. Borrower further acknowledges that all of the Liens granted by Borrowerunder the Original Loan Agreement, as amended by the First Term Loan Amendment,the Second Term Loan Amendment and the Third Term Loan Amendment, and allinstruments, documents and agreements executed in connection therewith arehereby reaffirmed and shall continue hereafter to secure the Obligations underthe Loan Documents, until all Obligations are repaid in full in cash and thisAgreement is terminated.

 

***SIGNATURE PAGES FOLLOW***

 

44

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***Signature Page to Amended and RestatedLoan and Security Agreement – Term Loan***

 

*SignaturePage to Amended and RestatedLoan and Security Agreement – Term Loan*

 

IN WITNESS WHEREOF, theparties hereto have duly executed this Agreement as of the date first writtenabove.

 

 
|   | CRDENTIA CORP.,  a Delaware corporation                  |
|--------|----------------------------------------------------------|
|   |                                                     |
|   |                                                     |
|   | By:                                                      | /s/ Pamela G. Atherton |   |
|   |                                                     | Pamela G. Atherton   President |
|   |                                                     |
|   |                                                     |
|   | BAKER ANDERSON CHRISTIE, INC.,  a California corporation |
|   |                                                     |
|   |                                                     |
|   | By:                                                      | /s/ Pamela G. Atherton |   |
|   |                                                     | Pamela G. Atherton  President |
|   |                                                     |   |
|   |                                                     |   |
|   | NURSES NETWORK, INC.,  a California corporation          |
|   |                                                     |
|   |                                                     |
|   | By:                                                      | /s/ Pamela G. Atherton |   |
|   |                                                     | Pamela G. Atherton   President |
|   |                                                     |
|   |                                                     |
|   | NEW AGE STAFFING, INC.,  a Delaware corporation          |
|   |                                                     |
|   |                                                     |
|   | By:                                                      | /s/ Pamela G. Atherton |   |
|   |                                                     | Pamela G. Atherton  President |

 

----

 
|   | PSR NURSES, LTD.,  a Texas limited partnership   |
|--------|--------------------------------------------------|
|   |                                             |
|   |
|   | By:                                              | PSR NURSE RECRUITING, INC. |
|   | Its:                                             | General Partner |
|   |                                             |
|   | By:                                              | /s/ Pamela G. Atherton |   |
|   | Pamela G. Atherton  President                    |
|   |                                             |
|   |                                             |
|   | PSR NURSE RECRUITING, INC.,  a Texas corporation |
|   |                                             |
|   |                                             |
|   | By:                                              | /s/ Pamela G. Atherton |   |
|   |                                             | Pamela G. Atherton  President |
|   |                                             |
|   |                                             |
|   | PSR NURSES HOLDINGS CORP.,  a Texas corporation  |
|   |                                             |
|   |                                             |
|   | By:                                              | /s/ Pamela G. Atherton |   |
|   |                                             | Pamela G. Atherton   President |
|   |                                             |
|   |                                             |
|   | CRDE CORP.,  a Delaware corporation              |
|   |                                             |
|   |                                             |
|   | By:                                              | /s/ Pamela G. Atherton |   |
|   |                                             | Pamela G. Atherton  President |
|        |                                                  |  |  |  |  |  |  |

 

----

 
|   | ARIZONA HOME HEALTH CARE/PRIVATE   DUTY, INC.,  an Arizona corporation        |
|--------|-------------------------------------------------------------------------------|
|   |                                                                          |
|   |                                                                          |
|   | By:                                                                           | /s/ Pamela G. Atherton |   |
|   |                                                                          | Pamela G. Atherton   President |
|   |                                                                          |
|   |                                                                          |
|   | CARE PROS STAFFING, INC.,  a Texas corporation                                |
|   |                                                                          |
|   |                                                                          |
|   | By:                                                                           | /s/ Pamela G. Atherton |   |
|   |                                                                          | Pamela G. Atherton  President |
|   |                                                                          |   |
|   |                                                                          |   |
|   | HIP HOLDING, INC.,  a Delaware corporation                                    |
|   |                                                                          |
|   |                                                                          |
|   | By:                                                                           | /s/ Pamela G. Atherton |   |
|   |                                                                          | Pamela G. Atherton   President |
|   |                                                                          |
|   |                                                                          |
|   | HEALTH INDUSTRY PROFESSIONALS,  L.L.C.,  a Michigan limited liability company |
|   |                                                                          |
|   |                                                                          |
|   | By:                                                                           | /s/ Pamela G. Atherton |   |
|   |                                                                          | Pamela G. Atherton  President |
|   |                                                                          |
|   |                                                                          |
|   | TRAVMED USA, INC., a North Carolina  corporation                              |
|   |                                                                          |
|   |                                                                          |
|   | By:                                                                           | /s/ Pamela G. Atherton |   |
|   |                                                                          | Pamela G. Atherton  President |

 

----

 
|   | GHS ACQUISITION CORPORATION,  a Delaware corporation           |
|--------|----------------------------------------------------------------|
|   |                                                           |
|   |                                                           |
|   | By:                                                            | /s/ Pamela G. Atherton |   |
|   |                                                           | Pamela G. Atherton   President |
|   |                                                           |
|   |                                                           |
|   | PRIME STAFF, LP,  a Texas limited partnership                  |
|   |
|   | By:                                                            | CRDE CORP. |
|   | Its:                                                           | General Partner |
|   |                                                           |
|   | By:                                                            | /s/ Pamela G. Atherton |   |
|   | Pamela G. Atherton  President                                  |
|   |                                                           |   |
|   |                                                           |   |
|   | MINT MEDICAL STAFFING ODESSA, LP,  a Texas limited partnership |
|   |                                                           |
|   | By:                                                            | CRDE CORP. |
|   | Its:                                                           | General Partner |
|   |                                                           |
|   | By:                                                            | /s/ Pamela G. Atherton |   |
|   | Pamela G. Atherton  President                                  |
|        |                                                                |  |  |  |  |  |

