Document:

EXHIBIT 10.35

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT – TERM LOAN

 

DATED AS OF MAY 16, 2005

 

BETWEEN

 

BRIDGE OPPORTUNITY FINANCE, LLC

 

AS LENDER,

 

AND

 

CRDENTIA CORP. (“CRDENTIA”)

BAKER ANDERSON CHRISTIE, INC.(“BAKER”)

NURSES NETWORK, INC.(“NURSES NETWORK”)

NEW AGE STAFFING, INC. (“NEW AGE”)

PSR NURSES, LTD. (“PSR LTD.”)

PSR NURSE RECRUITING, INC. (“PSR RECRUITING”)

PSR NURSES HOLDINGS CORP. (“PSR HOLDING”)

CRDE CORP. (“CRDE”)

ARIZONA HOME HEALTH CARE/PRIVATE DUTY, INC. (“AHHC”)

CARE PROS STAFFING, INC. (“CARE PROS”)

HIP HOLDING, INC. (“HIP”)

HEALTH INDUSTRY PROFESSIONALS, L.L.C. (“HIP LLC”)

TRAVMED USA, INC. (“TRAVMED”)

PRIME STAFF, LP (“PRIME STAFF”)

MINT MEDICAL STAFFING ODESSA, LP (“MMSO”)

GHS ACQUISITION CORPORATION (“GHS”)

 

AS BORROWER

 

 

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)

  	
  Term Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Permitted
  Acquisitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Repayments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  WARRANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  INTEREST, FEES AND CHARGES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Interest
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Fees
  and Charges

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Maximum
  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  COLLATERAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Grant of Security Interest to Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Other
  Security

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Possessory
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Electronic
  Chattel Paper

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Letter-of-Credit
  Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Third-Party
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Deposit
  Account

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Insurance
  Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
  THEREIN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  POSSESSION OF COLLATERAL AND RELATED MATTERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  COLLECTIONS

  	
   

  

 

i

 

	
  9.

  	
  COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Borrowing
  Base Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Monthly
  Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Financial
  Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Annual
  Projections

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Explanation of Budgets and Projections

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Invoices and Billing Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Obligor Financial Statements and Tax Returns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Other
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Post-Closing
  Review

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Public
  Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Financial Statements and Other Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Locations; Certain Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Loans
  by Borrower

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  [Left
  Blank]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Organization, Authority and No Conflict

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Compliance with Laws and Maintenance of Permits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Affiliate
  Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Names
  and Trade Names

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (l)

  	
  Enforceability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (m)

  	
  Solvency

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (n)

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (o)

  	
  Margin Security and Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (p)

  	
  Parent, Subsidiaries and Affiliates

  	
   

  

 

ii

 

	
   

  	
  (q)

  	
  No
  Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (r)

  	
  Employee
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (s)

  	
  Intellectual
  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (t)

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (u)

  	
  ERISA
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (v)

  	
  Reimbursement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (w)

  	
  Compliance with Healthcare Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (x)

  	
  Immigration
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (y)

  	
  Licenses,
  Permits, etc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (z)

  	
  Collective
  Enterprise

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (aa)

  	
  Acquisition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (bb)

  	
  Certain Financial Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Maintenance
  of Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Compliance with Laws and Maintenance of
  Permits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Inspection and Audits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Staffing Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Billing and Collection System Access

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Mergers, Sales, Acquisitions, Subsidiaries
  and Other Transactions Outside the Ordinary Course of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Dividends and Distributions

  	
   

  

 

iii

 

	
   

  	
  (e)

  	
  Investments; Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Fundamental Changes, Line of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Affiliate Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Settling of Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Restricted Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Restricted Locations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (l)

  	
  Payments to Travmed

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  FINANCIAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Tangible Net Worth

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Senior Debt Service Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Minimum EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Term Loan Debt Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Capital Expenditure Limitations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Operating Lease Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Breach of This Agreement, the Other
  Agreements and the Revolving Loan Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Breach of Subordination Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Breaches of Other Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  Breach of Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (f)

  	
  Loss of Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (g)

  	
  Levy, Seizure or Attachment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (h)

  	
  Bankruptcy or Similar Proceedings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  Appointment of Receiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (j)

  	
  Judgment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (k)

  	
  Default or Revocation of Guaranty

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (l)

  	
  Change of Ownership/Management

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (m)

  	
  Material Adverse Change

  	
   

  

 

iv

 

	
   

  	
  (n)

  	
  Governmental Authorizations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (o)

  	
  Failure to Maintain Third-Party Payroll Tax
  Service Provider

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (p)

  	
  [Intentionally Deleted]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (q)

  	
  Breach of Certain Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  REMEDIES UPON AN EVENT OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  JOINT AND SEVERAL LIABILITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  RELEASES; INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  NOTICE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  CHOICE OF GOVERNING LAW; CONSTRUCTION;
  FORUM SELECTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
  MODIFICATION AND BENEFIT OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
  HEADINGS OF SUBDIVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
  POWER OF ATTORNEY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
  BROKERAGE FEES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
  PUBLICITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
  LIMITATION OF ACTIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  29.

  	
  LIABILITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  30.

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  31.

  	
  ELECTRONIC SUBMISSIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  32.

  	
  WAIVER OF JURY TRIAL; OTHER WAIVERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  33.

  	
  AMENDMENT AND RESTATEMENT

  	
   

  

 

v

 

	
  ANNEX 1 - DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  EXHIBIT A –
  COMPLIANCE CERTIFICATE

  	
   

  
	
   

  	
   

  
	
  EXHIBIT B – CLOSING CHECKLIST

  	
   

  
	
   

  	
   

  
	
  EXHIBIT C – INFORMATION CERTIFICATE

  	
   

  
	
   

  	
   

  
	
  EXHIBIT D – FORM OF SUBORDINATION
  AGREEMENT

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 1 –
  PERMITTED LIENS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(b) –
  BUSINESS AND COLLATERAL LOCATIONS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(b) - CERTAIN
  COLLATERAL

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(g) – LITIGATION

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(i) –
  AFFILIATE TRANSACTIONS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(j)
  – NAMES & TRADE NAMES

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(n)
  – INDEBTEDNESS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(p)
  – PARENT, SUBSIDIARIES AND AFFILIATES

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(q) – DEFAULTS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(t) – ENVIRONMENTAL MATTERS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(v) – GOVERNMENT REIMBURSEMENT PROGRAM MATTERS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE 11(y) – LICENSES AND PERMITS

  	
   

  

 

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT – TERM LOAN

 

THIS AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT – TERM LOAN (as amended, modified or supplemented
from time to time, this “Agreement”)
made this 16th day of May, 2005 by and between BRIDGE OPPORTUNITY 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, Borrower may,
from time to time, request certain Term Loans from Lender in connection with
certain Permitted Acquisitions, and the parties wish to provide for the terms
and conditions upon which such Term Loans or other financial accommodations, if
made by Lender, shall be made, which Term Loans shall be secured by a second
priority security interest in all assets of Borrower (except for all of the
equity interests of each direct and indirect Subsidiary of Crdentia, which has
been pledged to Lender as a first priority security interest pursuant to the
terms of the Pledge Agreement);

 

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

 

WHEREAS, the Original
Borrowers entered into that certain Loan and Security Agreement – Revolving
Loans, dated as of June 16, 2004 (as amended, restated, supplemented or
otherwise modified from time to time, the “Revolving Loan Agreement”) with
Bridge Healthcare Finance, LLC, secured by a first priority security interest
in all assets of Borrower (except for all of the equity interests of each
direct and indirect Subsidiary of Crdentia, which has been pledged to Lender
pursuant to the terms of the Pledge Agreement);

 

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

 

1

 

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

 

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

 

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

 

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

 

2

 

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 Loan Agreement pursuant to the
terms of that certain Amendment No. 3, Joinder and Consent to Loan and
Security Agreement – Term Loans, dated May 5, 2005 (the “Third Term Loan
Amendment”), to provide for, among other things, the addition of GHS, Prime
Staff and MMSO as additional Borrowers to the Original Loan Agreement; and

 

WHEREAS, the Borrowers
and Lender desire to amend and restate the Original Loan Agreement, as amended
by the First Term Loan Amendment, the Second Term Loan Amendment and the Third
Term Loan Amendment, upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in
consideration of any Term 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 Loan
Agreement, as amended by the First Term Loan Amendment, the Second Term Loan
Amendment and the Third Term Loan 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 

 

3

 

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
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 

 

4

 

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

 

(b)                                 Permitted
Acquisitions.  In connection with any
Acquisition approved in writing by Lender in its sole discretion, any Term Loan
in connection therewith shall be made subject to the satisfaction of the
following conditions precedent thereto (each, a “Permitted Acquisition”): 
(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;
(F) any Indebtedness to be issued by any Borrower in respect of such
Acquisition (other than Indebtedness under the Revolving Loan Agreement) 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
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.

