EXHIBIT 10.34


 


SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT – REVOLVING LOANS


 


DATED AS OF MAY 16, 2005


 


BETWEEN


 


BRIDGE HEALTHCARE 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


 





















 


Table of Contents


 


	
  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)

  	
  Revolving Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  MANDATORY PREPAYMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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)

  	
  Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (q)

  	
  No
  Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (r)

  	
  Employee Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (s)

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (t)

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (u)

  	
  ERISA
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (v)

  	
  Eligible Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (w)

  	
  Reimbursement

  	
   

  



 





















 


	
   

  	
  (x)

  	
  Compliance with Healthcare Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (y)

  	
  Immigration Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (z)

  	
  Licenses, Permits, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (aa)

  	
  Collective Enterprise

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (bb)

  	
  Acquisition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (cc)

  	
  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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (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 Term 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;
  Subordination Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (l)

  	
  Change of Ownership/Management

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (m)

  	
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (n)

  	
  Governmental Authorizations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (o)

  	
  Lockbox Account Instructions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (p)

  	
  Failure to Maintain Third-Party Payroll Tax
  Service Provider

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (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

  	
   

  



 





















 


	
  ANNEX 1 - DEFINITIONS

  
	
   

  
	
  EXHIBIT A –
  BORROWING BASE CERTIFICATE

  
	
   

  
	
  EXHIBIT B –
  COMPLIANCE CERTIFICATE

  
	
   

  
	
  EXHIBIT C – CLOSING CHECKLIST

  
	
   

  
	
  EXHIBIT D – INFORMATION
  CERTIFICATE

  
	
   

  
	
  EXHIBIT E – NOTICE OF
  BORROWING

  
	
   

  
	
  SCHEDULE 1 – PERMITTED LIENS

  
	
   

  
	
  SCHEDULE 11(b) –
  BUSINESS AND COLLATERAL LOCATIONS

  
	
   

  
	
  SCHEDULE 11(b) -
  CERTAIN COLLATERAL

  
	
   

  
	
  SCHEDULE 11(g)
  – LITIGATION

  
	
   

  
	
  SCHEDULE 11(i)
  – AFFILIATE TRANSACTIONS

  
	
   

  
	
  SCHEDULE 11(j)
  – NAMES & TRADE NAMES

  
	
   

  
	
  SCHEDULE 11(n)
  – INDEBTEDNESS

  
	
   

  
	
  SCHEDULE 11(p)
  – PARENT, SUBSIDIARIES AND AFFILIATES

  
	
   

  
	
  SCHEDULE 11(q) –
  DEFAULTS

  
	
   

  
	
  SCHEDULE 11(t) –
  ENVIRONMENTAL MATTERS

  
	
   

  
	
  SCHEDULE 11(z) – LICENSES AND
  PERMITS

  



 





















 


SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT


 


THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as
amended, modified or supplemented from time to time, this “Agreement”) is made this 16th day of May,
2005 by and between BRIDGE HEALTHCARE FINANCE, LLC (“Lender”), Crdentia Corp., a Delaware corporation (“Crdentia”), Baker Anderson Christie, Inc.,
a California corporation (“Baker”),
Nurses Network, Inc., a California corporation (“Nurses Network”), New Age Staffing, Inc., a Delaware
corporation (“New Age”), PSR
Nurses, Ltd., a Texas limited partnership (“PSR
Ltd.”), PSR Nurse Recruiting, Inc., a Texas corporation (“PSR Recruiting”), PSR Nurses Holdings
Corp., 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., a Texas
corporation (“Care Pros”), HIP
Holding, Inc., a Delaware corporation (“HIP”),
Health Industry Professionals, L.L.C., a Michigan limited liability company (“HIP LLC”), Travmed USA, Inc., a North
Carolina corporation (“Travmed”),
GHS Acquisition Corporation, a Delaware corporation (“GHS”), Prime Staff, LP, a Texas 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 to
individually 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
S  E  T  H:


 


WHEREAS, Crdentia, Baker, Nurses Network, New Age, PSR Ltd., PSR
Recruiting, PSR Holding, CRDE, AHHC and Care Pros (the “First Restatement Borrowers”) entered into
that certain Loan and Security Agreement – Term Loan, dated as of August 31,
2004 (as amended, restated, supplemented or otherwise modified from time to
time, the “Term Loan Agreement”
with Bridge Opportunity Finance, LLC (“BOF”), which Term Loan is secured by a
second priority security interest in the Collateral (except for all of the
equity interests of each direct and indirect Subsidiary of Crdentia, which has
been pledged to Bridge Opportunity Finance, LLC pursuant to the terms of the
Pledge Agreement);


 


WHEREAS, First Restatement Borrowers and Lender entered into that
certain Amended and Restated Loan and Security Agreement – Revolving Loans
dated as of November 30, 2004, but effective August 31, 2004 (the “Original Amended and
Restated Loan Agreement”), which Original Amended and Restated Loan
Agreement amended and restated and replaced in full that certain Loan and
Security Agreement – Revolving Loans dated as of June 16, 2004 (the “Original Loan Agreement”);


 


WHEREAS, Crdentia formed HIP Acquisition Corporation, a wholly owned
Subsidiary of CRDE, to acquire HIP and HIP LLC through merger.  HIP LLC is a wholly owned Subsidiary of
HIP.  Pursuant to that certain Agreement
and Plan of Reorganization (“HIP Merger
Agreement”) dated as of March 29, 2005 by and among Crdentia, HIP
Acquisition Corporation, HIP, and certain shareholders of HIP, HIP merged with
and into HIP Acquisition Corporation with HIP Acquisition Corporation being the
surviving entity and immediately upon such merger


 


1





















 


HIP Acquisition Corporation changed its name 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
contribution of equity interests by Crdentia, HIP LLC is a wholly owned
subsidiary of HIP and HIP is wholly owned subsidiary of CRDE;


 


WHEREAS, Crdentia formed Travmed Acquisition Corporation, a wholly
owned Subsidiary of CRDE, to acquire Travmed through merger.  Pursuant to that Agreement and Plan of
Reorganization (“Travmed Merger Agreement”)
dated as of March 29, 2005 by and among Crdentia, CRDE, Travmed Acquisition
Corporation, Travmed and certain shareholders of Travmed, Travmed Acquisition
Corporation merged with and into Travmed, with Travmed being the surviving
entity (the “Travmed Acquisition”).  As a result of the Travmed Acquisition, Travmed
is wholly owned subsidiary of CRDE;


 


WHEREAS, as a result of the HIP Acquisition and Travmed Acquisition,
First Restatement Borrowers, HIP, HIP LLC, Travmed and Lender agreed to further
amend the Original Amended and Restated Loan Agreement pursuant to the terms of
that certain Amendment No. 1, Joinder and Consent to Amended and Restated Loan
and Security Agreement – Revolving Loans, dated March 29, 2005 (the “First
Amendment”), to provide for, among other things, the addition of HIP, HIP LLC
and Travmed as additional Borrowers to the Original Amended and Restated Loan
Agreement;


 


WHEREAS, Crdentia formed GHS, a wholly owned Subsidiary of CRDE, to
acquire all of the equity interests of Prime Staff and MMSO.  Pursuant to that 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 Delaware limited liability company (“PSGP”), Prime Caid Management, Inc., a
Texas corporation (“Prime Caid”),
Mint Medical, LLC, a Delaware limited liability company (“MM”), 
Mint Medical GP, LLC, a Delaware 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 purchased all of
the equity interests in each of Prime Staff and MMSO (collectively, the “Prime Staff Acquisition”).  As a result of the Prime Staff Purchase
Agreement and the Prime Staff Acquisition, CRDE owns all of the general
partnership interests of both Prime Staff and MMSO and GHS owns all of the
limited partnership interests of both Prime Staff and MMSO;


 


WHEREAS, as a result of the Prime Staff Purchase Agreement and the
Prime Staff Acquisition, Borrower and Lender agreed to further amend the
Original Amended and Restated Loan Agreement pursuant to the terms of that
certain Amendment No. 2, Joinder and Consent to Amended and Restated Loan and
Security Agreement – Revolving Loans, dated May 5, 2005 (the “Second Amendment”),
to provide for, among other things, the addition of GHS, Prime Staff and MMSO
as additional Borrowers to the Original Amended and Restated Loan Agreement;
and


 


WHEREAS, the Borrowers and Lender desire to amend and restate the
Amended and Restated Loan Agreement upon the terms and conditions set forth in
this Agreement.


 


2





















 


NOW, THEREFORE, in consideration of any Revolving Loan hereafter made
to Borrower by Lender, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Borrower, the
parties agree that the Original Amended and Restated Loan Agreement, as amended
by the First Amendment and the Second Amendment, is hereby amended and restated
to read in full as follows:


 


1.             DEFINITIONS.


 


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


 


(b)           Accounting Terms.  Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP. 
Calculations and determinations of financial and accounting terms used
and not otherwise specifically defined hereunder and the preparation of
financial statements to be furnished to the Lender pursuant hereto shall be
made and prepared, both as to classification of items and as to amount, in
accordance with GAAP as used in the preparation of the financial statements of
the Borrower on the Original Closing Date. 
If any changes in accounting principles or practices from those used in
the preparation of the financial statements are hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or any successor thereto or agencies with similar
functions), which results in a material change in the method of accounting in
the financial statements required to be furnished to the Lender hereunder or in
the calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of the Borrower
will be the same after such changes as they were before such changes; and, if
the parties fail to agree on the amendment of such provisions, the Borrower
will furnish financial statements in accordance with such changes but shall
provide calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes.


 


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


 


(d)           Other Definitional Provisions; Construction.  Whenever the context so requires, the neuter
gender includes the masculine and feminine, the single number includes the


 


3





















 


plural, and vice versa,
and in particular the word “Borrower” shall be so construed.  The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
references to Article, Section, Subsection, Annex, Schedule, Exhibit and
like references are references to this Agreement unless otherwise
specified.  The word “including” shall
mean “including, without limitation”.  An
Event of Default shall “continue” or be “continuing” until such Event of
Default has been waived in accordance with Section 32(e) hereof. 
References in this Agreement to any party shall include such party’s
successors and permitted assigns. 
References to any “Section” shall be a reference to such Section of this
Agreement unless otherwise stated.  To
the extent any of the provisions of the Other Agreements are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall
govern.  This Agreement and the Other
Agreements are the result of negotiations among and have been reviewed by
counsel to the Lender, Borrower and any other parties thereto, are product of
all parties and, accordingly, they shall not be construed against the Lender.


 


(e)           References to Agreements, Enactments, Etc. 
Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments, restatements, supplements and other
modifications are not prohibited by the terms of this Agreement or any Other
Agreement, and (ii) references to any statute or regulation shall be construed
as including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.


 


2.             LOANS.


 


(a)           Revolving Loans.  Subject to the terms and conditions of this
Agreement and the Other Agreements, during the Term, Lender shall, absent a
Default or an Event of Default, make revolving loans and advances (the “Revolving Loans”) in an amount up to the
sum of the following sublimits (the “Revolving
Borrowing Base Amount”):


 


(i)            Up to
eighty five percent (85%), or such lesser percentage as determined by Lender in
its sole discretion exercised in good faith, of Borrowers’ Eligible Accounts
(as such Borrowers exist as of the Closing Date); provided that such advance
rate shall be reduced by one (1) percentage point for each whole or
partial percentage point by which Dilution (as determined by Lender in good
faith based on the results of the most recent twelve (12) month period for
which Lender has conducted a field audit of Borrower) exceeds five percent
(5%); plus 


 


(ii)           Accounts
that are unbilled and aged less than seven (7) days (or for the Accounts of
Travmed that are unbilled and aged less than fourteen (14) days) from the date
that the applicable Staffing Services were rendered or delivered not to exceed
an aggregate amount of $750,000 at any time, provided that Lender determines
that satisfactory documentation exists to generate valid invoices for such
unbilled Eligible Accounts; minus


 


4





















 


(iii)          such
reserves against Eligible Accounts as Lender elects, in its good faith credit
judgment, determined in good faith, to establish, increase, or decrease from
time to time;


 


provided that the Revolving Borrowing Base Amount shall in no event
exceed Fifteen Million Dollars ($10,000,000) (the “Maximum Revolving Loan Limit”) except as such amount may be
increased or decreased by Lender, in its sole discretion.


 


The aggregate unpaid principal balance of the Revolving Loans shall not
at any time exceed the lesser of the (x) Revolving Borrowing Base Amount
and (y) the Maximum Revolving Loan Limit. 
If at any time the amount of outstanding Revolving Loans exceeds either
the Revolving Borrowing Base Amount or the Maximum Revolving Loan Limit, or any
portion of the Revolving Loans exceeds any applicable sublimit within the
Revolving Borrowing Base Amount, Borrowers shall immediately, and without the
necessity of demand by Lender, pay to Lender such amount as may be necessary to
eliminate such excess and Lender shall apply such payment to the Obligations in
such order as Lender shall determine in its sole discretion.


 


Subject to the terms and conditions of this Agreement, Revolving Loans
shall be made against the Revolving Borrowing Base Amount.  The Revolving Borrowing Base Amount shall be
determined by Lender (including the eligibility of Accounts) based on the most
recent Borrowing Base Certificate delivered to Lender in accordance with this
Agreement and such other information as may be available to Lender. Without
limiting any other rights and remedies of Lender hereunder or under the other
Loan Documents, the Revolving Loans shall be subject to Lender’s continuing
right to withhold from the Revolving Borrowing Base Amount reserves, and to
increase and decrease such reserves from time to time, if and to the extent
that in Lender’s good faith credit judgment such reserves are necessary,
including to protect Lender’s interest in the Collateral or to protect Lender
against possible non-payment of Accounts for any reason by Account Debtors or
possible diminution of the value of any Collateral or possible non-payment of
any of the Obligations or for any taxes or customs duties or in respect of any
state of facts which may constitute an Event of Default.  Lender may, at its option, implement reserves
by designating as ineligible a sufficient amount of Accounts which would
otherwise be Eligible Accounts, so as to reduce the Revolving Borrowing Base
Amount by the amount of the intended reserves. 
Lender, in its discretion, may further adjust the Revolving Borrowing
Base Amount by applying percentages (known as “liquidity factors”) to Eligible
Accounts by payor class based upon Borrower’s actual recent collection history
for each such payor class.  Such
liquidity factors may be adjusted by Lender from time to time as warranted by
Lender’s underwriting practices and procedures and using its discretion.


 


Borrower hereby authorizes Lender, in its sole discretion, to charge
any of Borrower’s accounts or advance Revolving Loans to make any payments of
principal, interest, fees, costs or expenses required to be made under this
Agreement or the Other Agreements.  


 


A request for a Revolving Loan shall be made or shall be deemed to be
made, each in the following manner: 
Borrowing Agent may give Lender same-day notice, no later than 11:00
a.m. Central time on such day, of its request for a Revolving Loan by
submitting a Notice of Borrowing, in which notice Borrowing Agent shall specify
the amount of the proposed borrowing and the proposed borrowing date; provided,
however, that no such request may be


 


5





















 


made at a time when there exists an Event of Default
or an event which, with the passage of time or giving of notice, will become an
Event of Default.  In the event that
Borrower maintains a controlled disbursement account with Lender, each check
presented for payment against such controlled disbursement account and any
other charge or request for payment against such controlled disbursement
account shall constitute a request for a Revolving Loan.  Borrowing Agent’s Notice of Borrowing shall
be accompanied with a certificate, on a form designated by Lender and in
substance satisfactory to Lender, certifying the amount of the Borrowing Base
and providing such backup information as Lender shall deem necessary.  Lender may from time to time change the form
of such Borrowing Base Certificate and/or Notice of Borrowing and shall at all
times have the right to request a separate Borrowing Base Certificate from each
entity constituting the Borrower.  As an
accommodation to Borrower, Lender may permit electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.  Unless Borrower specifically directs Lender
in writing not to accept or act upon telephonic or electronic communications
from Borrower, Lender shall have no liability to Borrower for any loss or
damage suffered by Borrower as a result of Lender’s honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to Lender by Borrower, and Lender shall have no duty to verify
the origin of any such communication or the authority of the Person sending it.


 


Borrower hereby irrevocably authorizes Lender to disburse the proceeds
of each Revolving Loan requested by Borrowing Agent, or deemed to be requested
by Borrowing Agent, as follows:  the
proceeds of each Revolving Loan requested under Section 2(a) shall
be disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrowing
Agent, and in the case of each subsequent borrowing, by wire transfer or
Automated Clearing House (ACH) transfer to such bank account as may be agreed
upon by Borrowing Agent and Lender from time to time, or elsewhere if pursuant
to a written direction from Borrowing Agent. 
The Revolving Loans and all other Obligations shall be repaid on the
last day of the Term.