 

----

 

*SignaturePage to Term Loan Agreement*

 

 
|   | BRIDGE OPPORTUNITY FINANCE, LLC,  a Delaware limited liability company |
|--------|------------------------------------------------------------------------|
|   |                                                                   |
|   |                                                                   |
|   | By                                                                     | /s/ Randy Abrahams |   |
|   |                                                                   | Randy Abrahams  Chief Executive Officer |

 

----

 

ANNEX 1-DEFINED TERMS

 

“**Account**” shall mean all present and futureaccounts and payment intangibles (in respect of Staffing Services), as suchterms are defined in the UCC, of Borrower, including, without limitation, allobligations for the payment of money (including, without limitation, allamounts due and owing from Government Authorities to the extent such amountsare deemed to be or construed to be general intangibles) arising out of thesale, lease, license or other disposition of goods or other Property or therendering of services and all proceeds thereof.

 

“**Account Debtor**” shall mean, with respect toany Account, the Person obligated to pay under such Account.  The term “Account Debtor” specificallyincludes, without limitation, any insurer or Government Reimbursement Program.

 

“**Acquisition**” shall mean the purchase byCrdentia (or another Borrower) of all of the issued and outstanding equityinterests or substantially all of the operating assets of any Person in thehealthcare staffing industry pursuant to the Acquisition Documents.

 

“**Acquisition Documents**” shall mean allagreements, instruments and documents executed or delivered in connection withan Acquisition.

 

“**Affiliate**” shall mean any Person (i) whichdirectly or indirectly through one or more intermediaries, controls, iscontrolled by, or is under common control with, Borrower, (ii) whichbeneficially owns or holds five percent (5%) or more of the voting control orequity interests of Borrower, or (iii) five percent (5%) or more of thevoting control or equity interests of which is beneficially owned or held byBorrower.

 

“**Authorized Officer**”  shall mean, as applied to any Person, anyindividual holding the position of chairman of the board (if an officer), chiefexecutive officer, president or one of its vice presidents (or the equivalentthereof), and such Person’s chief financial officer or treasurer.

 

“**BHF**” shall mean Bridge Healthcare Finance,LLC.

 

**“BorrowedMoney”** shall mean, as applied to any Person, withoutduplication, (a) all Indebtedness of such Person, (b) all debt ofsuch Person, whether or not evidenced by bonds, debentures, notes or similarinstruments, (c) all obligations of such Person as lessee under CapitalLeases which have been or should be recorded as liabilities on a balance sheetof such Person in accordance with GAAP, (d) all obligations of such Personto pay the deferred purchase price of property or services (excluding tradeaccounts payable in the ordinary course of business), (e) all indebtednesssecured by a Lien on the property of such Person, whether or not suchindebtedness shall have been assumed by such Person; provided that if suchPerson has not assumed or otherwise become liable for such indebtedness, suchindebtedness shall be measured at the fair market value of such propertysecuring such indebtedness at the time of determination, (f) allobligations, contingent or otherwise, with respect to the face amount of allletters of credit (whether or not drawn), bankers’ acceptances and similarobligations issued for the account of such Person (including the Letters ofCredit), (g) all hedging, swap, or similar obligations of such Person, (h) allContingent Liabilities of such Person and (i) all debt of any partnership,limited liability company, or other entity (only if such partnership, limitedliability company or other entity is a Borrower) of which such Person is amajority owner.

 

 

Annex 1 - 1

----

 

“**Borrower**” and “**Borrowers**” shall mean, individually and collectively, each ofthe Borrowers named in the first paragraph hereof provided that each referenceto “Borrower” herein shall mean each Borrower individually and all Borrowerscollectively, as the context requires.

 

“**Borrowing Agent**” shall mean Crdentia.

 

“**Business Day**” shall mean any day other thana Saturday, a Sunday or any day that banks in Chicago, Illinois are required orpermitted to close.

 

“**Capital Expenditures**” shall mean withrespect to any period, the aggregate of all expenditures (whether paid in cashor accrued as liabilities and including Capital Lease Obligations) by Borrowersduring such period that are required by GAAP, consistently applied, to beincluded in or reflected by the property, plant and equipment or similar fixedasset accounts (or intangible accounts subject to amortization) on the balancesheet of Borrowers, excluding expenditures for any assets or equity interestsacquired pursuant to a Permitted Acquisition.

 

**“CapitalLease”** shall mean, as to any Person, a lease of any interestin any kind of property or asset, whether real, personal or mixed, or tangibleor intangible, by such Person as lessee that is, or should be, recorded as a “capitallease” on the balance sheet of such Person prepared in accordance with GAAP.

 

**“CapitalLease Obligations”** shall mean, as to any Person, indebtednessrepresented by obligations under a Capital Lease that is required to becapitalized for financial reporting purposes in accordance with GAAP.

 

“**Closing Date**” shall mean May 16, 2005.

 

“**Closing Document List**” shall have themeaning set forth in Section 17 hereof.

 

“**Collateral**” shall mean all of the propertyof Borrower described in Section 5 hereof, together with all otherreal or personal property of any Obligor or any other Person now or hereafterpledged to Lender to secure, either directly or indirectly, repayment of any ofthe Obligations.

 

“**Concentration Account**” shall have themeaning set forth in Section 8(a) of the Revolving Loan Agreement.