 

5

 

(c)                                  Repayments.

 

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

 

(ii)                                  Mandatory
Prepayments of the Term Loan.

 

(1)                                  Sales
of Assets.  Upon receipt of the
proceeds of the sale or other disposition of any Equipment or real property of
Borrower which is subject to a mortgage in favor of Lender, or if any of the
Equipment or real property subject to such mortgage is damaged, destroyed or
taken by condemnation in whole or in part, the proceeds thereof, in any case,
in excess of $15,000 individually, or in excess of $50,000 in the aggregate, in
any Fiscal Year shall be paid by Borrower to Lender as a mandatory prepayment
of the Term Loan, such payment to be applied against the remaining installments
of principal in the inverse order of their maturities until repaid in full, and
then against the other Obligations, as determined by Lender, in its sole
discretion.

 

(2)                                  Excess
Cash Flow.  Five (5) days after
receipt by Lender of Borrower’s internally prepared quarterly financial
statements pursuant to Section 9(c)(ii) hereof, commencing with the
calendar quarter ended September 30, 2005, Borrower shall make a mandatory
prepayment of the Term Loan in an amount equal to fifty percent (50%) of Borrower’s
“Excess Cash Flow” (as described below) for the calendar quarter just ended,
such prepayment to be applied against the remaining installments of principal
in the inverse order of their maturities, such mandatory prepayments to
continue until the date on which the Term Loan shall be repaid in full.  In addition, within ten (10) days after
receipt of Borrower’s Fiscal Year-end audited financial statements for each
Fiscal Year of Borrower, or required by Section 9(c)(iii) hereof,
commencing with Borrower’s fiscal year ending December 31, 2005, Borrower
shall make a mandatory prepayment of the Term Loan in any amount necessary to
satisfy any discrepancy between the actual Excess Cash Flow payments received
on a quarterly basis for such Fiscal Year, and the amount required herein as
calculated pursuant to the audited financial statements for such Fiscal
Year.  For purposes hereof, “Excess Cash
Flow” shall mean for each of Borrower’s Fiscal Years, Borrower’s EBITDA for
such period, minus Borrower’s cash taxes paid during such period, minus
actual principal and interest payments made with respect to Borrowed Money
during such period, minus Borrower’s legal, consulting and accounting
expenses in connection with Permitted Acquisitions, if any, for such period (but
only to the extent permitted by Lender and only to the extent not previously
deducted from net income in the calculation of EBITDA), minus all
unfinanced Capital Expenditures by Borrower during such period.

 

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

 

6

 

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

 

3.                                       WARRANTS.

 

As additional
consideration for Lender entering into this Agreement and making the credit
facilities available to Borrower as contemplated hereby, Crdentia agrees to
issue to Lender warrants to purchase shares of common stock of Crdentia equal
to, in the aggregate, twelve percent (12%) of the common stock of Crdentia in
accordance with the provisions of Section 12 to the Warrant Agreement, as
follows:

 

(a)                                  Concurrently
with the execution of this Agreement and the making by Lender of an initial
Term Loan to Borrower in the aggregate principal amount of $2,697,801.75,
Crdentia will enter into the Warrant Agreement and, pursuant thereto, will
issue Lender a Warrant Certificate evidencing Lender’s right to purchase three
and 24/100 percent (3.24%) of the common stock of Crdentia, at an exercise
price per warrant of an amount provided in the Warrant Agreement.

 

(b)                                 Concurrently
with the funding by Lender of each additional Term Loan to Borrower, with the
aggregate principal amount of such additional Term Loans not to exceed
$7,500,000, Crdentia will issue to Lender one or more additional Warrant
Certificates representing the right to purchase up to an additional eight and
76/100 percent (8.76%) of the common stock of Crdentia in accordance with the
provisions of Section 12 to the Warrant Agreement.  The Warrant Certificate percentage of each
additional Warrant Certificate shall be determined on a pro rata basis relative
to the amount of each such additional Term Loan.  The exercise price for each additional
Warrant Certificate shall be determined as provided in the Warrant Agreement.

 

4.                                       INTEREST, FEES AND CHARGES.

 

(a)                                  Interest
Rate.

 

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

 

(b)                                 Fees
and Charges.

 

(i)                                     Closing
Fee:  Borrower shall pay to Lender a
closing fee of one and one-half percent (1.5%) of the principal amount of each
Term Loan funded hereunder, which fees shall be fully earned and payable on the
date of disbursement of such Term Loan hereunder.

 

(ii)                                  Collateral
Monitoring Fee:  On the first
Business Day of each calendar month following the Original Closing Date,
Borrower shall pay Lender a 

 

7

 

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

 

(iii)                               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 Term Loans hereunder.

 

(iv)                              Capital
Adequacy Charge.  If Lender shall have
determined that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority enacted after the Original Closing Date, 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.

 

8

 

(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 Term 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 security interest (subject only to Liens of BHF 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:  (i) 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; (ii) 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); (iii) all Inventory; (iv) all Goods
(other than Inventory), including, without limitation, Equipment, vehicles and
Fixtures; (v) all Investment Property; (vi) all Deposit Accounts,
bank accounts, deposits and cash; (vii) all Letter-of-Credit Rights; (viii) Commercial
Tort Claims listed on Schedule 11(b) hereto from time to time;
(ix) any other property of Borrower now or hereafter in the possession,
custody or control of Lender or any agent or any parent, affiliate or
subsidiary of Lender or any participant with Lender in the Term Loans, for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); and (x) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of Borrower’s books and records
relating to any of the foregoing and to Borrower’s business.  The
foregoing notwithstanding, the Collateral shall not be deemed to
include any right, title, interest, claim or demand of Borrower in and to
any agreement, document, license or instrument which relates to the foregoing
Collateral to the extent such agreement, document, license or instrument is not
assignable or capable of being encumbered as a matter of law or under the terms
of the agreement, document or instrument applicable thereto or such grant would
result in a breach of the terms of such agreement, document, license, or
instrument (but, in each case, solely to the extent that any such restriction
shall be enforceable under applicable law) without the consent of the
applicable party thereto, and, in each case, only to the extent that any such
term would not be rendered ineffective pursuant to Section 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 

 

9

 

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 Term 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,
Borrower shall deliver the original thereof (i) to BHF, to hold pursuant
to the terms of the Revolving Loan Agreement (other than equity interests of
any Borrower pledged by Crdentia to Lender under the Pledge Agreement, which
shall be delivered to Lender pursuant to the terms of the Pledge Agreement), or
(ii) to the extent the Revolving Loan Agreement has been terminated, 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 (i) comply
with Section 5(e) of the Revolving Loan Agreement, or (ii) to
the extent the Revolving Loan Agreement has been terminated, create, store and
assign the record or records comprising the Electronic Chattel Paper in such a
manner that (i) a single authoritative copy of the record or records
exists which is unique, identifiable and, except as otherwise provided in clauses
(iv), (v) and (vi) below, unalterable, (ii) the authoritative
copy identifies Lender as the assignee of the record or records, (iii) the
authoritative copy is communicated to and maintained by the Lender or its
designated custodian, (iv) copies or revisions that add or change an
identified assignee of the authoritative copy can only be made with the
participation of Lender, (v) each copy of the authoritative copy and any
copy of a copy is readily identifiable as a copy that is not the authoritative
copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.

 

(e)                                  Letter-of-Credit
Rights.  If Borrower at any time is a
beneficiary under a letter of credit now or hereafter issued in favor of Borrower,
at the request and option of Lender, Borrower shall (i) comply with Section 5(e) of
the Revolving Loan Agreement, or (ii) to the extent the Revolving Loan
Agreement has been terminated, 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 (subject to the rights of BHF therein) promptly 

 

10

 

obtain
an acknowledgment from the third party that it is holding such Collateral for
the benefit of BHF and the Lender.

 

(g)                                 Deposit Account.  Borrower shall upon the request of Lender
deliver to Lender (subject to the rights of BHF therein), 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 BHF and the Lender, executed by the financial institution at
which such account is maintained, and shall take such other actions as BHF and
the Lender 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 (subject to the rights of BHF and the use of such proceeds
to first repay all Revolving Loan Obligations), 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.