 


(b)           Notes.  The Loans shall, in Lender’s sole discretion,
be evidenced by one or more promissory notes in form and substance satisfactory
to Lender.  However, if such Loans are
not so evidenced, such Loans may be evidenced solely by entries upon the books
and records maintained by Lender.


 


3.             MANDATORY
PREPAYMENTS.  All amounts received by
Borrower after the date of a Travmed Subordinated Debt Default and (i) from an
Account Debtor of Travmed USA, Inc. or (ii) which are attributed to services
provided by Travmed USA, Inc., after the date in which a Travmed Subordinated
Debt Default occurs, shall immediately be paid by Borrower to Lender as a
mandatory prepayment of the Loans to be applied against all outstanding
Obligations, as determined by Lender in its sole discretion.


 


6





















 


4.             INTEREST, FEES AND CHARGES.


 


(a)           Interest Rate.


 


Each Revolving Loan shall bear interest at the rate of
three percent (3.0%) per annum in excess of the Prime Rate in effect from time
to time, which rate shall not be less than nine and one-half percent (9.5%),
all such interest to be payable on the first Business Day of each month in
arrears.  Said rate of interest shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the effective date of each such change in the Prime
Rate.  Upon the occurrence of an Event of
Default and during the continuance thereof, each Loan shall bear interest at
the rate of four percent (4%) per annum in excess of the interest rate
otherwise payable thereon, which interest shall be payable on demand.  All interest shall be calculated on the basis
of a 360-day year.


 


(b)           Fees and Charges.


 


(i)            Closing Fee:  Borrower has paid to Lender a closing fee of
one hundred fifty thousand dollars ($150,000).


 


(ii)           Unused Line Fee:  Borrower shall pay to Lender an unused line
fee of one-half percent (0.50%) per annum of the difference between the Maximum
Revolving Loan Limit and the average daily balance of the Revolving Loans for
each month, which fee shall be fully earned by Lender and payable monthly in
arrears on the first Business Day of each month.  Said fee shall be calculated on the basis of a
360-day year.


 


(iii)          Collateral Monitoring Fee:  On the first Business Day of each calendar
month following the Closing Date, Borrower shall pay Lender a monthly
collateral monitoring fee of Four Thousand and No/100 Dollars ($4,000) with
respect to the Revolving Loans (pro rated for the first month, if it is a
partial month), which fee shall be deemed earned at the beginning of each
month.


 


(iv)          Costs and Expenses: Borrower shall
reimburse Lender for all reasonable costs and expenses, including, without limitation,
legal expenses and reasonable attorneys’ fees (whether for internal or outside
counsel), incurred by Lender in connection with the (i) documentation and
consummation of this transaction and any other transactions between Borrower
and Lender, including, without limitation, Uniform Commercial Code and other
public record searches and filings, overnight courier or other express or
messenger delivery, appraisal costs and surveys (ii) collection,
protection or enforcement of any rights in or to the Collateral;
(iii) collection of any Obligations; and (iv) administration and
enforcement of any of Lender’s rights under this Agreement or any Other
Agreement.  Borrower shall also pay all
normal service charges with respect to all accounts maintained by Borrower with
Lender and any additional services requested by Borrower from Lender.  All such costs, expenses and charges shall,
if owed to Lender, be reimbursed by Lender and, in such event or in the event
such costs and expenses are owed to Lender, shall constitute Obligations
hereunder, shall be payable by Borrower to Lender on demand and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.


 


(v)           Capital Adequacy Charge:  If Lender shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change


 


7





















 


therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority enacted after the date hereof, does or shall have the
effect of reducing the rate of return on such party’s capital as a consequence
of its obligations hereunder to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking into consideration
Lender’s policies with respect to capital adequacy) by a material amount, then,
from time to time after submission by Lender to Borrower of a written demand
therefor (“Capital Adequacy Demand”)
together with the certificate described below, Borrower shall pay to Lender
such additional amount or amounts (“Capital
Adequacy Charge”) as will compensate Lender for such reduction, such
Capital Adequacy Demand to be made with reasonable promptness following such
determination.  A certificate of Lender
claiming entitlement to payment as set forth above shall be deemed
presumptively correct in the absence of manifest error.  Such certificate shall set forth the nature
of the occurrence giving rise to such reduction, the amount of the Capital
Adequacy Charge to be paid to Lender, and the method by which such amount was
determined.  In determining such amount,
Lender may use any reasonable averaging and attribution method, applied on a
non-discriminatory basis.


 


(c)           Maximum Interest.  It is the intent of the parties that the rate
of interest and other charges to Borrower under this Agreement and the Other
Agreements shall be lawful; therefore, if for any reason the interest or other
charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Lender may
lawfully charge Borrower, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to
Borrower.


 


5.             COLLATERAL.


 


(a)           Grant of Security Interest to Lender.  As security for the payment of all Loans now
or in the future made by Lender to Borrower hereunder and for the payment or
other satisfaction of all other Obligations, Borrower hereby assigns to Lender
and grants to Lender a continuing first priority security interest (subject
only to Liens of BOF and other Permitted Liens) in the following property of
Borrower, whether now or hereafter owned, existing, acquired or arising and
wherever now or hereafter located: 
(a) all Accounts and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to,
or repossessed or stopped in transit by, Borrower; (b) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without limitation,
all Intellectual Property, licenses, software, franchises, tax refund claims,
claims against carriers and shippers, guarantee claims, contract rights,
Payment Intangibles, security interests, security deposits and rights to
indemnification); (c) all Inventory; (d) all Goods (other than
Inventory), including, without limitation, Equipment, vehicles and Fixtures;
(e) all Investment Property; (f) all Deposit Accounts, bank accounts,
deposits and cash; (g) all Letter-of-Credit Rights; (h) Commercial
Tort Claims listed on Schedule 11(b) hereto from time to time;
(i) any other property of Borrower now or hereafter in the possession,
custody or control of Lender or any agent or any parent, affiliate or
subsidiary of Lender or any participant with Lender in the Loans, for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); and


 


8





















 


(j) all additions
and accessions to, substitutions for, and replacements, products and Proceeds
of the foregoing property, including, without limitation, proceeds of all
insurance policies insuring the foregoing property, and all of Borrower’s books
and records relating to any of the foregoing and to Borrower’s business.  The foregoing
notwithstanding, the Collateral shall not be deemed to include (y) any
right, title, interest, claim or demand of Borrower in and to any agreement,
document, license or instrument which relates to the foregoing Collateral to
the extent such agreement, document, license or instrument is not assignable or
capable of being encumbered as a matter of law or under the terms of the
agreement, document or instrument applicable thereto or such grant would result
in a breach of the terms of such agreement, document, license, or instrument
(but, in each case, solely to the extent that any such restriction shall be
enforceable under applicable law) without the consent of the applicable party
thereto, and, in each case, only to the extent that any such term would not be
rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the
Uniform Commercial Code of any relevant jurisdiction.


 


(b)           Other Security.  Lender, in its sole discretion, without
waiving or releasing any obligation, liability or duty of Borrower under this
Agreement or the Other Agreements or any Event of Default, may at any time or
times hereafter, but shall not be obligated to, pay, acquire or accept an
assignment of any Lien asserted by any Person in, upon or against the
Collateral, provided, that Lender may take such actions with respect to
Permitted Liens only after the occurrence and during the continuance of an
Event of Default.  All sums paid by
Lender in respect thereof and all costs, fees and expenses including, without
limitation, reasonable attorney fees, all court costs and all other charges
relating thereto incurred by Lender shall constitute Obligations payable by
Borrower to Lender on demand and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.


 


(c)           Possessory Collateral.  Immediately upon Borrower’s receipt of any
portion of the Collateral evidenced by an agreement, Instrument or Document,
including, without limitation, any Tangible Chattel Paper and any Investment
Property consisting of Certificated Securities (not including, however, any
equity interests of any Borrower pledged by Crdentia to BOF under the Pledge
Agreement), Borrower shall deliver the original thereof to Lender together with
an appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender).  If an endorsement or assignment of any such
items shall not be made for any reason, Lender is hereby irrevocably
authorized, as Borrower’s attorney and agent-in-fact, to endorse or assign the
same on Borrower’s behalf.


 


(d)           Electronic Chattel Paper.  To the extent that Borrower obtains or
maintains any Electronic Chattel Paper, Borrower shall create, store and assign
the record or records comprising the Electronic Chattel Paper in such a manner
that (i) a single authoritative copy of the record or records exists which
is unique, identifiable and, except as otherwise provided in clauses (iv),
(v) and (vi) below, unalterable, (ii) the authoritative copy
identifies Lender as the assignee of the record or records, (iii) the authoritative
copy is communicated to and maintained by the Lender or its designated
custodian, (iv) copies or revisions that add or change an identified
assignee of the authoritative copy can only be made with the participation of
Lender, (v) each copy of the authoritative copy and any copy of a copy is
readily identifiable as a copy that is not the authoritative copy and
(vi) any revision of the authoritative copy is readily identifiable as an
authorized or unauthorized revision.


 


9





















 


(e)           Letter-of-Credit Rights.  If Borrower at any time is a beneficiary
under a letter of credit now or hereafter issued in favor of Borrower, at the
request and option of Lender, Borrower shall, pursuant to an agreement in form
and substance satisfactory to Lender, either (i) arrange for the issuer
and any confirmer of such letter of credit to consent to an assignment to
Lender of the proceeds of any drawing under the letter of credit, or
(ii) arrange for Lender to become the transferee beneficiary of the letter
of credit, with Lender agreeing, in each case, that the proceeds of any drawing
under the letter to credit are to be applied as provided in this Agreement.


 


(f)            Third-Party Collateral.  If Borrower shall at any time hold or acquire
an interest in Collateral in the possession of a third party (other than
Certificated Securities and Goods covered by a Document), Borrower shall
promptly obtain an acknowledgment from the third party that it is holding such
Collateral for the benefit of the Lender. 



 


(g)           Deposit Account.  Borrower shall deliver to Lender, with
respect to each Deposit Account maintained by Borrower now or hereafter (other
than with Lender) and that is permitted hereby, upon obtaining an interest in
such Deposit Account, a deposit account control agreement in form and substance
satisfactory to Lender and BOF, executed by the financial institution at which
such account is maintained, and shall take such other actions as Lender and BOF
may jointly request to ensure that Lender’s security interest in such account
is perfected by control as such term is used in UCC Section 9-104.


 


(h)           Insurance Proceeds. The net
proceeds of any casualty insurance insuring the Collateral, after deducting all
costs and expenses (including attorneys’ fees) of collection, shall be applied,
at Lender’s option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to Lender, or, at Lender’s discretion after
the occurrence and during the continuance of an Event of Default, towards
payment of the Obligations.  Any proceeds
applied to the payment of Obligations shall be applied in such manner as Lender
may elect.  In no event shall such application
relieve Borrower from payment in full of all installments of principal and
interest which thereafter become due in the order of maturity thereof.  


 


6.             PRESERVATION
OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.  


 


Borrower shall, at Lender’s request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all other
Liens, except Permitted Liens) to secure payment of the Obligations, and in
order to facilitate the collection of the Collateral.  Borrower irrevocably hereby makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower’s true and lawful attorney and agent-in-fact to execute
and file such financing statements, documents and other agreements and
instruments and do such other acts and things as may be necessary to preserve
and perfect Lender’s security interest in the


 


10





















 


Collateral. 
Borrower further agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement.  Borrower
further ratifies and confirms the prior filing by Lender of any and all
financing statements which identify the Borrower as debtor, Lender as secured
party and any or all Collateral as collateral.


 


7.             POSSESSION
OF COLLATERAL AND RELATED MATTERS.


 


Until otherwise notified by Lender following the occurrence of an Event
of Default, Borrower shall have the right, except as otherwise provided in this
Agreement, in the ordinary course of Borrower’s business, to (a) sell,
lease or furnish under contracts of service any of Borrower’s assets in the
ordinary course of business; (b) use and consume any raw materials, work
in process or other materials normally held by Borrower for such purpose;
(c) dispose of obsolete or unuseful Equipment or other property or assets
so long as all of the proceeds thereof are used for the replacement or
substitution of such Equipment or other property or assets, or, if not so
replaced or substituted within ninety (90) days, paid to Lender for application
to the Obligations (except for such proceeds which are required to be delivered
to the holder of a Permitted Lien which is prior in right of payment);
provided, however, that a sale in the ordinary course of business shall not
include any transfer or sale in satisfaction, partial or complete, of a debt
owed by Borrower, other than a debt secured by a Permitted Lien; (d) transfer
assets to any other Borrower or Subsidiary which is a Borrower; (e) lease or
sublease property; (f) sell or dispose of assets for its fair market value in
an amount not to exceed $50,000 in the aggregate in any fiscal year; and (g)
sell or dispose of other assets with a book value of less than $50,000 in any
fiscal year.


 


8.             COLLECTIONS.


 


(a)           Borrower
shall establish and maintain a lockbox (the “Lockbox”)
with a United States depository institution designated from time to time by
Lender (the “Lockbox Bank”),
subject to the provisions of this Agreement for receivables from Account
Debtors.  Borrower shall execute with the
Lockbox Bank a lockbox agreement for the Account Debtor Collection Lockbox
Account in form and substance acceptable to Lender, and such other agreements
related to such lockbox agreement as Lender may require.  Borrower shall ensure that all collections of
Accounts on which Account Debtors are obligated are paid directly into the
Lockbox for deposit into the Account Debtor Collection Lockbox Account, and
that all funds deposited into the Account Debtor Collection Lockbox Account are
immediately transferred into a depository account owned by the Lender (the “Concentration Account”).


 


(b)           Notwithstanding
anything in any lockbox agreement to the contrary, Borrower agrees that it
shall be liable for any fees and charges in effect from time to time and
charged by the Lockbox Bank in connection with the Lockboxes and Lockbox
Accounts, and that Lender shall have no liability therefor.  Borrower further acknowledges and agrees
that, to the extent such fees and charges are not paid by Borrower directly but
are satisfied using collections in the Lockbox Accounts, such fees and charges
shall be deemed to be Revolving Credit Loans made by Lender hereunder and, to
the extent that the payment of such fees or charges by Borrower as provided
herein results in any overadvance under this Agreement, Borrower agrees to
immediately (upon notice) repay to Lender the amount of such overadvance.


 


11





















 


Borrower agrees to
indemnify and hold Lender harmless from any and all liabilities, claims, losses
and demands whatsoever, including reasonable attorneys’ fees and expenses,
arising from or relating to actions of Lender or the Lockbox Bank pursuant to
this Section 2.3 or any lockbox agreement, other than if such liability, claim,
loss or demand arises due to the gross negligence or willful misconduct of
Lender or the Lockbox Bank, as determined by a court of competent jurisdiction.


 


(c)           Borrower
agrees that all payments made to the Concentration Account or otherwise
received by Lender, whether in respect of the Accounts or as Proceeds of other
Collateral or otherwise (except for proceeds of Collateral which are required
to be delivered to the holder of a Permitted Lien which is prior in right of
payment and insurance proceeds applied pursuant to Section 5(h)), will be
applied on account of the Obligations in accordance with the terms of this
Agreement.  


 


(d)           Subject to all applicable law, Lender may, at
any time and from time to time after the occurrence and during the continuance
of an Event of Default, whether before or after notification to any Account
Debtor and whether before or after the maturity of any of the Obligations,
(i) enforce collection of any of Borrower’s Accounts or other amounts owed
to Borrower by suit or otherwise; (ii) exercise all of Borrower’s rights
and remedies with respect to proceedings brought to collect any Accounts or
other amounts owed to Borrower; (iii) surrender, release or exchange all
or any part of any Accounts or other amounts owed to Borrower, or compromise or
extend or renew for any period (whether or not longer than the original
period) any Indebtedness thereunder; (iv) sell or assign any Account
of Borrower or other amount owed to Borrower upon such terms, for such amount
and at such time or times as Lender deems advisable; (v) prepare, file and
sign Borrower’s name on any proof of claim in bankruptcy or other similar
document against any Account Debtor or other Person obligated to Borrower; and
(vi) do all other acts and things which are necessary, in Lender’s sole
discretion, to fulfill Borrower’s obligations under this Agreement and the
Other Agreements and to allow Lender to collect the Accounts or other amounts
owed to Borrower.  In addition to
any other provision hereof, Lender may at any time, after the occurrence and
during the continuance of an Event of Default, at Borrower’s expense, notify
Account Debtors to make payment directly to Lender of any amounts due or to
become due thereunder (and once such notice has been given to an Account
Debtor, Borrower shall not give any contrary instructions to such Account
Debtor during the continuance of an Event of Default without Lender’s prior
written consent). 


 


(e)           For purposes of calculating interest and
fees, Lender shall, within three (3) Business Days after receipt by Lender at
its office in Chicago, Illinois of (i) checks and (ii) cash or other
immediately available funds from collections of items of payment and Proceeds
of any Collateral, apply the whole or any part of such collections or Proceeds
against the Obligations in such order as Lender shall determine in its sole
discretion.  For purposes of
determining the amount of Loans available for borrowing purposes, checks and
cash or other immediately available funds from collections of items of payment
and Proceeds of any Collateral shall be applied in whole or in part against the
Obligations, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.