 

**“ContingentLiability”** shall mean any agreement, undertaking orarrangement by which any Person guarantees, endorses or otherwise becomes or iscontingently liable upon (by direct or indirect agreement, contingent orotherwise, to provide funds for payment, to supply funds to or otherwise toinvest in a debtor, or otherwise to assure a creditor against loss) anyIndebtedness, obligation or other liability of any other Person (other than byendorsements of instruments in the course of collection), or guarantees thepayment of dividends or other distributions upon the shares of any otherPerson.  The amount of any ContingentLiability shall (subject to any limitation set forth herein) be deemed to bethe outstanding principal amount (or maximum permitted principal amount, iflarger) of the Indebtedness, obligation or other liability guaranteed orsupported thereby.

 

 

Annex 1 - 2

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“**CRDE**” shall mean CRDE Corp., the Subsidiaryof Crdentia formed to hold all Target entities acquired in PermittedAcquisitions, and shall mean, collectively, CRDE Corp. and each of its director indirect subsidiaries.

 

“**CRDE Account Debtor Collection Lockbox Account**”shall mean an account or accounts maintained at the Lockbox Bank into which allcollections of Accounts of CRDE are paid directly; the CRDE Account DebtorCollection Lockbox Account shall be an account in the name of Lender (orBorrower for the sole benefit of Lender), and shall be the sole and exclusiveproperty of Lender.

 

**“Default”**shall mean an event which, with the giving of notice or passage of time orboth, would constitute an Event of Default.

 

**“DerivativeObligations”** shall mean every obligation of a Person underany forward contract, futures contract, exchange contract, swap, option orother financing agreement or arrangement (including, without limitation, caps,floors, collars and similar agreement), the value of which is dependent uponinterest rates, currency exchange rates, commodities or other indices.

 

“**EBITDA**” shall mean, with respect to anyperiod, net income of the Borrower, on a consolidated basis, after taxes forsuch period (excluding any after-tax gains or losses and excluding otherafter-tax extraordinary gains or losses) plus interest expense, incometax expense, depreciation and amortization for such period, plus or minusany other non-cash charges or gains which have been subtracted or added incalculating net income after taxes for such period.

 

“**Eligible Account**” shall have the meaningset forth in the Revolving Loan Agreement.

 

“**Environmental Laws**” shall mean all federal,state, district, local and foreign laws, rules, regulations, ordinances, andconsent decrees relating to health, safety, hazardous substances, pollution andenvironmental matters, as now or at any time hereafter in effect, applicable toBorrower’s business or facilities owned or operated by Borrower, including lawsrelating to emissions, discharges, releases or threatened releases ofpollutants, contamination, chemicals, or hazardous, toxic or dangeroussubstances, materials or wastes into the environment (including, withoutlimitation, ambient air, surface water, ground water, land surface orsubsurface strata) or otherwise relating to the generation, manufacture,processing, distribution, use, treatment, storage, disposal, transport orhandling of Hazardous Materials.

 

“**ERISA**” shall mean the Employee RetirementIncome Security Act of 1974, as amended, modified or restated from time totime.

 

“**Event of Default**” shall have the meaningspecified in Section 15 hereof.

 

“**Excess Availability**” shall mean, as of anydate of determination by BHF, the excess, if any, of the lesser of (i) theMaximum Revolving Loan Limit less the sum of the outstanding Revolving Loansand (ii) the Revolving Borrowing Base Amount less the sum of theoutstanding Revolving Loans, in each case as of the close of business on suchdate and assuming, for purposes of calculation, that all accounts payable ofthe Borrower which remain unpaid more than thirty (30) days after the due datesthereof (except for professional fees and amounts 

 

 

Annex 1 - 3

----

 

contested in goodfaith) as of the close of business on such date are treated as additionalRevolving 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 ofaccounting and consistently applied with prior periods to the extent requiredunder Section 1(b); provided, however, that GAAP with respect toany interim financial statements or reports shall be deemed subject to fiscalyear-end adjustments and footnotes made in accordance with GAAP.

 

“**Governmental Authorization**” means anypermit, license, registration, authorization, certificate, accreditation, plan,directive, consent order or consent decree of or from, or notice to, anyGovernment Authority.

 

“**Government Authority**” means any federal,state, District of Columbia, municipal, national or other government,governmental department, commission, board, bureau, court, agency orinstrumentality or political subdivision thereof or any entity or officerexercising executive, legislative, judicial, regulatory or administrativefunctions of or pertaining to any government or any court, in each case whetherassociated with a state of the United States, the United States, or a foreignentity or government.

 

“**Government Reimbursement Program**” shallmean (i) the Medicare program established under the Title XVIII of theFederal Social Security Act, the Federal Employees Health Benefit Program under5 U.S.C. §§ 8902 et seq., the TRICARE program established by theDepartment of Defense under 10 U.S.C. §§ 1071 et seq. or the CivilianHealth and Medical Program of the Uniformed Services under 10 U.S.C. §§ 1079and 1086, (ii) the Medicaid program of any state or the District ofColumbia acting pursuant to a health plan adopted pursuant to Title XIX of theFederal Social Security Act or (iii) any agent, administrator,intermediary or carrier for any of the foregoing.

 

“**Hazardous Materials**” shall mean anyhazardous, toxic or dangerous substance, materials and wastes, including,without limitation, hydrocarbons (including naturally occurring or man-madepetroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehydeinsulation, radioactive materials, biological substances, polychlorinatedbiphenyls, pesticides, herbicides and any other kind and/or type of pollutantsor contaminants (including, without limitation, materials which includehazardous constituents), sewage, sludge, industrial slag, solvents and/or anyother similar substances, materials, or wastes and including any othersubstances, materials or wastes that are, or become, regulated under anyEnvironmental Law (including, without limitation any that are, or become, classifiedas hazardous or toxic under any Environmental Law).