 

Subject to the rights of
BHF 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 the Liens in favor of BHF and other Permitted Liens) to
secure payment of the Obligations, and in order to facilitate the collection of
the Collateral.  Subject to the rights of
BHF in the Collateral, Borrower irrevocably hereby makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower’s true and lawful attorney and agent-in-fact to execute and file such
financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect Lender’s
security interest in the Collateral. 
Borrower further agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement. 
Borrower further ratifies and confirms the prior filing by Lender of any
and all financing statements which identify the Borrower as debtor, Lender as
secured party and any or all Collateral as collateral.  Notwithstanding the foregoing, if at any time
BHF issues to the Borrower an instruction with respect to the Collateral or BHF’s
rights thereunder, Borrower may, and the Lender hereby authorizes and instructs
the Borrower to, follow such instruction of BHF, notwithstanding any conflict
that may exist with respect to the Lender’s rights in such Collateral, 

 

11

 

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

 

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)                                  Upon
request of Lender and consent of BHF, and consistent with the terms of Section 8
of the Revolving Loan Agreement, Borrower shall establish and maintain a
separate 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 of CRDE.  Borrower shall execute
with the Lockbox Bank a lockbox agreement for the CRDE 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 of CRDE are obligated are paid directly into
the Lockbox for deposit into the CRDE Account Debtor Collection Lockbox
Account, and that all funds deposited into the CRDE Account Debtor Collection
Lockbox Account are immediately transferred into the Concentration Account
described in Section 8 of the Revolving Loan Agreement.

 

(b)                                 Intentionally
Deleted.

 

(c)                                  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 

 

12

 

Loans
made by Lender under the Revolving Loan Agreement.  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 8 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.

 

(d)                                 Subject to all applicable law and all rights
of BHF, 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. 
Subject to the rights of BHF, addition to any other provision hereof,
Lender may at any time, after the occurrence and during the continuance of 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)                                  On a monthly basis, Lender shall deliver to
Borrower an account statement showing all Loans, charges and payments which
shall be deemed final, binding and conclusive upon Borrower unless Borrower
notifies Lender in writing, specifying any error therein, within thirty (30)
days of the date such account statement is sent to Borrower, and any such
notice shall only constitute an objection to the items specifically identified.

 

9.                                       COLLATERAL,
AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

 

(a)                                  Borrowing
Base Reports.  To the extent
requested by Lender from time to time Borrower shall deliver to Lender the
Borrowing Base Certificate delivered to BHF in respect of the Revolving
Obligations.

 

(b)                                 Monthly
Reports.  After the Revolving Loan
Agreement has been terminated, Borrower shall deliver to Lender, in addition to
any other reports, as soon as practicable and in any event within fifteen
(15) days after the end of each month, (A) a detailed trial balance 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 

 

13

 

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.  Prior to the
termination of the Revolving Loan Agreement, Borrower shall deliver to Lender
any monthly report delivered to BHF in respect of the Revolving Obligations as
requested from time to time by Lender.

 

(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 A
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
Borrower on a consolidated basis, certified by the Chief Financial Officer of
Borrower; and (iii) no later than ninety (90) days after the end of each
of Borrower’s Fiscal Years, audited annual financial statements of Borrower on
a consolidated basis, with an unqualified opinion as to the audited financial
statements by independent certified public accountants selected by Borrower and
reasonably satisfactory to Lender.  The
report of such accounts shall be accompanied by copies of any management
letters sent to the Borrower by such accountants.

 

(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.  After the Revolving Loan Agreement has been
terminated, 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 

 

14

 

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”).

 

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

 

(b)                                 If
this Agreement expires, then (i) Lender shall not make any additional Term
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.  In the event that the Term Loan (other than
as a result of a mandatory prepayment pursuant to subsection 2(c))
or 

 

15

 

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

 

(d)                                 Any
prepayment of the Term Loan (other than a mandatory prepayment made pursuant to
the prepayment provisions described in Section 2(c) hereof) 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 positive difference, if any, between (x) the
Remaining Payment Amount immediately prior to any prepayment of that portion of
the Term Loan which is being prepaid and (y) the principal balance of the
Term Loan being prepaid as of the date of any such prepayment; and

 

(ii)                                  “Remaining
Payment Amount” means the sum of (x) amount of each future and unpaid
scheduled payment of principal and interest on the Term Loan, that would be due
on or after the date of a prepayment of the Term Loan if no payment of the Term
Loan were made prior to the end of the Term, plus (y) the amount of
all Term Loan related fees which would have been earned by Lender from the date
of prepayment through the end of the Term if no payment of the Term Loan were
made prior to the end of the Term.

 

Lender shall provide
Borrower with a written calculation of the Make Whole Amount due from Borrower
hereunder, which calculation shall be presumptively correct absent manifest
error.

 

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

 

(f)                                    Notwithstanding
anything in this Agreement to the contrary, if the funding obligations of BHF
under the Revolving Loan Agreement terminates for any reason (whether by
voluntary termination by Borrowers, by reason of the occurrence of an Event of
Default or otherwise) prior to the expiration of the Term of this Agreement,
the entire principal balance, together with accrued and unpaid interest on any
Obligations under this Agreement and all Revolving 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 Revolving Loan Agreement, shall be immediately due and payable on
the effective date of such termination. 
Notwithstanding the foregoing, in the event that Borrower prepays the
Revolving Loan Obligations under the Revolving Loan Agreement solely as a
result of the circumstances described in Section 10(e) of the
Revolving Loan Agreement, the prepayment of the Obligations under this
Agreement shall be prepaid without payment of any prepayment fee, and Borrower
shall not have to pay (I) a prepayment fee equal to the Make 

 

16

 

Whole
Amount under this Agreement, nor (II) a prepayment fee equal to the Make Whole
Amount under the Revolving 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 Term 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 on 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.

 

(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)                                 [Left
Blank].

 

17

 

(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 Liens in favor of BHF and other 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 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 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.

 

18

 

(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 Liens in favor of BHF and other
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 (subject to the rights of BHF)
or, if such real estate is leased, is subject to a landlord’s agreement in
favor of (subject to the rights of BHF) Lender on terms acceptable to Lender,
or an accession to other personal property unless such personal property is
subject to a second priority Lien in favor of Lender (subject to the rights of
BHF).

 

(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 BHF, and Schedule 11(n)
hereto describes all Indebtedness of the Borrower existing as of May 5,
2005, including, without limitation, any Indebtedness permitted under Section 13(a).

 

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

 

(p)                                 Parent,
Subsidiaries and Affiliates.  Except
as set forth on Schedule 11(p) hereto or as otherwise permitted
hereunder, including under Section 13(c) hereof, Borrower has no
Parents, Subsidiaries or other Affiliates, nor is Borrower engaged in any joint
venture or partnership with any other Person.

 

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

 

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

 

19

 

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.

 

(v)                                 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.

 

(w)                               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);

 

20

 

(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.

 

(x)                                   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.

 

(y)                                 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(y) 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.

 

(z)                                   Collective
Enterprise.  Borrowers are engaged in
the businesses of providing staffing in the healthcare industry as of the
Closing Date, as well as in certain other businesses.  These operations require financing on a basis
such that the credit supplied can be made available from time to time to
Borrowers, as required for the continued successful operation of Borrowers
taken as a whole.  Borrowers have
requested the Lender make credit available hereunder primarily for the purposes
of Subsection 12(g) and generally for the purposes of
financing the operations of Borrowers. 
Each Borrower expects to derive benefit (and the Board of Directors of
each Borrower has determined that such Borrower may reasonably be expected to
derive benefit), directly or indirectly, from a portion of the credit extended
by Lender hereunder, both in its separate capacity and as a member of the group
of companies, since the successful operation and condition of each Borrower is
dependent on the continued successful performance of the functions of the group
as a whole.  Each Borrower acknowledges
that, but for the agreement of each of the other Borrowers to execute and
deliver this Agreement, Lender would not have made available the credit
facilities established hereby on the terms set forth herein.

 

(aa)                            Acquisition.  Each Acquisition has been
consummated pursuant to the terms of the applicable Acquisition Documents 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 

 

21

 

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.

 

(bb)                          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 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)                                  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

 

(iii)                               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.

 

(iv)                              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 

 

22

 

(“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.

 

(v)                                 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.

 

(vi)                              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).

 

(vii)                           Subordinated
Debt.  Promptly advise Lender of any
default or any event which, with the giving of notice or lapse of time, or
both, would constitute a default, under any subordination agreement relative to
Subordinated Debt, or any agreement, instrument or document evidencing or
relating to any Subordinated Debt, and a certificate of a authorized officer of
Borrower specifying the nature thereof and Borrower’s proposed response
thereto, in reasonable detail; 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.