 


(f)            On a monthly basis, Lender shall deliver to
Borrower an account statement showing all Loans, charges and payments which
shall be deemed final, binding and conclusive


 


12





















 


upon
Borrower unless Borrower notifies Lender in writing, specifying any error
therein, within thirty (30) days of the date such account statement is sent to
Borrower, and any such notice shall only constitute an objection to the items
specifically identified.


 


9.             COLLATERAL,
AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.


 


(a)           Borrowing Base Reports.  Borrower shall deliver to Lender an executed
Borrowing Base Certificate in the form of Exhibit A at least once
each week, and otherwise, from time to time, to the extent requested by Lender,
and, in any event, in connection with any Revolving Loan request of Borrower, which
Borrowing Base Certificate shall be accompanied by copies of Borrower’s sales
journal, cash receipts journal and credit memo journal, which journal shall
report contractual allowances made by Borrower, for the relevant period.  Such Borrowing Base Certificate shall reflect
the activity of Borrower with respect to Accounts for the immediately preceding
week, and shall be in a form and with such specificity as is satisfactory to
Lender and shall contain such additional information concerning Accounts and
other Collateral as may be requested by Lender, including, without limitation,
but only if specifically requested by Lender, copies of all invoices prepared
in connection with such Accounts, and evidence of the payment of state and
federal payroll taxes.


 


(b)           Monthly Reports.  Borrower shall deliver to Lender, in addition
to any other reports, as soon as practicable and in any event:  (i) within fifteen (15) days after the
end of each month, (A) a detailed trial balance of Borrower’s Accounts
aged by Account Debtor or payor per date of invoice, in form and substance
reasonably satisfactory to Lender, including, without limitation, the names and
addresses of all Account Debtors of Borrower, and (B) a summary and detail
of accounts payable (such Accounts and accounts payable divided into such time
intervals as Lender may require in its sole discretion), including a listing of
any held checks; and (ii) within fifteen (15) days after the end of each
month, (x) completed Account Debtor reconciliation form, in a format
provided by Lender, and (y) a text file containing a list of Borrower’s
Accounts aged by payor per date of service, including, without limitation, the
names and addresses of all Account Debtors of Borrower.


 


(c)           Financial Statements.  Borrower shall deliver to Lender the
following financial information, all of which shall be prepared in accordance
with GAAP consistently applied (except where such calculations otherwise
require), and shall be accompanied by a certificate in the form of Exhibit B
hereto, which compliance certificate shall include a calculation of all
financial covenants contained in this Agreement, including the financial tests
set forth in Section 13(j)(iii): 
(i) no later than fifteen (15) days after each calendar month,
copies of internally prepared financial statements, including, without
limitation, balance sheets and statements of income, retained earnings and cash
flow of (A) CRDE and (B) the Borrowers, in each case certified by the Chief
Financial Officer of Borrower; (ii) no later than forty-five (45) days
after the end of each of the first three quarters of Borrower’s Fiscal Year,
copies of internally prepared financial statements, including, without
limitation, balance sheets, statements of income, retained earnings, cash flows
and reconciliation of surplus for (X) CRDE and (Y) the Borrowers, in each case
certified by the Chief Financial Officer of Borrower; and (iii) no later
than ninety (90) days after the end of each of Borrower’s Fiscal Years, audited
annual financial statements of the Borrowers on a consolidated basis, with an
unqualified opinion as to the


 


13





















 


audited financial
statements by independent certified public accountants selected by Borrower and
reasonably satisfactory to Lender.  The
report of such accounts shall be accompanied by copies of any management
letters sent to the Borrower by such accountants.


 


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


 


(e)           Explanation of Budgets and Projections.  In conjunction with the delivery of the
annual presentation of projections or budgets referred to in Subsection 9(d)
above, Borrower shall deliver a letter signed by the President or a Vice
President of Borrower and by the Treasurer or Chief Financial Officer of
Borrower, describing, comparing and analyzing, in detail, all changes and
developments between the anticipated financial results included in such
projections or budgets and the historical financial statements of Borrower.


 


(f)            Invoices and Billing Statements.  Promptly following request therefor by
Lender, Borrower shall provide copies of sales journals, cash receipt journals,
and deposit slips, copies of service invoices, customer statements and credit
memoranda issued, remittance advices and reports, evidence of billing and
copies of shipping and delivery documents, each as applicable to Borrower.


 


(g)           Obligor Financial Statements and Tax Returns.  Borrower shall cause each Obligor to deliver
to Lender such Obligor’s annual financial statement (in form acceptable to
Lender) and a copy of such Obligor’s federal income tax return with respect to
the corresponding year, in each case on the date when such tax return is due
or, if earlier, on the date when available.


 


(h)           Other Information.  Promptly following request therefor by
Lender, such other business or financial data, reports, appraisals and
projections as Lender may reasonably request. 
This may include, without limitation, a monthly certificate from the
President and Chief Financial Officer of Borrower showing Borrower’s compliance
with each of the financial covenants set forth in this Agreement, and stating whether
any Event of Default has occurred or event that, with giving of notice or the
passage of time, or both, would constitute an Event of Default, and if so, the
steps being taken to prevent or cure such Event of Default.


 


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


 


14





















 


(j)            Public Reporting.  Promptly upon the filing thereof, each
Borrower shall deliver to Lender copies of all registration statements and
annual, quarterly, monthly or other regular reports which such Borrower or any
of its Subsidiaries files with the Securities and Exchange Commission, as well
as promptly providing to Lender copies of any reports and proxy statements
delivered to its shareholders.


 


10.           TERMINATION;
AUTOMATIC RENEWAL; EARLY TERMINATION FEE.


 


(a)           This
Agreement shall be in effect for a period of three (3) years from the date of
the Original Loan Agreement until June 16, 2007 (the “Term”), unless earlier terminated by the
terms of this Agreement.  


 


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


 


(c)           Borrower
may terminate this Agreement at any time but only upon sixty (60) days prior
written notice and prepayment of all Obligations.  


 


(d)           Any
prepayment of the Obligations and termination of this Agreement by Borrower
shall also be accompanied by a prepayment fee, equal to the Make Whole
Amount.  The following definitions shall
apply:


 


(i)            “Make
Whole Amount” means the amount determined by discounting the Remaining
Payment Amount to the date of the prepayment of the Revolving Loan, at a
discount factor equal to the Loan Yield.


 


(ii)           “Remaining
Payment Amount” means the sum of amount of the average outstanding balance
of the Revolving Loans during the period from the date of the initial Loan
advance hereunder through the date of prepayment.


 


(iii)          “Loan
Yield” means the percentage yield earned by Lender during the period from
the initial Loan advance hereunder through the date of prepayment.


 


(e)           Notwithstanding
the foregoing, Borrower may prepay all of the Obligations and terminate this
Agreement without payment of a prepayment fee, upon written notice to Lender,
if, at any time during the Term, and so long as no Default or Event of Default
has occurred and is continuing, Lender reduces the advance rate for Eligible
Accounts (as set forth in Section 2(a)(i) hereto) to an advance rate of less
than eighty-five percent (85%) for a period in excess of 30 days (the “Prepayment Fee Exception”).


 


(f)            If
the funding obligation of the Lender under this Agreement terminates for any
reason (whether by voluntary termination by Borrowers, by reason of the
occurrence of


 


15





















 


an Event of Default or
otherwise) prior to the expiration of the Term, the entire principal balance,
together with accrued and unpaid interest on any Obligations under this
Agreement and all Term Loan Obligations then outstanding, including, without
limitation, a prepayment fee equal to (i) the Make Whole Amount due under this
Agreement, and (ii) the Make Whole Amount due under the Term Loan Agreement,
shall be immediately due and payable on the effective date of such termination;
provided that if the funding obligations of the Lender under this
Agreement shall terminate solely as a result of Section 10(e) of this
Agreement, Borrower shall not have to pay (I) a prepayment fee equal to the
Make Whole Amount under this Agreement, nor (II) a prepayment fee equal to the
Make Whole Amount under the Term Loan Agreement.


 


11.           REPRESENTATIONS
AND WARRANTIES.


 


Borrower hereby represents and warrants to Lender, which representations
and warranties (whether appearing in this Section 11 or elsewhere)
shall be true at the time of the Original Closing Date, shall remain true until
the repayment in full and satisfaction of all the Obligations and termination
of this Agreement, and shall be remade by Borrower at the time each Revolving
Loan is made pursuant to this Agreement, provided, that representations and
warranties made as of a particular date shall be true and correct as of such
date.


 


(a)           Financial Statements and Other Information.  The financial statements and other
information delivered or to be delivered by Crdentia to Lender at or prior to
the Original Closing Date fairly present in all material respects the financial
condition of Borrowers, and there has been no material adverse change in the
financial condition, the operations or any other status of Borrowers, taken as
a whole, since the date of the financial statements delivered to Lender most
recently prior to the date of this Agreement. 
All written information now or heretofore furnished by Borrower to
Lender is true and correct in all material respects as of the date with respect
to which such information was furnished, other than budgets and projections,
which represent Borrowers’ good faith estimate of the matters contained
therein.


 


(b)           Locations; Certain Collateral.  The office where Borrower keeps its books,
records and accounts (or copies thereof) concerning the Collateral, Borrower’s
principal place of business and all of Borrower’s other places of business,
locations of Collateral and post office boxes and locations of bank accounts
are as set forth in Schedule 11(b) and at other locations within
the continental United States of which Lender has been advised by Borrower in
accordance with Subsection 12(b)(i).  The Collateral, including, without
limitation, the Equipment (except any part thereof which Borrower shall have
advised Lender in writing consists of Collateral normally used in more than one
state) is kept, or, in the case of vehicles, based, only at the addresses set
forth on Schedule 11(b), and at other locations within the
continental United States of which Lender has been advised by Borrower in
writing in accordance with Subsection 12(b)(i) hereof.  Schedule 11(b) hereto contains a
complete listing of all of the following assets of Borrower as of May 5, 2005
(a) Intellectual Property which is subject to registration statutes and
licenses of Intellectual Property to which Borrower is a party (whether as
licensor or licensee), (b) Instruments (other than Instruments deposited
for collection in the ordinary course of business), (c) Deposit Accounts,
(d) Investment Property, (e) Letter-of-Credit Rights,
(f) Chattel Paper, (g) Documents, (h) Commercial Tort Claims,
(i) Collateral which is subject to certificate of title statutes, and
(j) tangible Collateral located with any bailee, warehousemen or other
third parties.


 


16





















 


(c)           Loans by Borrower.  Borrower has not made any loans or advances
to any Affiliate or other Person except for advances authorized hereunder to
employees, officers and directors of Borrower for travel and other expenses
arising in the ordinary course of Borrower’s business.


 


(d)           Accounts.  Each Account which Borrower shall, expressly
or by implication, request Lender to classify as an Eligible Account shall, as
of the time such request is made, conform in all respects to the requirements
of such classification as set forth in the definition of “Eligible Account” as
set forth herein and as otherwise established by Lender from time to time.


 


(e)           Liens. 
Borrower is the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all Liens, other than the
Permitted Liens.


 


(f)            Organization, Authority and No Conflict.  Borrower is a corporation or limited
partnership, duly organized, validly existing and in good standing in the State
of its organization, its state organizational identification number is as set
forth on the Information Certificate and Borrower is duly qualified and in good
standing in all states where the nature and extent of the business transacted
by it or the ownership of its assets makes such qualification necessary or, if
Borrower is not so qualified, Borrower may cure any such failure without losing
any of its rights, incurring any Liens or material penalties, or otherwise
affecting Lender’s rights.  Borrower has
the right and power and is duly authorized and empowered to enter into, execute
and deliver this Agreement and the Other Agreements and perform its obligations
hereunder and thereunder.  Borrower’s
execution, delivery and performance of this Agreement and the Other Agreements
do not conflict with the provisions of the organizational documents of
Borrower, any statute, regulation, ordinance or rule of law, or any agreement,
contract or other document which may now or hereafter be binding on Borrower,
except for conflicts with agreements, contracts or other documents which would
not have a Material Adverse Effect on Borrower, and Borrower’s execution,
delivery and performance of this Agreement and the Other Agreements shall not
result in the imposition of any Lien upon any of Borrower’s property (other
than Permitted Liens) under any existing indenture, mortgage, deed of trust,
loan or credit agreement or other agreement or instrument by which Borrower or
any of its property may be bound or affected.


 


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


 


(h)           Compliance with Laws and Maintenance of Permits.  Borrower has obtained all governmental
consents, franchises, certificates, licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on
Borrower.  Borrower is in compliance in
all material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, Environmental Laws and statutes, orders, regulations, rules and
ordinances relating to taxes, employer and employee


 


17





















 


contributions and similar
items, securities, ERISA or employee health and safety) the failure to comply
with which would have a Material Adverse Effect on Borrower.


 


(i)            Affiliate Transactions.  Except as set forth on Schedule 11(i)
hereto or as permitted pursuant to Subsection 11(c) and Subsection
13(h) hereof, Borrower is not conducting, permitting or suffering to be
conducted, transactions with any Affiliate other than transactions with
Affiliates for the purchase or sale of Inventory or services in the ordinary
course of business pursuant to terms that are no less favorable to Borrower
than the terms upon which such transactions would have been made had they been
made to or with a Person that is not an Affiliate.


 


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


 


(k)           Equipment.  Except for Permitted Liens, Borrower has good
and indefeasible and merchantable title to and ownership of all Equipment.  No Equipment is a Fixture to real estate
unless such real estate is owned by Borrower and is subject to a mortgage in
favor of Lender or, if such real estate is leased, is subject to a landlord’s
agreement in favor of Lender on terms acceptable to Lender, or an accession to
other personal property unless such personal property is subject to a first priority
Lien in favor of Lender.


 


(l)            Enforceability.  This Agreement and the Other Agreements to
which Borrower is a party are the legal, valid and binding obligations of
Borrower and are enforceable against Borrower in accordance with their
respective terms.


 


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


 


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


 


(o)           Margin Security and Use of Proceeds.  Borrower does not own any margin securities,
and none of the proceeds of the Revolving Loans hereunder shall be used for the
purpose of purchasing or carrying any margin securities or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
any margin securities or for any other purpose not permitted by Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.


 


(p)           Parent, Subsidiaries and Affiliates.  Except as set forth on Schedule 11(p)
hereto or as otherwise permitted hereunder, including under Section 13(c)
hereof,


 


18





















 


Borrower has no Parents,
Subsidiaries or other Affiliates, nor is Borrower engaged in any joint venture
or partnership with any other Person.


 


(q)           No Defaults.  Except as set forth on Schedule 11(q)
hereto, Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which would
have, in either case, a Material Adverse Effect on Borrower.


 


(r)            Employee Matters.  As of the Closing Date, there are no
controversies pending or threatened between Borrower and any of its employees,
agents or independent contractors, other than employee grievances arising in
the ordinary course of business which would not, in the aggregate, have a
Material Adverse Effect on Borrower, and Borrower is in compliance with all
federal and state laws respecting employment and employment terms, conditions and
practices except for such noncompliance which would not have a Material Adverse
Effect on Borrower.


 


(s)           Intellectual Property.  Borrower possesses adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue to conduct its business
as heretofore conducted by it except to the extent that the failure to possess
such items would not have a Material Adverse Effect on Borrower.


 


(t)            Environmental Matters.  Except as set forth on Schedule 11(t)
hereto, Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any Environmental Law, or any license, permit,
certificate, approval or similar authorization thereunder, and the operations
of the Borrower comply in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.  There has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending
or, to the best of the Borrower’s knowledge, threatened with respect to any
non-compliance with or violation of the requirements of any Environmental Law
by the Borrower or the release, spill or discharge, threatened or actual, of
any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter which would have
a Material Adverse Effect on Borrower or its business, operations or assets or
any properties at which the Borrower has transported, stored or disposed of any
Hazardous Materials.  Borrower has no
material liability (contingent or otherwise) in connection with a release,
spill or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.


 


(u)           ERISA Matters.  Borrower has paid and discharged all
obligations and liabilities arising under ERISA of a character which, if unpaid
or unperformed, might result in the imposition of a Lien against any of its
properties or assets.