 

“**Healthcare Regulations**” means any and allcurrent or future Laws relating to HMOs, healthcare service providers,Government Reimbursement Programs, Persons engaged in the Healthcare ServiceBusiness, healthcare-related insurance companies, or any other similar Personand any rule, regulation, directive, order or decision promulgated or issuedpursuant thereto.  Healthcare Regulationsshall include the Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.),

 

 

Annex 1 - 4

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federalanti-kickback statute (42 U.S.C. § 1320a-7b), the False Claims Act (31U.S.C. §§ 3729 et seq.), the Health Insurance Portability andAccountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996))and the federal physician self-referral laws (42 U.S.C. § 1395nn).

 

**“Indebtedness”**of any Person shall mean, without duplication, (a) all indebtedness ofsuch Person for borrowed money, whether or not evidenced by bonds, debentures,notes or similar instruments, (b) all Capital Lease Obligations of suchPerson, (c) all obligations of such Person to pay the deferred purchaseprice of property or services (excluding trade accounts payable in the ordinarycourse of business), (d) all indebtedness secured by a Lien on theproperty of such Person, whether or not such indebtedness shall have beenassumed by such Person, (e) all obligations, contingent or otherwise, withrespect to the face amount of all letters of credit (whether or not drawn) andbanker’s acceptances issued for the account of such Person, (f) allDerivative Obligations of such Person, (g) all Contingent Obligations, and(h) all liabilities of any partnership or joint venture of which suchPerson is a general partner or joint venturer.

 

“**Information Certificate**” means the documentattached hereto as Exhibit C.

 

**“IntellectualProperty”** 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 andcombinations of the foregoing), indicia and other source and/or business identifiers,and the goodwill of the business relating thereto and all registrations orapplications for registrations which have heretofore been or may hereafter beissued thereon throughout the world; copyrights (including copyrights forcomputer programs) and copyright registrations or applications forregistrations which have heretofore been or may hereafter be issued throughoutthe world and all tangible property embodying the copyrights; unpatentedinventions (whether or not patentable); patent applications and patents;industrial designs, industrial design applications and registered industrialdesigns; license agreements related to any of the foregoing and incometherefrom; books, records, writings, computer tapes or disks, flow diagrams,specification sheets, computer software, source codes, object codes, executablecode, data, databases and other physical manifestations, embodiments orincorporations of any of the foregoing; the right to sue for all past, presentand future infringements of any of the foregoing; all other intellectualproperty; and all common law and other rights throughout the world in and toall of the foregoing.

 

“**Lender Affiliate**” shall mean Lender’sdirectors, officers, employees, agents, attorneys or any other Person or entityaffiliated with or representing Lender.

 

**“Lien”**shall mean any mortgage, pledge, claim, hypothecation, judgment lien or similarlegal process, title retention lien, or other lien or security interest,including, without limitation, the interest of a vendor under any conditionalsale or other title retention agreement and the interest of a lessor under alease of any interest in any kind of property or asset, whether real, personalor mixed, or tangible or intangible, that is, or should be, accounted for as a CapitalLease.

 

“**Loan Documents**” shall mean this Agreementand the Other Agreements.

 

 

Annex 1 - 5

----

 

“**Loans**” shall mean all loans and advancesmade by Lender to or on behalf of Borrower hereunder or under the RevolvingLoan Agreement.

 

“**Lockbox**” shall have the meaning specifiedin Subsection 8(a) hereof.

 

“**Lockbox Bank**” shall have the meaningspecified in Subsection 8(a) hereof.

 

“**Makewell Agreement**” means that certainMakewell Agreement executed by MedCap Partners L.P., a Delaware limitedpartnership, dated as of the date hereof in favor of the Lender, as the samemay be amended, restated, supplemented or otherwise modified from time to time.

 

“**Material Adverse Effect**” shall mean amaterial adverse effect on the business, property, assets, prospects,operations or condition, financial or otherwise, of a Person.

 

**“MaximumRevolving Loan Limit”**means the maximum commitments of BHF under the Revolving Loan Agreement.

 

“**Obligations**” shall mean any and allobligations, liabilities and Indebtedness of Borrower to Lender (other thanRevolving Loan Obligations), or to any parent, affiliate or subsidiary ofLender, of any and every kind and nature, howsoever created, arising orevidenced and howsoever owned, held or acquired, whether now or hereafterexisting, 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, andwhether arising or existing under written or oral agreement or by operation oflaw.

 

“**Obligor**” shall mean Borrower and each otherPerson who is or shall become primarily or secondarily liable for any of theObligations.

 

“**Operating Cash Flow**” means, for any period,Borrower’s consolidated net income or loss (excluding the effect of anyextraordinary gains or losses), determined in accordance with GAAP, plusor minus each of the following items on a consolidated basis, to theextent deducted from or added to the revenues of Borrower in the calculation ofconsolidated net income or loss: (i) depreciation; (ii) amortizationand other non-cash charges; (iii) interest and fee expenses paid oraccrued; (iv) total federal and state income tax expense determined as theaccrued liability of Borrower in respect of such period, regardless of whatportion 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 ofBorrower; and (vi) management fees and other fees paid to subordinatingcreditors to the extent permitted hereunder, and under the applicablesubordination agreement(s), but only to the extent any such item was expensedin the calculation of net income and after deduction for each of (a) federaland state income taxes, to the extent actually paid during such period; (b) anynon-cash income and gains from the sale of property; and (c) all actualCapital Expenditures made during such period and not financed.

 

“**Original Closing Date**” shall mean August 31,2004.