 

23

 

(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 Term Loans hereunder; provided, however, that so
long as no Event of Default has occurred, Borrower shall not pay for more than
four (4) audits in any Fiscal Year, except for 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 BHF and Lender).  Certificates of insurance or, if requested by
Lender, original (or certified) copies of such policies of insurance have been
or shall be, within ninety (90) days after 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 BHF and Lender, 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 

 

24

 

BHF and the
Lender, 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 BHF and the Lender, as their
interests may appear.  Subject to the
rights of BHF in and to the Collateral and insurance proceeds, 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.

 

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
Term Loans hereunder, shall be payable on demand by Borrower to Lender and,
until paid, shall bear interest at the highest rate then applicable to Term
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 

 

25

 

satisfactory
to Lender, of the security interest of BHF and the 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 (i) payment of a portion of the purchase price for certain
Permitted Acquisitions plus transaction fees and expenses related thereto, and (ii) 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 Term Loans hereunder, shall be payable by
Obligor to Lender on demand and, until paid, shall bear interest at the highest
rate then applicable to Term Loans hereunder.

 

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

 

(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 Access.  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.

 

26

 

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 Term Loans and the Revolving Loans, 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,
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 

 

27

 

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 provisions of Section 13(c)(i)(A) above, Crdentia may enter into
certain Permitted Acquisitions with the prior written consent of Lender in its
sole discretion.

 

(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 Sections
2(b) and 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 

 

28

 

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 

 

29

 

a Loan
or the payment of proceeds of any Collateral) to Travmed, and (ii) BHF
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

  

 

30

 

(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 Revolving
Loan Obligations.

 

(b)                                 Breach
of This Agreement, the Other Agreements and the Revolving 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 Revolving 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 Revolving 

 

31

 

Loan
Agreement) shall not constitute an Event of Default hereunder until the
fifteenth (15th) day following the occurrence thereof, and (ii) any such
failure by Borrower under Subsections 12(b)(ii) and (v) of
this Agreement (or Subsections 12(b)(iii) and 12(b)(vi) of
the Revolving 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 Term Loans to Borrower during such
forty-five (45) day period or, if earlier, until such proceedings are
dismissed.

 

32

 

(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 Term Loans 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)                                 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.

 

(p)                                 [Intentionally
Deleted]

 

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

 

33

 

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, subject to the rights of BHF, 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, but subject to the rights of BHF, 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.  Subject to the
rights of BHF, 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.

 

34

 

17.                                 CONDITIONS
PRECEDENT.

 

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

 

(a)                                  Lender shall have received four (4) originals
of each of the agreements, opinions, reports, approvals, consents, certificates
and other documents set forth on the closing document list attached hereto as Exhibit B
(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, in form and substance reasonably
acceptable to Lender;

 

(c)                                  All of the obligations of Borrower to any
prior lender (other than Subordinated Debt and BHF) 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 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;

 

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

 

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

 

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

 

35

 

(k)                                  Lender
shall have received an opinion from Borrower’s counsel, in form and substance
reasonably acceptable to the Lender in connection with any Permitted
Acquisition;

 

(l)                                     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;

 

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

 

(n)                                 Lender
shall have reviewed general background verifications of select principals,
officers and directors of the Target that will remain after the closing of any
Acquisition;

 

(o)                                 Lender
shall have received the Warrant Agreement, together with the Warrant
Certificate contemplated therein, fully executed by Crdentia;

 

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

 

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

 

(r)                                    Lender
shall have received a Subordination Agreement, in form and substance acceptable
to Lender, with respect to any seller Indebtedness outstanding as of the
Closing Date;

 

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

 

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

 

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 

 

36

 

Lender
and holds Lender harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against Lender by any
Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as provided herein, reliance by Lender on any request
or instruction from Borrowing Agent or any other action taken by Lender with
respect to this Section 18 except due to willful misconduct or gross (not
mere) negligence by the indemnified party.

 

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

 

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

 

37

 

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

 

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

 

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

 

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, 

 

38

 

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 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, 

 

39

 

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

 

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

 

22.                                 MODIFICATION
AND BENEFIT OF AGREEMENT.

 

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

 

40

 

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.

 

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 

 

41

 

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.

 

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 

 

42

 

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.

 

43

 

(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 Loan Agreement, as
amended by the First Term Loan Amendment, the Second Term Loan Amendment and
the Third Term Loan Amendment, upon the execution of this Agreement by Borrower
and Lender; and from and after such effective time, (i) all references
made to the “this Agreement” or “the Loan Agreement” 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 Loan Agreement, as amended by the First Term Loan Amendment, the
Second Term Loan Amendment and the Third Term Loan 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 Term Loans and
other Obligations evidenced by the Original Loan Agreement, as amended by the
First Term Loan Amendment, the Second Term Loan Amendment and the Third Term
Loan Amendment, including the Other Agreements and all the other instruments,
documents and agreements executed and delivered in connection with the Original
Loan Agreement, as amended by the First Term Loan Amendment, the Second Term
Loan Amendment and the Third Term Loan Amendment, , have not been satisfied but
instead have become part of the Term 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 Loan Agreement, as amended by the First Term Loan Amendment,
the Second Term Loan Amendment and the Third Term Loan 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

 

44

 

Signature Page to Amended and Restated

Loan and Security Agreement – Term Loan

 

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

 

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

  
							

 

 

Signature
Page to Term Loan Agreement

 

 

	
   

  	
  BRIDGE OPPORTUNITY FINANCE, LLC,

  a Delaware limited liability company 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Randy Abrahams

  	
   

  
	
   

  	
   

  	
  Randy Abrahams

  Chief Executive Officer

  

 

 

ANNEX 1-DEFINED TERMS

 

“Account” shall mean all present and 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 Government 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.

 

“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.

 

“BHF” shall mean Bridge Healthcare Finance,
LLC.

 

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

 

 

Annex 1 - 1

 

“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.

 

“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) of the Revolving Loan Agreement.

 

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

 

 

Annex 1 - 2

 

“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.

 

“CRDE Account Debtor Collection Lockbox Account”
shall mean an account or accounts maintained at the Lockbox Bank into which all
collections of Accounts of CRDE are paid directly; the CRDE 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.

 

“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.

 

“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 have the meaning
set forth in the Revolving Loan Agreement.

 

“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 BHF, 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 

 

 

Annex 1 - 3

 

contested in good
faith) as of the close of business on such date are treated as additional
Revolving Loans outstanding on such date.

 

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

 

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

 

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

 

“Government Authority” means any federal,
state, District of Columbia, municipal, national or other government,
governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a foreign
entity or government.

 

“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.),

 

 

Annex 1 - 4

 

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 C.

 

“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.

 

 

Annex 1 - 5

 

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

 

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

 

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

 

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

 

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

 

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

 

“Obligations” shall mean any and all
obligations, liabilities and Indebtedness of Borrower to Lender (other than
Revolving 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 August 31,
2004.

 

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

 

 

Annex 1 - 6

 

assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, and all other writings heretofore, now or from 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)(iv) hereof.

 

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

 

“Permitted Liens” shall mean (i) statutory
Liens of landlords, carriers, warehousemen, processors, mechanics, materialmen
or suppliers incurred in the ordinary course of business and securing amounts
not yet due or declared to be due by the claimant thereunder in excess of
fifteen (15) days or amounts which are being contested in good faith and by
appropriate proceedings and for which Borrower has maintained adequate
reserves; (ii) Liens in favor of Lender; (iii) zoning restrictions
and easements, licenses, covenants and other restrictions affecting the use of
real property that do not individually or in the aggregate have a material
adverse effect on Borrower’s ability to use such 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 BHF.

 

“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)(iv) hereof.

 

“Pledge Agreement” shall mean that certain
Pledge Agreement dated as of August 31 2004 between Crdentia and
Lender, 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.

 

 

Annex 1 - 7

 

“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 set forth in the Revolving Loan Agreement.

 

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

 

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

 

“Revolving Loan Obligations” shall mean all
indebtedness and obligations of every kind and nature of Borrowers in respect
of the Revolving Loan Documents.

 

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

 

“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 

 

 

Annex 1 - 8

 

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 have the meaning
specified in Subsection 2(a) hereof.

 

“Total Debt Service” means, for any period,
the sum of payments made (or, as to clause (i) of this sentence, 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.

 

“Warrant Agreement” shall mean that certain
Warrant Agreement dated as of the date hereof between Crdentia Corp. and
Lender.

 

“Warrant Certificate” shall mean a
certificate evidencing one or more warrants, substantially in the form of Exhibit A
to the Warrant Agreement, with such changes therein as may be required to
reflect any adjustments made pursuant to Section 12 of the Warrant
Agreement.