 


19





















 


(v)           Eligible Accounts.  With respect to each Account, as of the date
such Account is created and included as an Eligible Account:  


 


(i)            all
documents and agreements relating to the Account requested by Lender have been
delivered to Lender with respect to such Account and such documents are true
and correct in all material respects; 


 


(ii)           the
Account is genuine and in all respects what it purports to be and is not
evidenced by a judgment; 


 


(iii)          the
Account is for a liquidated amount maturing as stated in a duplicate claim or
invoice covering such sale or rendition of Staffing Services;


 


(iv)          the Account
is not subject to any offset, Lien (other than a Lien of Lender or a Permitted
Lien), recoupment, deduction, defense, dispute, counterclaim or any other
adverse condition or adjustment of any kind (in each case other that any such
item that is taken into account in determining the net amount of such Account)
that is known to Borrower as existing or asserted, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for any
reason;


 


(v)           there are
no facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable thereunder
from the face amount of the claim or invoice and statements delivered to Lender
with respect thereto other than adjustments made by Borrower in the ordinary
course of business;


 


(vi)          to the
knowledge of the Borrower, the Account Debtor under the Account had the
capacity to contract at the time any contract or other document giving rise to
the Account was executed; 


 


(vii)         with
the exceptions of Accounts described in Section 2(a)(ii), the Account has been
billed and forwarded to the Account Debtor for payment in accordance with
applicable laws and compliance and conformance in all material respects with
any and requisite procedures, requirements and regulations governing payment by
such Account Debtor with respect to such Account; 


 


(viii)        Borrower
has obtained and currently has all licenses, permits and authorizations that
are necessary in the generation of such Accounts; 


 


(ix)           Lender has
a perfected, first-priority security interest in such Account to secure the
Obligations; 


 


(x)            the aging
of such Eligible Account, as reflected in the information submitted to Lender,
reflects the age of such Eligible Account from the date of service and not from
the date of billing or any re-billing of the Eligible Account; 


 


(xi)           Borrower
has not made, and will not make without concurrent written notice provided to
Lender, any agreement with any Account Debtor for any


 


20





















 


extension of the time for payment of the Account, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance for prompt or early payment allowed by Borrower in the
ordinary course of its business consistent with its historical practices and as
disclosed to Lender in writing; 


 


(xii)          all
information relating to such Account that has been delivered to Lender is true
and correct in all material respects, such that with respect to each such
Account that has been invoiced, Borrower has delivered or is delivering to the
Account Debtor all requested supporting claim documents and all information set
forth in the invoice and supporting claim documents is true, complete and
correct in all material respects; 


 


(xiii)         such
Account is (i) payable in the amount identified by Borrower; or,
(ii) to the knowledge of Borrower the legally enforceable obligation of
such Account Debtor, and (iii) an account receivable or general intangible
within the meaning of the UCC of the state in which Borrower is “located”
(within the meaning of such term in the UCC); 


 


(xiv)        no
such Account (i) after giving effect to the provisions of the UCC,
requires the approval of any third person for such Account to be assigned to
Lender hereunder, or (ii) is past, or within 120 days of, the statutory
limit for collection applicable to the Account Debtor;


 


(xv)         Borrower
does not have any guaranty of, letter of credit support for, or collateral
security for, such Account, other than any such guaranty, letter of credit or
collateral security to which Lender has a Lien; 


 


(xvi)        the
fees and charges charged for the services constituting the basis for such
Account were when rendered and are currently consistent with (i) the
usual, customary and reasonable fees charged by Borrower or (ii) pursuant
to negotiated fee contracts, or imposed fee schedules, with or by the
applicable Account Debtors; 


 


(xvii)       if
requested by Lender, a copy of each related contract and provider agreement to
which Borrower is a party has been delivered to Lender unless Borrower shall
have, prior to the related funding date, certified to Lender that such delivery
is prohibited by the terms of the contract or by law, and the circumstances of
such prohibition; and


 


(xviii)      such
Account was (or if unbilled, will be (nothing herein implying any obligation of
Lender to make advances in respect of unbilled Accounts other than as provided
in Section 2(a)(ii))) in any event billed no later than thirty (30) days after
the date the services or goods giving rise to such Account were rendered or
provided, as applicable, and each bill (other than bills delivered prior to the
date that the lockbox agreements are in effect), contains an express direction
requiring the Account Debtor to remit payments to the applicable lockbox linked
to the applicable Account Debtor Collection Lockbox Account.


 


21





















 


If a breach of any of the representations or warranties contained
herein relating to an Account may, in the reasonable credit judgment of Lender
have a Material Adverse Effect upon the validity, legality or collectibility of
such Account, then such Account shall no longer be deemed an “Eligible Account”
as defined in Section 1(a) hereof.


 


(w)          Reimbursement.  Borrower has provided to Lender copies of all
service contracts with Account Debtors, to the extent required by the
Lender.  Borrower is in compliance in all
material respects with such contracts and is entitled to reimbursement under
such contracts.


 


(x)            Compliance with Healthcare Regulations.


 


(i)            Borrower
is not subject to compliance with any Healthcare Regulations, including without
limitation, the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), the False
Claims Act (31 U.S.C. §§ 3729 et seq.), the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)) and the
federal physician self-referral laws (42 U.S.C. § 1395nn);


 


(ii)           Borrower
has obtained all necessary licenses and accreditations to operate its business
as now conducted, and currently is in compliance with all statutory and
regulatory requirements applicable to it, the failure of which would have a
Material Adverse Effect upon Borrower; and


 


(iii)          All
persons providing professional health care services for or on behalf of
Borrower (either as an employee or independent contractor) are appropriately
licensed in every jurisdiction in which they hold themselves out as
professional health care providers.


 


(y)           Immigration Matters.  Borrower has complied with applicable United
States immigration law requirements, including without limitation the Illegal
Immigration Reform and Immigrant Responsibility Act of 1996 (Pub. L. No.
104-193), as such laws apply to Borrower’s recruitment of international
temporary professional health care service providers.


 


(z)            Licenses, Permits, etc. 
Borrower has all necessary federal, state and local licenses, permits,
registrations, certifications and other approvals required in order to conduct
any healthcare activity in which it is currently engaged; the failure of
Borrower to have such licenses, permits, registrations, certifications and
other approvals would have a Material Adverse Effect on the Borrower and any
Person that provides any healthcare services for or on behalf of Borrower
(either as an employee or independent contractor) holds the required federal,
state and local licenses that are necessary to legally perform such services
and are not suspended or limited in any way; and, except as set forth on
Schedule 11(z) hereto, Borrower is in good standing with the respective
governmental, quasi-governmental and other third party payors and regulatory
agencies that are involved in such healthcare activities.


 


(aa)         Collective Enterprise.  Borrowers are engaged in the businesses of
providing staffing in the healthcare industry as of the Closing Date, as well
as in certain other businesses.  These
operations require financing on a basis such that the credit supplied can be
made available from time to time to Borrowers, as required for the continued
successful operation of Borrowers taken as a whole.  Borrowers have requested the Lender make
credit


 


22





















 


available hereunder
primarily for the purposes of Subsection 12(g) and generally for
the purposes of financing the operations of Borrowers.  Each Borrower expects to derive benefit (and
the Board of Directors of each Borrower has determined that such Borrower may
reasonably be expected to derive benefit), directly or indirectly, from a
portion of the credit extended by Lender hereunder, both in its separate
capacity and as a member of the group of companies, since the successful
operation and condition of each Borrower is dependent on the continued
successful performance of the functions of the group as a whole.  Each Borrower acknowledges that, but for the
agreement of each of the other Borrowers to execute and deliver this Agreement,
Lender would not have made available the credit facilities established hereby
on the terms set forth herein.


 


(bb)         Acquisition.  Each
Acquisition has been consummated pursuant to the terms of the Acquisition
Documents related thereto and in compliance with all applicable laws.  Borrower has provided to Lender complete
copies of the Acquisition Documents, including all schedules, exhibits and
disclosure letters referred to therein or delivered pursuant thereto, if any,
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the term thereof. 
None of such agreements and documents has been amended or supplemented,
nor have any of the provisions thereof been waived by the parties thereto,
except pursuant to a written agreement or agreement which has heretofore been
delivered to the Lender.


 


(cc)         Certain
Financial Information.  The following have been delivered to Lender
as of the Original Closing Date:  (i)
internally prepared financial statements of Borrower for the most recent month
end and (ii) projections in form and detail satisfactory to Lender giving
effect to each Permitted Acquisition.


 


12.           AFFIRMATIVE
COVENANTS.


 


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


 


(a)           Maintenance of Records.  Borrower shall at all times keep accurate and
complete books, records and accounts with respect to all of Borrower’s business
activities, in accordance with sound accounting practices and GAAP consistently
applied, and shall keep such books, records and accounts, and any copies
thereof, only at the addresses indicated for such purpose on Schedule 11(b)
or such other location that is notified to Lender in writing.


 


(b)           Notices.  Borrower shall:


 


(i)            Locations.  Promptly (but in no event less than ten (10)
days prior to the occurrence thereof) notify Lender of the proposed opening of
any new place of business or new location of Collateral, the closing of any
existing place of business or location of Collateral, any change of the
location of Borrower’s books, records and accounts (or copies thereof), the
opening or closing of any post office box, the opening or closing of any bank
account or, if any of the Collateral consists of Goods of a type


 


23





















 


normally used in more than one state, the use of any
such Goods in any state other than a state in which Borrower has previously
advised Lender that such Goods will be used.


 


(ii)           Eligible
Accounts.  Promptly upon becoming
aware thereof (but in no event later than three (3) days after so becoming
aware), notify Lender if any Account identified by Borrower to Lender as an
Eligible Account becomes ineligible for any reason.


 


(iii)          Litigation
and Proceedings.  Promptly upon
becoming aware thereof (but in no event later than three (3) days after so
becoming aware), notify Lender of (i) any actions or proceedings that are
greater than $50,000, individually or in the aggregate, which are pending or
threatened against Borrower and (ii) any Commercial Tort Claims of
Borrower which may arise which involve an amount in controversy in excess of
Fifty Thousand and No/100 Dollars ($50,000.00), which notice shall constitute
Borrower’s authorization to amend Schedule 11(b) to add such
Commercial Tort Claim.


 


(iv)          Names
and Trade Names.  Notify Lender
within ten (10) days of the change of its name or the use of any trade name,
assumed name, fictitious name or division name not previously disclosed to
Lender in writing.


 


(v)           ERISA
Matters.  Promptly notify Lender of
(x) the occurrence of any “reportable event” (as defined in ERISA) which
might result in the termination by the Pension Benefit Guaranty Corporation
(the “PBGC”) of any employee
benefit plan (“Plan”) covering any
officers or employees of the Borrower, any benefits of which are, or are
required to be, guaranteed by the PBGC, (y) receipt of any notice from the
PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor or (z) its intention to terminate or withdraw from any Plan.


 


(vi)          Environmental
Matters.  Immediately notify Lender
upon becoming aware of any investigation, proceeding, complaint, order,
directive, claim, citation or notice with respect to any noncompliance with or
violation of the requirements of any Environmental Law by Borrower or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter which affects Borrower or its business operations or
assets or any properties at which Borrower has transported, stored or disposed
of any Hazardous Materials unless the foregoing could not reasonably be
expected to have a Material Adverse Effect on Borrower.


 


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


 


(viii)        Subordinated
Debt.  Promptly advise Lender of any
default or any event which, with the giving of notice or lapse of time, or
both, would constitute a default, under any subordination agreement relative to
Subordinated Debt, or any


 


24





















 


agreement, instrument or document evidencing or
relating to any Subordinated Debt, and a certificate of a authorized officer of
Borrower specifying the nature thereof and Borrower’s proposed response
thereto, in reasonable detail; provided that Borrower shall immediately
advise Lender of a Travmed Subordinated Debt Default.


 


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


 


(c)           Compliance with Laws and Maintenance of Permits.  Borrower shall maintain all governmental
consents, franchises, certificates, licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on Borrower,
and Borrower shall remain in compliance with all applicable federal, state,
local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules and ordinances relating to taxes, employer and employee
contributions and similar items, securities, ERISA or employee health and
safety) the failure with which to comply would have a Material Adverse Effect
on Borrower.  Following any determination
by Lender that there is noncompliance, or any condition which requires any
action by or on behalf of Borrower in order to avoid noncompliance, with any
Environmental Law, at Borrower’s expense, cause an independent environmental
engineer acceptable to Lender to conduct such tests of the relevant site(s) as
are appropriate and prepare and deliver a report setting forth the results of
such tests, a proposed plan for remediation and an estimate of the costs
thereof.


 


(d)           Inspection and Audits.  Upon five (5) Business Days prior written
notice so long as no Default or Event of Default exists, Borrower shall permit
Lender, or any Persons designated by it, to call at Borrower’s places of
business at any reasonable times during normal business hours and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Borrower’s books, records, journals, orders, receipts and
any correspondence and other data relating to Borrower’s business, the
Collateral or any transactions between the parties hereto, and shall have the
right to make such verification concerning Borrower’s business as Lender may
consider reasonable under the circumstances. 
Borrower shall furnish to Lender such information relevant to Lender’s
rights under this Agreement and the Other Agreements as Lender shall at any
time and from time to time request. 
Lender, through its officers, employees or agents, shall have the right,
at any time and from time to time, in Lender’s name, to verify the validity,
amount or any other matter relating to any of Borrower’s Accounts, by mail,
telephone, telecopy, electronic mail or otherwise, provided that, prior to the
occurrence of an Event of Default, Lender shall conduct such verification in
the name of a nominee of Lender or in Borrower’s name.  Borrower authorizes Lender to discuss the
affairs, finances and business of Borrower with any officers, employees or
directors of Borrower or with its Parent or any Affiliate or the officers,
employees or directors of its Parent or any Affiliate, and to discuss the
financial condition of Borrower with Borrower’s independent public accountants,
which shall be attended by a representative of Borrower.  Any such discussions shall be without
liability to Lender or to Borrower’s independent public accountants.  Borrower shall pay to Lender all customary
fees (currently Eight Hundred Fifty and No/100 Dollars ($850.00) per person,
per day) and all reasonable costs and out-of-pocket expenses incurred by Lender
in the exercise of its rights hereunder, and all of such fees, costs and
expenses shall constitute Obligations hereunder, shall be payable on demand
and, until paid, shall bear interest at the highest rate then applicable to
Revolving Loans hereunder; provided, however, that so long


 


25





















 


as no Event of Default
has occurred, Borrower shall not pay for more than four (4) audits in any
Fiscal Year, except for any audits of a Target in connection with a proposed
Acquisition.


 


(e)           Insurance.  Borrower shall:


 


(i)            Keep the
Collateral properly housed and insured for the full insurable value thereof
against loss or damage by fire, theft, explosion, sprinklers, collision (in the
case of motor vehicles) and such other risks as are customarily insured against
by Persons engaged in businesses similar to that of Borrower, with such
companies, in such amounts, with such deductibles and under policies in such
form as shall be reasonably satisfactory to Lender and BOF.  Certificates of insurance or, if requested by
Lender, original (or certified) copies of such policies of insurance have been
or shall be, within ninety (90) days of the Original Closing Date, delivered to
Lender, together with evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance acceptable to Lender, showing
loss under such insurance policies payable to Lender and BOF, as their
interests appear.  Such endorsement, or
an independent instrument furnished to Lender, shall provide that the insurance
company shall give Lender at least thirty (30) days’ written notice before any
such policy of insurance is altered or canceled (ten (10) days for non-payment
of premiums) and that no act, whether willful or negligent, or default of
Borrower or any other Person shall affect the right of Lender to recover under
such policy of insurance in case of loss or damage.  In addition, Borrower shall cause to be
executed and delivered to Lender and BOF, as their interests may appear, an
assignment of proceeds of its business interruption insurance policies.  Borrower hereby directs all insurers under
all policies of insurance to pay all proceeds payable thereunder directly to
Lender and BOF, as their interests may appear. 
Borrower irrevocably makes, constitutes and appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower’s true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions with respect
to such policies of insurance, provided however, that if no Event of Default
shall have occurred and is continuing, Borrower may make, settle and adjust
claims involving less than $100,000.00 in the aggregate without Lender’s
consent.


 


(ii)           Maintain,
at its expense, such public liability and third-party property damage insurance
as is customary for Persons engaged in businesses similar to that of Borrower
with such companies and in such amounts with such deductibles and under
policies in such form as shall be reasonably satisfactory to Lender and
certificates of insurance or, if requested by Lender, original (or certified)
copies of such policies have been or shall be, within ninety (90) days after
the Original Closing Date, delivered to Lender, together with evidence of
payment of all premiums therefor; each such policy shall contain an endorsement
showing Lender as additional insured thereunder and providing that the
insurance company shall give Lender at least thirty (30) days’ written notice
before any such policy shall be altered or canceled.


 


26





















 


If Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium relating thereto, then Lender,
without waiving or releasing any obligation or default by Borrower hereunder,
may (but shall be under no obligation to) obtain and maintain such policies of
insurance and pay such premiums and take such other actions with respect
thereto as Lender deems advisable.  Such
insurance, if obtained by Lender, may, but need not, protect Borrower’s
interests or pay any claim made by or against Borrower with respect to the
Collateral.  Such insurance may be more
expensive than the cost of insurance Borrower may be able to obtain on its own
and may be cancelled only upon Borrower providing evidence that it has obtained
the insurance as required above.  All
sums disbursed by Lender in connection with any such actions, including,
without limitation, court costs, expenses, other charges relating thereto and
reasonable attorneys’ fees, shall constitute Revolving Loans hereunder, shall
be payable on demand by Borrower to Lender and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans hereunder.