 

“**Other Agreements**” shall mean allagreements, makewell agreements, instruments and documents, other than thisAgreement and the Revolving Loan Documents, including, without limitation,guaranties, mortgages, trust deeds, pledges, powers of attorney, consents, 

 

 

Annex 1 - 6

----

 

assignments,contracts, notices, security agreements, leases, financing statements,subordination agreements, and all other writings heretofore, now or from timeto time hereafter executed by or on behalf of Borrower or any other Person anddelivered to Lender in connection with the Obligations or the transactionscontemplated hereby, as each of the same may be amended, modified orsupplemented from time to time.

 

“**Parent**” shall mean any Person now or at anytime 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, ifBorrower is a partnership, the general partner of Borrower.

 

“**PBGC**” shall have the meaning specified in Subsection 12(b)(iv) hereof.

 

“**Permitted Acquisition**” shall have themeaning set forth in Section 2(b) hereof.

 

“**Permitted Liens**” shall mean (i) statutoryLiens of landlords, carriers, warehousemen, processors, mechanics, materialmenor suppliers incurred in the ordinary course of business and securing amountsnot yet due or declared to be due by the claimant thereunder in excess offifteen (15) days or amounts which are being contested in good faith and byappropriate proceedings and for which Borrower has maintained adequatereserves; (ii) Liens in favor of Lender; (iii) zoning restrictionsand easements, licenses, covenants and other restrictions affecting the use ofreal property that do not individually or in the aggregate have a materialadverse effect on Borrower’s ability to use such real property for its intendedpurpose in connection with Borrower’s business; (iv) Liens in connectionwith purchase money indebtedness and Capital Leases otherwise permittedpursuant to this Agreement, provided, that such Liens attach only to the assetsthe purchase of which was financed by such purchase money indebtedness or whichis the subject of such Capital Leases; (v) Liens set forth on Schedule 1;(vi) Liens specifically permitted by Lender in writing; (vii) involuntaryLiens securing amounts less than $50,000 and which are released or for which abond acceptable to Lender in its reasonable credit judgment, determined in goodfaith, has been posted within ten (10) days of its creation; (viii) Liensfor taxes not yet due and payable or for taxes being contested in good faith byappropriate proceedings and as to which the Borrower has deposited with theLender 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 BHF.

 

“**Person**” shall mean any individual, soleproprietorship, partnership, joint venture, trust, unincorporated organization,association, corporation, limited liability company, institution, entity, partyor 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)(iv) hereof.

 

“**Pledge Agreement**” shall mean that certainPledge Agreement dated as of August 31 2004 between Crdentia andLender, as amended, restated, supplemented or otherwise modified from time totime.

 

“**Prime Rate**” shall mean the prime ratepublicly announced by LaSalle Bank, N.A., in effect from time to time.

 

 

Annex 1 - 7

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“**Property**” shall mean, with respect to anyPerson, any interest of such Person in any kind of property or asset, whetherreal, personal or mixed, or tangible or intangible, including capital stock in,and other securities of, any other Person.

 

“**Revolving Borrowing Base Amount**” shall havethe meaning set forth in the Revolving Loan Agreement.

 

“**Revolving Loan Agreement**” shall have themeaning set forth in the recitals hereto.

 

“**Revolving Loan Documents**” shall mean theRevolving Loan Agreement and all agreements, instruments and documents,executed by or on behalf of Borrower or any other Person and delivered to BHFin connection with the transactions contemplated by the Revolving LoanAgreement.

 

“**Revolving Loan Obligations**” shall mean allindebtedness and obligations of every kind and nature of Borrowers in respectof the Revolving Loan Documents.

 

“**Revolving Loans**” shall mean those certainRevolving Loans of BHF to Borrowers pursuant to the Revolving Loan Agreement.

 

“**Seller Notes**” shall mean, collectively, thenotes listed on Schedule 11(n) hereto and any other notesrepresenting Subordinated Debt incurred as a part of the purchase price of aPermitted Acquisition subject to a Subordination Agreement acceptable to theLender.

 

“**Senior Debt Service**” means, for any periodwith respect to the Borrowers, the sum of payments made or required to be madeby Borrower during such period for (i) interest only payments due on theRevolving Loans facility, and (ii) interest and scheduled principalpayments due on any and all other Indebtedness for Borrowed Money excluding theSubordinated Debt.

 

“**Staffing Services**” means arranging toprovide healthcare-related staffing services, long-term care or any business oractivity that is reasonably similar thereto or a reasonable extension,development or expansion thereof or ancillary thereto.

 

“**Subordinated Debt**” shall mean Indebtednessof Borrower or any Subsidiary of Borrower that is subordinated to theObligations 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, intercreditoragreements, consent and similar agreements among either Borrower, Lender andany holder of Indebtedness, whether entered into on or prior to the date hereofor from time to time hereafter, together with all modifications, amendments andrestatements of any of the foregoing, including, without limitation, theSubordination Agreements listed on Schedule 11(n) hereto in respectof the Seller Notes existing on the Original Closing Date.

 

“**Subsidiary**” shall mean any corporation ofwhich more than fifty percent (50%) of the outstanding capital stock havingordinary voting power to elect a majority of the board of directors of suchcorporation (irrespective of whether, at the time, stock of any other class of 

 

 

Annex 1 - 8

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such corporationshall have or might have voting power by reason of the happening of anycontingency) is at the time, directly or indirectly, owned by Borrower, or anypartnership, joint venture or limited liability company of which more thanfifty percent (50%) of the outstanding equity interests are at the time,directly or indirectly, owned by Borrower or any partnership of which Borroweris a general partner.

 

“**Tangible Net Worth**” shall have the meaningspecified in Subsection 14(a) hereof.

 

“**Target**” shall mean, the entity which is thesubject of an Acquisition.

 

“**Term**” shall have the meaning specified in Section 10hereof.

 

“**Term Loan**“ shall have the meaningspecified in Subsection 2(a) hereof.