 

 

Annex 1 - 9

 

INDEX OF EXHIBITS AND SCHEDULES

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Compliance Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Closing Checklist

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Information Certificate

  

 

	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
   

  	
  Permitted Liens

  
	
   

  	
   

  	
   

  
	
  Schedule 11(b)

  	
   

  	
  Business and Collateral Locations

  
	
   

  	
   

  	
   

  
	
  Schedule 11(b)

  	
   

  	
  Certain Collateral

  
	
   

  	
   

  	
   

  
	
  Schedule 11(g)

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  Schedule 11(i)

  	
   

  	
  Affiliate Transactions

  
	
   

  	
   

  	
   

  
	
  Schedule 11(j)

  	
   

  	
  Names & Trade Names

  
	
   

  	
   

  	
   

  
	
  Schedule 11(n)

  	
   

  	
  Indebtedness

  
	
   

  	
   

  	
   

  
	
  Schedule 11(p)

  	
   

  	
  Parent, Subsidiaries and Affiliates

  
	
   

  	
   

  	
   

  
	
  Schedule 11(q)

  	
   

  	
  Defaults

  
	
   

  	
   

  	
   

  
	
  Schedule 11(t)

  	
   

  	
  Environmental Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 11(v

  	
   

  	
  Government Reimbursement Program Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 11(y)

  	
   

  	
  Licenses and Permits

  

 

 

EXHIBIT A - 1

 

EXHIBIT A –
COMPLIANCE CERTIFICATE

 

Date:

 

	
  TO:

  	
   

  	
  Bridge Opportunity Finance, LLC

  
	
   

  	
   

  	
  233 South Wacker Drive, Suite 5350

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  

 

Gentlemen and Ladies:

 

The undersigned Borrower hereby certifies to you the following pursuant
to Section 9(c) of the Amended and Restated Loan and Security
Agreement-Term 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”), a d Bridge Healthcare Finance,
LLC (the “Lender”).

 

1.               As of            ,
no event of default or event which with the lapse of time or the giving 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) at all times
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:           No:           

 

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: (See attached Schedule B for calculation)

 

	
  Time Frame

  	
   

  	
  Date Tested

  	
   

  	
  Senior Debt Service Coverage
  Ratio

  	
   

  	
  Based on

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  6/30/05

  	
   

  	
  0.5 to 1.00

  	
   

  	
  Trailing 3 months

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  9/30/05

  	
   

  	
  1.00 to 1.00

  	
   

  	
  Trailing 6 months

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  12/31/05

  	
   

  	
  1.15 to 1.00

  	
   

  	
  Trailing 9 months

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  3/31/06

  	
   

  	
  1.5 to 1.00

  	
   

  	
  Trailing 12 months

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  6/30/06 and each fiscal quarter thereafter

  	
   

  	
  1.5 to 1.00

  	
   

  	
  Trailing 12 months

  

 

	
  Actual Debt
  Service Coverage

  Ratio:

  	
   

  	
  Compliance:

  	
   

  	
  Yes:

  	
   

  	
  No:

  

 

c.               Minimum EBITDA.  Borrower shall not permit EBITDA of 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:           No:           

 

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:

  	
   

  	
  No:

  

 

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:

  	
   

  	
  No:

  

 

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:

  	
   

  	
  No:

  

 

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

 

Exhibit B

Closing Checklist

(See Attached)

 

 

EXHIBIT B - 2

 

Exhibit C

Information Certificate

(See Attached)

 

 

EXHIBIT B - 3

 

Exhibit D

Subordination Agreement

(See Attached)

 

 

EXHIBIT B - 4

 

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
(“Borrower”) and BRIDGE
OPPORTUNITY 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(J) - 1

 

SCHEDULE 11(P) – PARENT, SUBSIDIARIES AND AFFILIATES

 

 

SCHEDULE 11(X) - 1Exhibit 10.1

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

dated
as of July 12, 2005

 

between

 

GREAT
PLAINS ETHANOL, LLC

as Borrower

 

and

 

AGCOUNTRY
FARM CREDIT SERVICES, FLCA

as Lender

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I. DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
   

  
	
  Section 1.02

  	
  Accounting
  Terms and Determination

  	
   

  
	
  Section 1.03

  	
  Terms
  Generally

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. AMOUNTS AND TERMS OF THE
  LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  General
  Description of the Loans

  	
   

  
	
  Section 2.02

  	
  Term Loan
  Conversion

  	
   

  
	
  Section 2.03

  	
  Revolving
  Commitment

  	
   

  
	
  Section 2.04

  	
  Procedure
  for Revolving Borrowings

  	
   

  
	
  Section 2.05

  	
  Interest
  Rates

  	
   

  
	
  Section 2.06

  	
  2005 Term
  Loan

  	
   

  
	
  Section 2.07

  	
  Repayment
  of Loans

  	
   

  
	
  Section 2.08

  	
  Evidence
  of Indebtedness

  	
   

  
	
  Section 2.09

  	
  Prepayments

  	
   

  
	
  Section 2.10

  	
  Interest on Loans

  	
   

  
	
  Section 2.11

  	
  Fees

  	
   

  
	
  Section 2.12

  	
  Computation of Interest and Fees

  	
   

  
	
  Section 2.13

  	
  Increased Costs

  	
   

  
	
  Section 2.14

  	
  Taxes

  	
   

  
	
  Section 2.15

  	
  Payments Generally

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CONDITIONS PRECEDENT TO
  LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Conditions To Effectiveness

  	
   

  
	
  Section 3.02

  	
  Each Loan

  	
   

  
	
  Section 3.03

  	
  Delivery of Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Existence; Power

  	
   

  
	
  Section 4.02

  	
  Organizational Power; Authorization

  	
   

  
	
  Section 4.03

  	
  Governmental Approvals; No Conflicts

  	
   

  
	
  Section 4.04

  	
  Financial Statements

  	
   

  
	
  Section 4.05

  	
  Litigation and Environmental Matters

  	
   

  
	
  Section 4.06

  	
  Compliance with Laws and Agreements

  	
   

  
	
  Section 4.07

  	
  Investment Company Act, Etc.

  	
   

  
	
  Section 4.08

  	
  Taxes

  	
   

  
	
  Section 4.09

  	
  Margin Regulations

  	
   

  
	
  Section 4.10

  	
  ERISA

  	
   

  
	
  Section 4.11

  	
  Ownership of Property

  	
   

  
	
  Section 4.12

  	
  Disclosure

  	
   

  
	
  Section 4.13

  	
  Labor Relations

  	
   

  
	
  Section 4.14

  	
  Subsidiaries

  	
   

  

 

 

	
  Section 4.15

  	
  Projections

  	
   

  
	
  Section 4.16

  	
  Material Contracts

  	
   

  
	
  Section 4.17

  	
  Permits

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Financial Statements and Other Information

  	
   

  
	
  Section 5.02

  	
  Notices of Material Events

  	
   

  
	
  Section 5.03

  	
  Existence; Conduct of Business

  	
   

  
	
  Section 5.04

  	
  Compliance with Laws, Etc.

  	
   

  
	
  Section 5.05

  	
  Payment of Obligations

  	
   

  
	
  Section 5.06

  	
  Books and Records

  	
   

  
	
  Section 5.07

  	
  Visitation, Inspection, Audit, Etc.

  	
   

  
	
  Section 5.08

  	
  Maintenance of Properties; Insurance

  	
   

  
	
  Section 5.09

  	
  Use of Proceeds

  	
   

  
	
  Section 5.10

  	
  Subsidiaries

  	
   

  
	
  Section 5.11

  	
  Assignment of Material Contracts

  	
   

  
	
  Section 5.12

  	
  Food Security Act Compliance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI FINANCIAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
  Section 6.02

  	
  Owner’s Equity Ratio

  	
   

  
	
  Section 6.03

  	
  Capital Expenditures

  	
   

  
	
  Section 6.04

  	
  Current Ratio

  	
   

  
	
  Section 6.05

  	
  Working Capital

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Indebtedness

  	
   

  
	
  Section 7.02

  	
  Negative Pledge

  	
   

  
	
  Section 7.03

  	
  Fundamental Changes

  	
   

  
	
  Section 7.04

  	
  Investments, Loans, Etc.