 


(f)            Collateral.  Borrower shall keep the Collateral in good
condition, repair and order and shall make all necessary repairs to the
Equipment and replacements thereof so that the operating efficiency and the
value thereof shall at all times be preserved and maintained in all material
respects.  Borrower shall permit Lender
to examine any of the Collateral at any time during normal business hours (so
long as no Default or Event of Default exists) and wherever the Collateral may
be located and, Borrower shall, promptly upon request therefor by Lender,
deliver to Lender any and all evidence of ownership of any of the
Collateral.  Borrower shall, at the
request of Lender, indicate on its records concerning the Collateral a
notation, in form satisfactory to Lender, of the security interest of Lender
hereunder.  If, prior to the termination
of this Agreement, Borrower shall obtain rights to any new Collateral of the
type described in the last sentence of Subsection 11(b), Borrower
shall notify Lender in writing (with reasonable detail) of such changes at
least once every thirty (30) days. 
Borrower hereby authorizes Lender to unilaterally modify this Agreement
by amending Schedule 11(b) to include any such Collateral.  Notwithstanding the foregoing, Borrower
hereby agrees that Lender’s security interest shall extend to all such
Collateral, regardless of whether Lender actually amends Schedule 11(b).


 


(g)           Use of Proceeds.  All monies and other property obtained by
Borrower from Lender pursuant to this Agreement shall be used solely
for business purposes of Borrower.


 


(h)           Taxes. 
Borrower and any other Obligor shall file all required tax returns and
pay all of its taxes when due, subject to any extensions granted by the
applicable taxing authority, including, without limitation, taxes imposed by
federal, state or municipal agencies, and shall cause any Liens for taxes to be
promptly released; provided, that Obligor shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as
(i) the amount so contested is shown on Obligor’s financial statements;
and (ii) the contesting of any such payment does not impair the
enforceability, validity or priority of the Lender’s Liens.  If Obligor fails to pay any such taxes and in
the absence of any such contest by Obligor, Lender may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or
to secure the release of any Lien therefor, and any sums so advanced by Lender
shall constitute Revolving Loans hereunder, shall be payable by Obligor to
Lender on demand and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder.


 


27





















 


(i)            Intellectual Property.  Borrower shall maintain adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue its business as
heretofore conducted by it or as hereafter conducted by it unless the failure
to maintain any of the foregoing could not reasonably be expected to have a
Material Adverse Effect on Borrower.


 


(j)            Staffing Contracts.  Borrower shall promptly provide true and
complete copies to Lender of all material staffing or similar contracts and, to
the extent requested by Lender, deliver to Lender a collateral assignment
agreement with respect to such contracts.


 


(k)           Billing and Collection System.  After the Original Closing Date and, if
feasible based on Borrower’s accounting system, Borrower shall provide
electronic access to Lender to its billing and collection system, on a
read-only basis, for purposes of permitting Lender to inspect and verify
billing and collections transactions and related data in connection with the
Collateral, from time to time.


 


13.           NEGATIVE
COVENANTS.


 


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


 


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


 


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


 


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


 


(i)            Borrower
shall not, without the prior written consent of Lender:  (A) enter into any merger or
consolidation; provided that (i) any Borrower (other than CRDE, AHHC,
Care Pros, HIP, HIP LLC, Travmed, Prime Staff and MMSO) may merge with and into
Crdentia so long as Crdentia is the surviving entity, and (ii) any Borrower
(other than CRDE, AHHC, Care Pros, HIP, HIP LLC, Travmed, Prime Staff,


 


28





















 


MMSO and Crdentia) may merge with another Borrower
(other than CRDE, AHHC, Care Pros, HIP, HIP LLC, Travmed, Prime Staff, MMSO and
Crdentia), (B) change the state of Borrower’s organization or enter into
any transaction which has the effect of changing Borrower’s state of
organization, except in connection with a merger permitted in clause (A) above;
(C) sell, lease or otherwise dispose of any of its assets other than in
the ordinary course of business or as permitted under Section 7;
(D) purchase the stock, other equity interests or all or a material
portion of the assets of any Person or division of such Person; or
(E) enter into any other transaction outside the ordinary course of Borrower’s
business, including, without limitation, any purchase, redemption or retirement
of any shares of any class of its stock or any other equity interest, and any
issuance of any shares of, or warrants or other rights to receive or purchase
any shares of, any class of its stock or any other equity interest, subject to
clause (iii) below.  


 


(ii)           Borrower
shall not form any new Subsidiaries or enter into any joint ventures or
partnerships with any other Person, without the prior written consent of Lender
unless (A) Crdentia (or such other Borrower) pledges all of the equity
interests of such new Subsidiary to Lender, and (B) such entity enters
into a joinder agreement or similar agreement in which such entity becomes a
party to this Agreement, jointly and severally liable for the Obligations and
pledges to Lender all of its assets as Collateral hereunder.


 


(iii)          Notwithstanding
the foregoing, Crdentia may enter into certain Permitted Acquisitions with the
prior written consent of Lender in its sole discretion. A permitted acquisition
(“Permitted Acquisition”) shall
mean an Acquisition which satisfies each of the following conditions:  (A) the Borrower shall have: (x) a
coverage ratio of EBITDA to Debt Service of at least 1.5 to 1.0, (y) a
ratio of Senior Debt to EBITDA of not more than 4.0 to 1.0, and (z) a
ratio of Term Loan Debt to EBITDA of not more than 2.5 to 1.0;
(B) Borrowers are in compliance, and shall be on the date of the
consummation of such proposed Acquisition, with all financial covenants set forth
in Section 14 hereof; (C) pro forma financial projections, prepared
by the Borrower in good faith for the period from the date of the consummation
of such proposed Acquisition to the date which is one year thereafter, shall
reflect that the Borrowers shall be in compliance with all financial covenants
set forth in Section 14 hereof; (D) Excess Availability of the
Borrowers shall be an amount mutually agreed upon between Lender and Borrower
but in no event less than $250,000 after giving effect to the proposed Acquisition;
(E) the Target entity to be acquired in such Acquisition shall become a new
Borrower hereunder in accordance with the provisions and requirements of
Section 13(c)(ii) hereof, and shall be subject to all the terms and
conditions under this Agreement; (F) any Indebtedness to be issued by any
Borrower in respect of such Acquisition shall be Subordinated Debt subject to
Subordination Agreements in form and substance satisfactory to Lender
including, without limitation, payment blockage rights and indefinite
standstill on remedies; (G) Lender shall have reviewed and found
satisfactory all Acquisition Documents in respect thereof prior to Borrower
entering into any such Acquisition Documents; (H) no Default or Event of
Default exists as of the proposed date of the Acquisition or would result after
giving effect thereto; (I) Crdentia shall deliver to Lender a certificate
of an officer of Crdentia certifying compliance with the foregoing, (J)
Borrower shall deliver to Lender any other due diligence reasonably


 


29





















 


requested by the Lender in connection with an
Acquisition or Target, including, without limitation collateral, cash-flow, and
operational audits, and background checks on Target’s management, in each case
to the reasonable satisfaction to the Lender; and (K) Borrower shall establish
and maintain a separate Lockbox with a Lockbox Bank for receivables from
Account Debtors of CRDE in accordance with the requirements of the Term Loan
Agreement and this Agreement, and Borrower shall execute with such Lockbox Bank
a lockbox agreement, blocked account agreement, and such other agreements
related to the lockbox arrangements, in each case in form and substance
acceptable to the Lender.


 


(d)           Dividends and Distributions.  No Borrower shall declare or pay any dividend
or other distribution (whether in cash or in kind) on any class of its stock
(if Borrower is a corporation) or on account of any equity interest in Borrower
(if Borrower is a partnership, limited liability company or other type of
entity) to any Person; provided,  that (i) any Borrower may pay a
dividend or other distribution (whether in cash or in kind) on any class of its
stock (if Borrower is a corporation) or on account of any equity interest in
Borrower (if Borrower is a partnership, limited liability company or other type
of entity) to Crdentia to pay professional fees, franchise taxes and other
ordinary course of business operating expenses incurred by Crdentia solely in
its capacity as parent corporation of Borrower, (ii) any Borrower may pay a
dividend or other distribution (whether in cash or in kind) on any class of its
stock (if Borrower is a corporation) or on account of any equity interest in
Borrower (if Borrower is a partnership, limited liability company or other type
of entity) to another Borrower, and (iii) Crdentia may pay customary stock
dividends to holders of its Series A Preferred Stock, Series B Preferred Stock,
Series B-1 Preferred Stock and Series C Preferred Stock.


 


(e)           Investments; Loans.  Borrower shall not purchase or otherwise
acquire, or contract to purchase or otherwise acquire, the obligations or stock
of any Person, other than investments in the stock of a Borrower, investments
in connection with Permitted Acquisitions under Section 13(c)(iii), direct
obligations of the United States or of any State of the United States or
political subdivision thereof, obligations insured by the Federal Deposit
Insurance Corporation and obligations unconditionally guaranteed by the United States
or of any State of the United States or political subdivision thereof; nor
shall Borrower lend or otherwise advance funds to any Person except for
advances made to employees, officers and directors for travel and other
expenses and extensions of credit to customers arising in the ordinary course
of business.


 


(f)            Fundamental Changes, Line of Business.  Borrower shall not enter into a new line of
business materially different from Borrower’s current business.  Borrower further agrees that no Borrower shall
amend its organizational documents or change its Fiscal Year if such actions
(i) would have a Material Adverse Effect on the Borrower; (ii) would affect the
obligations of Borrower to Lender; or (iii) would affect the interpretation of
any of the terms of this Agreement or the Other Agreements unless Lender has
provided written consent after receiving not less than thirty (30) days’ prior
written notice of such actions.


 


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


 


30





















 


accession to any other
personal property unless such personal property is subject to a first priority
Lien in favor of Lender.


 


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


 


(i)            Settling of Accounts.  Borrower will not make without concurrent
written notice provided to Lender, any agreement with any Account Debtor for
any extension of the time for payment of the Account, any compromise or
settlement for less than the full amount thereof, any release of any Account
Debtor from liability therefore, or any deduction therefrom except a discount
or allowance for prompt or early payment allowed by Borrower in the ordinary
course of its business consistent with its historical practices and as
disclosed to Lender in writing; provided, that following the occurrence
and during the continuance of a Default an Event of Default, Borrower shall not
settle or adjust any Account without the consent of Lender.


 


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


 


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


 


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


 


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


 


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


 


(l)            Payments to Travmed.  Immediately upon the occurrence 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


 


31





















 


a Loan or the payment of
proceeds of any Collateral) to Travmed, and (ii) Lender shall have no further
obligation to make any Loans against the accounts receivable of Travmed and all
accounts receivable of Travmed shall be immediately removed from the Revolving
Borrowing Base Amount.


 


14.           FINANCIAL
COVENANTS.


 


Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below:


 


(a)           Tangible Net Worth.  Borrower’s Tangible Net Worth, on a
consolidated basis, shall not at any time be less than the Minimum Tangible Net
Worth; “Minimum Tangible Net Worth”
being defined for purposes of this Subsection as (i) ($5,000,000) at all
times through June 30,2005, and (ii) thereafter, from the last day of
each fiscal quarter of the Borrowers through the day prior to the last day of
each immediately succeeding fiscal quarter of the Borrowers, the Minimum
Tangible 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 Fiscal
Year ending on the first day of such period as reflected on the Borrowers’
audited year end financial statement; and “Tangible Net Worth” being defined
for purposes of this Subsection as the Borrowers’ shareholders’ equity
(including retained earnings) less the book value of all intangible
assets of the Borrowers as determined solely by Lender on a consistent basis plus
the amount of any Subordinated Debt of the Borrowers, all as determined on a
consolidated basis under GAAP applied on a basis consistent with the financial
statement dated March 31, 2005 except as set forth herein;


 


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


 


	
  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

  	
   

  



 


32





















 


(c)           Minimum EBITDA.  Borrower shall not permit EBITDA of Borrower
to be less than the amount set forth below for the corresponding 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)           Term Loan Debt Leverage Ratio.  Borrower shall not permit the ratio of Term
Loan Debt to EBITDA to be more than the following 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)           Capital Expenditure Limitations.  Borrowers shall not make any Capital
Expenditures if, after giving effect to such Capital Expenditure, the aggregate
cost of all such fixed assets purchased or otherwise acquired would exceed
$500,000 during any Fiscal Year.


 


(f)            Operating Lease Obligations.  Borrower shall not incur operating lease
obligations requiring payments in excess of $700,000 in the aggregate during
any Fiscal Year of Borrower.


 


15.           DEFAULT.


 


The
occurrence of any one or more of the following events shall constitute an “Event
of Default” by Borrower hereunder:


 


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


 


(b)           Breach of This Agreement, the Other Agreements and the
Term Loan Agreement.  The
failure of any Obligor to perform, keep or observe any of the covenants,
conditions, promises, agreements or obligations of such Obligor under this
Agreement or any of the Other Agreements or the Term Loan Agreement; provided
that (i) any such failure by Borrower under Subsections 12(b)(i), (iv),
(v) and 12(i) of this Agreement (or the Term Loan


 


33





















 


Agreement) shall not
constitute an Event of Default hereunder until the fifteenth (15th) day following
the occurrence thereof, and (ii) any such failure by Borrower under Subsections 12(b)(iii)
and (vi) of this Agreement (or Sections 12(b)(ii) and (v) of the Term Loan
Agreement) shall not constitute an Event of Default hereunder until the fifth
(5th) day following the occurrence thereof (including any grace periods
thereto).


 


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


 


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


 


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


 


(f)            Loss of Collateral.  The loss, theft, damage or destruction of any
of the Collateral in an amount in excess of $100,000 in excess of insurance in
the aggregate for all such events during any year of the Term as determined by
Lender in its reasonable discretion determined in good faith, or (except as
permitted hereby) sale, lease or furnishing under a contract of service of, any
of the Collateral.


 


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


 


(h)           Bankruptcy or Similar Proceedings.  The commencement of any proceedings in
bankruptcy by or against any Obligor or for the liquidation or reorganization
of any Obligor, or alleging that such Obligor is insolvent or unable to pay its
debts as they mature, or for the readjustment or arrangement of any Obligor’s
debts, whether under the United States Bankruptcy Code or under any other law,
whether state or federal, now or hereafter existing, for the relief of debtors,
or the commencement of any analogous statutory or non-statutory proceedings
involving any Obligor; provided, however, that if such commencement of
proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings, though Lender shall have no obligation to
make Loans or issue Letters of Credit to Borrower during such forty-five (45)
day period or, if earlier, until such proceedings are dismissed.


 


34





















 


(i)            Appointment of Receiver.  The appointment of a receiver or trustee for
any Obligor, for any of the Collateral or for any substantial part of any
Obligor’s assets or the institution of any proceedings for the dissolution, or
the full or partial liquidation, or the merger or consolidation, of any Obligor
which is a corporation, limited liability company or a partnership; provided,
however, that, if such appointment or commencement of proceedings against such
Obligor is involuntary, such action shall not constitute an Event of Default
unless such appointment is not revoked or such proceedings are not dismissed
within forty-five (45) days after the commencement of such proceedings, though Lender shall have no obligation to
make Loans or issue Letters of Credit to Borrower during such forty-five (45)
day period or, if earlier, until such proceedings are dismissed.


 


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


 


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


 


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


 


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


 


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


 


(o)           Lockbox Account Instructions.  Any instruction or agreement regarding an
Account Debtor Collection Lockbox Account, or related lockbox is amended or
terminated without the written consent of Lender, or if Borrower fails, within
five (5) Business Days of receipt, to forward proceeds of Accounts to the
applicable lockbox account, or if Borrower directs any Account Debtor to make a
payment in respect of any such Account to any place or account other than the
applicable Account Debtor Collection Lockbox Account or Lockbox and such
directions are not reversed within five (5) Business Days; and/or


 


35





















 


(p)           Failure to Maintain Third-Party Payroll Tax Service
Provider.  The failure to
maintain a contractual relationship with a payroll tax service provider,
acceptable to Lender, at any time.