 

“**Total Debt Service**” means, for any period,the sum of payments made (or, as to clause (i) of this sentence, requiredto be made) by Borrower, on a consolidated basis, during such period for (i) SeniorDebt Service, (ii) interest, fees and scheduled principal payments due onthe Term Loans, (iii) pursuant to the scheduled Subordinated Debt paymentspermitted by this Agreement and the applicable subordination agreement, and (iv) interestand scheduled principal payments due on any and all other Indebtedness forBorrowed Money of Borrower.

 

“**Travmed Subordinated Debt**” shall mean theIndebtedness of Borrower owed to Robert Litton, Steve Williams, or any otherPerson, including all of their respective successors and assigns, which is inconnection with the acquisition by Borrower of Travmed USA, Inc.

 

“**Travmed Subordinated Debt Default**” shallmean a “Default” as defined in any of the Travmed Subordinated Notes.

 

“**Travmed Subordinated Notes**” shall mean (i) thatcertain Subordinated Promissory Note dated as of March 28, 2005, issued byCrdentia in favor of Robert Litton (including all of his successors andassigns) in the original principal amount of $1,607,745, and (ii)  thatcertain Subordinated Promissory Note dated as of March 28, 2005, issued byCrdentia in favor of Robert Litton (including all of his successors andassigns) in the original principal amount of $1,607,745.

 

“**UCC**” shall mean the Uniform Commercial Codeas in effect from time to time in the State of Illinois.

 

“**Warrant Agreement**” shall mean that certainWarrant Agreement dated as of the date hereof between Crdentia Corp. andLender.

 

“**Warrant Certificate**” shall mean acertificate evidencing one or more warrants, substantially in the form of Exhibit Ato the Warrant Agreement, with such changes therein as may be required toreflect any adjustments made pursuant to Section 12 of the WarrantAgreement.

 

 

Annex 1 - 9

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**INDEX OF EXHIBITS AND SCHEDULES**

 
| **Exhibits**   | ** ** | ** **              |
|----------------|------------|-------------------------|
| ** **     | ** ** | ** **              |
| Exhibit A |       | Compliance Certificate  |
|           |       |                    |
| Exhibit B |       | Closing Checklist       |
|           |       |                    |
| Exhibit C |       | Information Certificate |

 
| **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(t) |       | Environmental Matters                    |
|                |       |                                     |
| Schedule 11(v  |       | Government Reimbursement Program Matters |
|                |       |                                     |
| Schedule 11(y) |       | Licenses and Permits                     |

 

 

EXHIBIT A - 1

----

 

**EXHIBIT A –COMPLIANCE CERTIFICATE**

 

Date:

 
| TO:    |   | Bridge Opportunity Finance, LLC         |
|--------|--------|-----------------------------------------|
|   |   | 233 South Wacker Drive, Suite 5350 |
|   |   | Chicago, Illinois 60606                 |

 

Gentlemen and Ladies:

 

The undersigned Borrower hereby certifies to you the following pursuantto Section 9(c) of the Amended and Restated Loan and SecurityAgreement-Term Loans (the “Agreement”) dated as of May 16, 2005,among Crdentia Corp., a Delaware corporation (“**Crdentia**”), Baker Anderson Christie, Inc., a Californiacorporation (“**Baker**”), NursesNetwork, Inc., a California corporation (“**Nurses Network**”), New Age Staffing, Inc., a Delawarecorporation (“**New Age**”), PSRNurses, Ltd., a Texas limited partnership (“**PSRLtd.**”), PSR Nurse Recruiting, Inc., a Texas corporation (“**PSR Recruiting**”), PSR Nurses HoldingsCorp., a Texas corporation (“**PSR Holding**”),CRDE Corp., a Delaware corporation (“**CRDE**”),Arizona Home Health Care/Private Duty, Inc., an Arizona corporation (“**AHHC**”), Care Pros Staffing, Inc., aTexas corporation (“**Care Pros**”),HIP Holding, Inc., a Delaware corporation (“**HIP**”), Health Industry Professionals, L.L.C., a Michiganlimited liability company (“**HIP LLC**”),Travmed USA, Inc., a North Carolina corporation (“**Travmed**”), GHS Acquisition Corporation, aDelaware corporation (“**GHS**”),Prime Staff, LP, a Texas limited partnership (“**Prime Staff**”), and Mint Medical Staffing Odessa, LP, a Texaslimited partnership (“**MMSO**”; andtogether with Crdentia, Baker, Nurses Network, New Age, PSR Ltd., PSRRecruiting, PSR Holding, CRDE, AHHC, Care Pros, HIP, HIP LLC, Travmed, GHS andPrime Staff, each referred to individually and collectively, as “**Borrower**”), a d Bridge Healthcare Finance,LLC (the “Lender”).

 

1.               As of            ,no event of default or event which with the lapse of time or the giving ofnotice, or both, would become an event of default (an “unmatured event ofdefault”) has occurred or, if such a change has occurred, a writing attachedhereto specifies the nature thereof and the action that Borrower has taken orproposes to take with respect thereto.

 

2.               No material adversechange in the condition, financial or otherwise, business, property, or resultsof operations of Borrower has occurred since                                                             [dateof last Compliance Certificate/last financial statements delivered prior toclosing], or, if such a change has occurred, a writing attached heretospecifies the nature thereof and the action that Borrower has taken or proposesto take with respect thereto.

 

3.               Borrower is incompliance with the representations, warranties and covenants in the Agreementor, if Borrower is not in compliance with any representations, warranties 

 

----

 

or covenants in the Agreement, a writingattached hereto specifies the nature thereof and the action that Borrower hastaken or proposes to take with respect thereto.