  	
   

  
	
  Section 7.05

  	
  Restricted Payments

  	
   

  
	
  Section 7.06

  	
  Sale of Assets

  	
   

  
	
  Section 7.07

  	
  Transactions with Affiliates

  	
   

  
	
  Section 7.08

  	
  Restrictive Agreements

  	
   

  
	
  Section 7.09

  	
  Sale and Leaseback Transactions

  	
   

  
	
  Section 7.10

  	
  Lease Obligations

  	
   

  
	
  Section 7.11

  	
  Hedging Agreements

  	
   

  
	
  Section 7.12

  	
  Amendment to Material Documents

  	
   

  
	
  Section 7.13

  	
  Accounting Changes

  	
   

  
	
  Section 7.14

  	
  Deposit and Investment Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX MISCELLANEOUS

  	
   

  

 

 

	
  Section 9.01

  	
  Notices

  	
   

  
	
  Section 9.02

  	
  Waiver; Amendments

  	
   

  
	
  Section 9.03

  	
  Expenses; Indemnification

  	
   

  
	
  Section 9.04

  	
  Successors and Assigns

  	
   

  
	
  Section 9.05

  	
  Governing Law; Jurisdiction; Consent to Service of Process

  	
   

  
	
  Section 9.06

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  Section 9.07

  	
  Right of Setoff

  	
   

  
	
  Section 9.08

  	
  Counterparts; Integration

  	
   

  
	
  Section 9.09

  	
  Survival

  	
   

  
	
  Section 9.10

  	
  Severability

  	
   

  
	
  Section 9.11

  	
  Confidentiality

  	
   

  
	
  Section 9.12

  	
  Interest Rate Limitation

  	
   

  
	
  Section 9.13

  	
  Termination

  	
   

  
	
  Section 9.14

  	
  Other Agreements

  	
   

  

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Original Form of Construction Loan Note

  
	
  Exhibit B

  	
  -

  	
  Form of Amended and Restated Revolving Credit Note

  
	
  Exhibit C

  	
  -

  	
  Form of 2005 Term Note

  
	
  Exhibit 2.04

  	
  -

  	
  Form of Revolving Draw Request

  
	
  Exhibit 2.05(c)

  	
  -

  	
  Form of Interest Election

  
	
  Exhibit 2.06(c)

  	
  -

  	
  Form of 2005 Term Loan Draw Request

  
	
  Exhibit 3.01(b)(vii)

  	
  -

  	
  Form of Secretary’s Certificate

  
	
  Exhibit 3.01(b)(viii)

  	
  -

  	
  Form of Officer’s Certificate

  

 

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND
RESTATED CREDIT AGREEMENT (this “Agreement”) is made and entered into effective as of July 12,
2005, by and between GREAT PLAINS ETHANOL, LLC, a South Dakota limited
liability company (“Borrower”)
and AGCOUNTRY FARM CREDIT SERVICES, FLCA (“Lender”).

 

RECITALS:

 

A.                                   On June 19,
2002, Borrower and Lender entered into a Credit Agreement which provided for a
$32,500,000 multiple advance loan facility in favor of Borrower for the
purposes of acquiring, constructing, equipping and furnishing of an ethanol
production facility to be located near Chancellor, Turner County, South Dakota
(the “Project”).

 

B.                                     On October 1,
2003, Borrower completed constructing, equipping and furnishing the Project.

 

C.                                     On September 1,
2004, Borrower and Lender entered into the First Amendment to the Credit
Agreement which, among other things, contained Lender’s consent to certain
additional Indebtedness, and added a new Section 6.05 to the Credit
Agreement.

 

D.                                    Borrower has
requested that Lender amend and restate its credit arrangement to, among other
things: (1) increase the Revolving Loan to $8,000,000, (2) establish
a new $5,000,000 loan to finance certain Capital Expenditures, (3) suspend
Free Cash Flow payments to Lender, (4) modify Borrower’s ability to make a
Restricted Payment under certain terms and conditions, (5) increase
Borrower’s allowance for annual Capital Expenditures, (6) approve Borrower’s
Capital Expenditures for 2005 in the amount of $6,000,000, and (7) modify
certain financial covenants of Borrower.

 

E.                                      Subject to the
terms and conditions of this Agreement, Lender is willing to amend and restate
the Credit Agreement and provide certain additional financing and
accommodations to Borrower.

 

AGREEMENT:

 

In consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

Section 1.01                            Definitions.  In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein
specified (to be equally applicable to both the singular and plural forms of
the terms defined):

 

“2005 Closing Date” shall mean the date on
which the conditions precedent set forth in Section 3.01(b) have
been satisfied or waived in accordance with Section 9.02.

 

1

 

“2005 Closing Fee” shall have the meaning set
forth in Section 2.11(e).

 

“2005 Term Loan” shall have the meaning set
forth in Section 2.06.

 

“2005 Term Loan  Commitment” shall mean the obligation of
Lender to make the 2005 Term Loan to Borrower in accordance with the terms of Section 2.06.

 

“2005 Term Loan Commitment Termination Date”
shall mean the earliest of (i) December 31, 2005, (ii) the date
on which the 2005 Term Loan Commitment is fully drawn, and (iii) the date
on which all amounts outstanding under this Agreement have been declared or
have automatically become due and payable (whether by acceleration or
otherwise).

 

“2005 Term Loan Draw Request” shall have the
meaning set forth in Section 2.06.

 

“2005
Term Loan Funding Period” shall mean the period
from the 2005 Closing Date to the 2005 Term Loan Commitment Termination Date.

 

“2005 Term Loan Note” shall mean the note made
by Borrower payable to the order of Lender in substantially the form of Exhibit C.

 

“Affiliate” shall mean, as to any Person, any
other Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Person.

 

“Amended and Restated Revolving Credit Note”
shall mean the note made by Borrower payable to the order of Lender in
substantially the form of Exhibit B.

 

“Base Rate” shall mean the per annum
adjustable rate of interest, as of the applicable Determination Date, charged
by AgriBank FCB (or its successors or any other similar funding source
regularly used by Lender from time to time in Lender’s sole discretion) to
Lender for obligations of the same maturity related to the Interest Election
for the Term Loan selected by Borrower pursuant to Section 2.05(b).

 

“Board” shall mean the Board of Governors of
the Federal Reserve System, or its successor.

 

“Borrower” shall mean Great Plains Ethanol,
LLC, a South Dakota limited liability company, and any successor thereof.

 

“Borrowing” shall mean an advance of funds by
Lender to Borrower pursuant to Lender’s Commitments hereunder.

 

“Business Day” shall mean any day other than a
Saturday, Sunday or other day on which farm credit system banks or commercial
banks in Fargo, North Dakota are authorized or required by law to close.

 

“Capital
Expenditures” shall mean for any period, without
duplication, (a) the additions to property, plant and equipment and other
capital expenditures of Borrower and its Subsidiaries

 

2

 

that are (or would be) set forth on a combined statement of cash flows
of Borrower for such period prepared in accordance with GAAP and (b) Capital
Lease Obligations incurred by Borrower and its Subsidiaries during such period.

 

“Capital Lease Obligations” of any Person
shall mean all obligations of such Person to pay rent or other amounts under
any lease (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP.

 

“Cash
Taxes” shall mean the sum of Taxes paid by
Borrower and its Subsidiaries during the related Period.

 

“Change in Control” shall mean the occurrence
of one or more of the following events: (a) the acquisition of Control of
Borrower by any Person who does not Control Borrower on the Closing Date, (b) any
sale, lease, exchange or other transfer (in a single transaction or a series of
related transactions) of all or substantially all of the assets of Borrower to
any Person or “group” (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder in
effect on the date hereof), (c) occupation of a majority of the seats
(other than vacant seats) on the board of managers of Borrower by Persons who
were neither (i) nominated by the immediately previous board of managers
or (ii) appointed by managers so nominated, or (d) any change in the
managing member of Borrower or the rights, duties or obligations of such
managing member as presently set forth in Borrower’s operating agreement.

 

“Change in Law” shall mean (i) the
adoption of any applicable law, rule or regulation after the date of this
Agreement, (ii) any change in any applicable law, rule or regulation,
or any change in the interpretation or application thereof, by any Governmental
Authority after the date of this Agreement, or (iii) compliance by Lender
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.

 

“Charges” shall have the meaning set forth in Section 9.12.

 

“Class”, when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are Revolving Loans or the Term Loans.

 

“Closing Date” shall mean June 19, 2002.

 

“Code” shall mean the Internal Revenue Code of
1986, as amended and in effect from time to time.

 

“Collateral”
shall mean all tangible and intangible property, real and personal, of Borrower
that is the subject of a Lien granted pursuant to a Loan Document to Lender for
the benefit of Lender to secure the whole or any part of the Obligations or any
Guarantee thereof, and shall include, without limitation, all casualty
insurance proceeds and condemnation awards with respect to any of the
foregoing.