 


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


 


16.           REMEDIES
UPON AN EVENT OF DEFAULT.


 


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


 


(b)           Upon the occurrence and during the
continuance of a Default or an Event of Default, Lender may exercise from time
to time any rights and remedies available to it under the Uniform Commercial
Code and any other applicable law in addition to, and not in lieu of, any
rights and remedies expressly granted in this Agreement or in any of the Other
Agreements and all of Lender’s rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law.  In particular, but not by way of limitation
of the foregoing, Lender may, without notice, demand or legal process of any
kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found and, may enter
onto any of Borrower’s premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Lender shall have the right to
store the same at any of Borrower’s premises without cost to Lender.  At Lender’s request, Borrower shall, at
Borrower’s expense, assemble the Collateral and make it available to Lender at
one or more places to be designated by Lender and reasonably convenient to
Lender and Borrower.  Borrower recognizes
that if Borrower fails to perform, observe or discharge any of its Obligations
under this Agreement or the Other Agreements, no remedy at law will provide
adequate relief to Lender, and agrees that Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.  Any
notification of intended disposition of any of the Collateral required by law will
be deemed to be a reasonable authenticated notification of disposition if given
at least ten (10) days prior to such disposition and such notice shall
(i) describe Lender and Borrower, (ii) describe the Collateral that
is the subject of the intended disposition, (iii) state the method of the
intended disposition, (iv) state that Borrower is entitled to an
accounting of the Obligations and state the charge, if any, for an accounting
and (v) state the time and place of any public disposition or the time
after which any private sale is to be made. 
Lender may disclaim any warranties that might arise in connection with
the sale, lease or other disposition of the Collateral and has no obligation to
provide any warranties at such time.  Any
Proceeds of any disposition by Lender of any of the Collateral may be applied
by Lender to the payment of expenses in connection with the Collateral,
including, without limitation, legal expenses and reasonable attorneys’ fees,
and any balance of such Proceeds may be applied by Lender toward the payment of
such of the Obligations, and in such order of application as Lender may from
time to time elect.


 


36





















 


17.           CONDITIONS
PRECEDENT.


 


The obligation of Lender to enter into and perform this Agreement and
to continue to make Loans hereunder is subject to the satisfaction or waiver on
or before the date hereof, of the following conditions precedent:


 


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


 


(b)           Lender shall have received such financial
statements, reports, certifications, and other operational information required
to be delivered under this Agreement, including without limitation a Borrowing
Base Certificate calculating the Borrowing Base;


 


(c)           All of the obligations of Borrower to any
prior lender (other than Subordinated Debt and BOF) as in effect immediately
prior to the Closing Date will be performed and paid in full from the proceeds
of the initial advances under the initial Loans on the Closing Date and all
Liens of any such prior lender on any property of Borrower in respect thereof
will be terminated immediately upon such payment;


 


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


 


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


 


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


 


(g)           Lender shall have determined that Borrower
has Excess Availability of not less than Five Hundred Thousand Dollars
($500,000); 


 


(h)           Lender shall have reviewed and found
acceptable, in its sole discretion, a third-party background check on Jim
Durham, Pam Atherton and Fred Toney;


 


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


 


37





















 


(j)            Lender shall have received the results of a
roll-forward “take-over” audit, which shall be satisfactory to Lender in its
sole discretion; 


 


(k)           There
is no material default in any of the Borrower’s obligations under any contract
to which Borrower is a party;


 


(l)            Borrower
shall be in compliance with all applicable laws;


 


(m)          Lender
shall have received on, or prior to the date of any Permitted Acquisition, an
opinion from Borrower’s counsel with respect to such Permitted Acquisition, in
form and substance reasonably acceptable to the Lender;


 


(n)           Borrower
shall have established and maintained in its name all Lockboxes as set forth in
Section 8 to the satisfaction of the Lender and Borrower shall have delivered
to Lender, with respect to each Deposit Account maintained by Borrower, a
deposit account control agreement in form and substance satisfactory to the
Lender, executed by the financial institution at which such Deposit Account is
maintained;


 


(o)           Borrower
shall have delivered all due diligence materials to the Lender as Lender has
requested; 


 


(p)           Lender
shall have received an executed Collection Custodial Agreement from an officer
of the Borrowers in form and substance acceptable to Lender;


 


(q)           BOF
shall have received (i) the Term Loan Agreement, and (ii) the Warrant
Agreement, fully executed and each in form and substance satisfactory to BOF;
and


 


(r)            Lender
shall have received satisfactory evidence that Borrower has secured the
services of a third-party payroll tax service provider.


 


18.           JOINT
AND SEVERAL LIABILITY.


 


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


 


(b)           The
handling of this credit facility as a co-borrowing facility with a borrowing
agent in the manner set forth in this Agreement is solely as an accommodation
to Borrowers and at their request. 
Lender shall not incur liability to Borrowers as a result thereof.  To induce Lender to do so and in
consideration thereof, each Borrower hereby indemnifies Lender and holds Lender
harmless from and against any and all liabilities, expenses, losses, damages
and claims of damage or injury asserted against Lender by any Person arising
from or incurred by reason of the handling of the financing arrangements of
Borrowers as provided herein, reliance by Lender on any request or instruction
from Borrowing Agent or any other action taken by Lender with respect to this
Section 18 except due to willful misconduct or gross (not mere) negligence
by the indemnified party.


 


38





















 


(c)           Notwithstanding
anything to the contrary contained herein, all Obligations of each Borrower
hereunder shall be joint and several obligations of Borrowers.


 


(d)           Notwithstanding
any provisions of this Agreement to the contrary, it is intended that the joint
and several nature of the Obligations of Borrowers, and the liens and security
interests granted by Borrowers to secure the Obligations, not constitute a “Fraudulent
Conveyance” (as defined below). 
Consequently, Lender and Borrowers agree that if the Obligations of a
Borrower, or any liens or security interests granted by such Borrower securing
the Obligations, would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Obligations of such Borrower and the liens and
security interests securing such Obligations shall be valid and enforceable
only to the maximum extent that would not cause such Obligations or such lien
or security interest to constitute a Fraudulent Conveyance, and the Obligations
of such Borrower and this Agreement shall automatically be deemed to have been
amended accordingly.  For purposes
hereof, “Fraudulent Conveyance” means a fraudulent conveyance under
Section 548 of Chapter 11 of Title II of the United States Code (11 U.S.C.
§ 101, et seq.), as amended (the “Bankruptcy
Code”), or a fraudulent conveyance or fraudulent transfer under the
applicable provisions of any fraudulent conveyance or fraudulent transfer law
or similar law of any state, nation or other governmental unit, as in effect
from time to time.


 


(e)           Each
Borrower assumes responsibility for keeping itself informed of the financial
condition of the each other Borrower, and any and all endorsers and/or
guarantors of any instrument or document evidencing all or any part of such
other Borrower’s Obligations, and of all other circumstances bearing upon the
risk of nonpayment by such other Borrowers of their Obligations and each
Borrower agrees that Lender shall not have any duty to advise such Borrower of
information known to Lender regarding such condition or any such circumstances
or to undertake any investigation not a part of its regular business
routine.  If Lender, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to a Borrower, Lender shall not be under any obligation to update
any such information or to provide any such information to such Borrower on any
subsequent occasion.


 


(f)            Lender
is hereby authorized, without notice or demand and without affecting the
liability of a Borrower hereunder, to, at any time and from time to time,
(i) renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, a Borrower’s Obligations or otherwise modify, amend
or change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by a Borrower and delivered to Lender;
(ii) accept partial payments on a Borrower’s Obligations; (iii) take
and hold security or collateral for the payment of a Borrower’s Obligations
hereunder or for the payment of any guaranties of a Borrower’s Obligations or
other liabilities of a Borrower and exchange, enforce, waive and release any
such security or collateral; (iv) apply such security or collateral and
direct the order or manner of sale thereof as Lender, in its sole discretion,
may determine; and (v) settle, release, compromise, collect or otherwise
liquidate a Borrower’s Obligations and any security or collateral therefor in
any manner, without affecting or impairing the obligations of the other
Borrowers.  Lender shall have the
exclusive right to determine the time and manner of application of any payments
or credits, whether received from a Borrower or any other source, and such
determination shall be binding on such Borrower.  All such payments and credits may be applied,
reversed and reapplied, in whole or in part, to any of a Borrower’s Obligations
as


 


39





















 


Lender shall determine in
its sole discretion without affecting the validity or enforceability of the
Obligations of the other Borrowers.


 


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


 


(h)           Until
the Obligations of Lender have been paid in full, no payment made by or for the
account of a Borrower, including, without limitations, (i) a payment made
by such Borrower on behalf of another Borrower’s Obligations or (ii) a
payment made by any other person under any guaranty, shall entitle such
Borrower, by subrogation or otherwise, to any payment from such other Borrower
or from or out of such other Borrower’s property and such Borrower shall not
exercise any right or remedy against such other Borrower or any property of
such other Borrower by reason of any performance of such Borrower of its joint
and several obligations hereunder.


 


40





















 


19.           RELEASES; INDEMNITIES.


 


(a)           To
the fullest extent permitted by applicable law, in consideration of Lender’s
entering into this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which Borrower hereby acknowledges, Borrower, on
its own behalf and on behalf of its successors (including, without limitation,
any receiver or trustee acting on behalf of Borrower and any
debtor-in-possession with respect to Borrower), assigns, subsidiaries and
Affiliates (collectively, the “Releasors”), hereby forever release, discharge and
acquit Lender and its parents, subsidiaries, shareholders, Affiliates,
partners, trustees, officers, employees, directors, agents and attorneys and
their respective successors, heirs and assigns (collectively, the “Releasees”)
from any and all claims, demands, liabilities, responsibilities, disputes,
causes, damages, actions and causes of actions (whether at law or in equity)
indebtedness and obligations (collectively, “Claims”) of every type, kind,
nature, description or character, including, without limitation, any so-called “lender
liability” claims or defenses, and irrespective of how, why or by reason of
what facts, whether such Claims have heretofore arisen, are now existing or
hereafter arise, or which could, might or be claimed to exist, of whatever kind
or nature, whether known or unknown, suspected or unsuspected, liquidated or
unliquidated, matured or unmatured, fixed or contingent, each as though fully
set forth herein at length, which may in any way arise out of, are connected
with or in any way relate to actions or omissions which occurred on or prior to
the date hereof with respect to Borrower, this Agreement, the Obligations, any
Collateral, the Prior Agreements, any other Loan Document and any third parties
liable in whole or in part for the Obligations, other than such Claims arising
out of the gross negligence or willful misconduct of a Releasee.  This provision shall survive and continue in
full force and effect whether or not Borrower shall satisfy all other
provisions of this Agreement or the Loan Documents, including payment in full
of the Obligations.


 


(b)           Each of the Releasors
further agrees to indemnify the Releasees and hold the Releasees harmless from
and against any and all such Claims (as such term is defined in the immediately
preceding paragraph) which may be brought against any of the Releasees on
behalf of any entity or Person, including, without limitation, officers,
directors, agents, trustees, creditors, partners or shareholders of any of the
Releasors, whether threatened or initiated, asserting any claim for legal or
equitable remedy under any statutes, regulation or common law principle arising
from or in connection with the negotiation, preparation, execution, delivery,
performance, administration and enforcement of this Agreement or any other Loan
Document, the Obligations, any Collateral or the Prior Agreements, other than
such Claims arising out of the gross negligence or willful misconduct of a
Releasee.  The foregoing indemnity shall
survive the payment in full of the Obligations and the termination of this
Agreement and the other Loan Documents.


 


20.           NOTICE.


 


All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Lender shall be sent to it
at 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 at its principal place of business set forth on Schedule 11(b)
hereto or


 


41





















 


as otherwise directed by Borrower in writing.  All notices shall be deemed received upon
actual receipt thereof or refusal of delivery.


 


21.           CHOICE
OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.


 


This Agreement and the Other Agreements are submitted by Borrower to
Lender for Lender’s acceptance or rejection at Lender’s principal place of
business as an offer by Borrower to borrow monies from Lender now and from time
to time hereafter, and shall not be binding upon Lender or become effective
until accepted by Lender, in writing, at said place of business.  If so accepted by Lender, this Agreement and
the Other Agreements shall be deemed to have been made at said place of
business.  THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED
BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING,
WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT
EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF
THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF
THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED.  If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.


 


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


 


22.           MODIFICATION
AND BENEFIT OF AGREEMENT.


 


This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower or such other
Person who is a party to such Other Agreement and Lender.  Borrower may not sell, assign or transfer
this Agreement, or the Other Agreements or any portion thereof, including,
without limitation, Borrower’s rights,


 


42





















 


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 to time hereafter, of this Agreement, or the Other
Agreements, or of any portion thereof, or to Lender granting participations in
the Obligations and related Loan Documents, including, without limitation,
Lender’s rights, titles, interest, remedies, powers and/or duties.  Borrower agrees that it shall execute and
deliver such documents as Lender may request in connection with the
foregoing.  Borrower further consents to
the pledge or collateral assignment and grant of a security interest, by
Lender, in connection with its’ own financing, including all rights, benefits,
warranties, representations, covenants, indemnities and remedies, and all
proceeds of the foregoing, contained in this Agreement and any of the Other
Agreements.


 


23.           HEADINGS
OF SUBDIVISIONS.


 


The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the
provisions of this Agreement.


 


24.           POWER
OF ATTORNEY.


 


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


 


25.           CONFIDENTIALITY.


 


Lender hereby agrees to use commercially reasonable efforts to assure
that any and all information relating to Borrower which is (i) furnished
by Borrower to Lender (or to any affiliate of Lender); and
(ii) non-public, confidential or proprietary in nature shall be kept confidential
by Lender or such affiliate in accordance with applicable law; provided,
however, that such information and other credit information relating to
Borrower may be distributed by Lender or such affiliate to Lender’s or such
affiliate’s directors, officers, employees, attorneys, affiliates, assignees,
participants, auditors, agents and regulators, and upon the order of a court or
other governmental agency having jurisdiction over Lender or such affiliate, to
any other party, as long as such person or entity has been informed of Lender’s
confidentiality obligation hereunder and has agreed to abide by its terms.  Borrower and Lender further agree that this
provision shall survive the termination of this Agreement.  Notwithstanding the foregoing, Borrower
hereby consents to Lender publishing a tombstone or similar advertising
material relating to the financing transaction contemplated by this Agreement.


 


26.           BROKERAGE FEES.  


 


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


 


43





















 


27.           PUBLICITY.  


 


Lender is hereby authorized to issue appropriate press releases and to
cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.


 


28.           LIMITATION OF ACTIONS.  


 


Borrower
agrees that any claim or cause of action by Borrower against Lender, or any of
Lender’s directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Agreement, or any other present
or future agreement, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
whether or not relating hereto or thereto, occurred, done, omitted or suffered
to be done by Lender, or by Lender’s directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract or in tort or otherwise,
shall be barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one (1) year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based and service of a
summons and complaint on an officer of Lender or any other Person authorized to
accept service of process on behalf of Lender, within thirty (30) days
thereafter.  Borrower agrees that such
one-year period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action.  The one-year period provided herein shall not
be waived, tolled, or extended except by a specific written agreement of
Lender.  This provision shall survive any
termination of this Agreement or any other agreement.


 


29.           LIABILITY.


 


Neither Lender nor any Lender Affiliate shall be liable for any
indirect, special, incidental or consequential damages in connection with any
breach of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if Lender has been advised of the possibility of such
damages.  Neither Lender, nor any Lender
Affiliate shall be liable for any claims, demands, losses or damages, of any
kind whatsoever, made, claimed, incurred or suffered by the Borrower through
the ordinary negligence of Lender, or any Lender Affiliate.  


 


30.           COUNTERPARTS.


 


This Agreement, any of the Other Agreements, and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which, when
so executed and delivered, shall be deemed an original, but all of which
counterparts together shall constitute but one agreement.


 


44





















 


31.           ELECTRONIC
SUBMISSIONS.


 


Upon
not less than thirty (30) days’ prior written notice (the “Approved Electronic Form Notice”), Lender
may permit or require that any of the documents, certificates, forms,
deliveries or other communications, authorized, required or contemplated by
this Agreement or the Other Agreements be submitted to Lender in “Approved Electronic Form” (as hereafter
defined), subject to any reasonable terms, conditions and requirements in the
applicable Approved Electronic Forms Notice. 
For purposes hereof, “Electronic Form”
means e-mail, e-mail attachments, data submitted on web-based forms or any
other communication method that delivers machine readable data or information
to Lender, and “Approved Electronic Form”
means an Electronic Form that has been approved in writing by Lender (which
approval has not been revoked or modified by Lender) and sent to Borrower in an
Approved Electronic Form Notice.  Except
as otherwise specifically provided in the applicable Approved Electronic Form
Notice, any submissions made in an applicable Approved Electronic Form shall
have the same force and effect that the same submissions would have had if they
had been submitted in any other applicable form authorized, required or
contemplated by this Agreement or the Other Agreements.


 


32.           WAIVER
OF JURY TRIAL; OTHER WAIVERS.


 


(a)           BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED
TORTUOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
LENDER.  IN NO EVENT SHALL LENDER BE LIABLE FOR LOST
PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.