 

4.               As of                  ,Borrower maintains the following financial covenants pursuant to Section 14of the Agreement.

 

a.               Borrower shallmaintain a Minimum Tangible Net Worth of (i) ($5,000,000) at all timesfrom the date hereof through June 30, 2005, and (ii) thereafter, fromthe last day of each fiscal quarter of the Borrowers through the day prior tothe last day of each immediately succeeding fiscal quarter of the Borrowers,the Minimum Tangible Net Worth during the immediately preceding period plusseventy-five****percent (75%) of theBorrowers’ net income (but without reduction for any net loss) for the FiscalYear ending on the first day of such period as reflected on the Borrowers’audited year end financial statement. (See attached Schedule A for calculation of Tangible NetWorth)

 

Compliance                             Yes:           No:           

 

b.              Senior DebtService Coverage Ratio.  As of thelast day of each applicable period, the ratio of the Borrower’s Operating CashFlow to Borrower’s Senior Debt Service for each period set forth below (whichratio shall be tested as of the last day of each such period) must be at leastthe following: (See attached Schedule B for calculation)

 
| **Time Frame** | ** ** | **Date Tested**                            | ** ** | **Senior Debt Service Coverage  Ratio** | ** ** | **Based on**       |
|----------------|------------|--------------------------------------------|------------|-----------------------------------------|------------|--------------------|
| ** **     | ** ** | ** **                                 | ** ** | ** **                              | ** ** | ** **         |
| Quarterly      |       | 6/30/05                                    |       | 0.5 to 1.00                             |       | Trailing 3 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 9/30/05                                    |       | 1.00 to 1.00                            |       | Trailing 6 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 12/31/05                                   |       | 1.15 to 1.00                            |       | Trailing 9 months  |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 3/31/06                                    |       | 1.5 to 1.00                             |       | Trailing 12 months |
|           |       |                                       |       |                                    |       |               |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | 1.5 to 1.00                             |       | Trailing 12 months |

 
| Actual Debt  Service Coverage  Ratio: |   | Compliance: |   | Yes: |   | No: |
|---------------------------------------|--------|-------------|--------|------|--------|-----|

 

c.               Minimum EBITDA.  Borrower shall not permit EBITDA of Borrowerto be less than the amount set forth below for the corresponding period setforth below: (See attached Schedule C for calculation):

 

----

 
| **Time Frame** | ** ** | **Date Tested**                            | ** ** | **Minimum EBITDA** | ** ** | **Based on**       |
|----------------|------------|--------------------------------------------|------------|--------------------|------------|--------------------|
|           |       |                                       |       |               |       |               |
| Quarterly      |       | 6/30/05                                    |       | $100,000           |       | Trailing 3 months  |
|           |       |                                       |       |               |       |               |
| Quarterly      |       | 9/30/05                                    |       | $300,000           |       | Trailing 6 months  |
|           |       |                                       |       |               |       |               |
| Quarterly      |       | 12/31/05                                   |       | $600,000           |       | Trailing 9 months  |
|           |       |                                       |       |               |       |               |
| Quarterly      |       | 3/31/06                                    |       | $1,000,000         |       | Trailing 12 months |
|           |       |                                       |       |               |       |               |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | $1,000,000         |       | Trailing 12 months |

 

Compliance                                            Yes:           No:           

 

d.  Term Loan Debt Leverage Ratio.  Borrower shall note permit the ratio of TermLoan Debt to EBITDA to be more than the following for each period set forthbelow:  (See Schedule D forcalculation) 
| **Time Frame** | ** ** | **Date  Tested**                           | ** ** | **Coverage** | ** ** | **Based  on:**     |
|----------------|------------|--------------------------------------------|------------|--------------|------------|--------------------|
| ** **     | ** ** | ** **                                 | ** ** | ** **   | ** ** | ** **         |
| Quarterly      |       | 3/31/06                                    |       | 2.70 to 1    |       | Trailing 12 Months |
|           |       |                                       |       |         |       |               |
| Quarterly      |       | 6/30/06 and each fiscal quarter thereafter |       | 2.50 to 1    |       | Trailing 12 Months |

 
| Actual Term  Loan Debt   Leverage Ratio: |   | Compliance: |   | Yes: |   | No: |
|------------------------------------------|--------|-------------|--------|------|--------|-----|

 

e.  Capital Expenditure Limitation:  the aggregate cost of all fixed assetspurchased or otherwise acquired shall not exceed $500,000 during any FiscalYear.

 
| Total  Capital Expenditures  (YTD): |   | Compliance: |   | Yes: |   | No: |
|-------------------------------------|--------|-------------|--------|------|--------|-----|

 

f.  Operating Lease Obligations:  payments made pursuant to operating leaseobligations shall not exceed $700,000 during any Fiscal Year.

 
| Operating  Lease Payments  (YTD): |   | Compliance: |   | Yes: |   | No: |
|-----------------------------------|--------|-------------|--------|------|--------|-----|

 

The financialstatements, reports and information submitted concurrently herewith have beenprepared in accordance with generally accepted accounting principlesconsistently applied, where applicable, and there have been no material changesin accounting policies 

 

----

 

or financial reportingpractices of Borrower since                                                           [dateof last Compliance Certificate/last financial statements delivered prior toclosing], or, if such a change has occurred, a writing attached hereto specifiesthe nature thereof and the action that Borrower has taken or proposes to takewith respect thereto.