 

3

 

“Collateral Assignments” shall mean each
collateral assignment by Borrower (and such other parties as Lender may
require) to Lender, along with consents to such assignments as shall be deemed
appropriate by Lender, from time to time, of the Material Contracts.

 

“Commitment” shall mean the Revolving
Commitment or the 2005 Term Loan Commitment, or any combination thereof as the
context shall permit or require.

 

“Construction Loans” shall mean the loans made
by Lender to Borrower which have been converted to the Term Loan as described
in Section 2.02.

 

“Construction Note” and “Construction Loan Note”
shall each mean the Term Note.

 

“Control” shall mean the power, directly or
indirectly, either to (i) vote 5% or more of securities having ordinary
voting power for the election of directors (or persons performing similar
functions) of a Person or (ii) direct or cause the direction of the
management and policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise. The terms “Controlling”, “Controlled by”, and “under common Control with”
have meanings correlative thereto.

 

“Control Agreements” shall mean the agreements as may be requested by Lender to
perfect Lender’s security interest in the Deposit Accounts and Investment
Accounts, in form and substance satisfactory to Lender, as the same may be
amended, restated, supplemented or otherwise modified from time to time.

 

“Default” shall mean any condition or event
that, with the giving of notice or the lapse of time, or both, would constitute
an Event of Default.

 

“Default Interest” shall have the meaning set
forth in Section 2.10(b).

 

“Deposit
Accounts” shall mean all demand, time, savings,
passbook or similar depository accounts of Borrower with financial
institutions, including but not limited to the Equity Deposit Account and
Borrower’s operating, payroll and other deposit accounts.

 

“Determination Date” shall mean, (a) with
respect to Loans subject to the Variable Rate or the Term Variable Rate, the
date three (3) Business Days prior to the Closing Date with respect to the
Interest Period immediately following the Closing Date, and the first Business
Day of each subsequent month thereafter, and (b) with respect to all other
Loans, the date three (3) Business Days prior to the first day of the
related Interest Period.

 

“Dollars” or “$” shall mean dollars denominated in the
currency of the United States of America.

 

“Draw
Request” shall mean a Revolving Draw Request or a
2005 Term Loan Draw Request.

 

“EBITDA”
shall mean, for Borrower and its Subsidiaries for any period determined on a
consolidated basis in accordance with GAAP, an amount equal to (a) Net
Income for such period plus (b) to
the extent deducted in determining Net Income for such period, the sum of (i) Interest

 

4

 

Expense, (ii) income tax expense, (iii) depreciation and
amortization and (iv) all other non-cash charges, in each case for such
period.

 

“Environmental Laws” shall mean all laws,
rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions,
notices or binding agreements issued, promulgated or entered into by or with
any Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, the management, Release or
threatened Release of any Hazardous Material or to health and safety matters.

 

“Environmental Liability” shall mean any
liability, contingent or otherwise (including any liability for damages, costs
of environmental investigation and remediation, costs of administrative oversight,
fines, related attorneys’ fees, natural resource damages, penalties or
indemnities), of Borrower or any Subsidiary directly or indirectly resulting
from or based upon (a) any actual or alleged violation of any
Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) any actual
or alleged exposure to any Hazardous Materials, (d) the Release or
threatened Release of any Hazardous Materials, or (e) any contract,
agreement or other consensual arrangement pursuant to which liability is
assumed or imposed with respect to any of the foregoing.

 

“Equipment” shall mean all equipment,
machinery, apparatus, fittings, fixtures and other tangible personal property
of every kind and description used in the business operations of Borrower or
owned by Borrower or in which Borrower has an interest, and all parts,
accessories, and special tools and all increases and accessions thereto and
substitutions and replacements therefor.

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, and any successor
statute.

 

“ERISA Affiliate” shall mean any trade or
business (whether or not incorporated), which, together with Borrower, is
treated as a single employer under Section 414(b) or (c) of the
Code or, solely for the purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.

 

“ERISA Event”
shall mean (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an “accumulated funding deficiency”  (as defined in Section 412 of the Code
or Section 302 of ERISA), whether or not waived; (c) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by Borrower or the ERISA
Affiliate from the PBGC or a plan administrator appointed by the PBGC of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by Borrower or any of
its ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal

 

5

 

Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.

 

“Event of Default” shall have the meaning
provided in Article VIII.

 

“Excluded Taxes” shall
mean with respect to Lender or any other recipient of any payment to be made by
or on account of any obligation of Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its Net Income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in which its
applicable lending office is located, and (b) any branch profits taxes
imposed by the United States of America or any similar tax imposed by any other
jurisdiction in which Lender or other recipient is located.

 

“Farm
Products” has the meaning given to it in the Food
Security Act.

 

“Five-Year Adjustable Rate” shall have the
meaning set forth in Section 2.05(b)(iii).

 

“Fixed Base Rate” shall mean the per annum
fixed rate of interest, as of the applicable Determination Date, charged by
AgriBank FCB to Lender for obligations with a maturity of ten (10) years
and subject to a prepayment penalty.

 

“Fixed Charge Coverage Ratio” shall mean, for any
period of four consecutive fiscal quarters of Borrower, the ratio of (a) EBITDA
for such period to (b) Fixed
Charges for such period.

 

“Fixed Charges” shall mean, for Borrower and
its Subsidiaries for any period determined on a consolidated basis in accordance
with GAAP, the sum of (a) Interest Expense for such period, plus (b) scheduled principal payments
made on Total Debt (not including payments related to seasonal indebtedness for
which Lender has consented in writing to exclusion therefrom) for such period, plus (c) income tax expense for such
period, plus (d) Restricted
Payments paid during such period, plus
(e) Non-Financed Maintenance Capital Expenditures.

 

“Fixed Rate” shall have the meaning set forth
in Section 2.05(b)(v).

 

“Food
Security Act” shall mean the federal Food Security
Act of 1985, as amended from time to time (7 U.S.C. 1631, et seq.).

 

“Free
Cash Flow” shall mean for any period, the EBITDA
less the sum of Interest Expense, Mandatory Debt Retirement, Cash Taxes,
Non-Financed Maintenance Capital Expenditures.

 

“GAAP” shall mean generally accepted
accounting principles in the United States applied on a consistent basis and
subject to the terms of Section 1.02.

 

“Governmental Authority” shall mean the
government of the United States of America, any other nation or any political
subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity
exercising

 

6

 

executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”) shall
mean any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly and
including any obligation, direct or indirect, of the guarantor (a) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c) to
maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (d) as an account
party in respect of any letter of credit or letter of guaranty issued in
support of such Indebtedness or obligation; provided, that the term “Guarantee”
shall not include endorsements for collection or deposits in the ordinary
course of business. The amount of any Guarantee shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which Guarantee is made or, if not so stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith. The
term “Guarantee” used as a verb has a corresponding meaning.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all
other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Hedging Agreements” shall mean interest rate
swap, cap or collar agreements, interest rate future or option contracts, currency
swap agreements, currency future or option contracts, commodity agreements and
other similar agreements or arrangements designed to protect against
fluctuations in interest rates, currency values or commodity values, in each
case to which Borrower or any Subsidiary is a party.

 

“Indebtedness” of any Person shall mean,
without duplication (i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such Person in
respect of the deferred purchase price of property or services (other than
trade payables incurred in the ordinary course of business; provided,
that for purposes of Section 8.01(g), trade payables overdue by
more than 120 days shall be included in this definition except to the extent
that any of such trade payables are being disputed in good faith and by
appropriate measures), (iv) all obligations of such Person under any
conditional sale or other title retention agreement(s) relating to property
acquired by such Person, (v) all Capital Lease Obligations of such Person,
(vi) all obligations, contingent or otherwise, of such Person in respect
of letters of credit, acceptances or similar extensions of credit, (vii) all
Guarantees of such Person of the type of Indebtedness described in clauses (i) through
(vi) above, (viii) all Indebtedness of a third party secured by any
Lien on property owned by such Person, whether or not such Indebtedness has
been assumed by such Person,

 

7

 

(ix) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any common stock of
such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness
of any partnership or joint venture in which such Person is a general partner
or a joint venturer, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor.

 

“Indemnified Taxes” shall mean Taxes other
than Excluded Taxes.

 

“Interest Election” shall have the meaning set
forth in Section 2.05(b).

 

“Interest Expense” shall mean, for Borrower
and its Subsidiaries for any period determined on a consolidated basis in accordance
with GAAP, the sum of (i) total interest expense, including without
limitation the interest component of any payments in respect of Capital Lease
Obligations capitalized or expensed during such period (whether or not actually paid during such
period), plus (ii) the net amount payable (or minus the net amount receivable) under
Hedging Agreements (other than Hedging Agreements related to commodities)
during such period (whether or not actually paid or received during such
period).