 


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


 


(c)           Borrower hereby waives the benefit of any law
that would otherwise restrict or limit Lender or any affiliate of Lender in the
exercise of its right, which is hereby acknowledged and agreed to, to set-off
against the Obligations, without notice at any time hereafter, any
indebtedness, matured or unmatured, owing by Lender or such affiliate of Lender
to Borrower, including, without limitation, any deposit account at Lender or
such affiliate.


 


(d)           BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL, PROVIDED THAT IN THE EVENT LENDER SEEKS TO ENFORCE ITS RIGHTS
HEREUNDER BY JUDICIAL PROCESS OR SELF-HELP, LENDER SHALL PROVIDE BORROWER WITH
SUCH NOTICES AS ARE REQUIRED BY LAW.


 


45





















 


(e)           Lender’s failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement or any of the Other Agreements shall not waive, affect or diminish
any right of Lender thereafter to demand strict compliance and performance
therewith.  Any suspension or
waiver by Lender of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether
of the same or of a different kind or character.  No delay on the part of Lender in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right
or remedy.  None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement or any of the Other Agreements and no Event of Default under this
Agreement or default under any of the Other Agreements shall be deemed to have
been suspended or waived by Lender unless such suspension or waiver is in
writing, signed by a duly authorized officer of Lender and directed to Borrower
specifying such suspension or waiver.


 


33.           AMENDMENT
AND RESTATEMENT.  This Agreement shall
become effective, and shall amend and restate the Original Amended and Restated
Loan Agreement, as amended by the First Amendment and the Second Amendment,
upon the execution of this Agreement by Borrower and Lender; and from and after
such effective time, (i) all references made to the Original Amended and
Restated Loan Agreement, as amended by the First Amendment and the Second
Amendment in the Loan Documents or in any other instrument or document executed
and/or delivered pursuant thereto shall, without anything further, be deemed to
refer to this Agreement and (ii) the Original Amended and Restated Loan
Agreement, as amended by the First Amendment and the Second Amendment, shall be
deemed amended and restated, without novation, in its entirety hereby.  All the Other Agreements are hereby
reaffirmed and shall continue in full force and effect.  Borrower acknowledges that the Revolving
Loans and other Obligations evidenced by the Original Amended and Restated Loan
Agreement, as amended by the First Amendment and the Second Amendment,
including all the other instruments, documents and agreements executed and
delivered in connection with the Original Amended and Restated Loan Agreement,
as amended by the First Amendment and the Second Amendment, have not been
satisfied but instead have become part of the Loans and Obligations under this
Agreement and under the other Loan Documents. 
Borrower further acknowledges that all of the Liens granted by Borrower
under the Original Amended and Restated Loan Agreement, as amended by the First
Amendment and the Second Amendment and all instruments, documents and
agreements executed in connection therewith are hereby reaffirmed and shall
continue hereafter to secure the Obligations under the Loan Documents, until
all Obligations are repaid in full in cash and this Agreement is terminated.


 


SIGNATURE
PAGES FOLLOW


 


46





















 


Signature Page to Second Amended and Restated


Loan and Security Agreement – Revolving Loans


 


IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement as of the date
first written above.


 


 


	
   

  	
   

  	
  CRDENTIA CORP.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ 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

  
								



 





















 


	
   

  	
   

  	
  BRIDGE HEALTHCARE FINANCE,
  LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Kim Gordon

  	
   

  
	
   

  	
   

  	
   

  	
  Kim Gordon

  
	
   

  	
   

  	
   

  	
  Executive Vice
  President/Chief Credit Officer

  



 





















 


ANNEX 1-DEFINED TERMS


 


“Account” shall mean all
present and future accounts and payment intangibles (in respect of Staffing
Services), as such terms are defined in the UCC, of Borrower, including,
without limitation, all obligations for the payment of money (including,
without limitation, all amounts due and owing from Governmental Authorities to
the extent such amounts are deemed to be or construed to be general
intangibles) arising out of the sale, lease, license or other disposition of
goods or other Property or the rendering of services and all proceeds thereof.


 


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


 


“Account Debtor Collection Lockbox
Account” shall mean an account or accounts maintained at the Lockbox
Bank into which all collections of Accounts are paid directly; the Account
Debtor Collection Lockbox Account shall be an account in the name of Lender (or
Borrower for the sole benefit of Lender), and shall be the sole and exclusive
property of Lender.


 


“Acquisition” shall
mean the purchase by Crdentia (or another Borrower) of all of the issued and
outstanding equity interests or substantially all of the operating assets of
any Person in the healthcare staffing industry pursuant to the Acquisition
Documents.


 


“Acquisition Documents”
shall mean all agreements, instruments and documents executed or delivered in
connection with an Acquisition.


 


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


 


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


 


“Borrowed Money” shall mean, as
applied to any Person, without duplication, (a) all Indebtedness of such
Person, (b) all debt of such Person, whether or not evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such
Person as lessee under Capital Leases which have been or should be recorded as
liabilities on a balance sheet of such Person in accordance with GAAP,
(d) all obligations of such Person to pay the deferred purchase price of
property or services (excluding trade accounts payable in the ordinary course
of business), (e) all indebtedness secured by a Lien on the property of
such Person, whether or not such indebtedness shall have been assumed by such
Person; provided that if such Person has not assumed or otherwise become liable
for such indebtedness, such indebtedness shall be measured at the fair market
value of such property securing such indebtedness at the time of determination,
(f) all obligations, contingent or otherwise, with respect to the face
amount of all letters of credit (whether or not drawn), bankers’ acceptances
and similar obligations issued for the account of such Person (including the
Letters of Credit), (g) all hedging, swap, or similar obligations of such


 


 


Annex 1 - 1





















 


Person, (h) all Contingent Liabilities of such
Person and (i) all debt of any partnership, limited liability company, or
other entity (only if such partnership, limited liability company or other
entity is a Borrower) of which such Person is a majority owner.


 


“BOF” shall mean Bridge
Opportunity Finance, LLC.


 


“Borrower” and “Borrowers” shall mean, individually and
collectively, each of the Borrowers named in the first paragraph hereof
provided that each reference to “Borrower” herein shall mean each Borrower
individually and all Borrowers collectively, as the context requires.


 


“Borrowing Agent” shall
mean Crdentia.


 


“Borrowing Base Certificate”
shall mean an officer’s certificate, in the form and substance agreeable to
Lender, delivered by Borrower to Lender pursuant to the terms of this
Agreement.


 


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


 


“Capital Expenditures”
shall mean with respect to any period, the aggregate of all expenditures
(whether paid in cash or accrued as liabilities and including Capital Lease
Obligations) by Borrowers during such period that are required by GAAP,
consistently applied, to be included in or reflected by the property, plant and
equipment or similar fixed asset accounts (or intangible accounts subject to amortization)
on the balance sheet of Borrowers, excluding expenditures for any assets or
equity interests acquired pursuant to a Permitted Acquisition.


 


“Capital Lease” shall mean, as to
any Person, a lease of any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, by such Person as lessee
that is, or should be, recorded as a “capital lease” on the balance sheet of
such Person prepared in accordance with GAAP.


 


“Capital Lease Obligations” shall
mean, as to any Person, indebtedness represented by obligations under a Capital
Lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.


 


“Closing Date” shall mean
May 16, 2005.


 


“Closing Document List”
shall have the meaning set forth in Section 17 hereof.


 


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


 


“Concentration Account”
shall have the meaning set forth in Section 8(a).


 


“Contingent Liability” shall mean
any agreement, undertaking or arrangement by which any Person guarantees,
endorses or otherwise becomes or is contingently liable upon (by direct


 


 


Annex 1 - 2





















 


or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a debtor,
or otherwise to assure a creditor against loss) any Indebtedness, obligation or
other liability of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person.  The amount of any Contingent Liability shall
(subject to any limitation set forth herein) be deemed to be the outstanding
principal amount (or maximum permitted principal amount, if larger) of the
Indebtedness, obligation or other liability guaranteed or supported thereby.


 


“CRDE” shall mean CRDE
Corp., the Subsidiary of Crdentia formed to hold all Target entities acquired
in Permitted Acquisitions, and shall mean, collectively, CRDE Corp. and each of
its direct or indirect subsidiaries.


 


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


 


“Derivative Obligations” shall mean
every obligation of a Person under any forward contract, futures contract,
exchange contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar agreement),
the value of which is dependent upon interest rates, currency exchange rates,
commodities or other indices.


 


“Dilution” shall mean,
with respect to any period, the percentage obtained by dividing (i) the
sum of non-cash credits against Accounts (including, but not limited to
returns, adjustments and rebates) of Borrower for such period, plus pending or probable,
but not yet applied, non-cash credits against Accounts of Borrower for such
period, as determined by Lender in its sole discretion, by (ii) gross
invoiced sales of Borrower for such period.


 


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


 


“Eligible Account” shall
mean an Account arising in the ordinary course of Borrower’s business from the
rendition of Staffing Services, which was generated originally in the name of
Borrower and not acquired via assignment or otherwise from another Person that
Lender, in its reasonable credit judgment, shall deem eligible based on such
considerations as Lender may from time to time deem appropriate.  Without limiting the foregoing, an Account
shall NOT be deemed to be an Eligible Account if: 


 


(i)            the
Account remains unpaid for a period of one hundred twenty (120) days past the
date of invoice;


 


(ii)           the Account
Debtor has failed to pay more than fifty percent (50%) of all of the
outstanding amounts owed by the particular Account Debtor or payor to Borrower
one hundred twenty (120) days after the dates of service for such Accounts; 


 


 


Annex 1 - 3





















 


(iii)          the
Account Debtor is an Affiliate of Borrower; 


 


(iv)          the Account
does not arise out of the ordinary course of Borrower’s business, or as to
which a portion, if payable by a third-party payor or acceptable to Lender
pursuant to which payment by the account debtor or payor may be conditional; 


 


(v)           the
Account Debtor is located outside of the United States;


 


(vi)          the Account
Debtor is the United States or any department, agency or instrumentality
thereof, except to the extent that the requirements of the Federal Assignment
of Claims Act, 31 U.S.C. Section 3727; 


 


(vii)         Borrower
is or may become liable to the Account Debtor for goods sold or services
rendered by the Account Debtor to Borrower; 


 


(viii)        the
Account Debtor’s total obligations to Borrower exceed twenty-five percent (25%)
of all Eligible Accounts, to the extent of such excess; 


 


(ix)           the
Account Debtor disputes liability with respect to the applicable Account or
makes any claim with respect thereto (up to the amount of such liability or claim),
or is subject to any insolvency or bankruptcy proceeding or becomes insolvent,
or fails or goes out of a material portion of its business; 


 


(x)            the
amount thereof consists of late charges or finance charges, but only to the
extent of such charges; 


 


(xi)           the amount
thereof consists of a credit balance more than one hundred twenty (120) days
past due; 


 


(xii)          the
face amount of any single invoice thereof exceeds $20,000 unless accompanied by
evidence of invoice relating thereto satisfactory to Lender in its reasonable
credit judgment; 


 


(xiii)         the
Account Debtor is an individual or private party not in the business of
providing healthcare services (e.g. “self-pay” individuals not covered by
insurance or workers compensation); 


 


(xiv)        the
amount thereof is not yet represented by an invoice or bill issued in the name
of the applicable Account Debtor, other than as contemplated by Section
2(a)(ii); 


 


(xv)         the amount
thereof is denominated in or payable with any currency other than U. S.
Dollars; 


 


(xvi)        the
Account is not at all times subject to Lender’s duly perfected first priority
security interest; 


 


 


Annex 1 - 4





















 


(xvii)       the
representations and warranties with respect to such Account set forth in
Section 11(w) of this Agreement have been breached or are no longer true and
correct; or


 


(xviii)      solely
with respect to Travmed USA, Inc., the Account is owed by an Account Debtor of
Travmed USA, Inc. (or such Account is generated by any service provided by, or directly
attributed to, Travmed USA, Inc.) and such Account is generated after the date
in which a Travmed Subordinated Debt Default occurs.


 


“Environmental Laws” shall
mean all federal, state, district, local and foreign laws, rules, regulations,
ordinances, and consent decrees relating to health, safety, hazardous
substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to Borrower’s business or facilities owned or
operated by Borrower, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contamination, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.


 


“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended, modified or
restated from time to time.


 


“Event of Default” shall
have the meaning specified in Section 15 hereof.


 


“Excess Availability”
shall mean, as of any date of determination by Lender, the excess, if any, of
the lesser of (i) the Maximum Revolving Loan Limit less the sum of the
outstanding Revolving Loans and (ii) the Revolving Borrowing Base Amount
less the sum of the outstanding Revolving Loans, in each case as of the close
of business on such date and assuming, for purposes of calculation, that all
accounts payable of the Borrower which remain unpaid more than thirty (30) days
after the due dates thereof (except for professional fees and amounts contested
in good faith) as of the close of business on such date are treated as
additional Revolving Loans outstanding on such date.


 


“Fiscal Year” shall mean
each twelve (12) month accounting period of Borrower, which ends on December
31st of each year.


 


“GAAP” shall mean generally accepted
accounting principles, using the accrual basis of accounting and consistently
applied with prior periods to the extent required under Section 1(b); provided,
however, that GAAP with respect to any interim financial statements or reports
shall be deemed subject to fiscal year-end adjustments and footnotes made in
accordance with GAAP.


 


“Governmental Authorization”
means any permit, license, registration, authorization, certificate,
accreditation, plan, directive, consent order or consent decree of or from, or
notice to, any Government Authority.


 


“Government Authority”
means any federal, state, District of Columbia, municipal, national or other
government, governmental department, commission, board, bureau, court, agency
or instrumentality or political subdivision thereof or any entity or officer
exercising


 


 


Annex 1 - 5





















 


executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.


 


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


 


“Hazardous Materials”
shall mean any hazardous, toxic or dangerous substance, materials and wastes,
including, without limitation, hydrocarbons (including naturally occurring or
man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, biological substances,
polychlorinated biphenyls, pesticides, herbicides and any other kind and/or
type of pollutants or contaminants (including, without limitation, materials
which include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are, or become, regulated under any
Environmental Law (including, without limitation any that are, or become,
classified as hazardous or toxic under any Environmental Law).


 


“Healthcare Regulations”
means any and all current or future Laws relating to HMOs, healthcare service
providers, Government Reimbursement Programs, Persons engaged in the Healthcare
Service Business, healthcare-related insurance companies, or any other similar
Person and any rule, regulation, directive, order or decision promulgated or
issued pursuant thereto.  Healthcare
Regulations shall include the Food, Drug and Cosmetic Act (21 U.S.C. § 301 et
seq.), federal anti-kickback statute (42 U.S.C. § 1320a-7b), the False Claims
Act (31 U.S.C. §§ 3729 et seq.), the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)) and the
federal physician self-referral laws (42 U.S.C. § 1395nn).


 


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


 


“Information Certificate”
means the document attached hereto as Exhibit D.


 


 


Annex 1 - 6





















 


“Intellectual Property” shall mean
all past, present and future:  trade
secrets (including, without limitation, customer lists), know-how and other
proprietary information; trademarks, Internet domain names, service marks,
trade dress, trade names, business names, designs, logos, slogans (and all
translations, adaptations, derivations and combinations of the foregoing),
indicia and other source and/or business identifiers, and the goodwill of the
business relating thereto and all registrations or applications for
registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all
tangible property embodying the copyrights; unpatented inventions (whether or
not patentable); patent applications and patents; industrial designs,
industrial design applications and registered industrial designs; license
agreements related to any of the foregoing and income therefrom; books,
records, writings, computer tapes or disks, flow diagrams, specification
sheets, computer software, source codes, object codes, executable code, data,
databases and other physical manifestations, embodiments or incorporations of
any of the foregoing; the right to sue for all past, present and future
infringements of any of the foregoing; all other intellectual property; and all
common law and other rights throughout the world in and to all of the
foregoing.


 


“Lender Affiliate” shall
mean Lender’s directors, officers, employees, agents, attorneys or any other
Person or entity affiliated with or representing Lender.


 


“Lien” shall mean any mortgage,
pledge, claim, hypothecation, judgment lien or similar legal process, title
retention lien, or other lien or security interest, including, without
limitation, the interest of a vendor under any conditional sale or other title
retention agreement and the interest of a lessor under a lease of any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, that is, or should be, accounted for as a Capital Lease.


 


“Loan Documents” shall
mean this Agreement and the Other Agreements.


 


“Loans” shall mean all
loans and advances made by Lender to or on behalf of Borrower hereunder.


 


“Lockbox” shall have the
meaning specified in Subsection 8(a) hereof.


 


“Lockbox Bank” shall have
the meaning specified in Subsection 8(a) hereof.


 


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


 


“Makewell Agreement” means
that certain Makewell Agreement executed by MedCap Partners L.P., a Delaware
limited partnership, dated as of August 31, 2004, in favor of BOF, as the same
may be amended, restated, supplemented or otherwise modified from time to time.


 


“Maximum Loan Limit” shall
mean Ten Million and No/100 Dollars ($10,000,000).