 

----

 

Any and allinitially capitalized terms set forth in this certificate without definitionshall 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 Borrowers |   |
|-------------------------------------------------------------------------------------------|--------|
|                                                                                      |   |
| Less:Book  value of all intangible assets                                                 |   |
|                                                                                      |   |
| Add:Amount  of debt of Borrowers subordinated to   Lender                                 |   |
|                                                                                      |   |
| Tangible Net  Worth                                                                       |   |

 

----

 

**Schedule B**

 

**Senior Debt Service Coverage Ratio**

 
| **Operating Cash Flow**                                                     |                                                                                                                                             |                                                           |
|-----------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|
|                                                                        |                                                                                                                                             |                                                           |
| Net income  (Loss) of the 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 Borrowers                                                                              |                                                           |   |
|                                                                        | All taxes  paid or required to be paid during such period and all non-cash income of the  Borrowers                                              |                                                           |   |
|                                                                        |                                                                                                                                             |                                                           |
| Total  Operating Cash Flow                                                  |                                                                                                                                             |                                                           |
|                                                                        |                                                                                                                                             |                                                           |
| **Senior Debt Service**                                                     | ** **                                                                                                                                       | ** **                                                     |
|                                                                        |                                                                                                                                             |                                                           |
| Add:                                                                        | Interest due  on Revolving Loans of the Borrowers                                                                                                |                                                           |   |
|                                                                        |                                                                                                                                             |                                                           |
|                                                                        | Scheduled  principal and interest payments made or required to be made on all other  indebtedness of the Borrowers (excluding Subordinated Debt) |                                                           |   |
|                                                                        |                                                                                                                                             |                                                           |
| Total Senior  Debt Service                                                  |                                                                                                                                             |                                                           |
|                                                                        |
| **Total Operating Cash Flow:  Total Senior Debt Service**                   |                                                                                                                                             | =         to  1.0 |
|                                                                             |                                                                                                                                                  |                                                                |  |  |  |  |

 

----

 

**Schedule C**

 

**EBITDA**

 
| **EBITDA**                                                                                                                                 |                             |         |
|--------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------|
|                                                                                                                                       |                             |         |
| Net income  (Loss) of the 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 |         |   |
|                                                                                                                                       |                             |         |   |
| Total EBITDA                                                                                                                               |                             |         |
|                                                                                                                                       |                             |         |   |
| Minimum  EBITDA                                                                                                                            | $                                | Total EBITDA | $ |   |   |
|                                                                                                                                            |                                  |              |  |  |  |  |

 

----

 

**Schedule D**

 

**Term Loan Debt Leverage Ratio**

 
| **Term Loan Debt**                                   |       |                                                                 |
|------------------------------------------------------|------------|----------------------------------------------------------------------|
|                                                 |       |                                                                 |
| Aggregate  principal amount of Term Loan outstanding |       |                                                                 |
|                                                 |       |                                                                 |
| **EBITDA (from Schedule C)**                    | ** ** | ** **                                                           |
|                                                 |       |                                                                 |
| **Term Loan Debt to EBITDA**                         |       | =          to  1.0 |   |   |
|                                                      |            |                                                                      |  |  |

 

 

EXHIBIT B - 1

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**Exhibit B**

**Closing Checklist**

**(See Attached)**

 

 

EXHIBIT B - 2

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**Exhibit C**

**Information Certificate**

**(See Attached)**

 

 

EXHIBIT B - 3

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**Exhibit D**

**Subordination Agreement**

**(See Attached)**

 

 

EXHIBIT B - 4

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**SCHEDULE 1** – PERMITTED LIENS

 

 

SCHEDULE 1 - 1

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**SCHEDULE 11(B) - BUSINESS AND COLLATERAL LOCATIONS; CERTAIN COLLATERAL**

 

Attached to and made apart of that certain Loan and Security Agreement of even date herewith betweenCRDENTIA CORP., a             corporation(“**Borrower**”) and BRIDGEOPPORTUNITY FINANCE, LLC (“**Lender**”).

 

A.                                   Borrower’sbusiness locations (please indicate which location is the principal place ofbusiness and at which locations originals and all copies of Borrower’s books,records and accounts are kept).

 

1.

 

2.

 

B.                                     Otherlocations of Collateral (including, without limitation, warehouse locations,processing locations, consignment locations) and all post office boxes ofBorrower.  Please indicate therelationship of such location to Borrower (i.e., public warehouse, processor,etc.).

 

1.

 

2.

 

C.                                     BankAccounts of Borrower:

 
| ** ** | ** ** | **Bank (with address)** | ** ** | **Account Number** | ** ** | **Type of Account** |
|------------|------------|-------------------------|------------|--------------------|------------|---------------------|
| ** ** | ** ** | ** **              | ** ** | ** **         | ** ** | ** **          |
| 1.         |       |                    |       |               |       |                |
|       |       |                    |       |               |       |                |
| 2.         |       |                    |       |               |       |                |

 

D.                                    CertainCollateral

 

a.                                       IntellectualProperty

 

b.                                      Instruments

 

c.                                       DepositAccounts

 

d.                                      InvestmentProperty

 

e.                                       Letter-of-CreditRights

 

f.                                         ChattelPaper

 

g.                                      Documents

 

 

SCHEDULE 11(B) - 1

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h.                                      CommercialTort Claims

 

i.                                          Certificateof Title Goods

 

j.                                          Collateralwith Third Parties

 

 

SCHEDULE 11(B) - 2

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**SCHEDULE 11(G) –LITIGATION**

 

 

SCHEDULE 11(G) - 1

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**SCHEDULE 11(I) – AFFILIATE TRANSACTIONS**

 

 

SCHEDULE 11(I) - 1

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**SCHEDULE 11(J)– NAMES & TRADE NAMES**

 

 

SCHEDULE 11(J) - 1

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**SCHEDULE 11(N)– INDEBTEDNESS**

 

 

SCHEDULE 11(J) - 1

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**SCHEDULE 11(P) – PARENT, SUBSIDIARIES AND AFFILIATES**

 

 

SCHEDULE 11(X) - 1

----