 


“Maximum Revolving Loan Limit”
shall have the meaning specified in Subsection 2(a) hereof.


 


 


Annex 1 - 7





















 


“Notice of Borrowing”
shall mean a written notice that is accompanied by a Borrowing Base
Certificate, in the form of that attached hereto as Exhibit E, and
appropriately completed by Borrowing Agent.


 


“Obligations” shall mean
any and all obligations, liabilities and Indebtedness of Borrower to Lender
(other than Term Loan Obligations), or to any parent, affiliate or subsidiary
of Lender, of any and every kind and nature, howsoever created, arising or
evidenced and howsoever owned, held or acquired, whether now or hereafter
existing, whether now due or to become due, whether primary, secondary, direct,
indirect, absolute, contingent or otherwise (including, without limitation,
obligations of performance), whether several, joint or joint and several, and
whether arising or existing under written or oral agreement or by operation of
law.


 


“Obligor” shall mean
Borrower and each other Person who is or shall become primarily or secondarily
liable for any of the Obligations.


 


“Operating Cash Flow”
means, for any period, Borrower’s consolidated net income or loss (excluding
the effect of any extraordinary gains or losses), determined in accordance with
GAAP, plus or minus each of the following items on a consolidated
basis, to the extent deducted from or added to the revenues of Borrower in the
calculation of consolidated net income or loss: (i) depreciation;
(ii) amortization and other non-cash charges; (iii) interest and fee
expenses paid or accrued; (iv) total federal and state income tax expense
determined as the accrued liability of Borrower in respect of such period,
regardless of what portion of such expense has actually been paid by Borrower
during such period; and (v) gain or loss on the sale of property, plant or
equipment of Borrower; and (vi) management fees and other fees paid to
subordinating creditors to the extent permitted hereunder, and under the
applicable subordination agreement(s), but only to the extent any such item was
expensed in the calculation of net income and after deduction for each of
(a) federal and state income taxes, to the extent actually paid during
such period; (b) any non-cash income and gains from the sale of property;
and (c) all actual Capital Expenditures made during such period and not
financed.


 


“Original Closing Date”
shall mean June 16, 2004.


 


“Other Agreements” shall
mean all agreements, makewell agreements, instruments and documents, other than
this Agreement and the Term Loan Agreement, including, without limitation,
guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, financing
statements, subordination agreements, and all other writings heretofore, now or
from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to Lender in connection with the Obligations or the
transactions contemplated hereby, as each of the same may be amended, modified
or supplemented from time to time.


 


“Parent” shall mean any
Person now or at any time or times hereafter owning or controlling (alone or
with any other Person) at least a majority of the issued and outstanding equity
of Borrower and, if Borrower is a partnership, the general partner of Borrower.


 


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


 


“Permitted Acquisition”
shall have the meaning specified in Section 13(c)(iii) hereof.


 


 


Annex 1 - 8





















 


“Permitted Liens” shall
mean (i) statutory Liens of landlords, carriers, warehousemen, processors,
mechanics, materialmen or suppliers incurred in the ordinary course of business
and securing amounts not yet due or declared to be due by the claimant
thereunder in excess of fifteen (15) days or amounts which are being contested
in good faith and by appropriate proceedings and for which Borrower has maintained
adequate reserves; (ii) Liens in favor of Lender; (iii) zoning
restrictions and easements, licenses, covenants and other restrictions
affecting the use of real property that do not individually or in the aggregate
have a material adverse effect on Borrower’s ability to use such real property
for its intended purpose in connection with Borrower’s business;
(iv) Liens in connection with purchase money indebtedness and Capital
Leases otherwise permitted pursuant to this Agreement, provided, that such Liens
attach only to the assets the purchase of which was financed by such purchase
money indebtedness or which is the subject of such Capital Leases;
(v) Liens set forth on Schedule 1; (vi) Liens
specifically permitted by Lender in writing; (vii) involuntary Liens
securing amounts less than $50,000 and which are released or for which a bond
acceptable to Lender in its reasonable credit judgment, determined in good
faith, has been posted within ten (10) days of its creation; (viii) Liens for
taxes not yet due and payable or for taxes being contested in good faith by
appropriate proceedings and as to which the Borrower has deposited with the
Lender an amount sufficient in the Lender’s sole discretion to pay such taxes,
together with all estimated interest and penalties in connection therewith; and
(ix) Liens in favor of BOF, including the pledge by Crdentia of all of the
stock and other equity interests in each of the Subsidiaries of Crdentia under
the Pledge Agreement. 


 


“Person” shall mean any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.


 


“Plan” shall have the
meaning specified in Subsection 12(b)(v) hereof.


 


“Pledge Agreement” shall
mean that certain Pledge Agreement dated as of August 31 2004 between
Crdentia and BOF, as amended, restated, supplemented or otherwise modified from
time to time.


 


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


 


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


 


“Revolving Borrowing Base Amount”
shall have the meaning specified in Subsection 2(a) hereof.


 


“Revolving Loans” shall
have the meaning specified in Subsection 2(a) hereof.


 


 


Annex 1 - 9





















 


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


 


“Senior Debt Service”
means, for any period with respect to the Borrowers, the sum of payments made
or required to be made by Borrower during such period for (i) interest
only payments due on the Revolving Loans facility, and (ii) interest and
scheduled principal payments due on any and all other Indebtedness for Borrowed
Money excluding the Subordinated Debt.


 


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


 


“Subordinated Debt” shall
mean Indebtedness of Borrower or any Subsidiary of Borrower that is
subordinated to the Obligations in a manner satisfactory to Lender, and
contains terms, including, without limitation, payment terms, satisfactory to
Lender.


 


“Subordination Agreements”
shall mean, individually and collectively, all subordination agreements,
intercreditor agreements, consent and similar agreements among either Borrower,
Lender and any holder of Indebtedness, whether entered into on or prior to the
date hereof or from time to time hereafter, together with all modifications,
amendments and restatements of any of the foregoing, including, without
limitation, the Subordination Agreements listed on Schedule 11(n) hereto
in respect of the Seller Notes existing on the Original Closing Date.


 


“Subsidiary” shall mean
any corporation of which more than fifty percent (50%) of the outstanding
capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of
any other class of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned by Borrower, or any partnership, joint venture or limited
liability company of which more than fifty percent (50%) of the outstanding
equity interests are at the time, directly or indirectly, owned by Borrower or
any partnership of which Borrower is a general partner. 


 


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


 


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


 


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


 


“Term Loan “ shall mean that
certain Term Loan of BOF to the Borrowers pursuant to the Term Loan Agreement.


 


“Term Loan Agreement”
shall mean that certain Loan and Security Agreement – Term Loan, dated as of
the date hereof between Borrowers and BOF.


 


“Term Loan Obligations”
shall mean all indebtedness and obligations of every kind and nature of
Borrowers to BOF in respect of the Term Loan Agreement.


 


 


Annex 1 - 10





















 


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


 


“Travmed Subordinated Debt”
shall mean the Indebtedness of Borrower owed to Robert Litton, Steve Williams,
or any other Person, including all of their respective successors and assigns,
which is in connection with the acquisition by Borrower of Travmed USA, Inc.


 


“Travmed Subordinated Debt Default”
shall mean a “Default” as defined in any of the Travmed Subordinated Notes.


 


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


 


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


 


 


Annex 1 - 11





















 


INDEX OF EXHIBITS AND SCHEDULES


 


	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Borrowing Base
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Compliance
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Closing Checklist

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Information Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Notice of Borrowing

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
   

  	
  Permitted Liens

  
	
   

  	
   

  	
   

  
	
  Schedule 11(b)

  	
   

  	
  Business and Collateral Locations

  
	
   

  	
   

  	
   

  
	
  Schedule 11(b)

  	
   

  	
  Certain Collateral

  
	
   

  	
   

  	
   

  
	
  Schedule 11(g)

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  Schedule 11(i)

  	
   

  	
  Affiliate
  Transactions

  
	
   

  	
   

  	
   

  
	
  Schedule 11(j)

  	
   

  	
  Names & Trade Names

  
	
   

  	
   

  	
   

  
	
  Schedule 11(n)

  	
   

  	
  Indebtedness

  
	
   

  	
   

  	
   

  
	
  Schedule 11(p)

  	
   

  	
  Parent,
  Subsidiaries and Affiliates

  
	
   

  	
   

  	
   

  
	
  Schedule 11(q)

  	
   

  	
  Defaults

  
	
   

  	
   

  	
   

  
	
  Schedule 11(x)

  	
   

  	
  Government
  Reimbursement Program Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 11(t)

  	
   

  	
  Environmental Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 11(x)

  	
   

  	
  Healthcare Compliance

  
	
   

  	
   

  	
   

  
	
  Schedule 11(y)

  	
   

  	
  Healthcare Regulatory Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 11(z)

  	
   

  	
  Licenses and Permits

  
	
   

  	
   

  	
   

  
	
  Schedule 11(aa)

  	
   

  	
  Healthcare Authorizations

  



 


 


Annex 1 - 1





















 


EXHIBIT A - BORROWING BASE CERTIFICATE


 


FORM OF BORROWING BASE CERTIFICATE


 


To:          Bridge
Healthcare Finance, LLC

                                          ,
Agent

233 South Wacker Drive, Suite 5350

Chicago, Illinois  60606


 


Ladies and Gentlemen:


 


Please refer to the Second Amended and Restated Loan and Security
Agreement dated as of May 16, 2005 (as further amended or otherwise modified
from time to time, the “Loan Agreement”) between Crdentia Corp., a
Delaware corporation and its Subsidiaries (collectively, “Borrower”),
and BRIDGE HEALTHCARE FINANCE, LLC.  This
certificate (this “Certificate”), together with supporting calculations
attached hereto, is delivered to you pursuant to the terms of the Loan
Agreement.  Capitalized terms used but
not otherwise defined herein shall have the same meanings herein as in the Loan
Agreement.


 


The Borrower hereby certifies and warrants to the Bank that at the
close of business on                           ,
200      (the “Calculation Date”), the
Revolving Borrowing Base Amount was $                     ,
computed as set forth on the schedule attached hereto.


 


IN WITNESS WHEREOF, the Borrower has caused this Certificate to be
executed and delivered by its officer thereunto duly authorized on                      ,
              .


 


	
   

  	
  [                                      ]  

  	
   

  
	
   

  	
  a

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
							



 


 


EXHIBIT A - 1





















 


EXHIBIT B – COMPLIANCE CERTIFICATE


 


Date:


 


TO:         Bridge Healthcare
Finance, LLC, Agent

233 South Wacker Drive, Suite 5350

Chicago, Illinois 60606




 


Gentlemen and Ladies:


 


The undersigned Borrower hereby
certifies to you the following pursuant to Section 9(c) of the Second Amended
and Restated Loan and Security Agreement-Revolving Loans (the “Agreement”)
dated as of May 16, 2005, among Crdentia Corp., a Delaware corporation (“Crdentia”), Baker Anderson Christie, Inc.,
a California corporation (“Baker”),
Nurses Network, Inc., a California corporation (“Nurses Network”), New Age Staffing, Inc., a Delaware
corporation (“New Age”), PSR
Nurses, Ltd., a Texas limited partnership (“PSR
Ltd.”), PSR Nurse Recruiting, Inc., a Texas corporation (“PSR Recruiting”), PSR Nurses Holdings
Corp., 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., a Texas
corporation (“Care Pros”), HIP
Holding, Inc., a Delaware corporation (“HIP”),
Health Industry Professionals, L.L.C., a Michigan limited liability company (“HIP LLC”), Travmed USA, Inc., a North
Carolina corporation (“Travmed”),
GHS Acquisition Corporation, a Delaware corporation (“GHS”), Prime Staff, LP, a Texas 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 to individually
and collectively, as “Borrower”),
and Bridge Healthcare Finance, LLC (the “Lender”).


 


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


 


2.     No material adverse change in
the condition, financial or otherwise, business, property, or results of
operations of Borrower has occurred since                                                           
[date of last Compliance Certificate/last financial statements delivered prior
to closing], or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrower has taken or proposes
to take with respect thereto.


 


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


 





















 


or covenants
in the Agreement, a writing attached hereto specifies the nature thereof and
the action that Borrower has taken or proposes to take with respect thereto.


 


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


 


a.     Borrower
shall maintain a Minimum Tangible Net Worth of (i) $(5,000,000) from the
date hereof through June 30, 2005 and (ii) thereafter, from the last day of
each fiscal quarter of the Borrowers through the day prior to the last day of
each immediately succeeding fiscal quarter of the Borrowers, the Minimum
Tangible Net Worth during the immediately preceding period plus seventy-five percent (75%) of the Borrowers’ net income
(but without reduction for any net loss) for the Fiscal Year ending on the
first day of such period as reflected on the Borrowers’ audited year end
financial statement.  (See attached Schedule
A for calculation of Tangible Net Worth)


 


	
  Compliance

  	
   

  	
  Yes:  o

  	
   

  	
  No:  o

  



 


b.     As
of the last day of each applicable period, the ratio of the Borrower’s
Operating Cash Flow to Borrower’s Senior Debt Service for each period set forth
below (which ratio shall be tested as of the last day of each such period) must
be at least the following: (See attached Schedule B for calculation)


 


	
  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:  o

  	
   

  	
  No:  o

  



 


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


 





















 


	
  Time
  Frame

  	
   

  	
  Date
  Tested

  	
   

  	
  Minimum
  EBITDA

  	
   

  	
  Based on

  
	
  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:  o

  	
   

  	
  No:  o

  



 


d.     Term
Loan Debt Leverage Ratio.  Borrower
shall note permit the ratio of Term Loan Debt to EBITDA to be more than the
following for each period set forth below: 
(See Schedule D for calculation) 




	
  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:  o

  	
   

  	
  No:  o

  



 


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


 


	
  Total Capital Expenditures

  (YTD):

  	
   

  	
  Compliance:

  	
   

  	
  Yes:  o

  	
   

  	
  No:  o

  



 


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


 


	
  Operating Lease Payments

  (YTD):

  	
   

  	
  Compliance:

  	
   

  	
  Yes:   o

  	
   

  	
  No:  o

  



 


The financial statements, reports and
information submitted concurrently herewith have been prepared in accordance
with generally accepted accounting principles consistently applied (where
applicable) and there have been no material changes in accounting


 





















 


policies or financial reporting practices of
Borrower since                                                          
[date of last Compliance Certificate/last financial statements delivered prior
to closing], or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrower has taken or proposes
to take with respect thereto.


 





















 


Any and all initially capitalized terms set
forth in this certificate without definition shall have the respective meanings
ascribed thereto in the Agreement.


 


 


	
   

  	
   

  	
  Crdentia Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  



 





















 


Schedule A


 


Tangible Net Worth


 


Tangible
Net Worth


 


	
  Shareholders’ equity (including retained
  earnings and preferred stock) of 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





















 


SCHEDULE 1 –
PERMITTED LIENS


 


 


SCHEDULE 1 - 1





















 


SCHEDULE 11(B) -
BUSINESS AND COLLATERAL LOCATIONS; 

CERTAIN COLLATERAL


 


Attached to and made a part of that certain Loan and Security Agreement
of even date herewith between CRDENTIA CORP., a           
corporation and its Subsidiaries (collectively, “Borrower”) and BRIDGE HEALTHCARE FINANCE, LLC (“Lender”).


 


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


 


1.


 


2.


 


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


 


1.


 


2.


 


C.            Bank
Accounts of Borrower:


 


	
   

  	
   

  	
  Bank
  (with address)

  	
   

  	
  Account
  Number

  	
   

  	
  Type of
  Account

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


D.            Certain
Collateral


 


a.             Intellectual
Property


 


b.             Instruments


 


c.             Deposit
Accounts


 


d.             Investment
Property


 


e.             Letter-of-Credit
Rights


 


f.              Chattel
Paper


 


g.             Documents


 


 


SCHEDULE 11(B) - 1





















 


h.             Commercial
Tort Claims


 


i.              Certificate
of Title Goods


 


j.              Collateral
with Third Parties


 


 


SCHEDULE 11(B) - 2





















 


SCHEDULE 11(G) – LITIGATION


 


 


SCHEDULE 11(G) - 1





















 


SCHEDULE 11(I) – AFFILIATE TRANSACTIONS


 


 


SCHEDULE 11(I) - 1





















 


SCHEDULE 11(J) – NAMES & TRADE NAMES


 


 


SCHEDULE 11(J) - 1





















 


SCHEDULE 11(N) – INDEBTEDNESS


 


 


SCHEDULE 11(N) - 1





















 


SCHEDULE 11(P) – PARENT, SUBSIDIARIES AND AFFILIATES


 


 


 


SCHEDULE 11(P) - 1





















 


SCHEDULE 11(X) – GOVERNMENT REIMBURSEMENT PROGRAM MATTERS


 


 


SCHEDULE 11(X) - 1