 

“Interest Period” shall mean:

 

(a)                                  with respect to Loans
subject to the Variable Rate or the Term Variable Rate, the initial Interest
Period shall be the period beginning on the date of the related Borrowing and
continuing through the last day of the month of such Borrowing, and all other
Interest Periods shall be the calendar month;

 

(b)                                 with respect to Loans
subject to the Three-Year Adjustable Rate, the Five-Year Adjustable Rate, or
the Ten-Year Adjustable Rate, the initial Interest Period shall be the period
beginning on the date of the related Borrowing and continuing until the date
three (3), five (5) or ten (10) years, as applicable, after the date
of such Borrowing, and all other Interest Periods shall be the period beginning
on the effective date of such interest rate pursuant to Section 2.05(c) and
continuing until the date three (3), five (5) or ten (10) years, as
applicable, following such effective date; and

 

(c)                                  with respect to Loans
subject to the Fixed Rate, the Interest Period shall be the period beginning on
the date of funding on any such Loan and
continuing until the date ten (10) years following the Closing Date;

 

provided, that no
Interest Period may extend beyond the Maturity Date.

 

“Investment Accounts” shall mean all securities or investment accounts of
Borrower with brokerage firms and others, including but not limited to the
Equity Deposit Account.

 

“Investments” shall
have the meaning set forth in Section 7.04.

 

“Lender” shall mean AgCountry Farm Credit
Services, FLCA, and its successors and assigns.

 

8

 

“LIBOR” means the one month London interbank
rate reported on the tenth day of the month preceding the applicable Interest
Period by the Wall Street Journal
in its daily listing of money rates, defined therein as “the average of
interbank offered rates for dollar deposits in the London market based on
quotations at five major banks.”  If a one month LIBOR rate is not
reported on the tenth day of a month, the one month LIBOR rate reported on the
first Business Day preceding the tenth day of the month will be used.  If
this index is no longer available, Lender will select a new index which is
based on comparable information.

 

“License
Agreement” shall mean the Technology and Patent
Rights Licensing Agreement, dated as of April 5, 2005, between Borrower
and Broin and Associates, Inc., as the same may be amended, restated,
supplemented or otherwise modified from time to time

 

“Lien” shall mean any mortgage, pledge,
security interest, lien (statutory or otherwise), charge, encumbrance,
hypothecation, assignment, deposit arrangement, or other arrangement having the
practical effect of the foregoing or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
capital lease having the same economic effect as any of the foregoing).

 

“Loan Documents” shall mean collectively this
Agreement, the Notes, all Notices of Borrowing, the Mortgage, the Security
Agreement, the Collateral Assignments, and any and all other instruments,
agreements, documents and writings executed in connection with any of the
foregoing.

 

“Loans” shall mean the Revolving Loans and the
Term Loans in the aggregate, or any of them, as the context shall require.

 

“Management
Contracts” shall mean those certain agreements and
contracts which are material to the management of Borrower’s business listed on
Schedule 4.16(a), as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Material Adverse Effect” shall mean, with
respect to any event, act, condition or occurrence of whatever nature
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singularly or in conjunction
with any other event or events, act or acts, condition or conditions,
occurrence or occurrences whether or not related, a material adverse change in,
or a material adverse effect on, (i) the business, results of operations,
financial condition, assets, liabilities, Projections or prospects of Borrower,
(ii) the ability of Borrower to perform any of its obligations under the
Loan Documents, (iii) the rights and remedies of Lender under any of the
Loan Documents or (iv) the legality, validity or enforceability of any of
the Loan Documents.

 

“Material
Contracts” shall mean the Management Contracts,
Supply Contracts, Off-Take Contracts, Transportation Contracts, Power
Contracts, the License Agreement, the Process Guarantee, and such other
agreements and contracts as may be material to operation of Borrower’s
business.

 

“Material Indebtedness” shall mean
Indebtedness (other than the Loans) or obligations in respect of one or more
Hedging Agreements of Borrower and its Subsidiaries in an aggregate

 

9

 

principal amount exceeding $200,000. 
For purposes of determining Material Indebtedness, the “principal amount”
of the obligations of Borrower or any Subsidiary in respect to any Hedging
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that Borrower or such Subsidiary would be required to
pay if such Hedging Agreement were terminated at such time.

 

“Maturity Date” shall mean the earlier of (i) October 1,
2013, or (ii) the date on which the principal amount of all outstanding
Loans have been declared or automatically have become due and payable (whether
by acceleration or otherwise).

 

“Maximum Rate” shall have the meaning set
forth in Section 9.12.

 

“Mortgage”
shall mean the Amended and Restated Mortgage delivered by Borrower in favor of
Lender, as amended, restated, supplemented or otherwise modified from time to
time, whereby Borrower pledges all of its right, title and interest in the Real
Estate to Lender as collateral for the Obligations.

 

“Mortgage
Properties” shall mean, collectively, the Real
Estate subject to the Mortgage.

 

“Multiemployer Plan” shall have the meaning
set forth in Section 4001(a)(3) of ERISA.

 

“Net Income” shall mean, for any period, the
net income (or loss) of Borrower and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, but excluding
therefrom (to the extent otherwise included therein) (i) any extraordinary
gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any
equity interest of Borrower or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary, and (iv) any income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with Borrower or any Subsidiary on the date that such Person’s
assets are acquired by Borrower or any Subsidiary.

 

“Net Worth” shall mean, as of any date, (i) the
total assets of Borrower and its Subsidiaries that would be reflected on
Borrower’s consolidated balance sheet as of such date prepared in accordance
with GAAP, after eliminating all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries, less (ii) the sum of (a) the
total liabilities of Borrower and its Subsidiaries that would be reflected on a
consolidated balance sheet of Borrower and its Subsidiaries as of such date
prepared in accordance with GAAP, (b) the amount of any write-up in the
book value of any assets resulting from a revaluation thereof or any write-up
in excess of the cost of such assets acquired reflected on the consolidated
balance sheet of Borrower and its Subsidiaries as of such date prepared in
accordance with GAAP, and (c) the net book amount of all assets of
Borrower and its Subsidiaries that would be classified as intangible assets on
a consolidated balance sheet of Borrower and its Subsidiaries as of such date
prepared in accordance with GAAP.

 

“Non-Financed
Maintenance Capital Expenditures” shall mean the
sum of Capital Expenditures made by Borrower in the ordinary course of business
related to maintenance of Borrower’s property, plant and equipment and paid during the related period, except the term shall not include Capital
Expenditures for which Borrower or any Subsidiary incurred Indebtedness in connection therewith.

 

10

 

“Notes” shall mean, the Term Note, the Amended
and Restated Revolving Credit Note, and the 2005 Term Note, or any combination
thereof as the context shall permit or require.

 

“Obligations” shall mean all amounts owing by
Borrower to Lender pursuant to or in connection with this Agreement or any
other Loan Document, including without limitation, all principal, interest
(including any interest accruing after the filing of any petition in bankruptcy
or the commencement of any insolvency, reorganization or like proceeding
relating to Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), all reimbursement obligations, fees,
expenses, indemnification and reimbursement payments, costs and expenses
(including all fees and expenses of counsel to Lender incurred pursuant to this
Agreement or any other Loan Document), whether direct or indirect, absolute or
contingent, liquidated or unliquidated, now existing or hereafter arising
hereunder or thereunder, together with all renewals, extensions, modifications
or refinancings thereof.

 

“Off-Balance Sheet Liabilities”
of any Person shall mean (i) any repurchase obligation or liability of
such Person with respect to accounts or notes receivable sold by such Person, (ii) any
liability of such Person under any sale and leaseback transactions which do not
create a liability on the balance sheet of such Person, (iii) any
liability of such Person under any so-called “synthetic” lease transaction, or (iv) any
obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the balance sheet of such Person.

 

“Off-Take
Contracts” shall mean those certain agreements and
contracts which are material to the sale or disposal of products and
by-products produced by Borrower listed on Schedule 4.16(c), as the
same may be amended, restated, supplemented or otherwise modified from time to
time.

 

“Other Taxes” shall mean any and all present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to, this
Agreement or any other Loan Document.

 

“Owner’s Equity Ratio” shall mean owner’s
equity plus approved subordinated debt divided by total assets expressed as a
percent of total assets.

 

“Participant” shall have the meaning set forth
in Section 9.04(c).

 

“Payment Office” shall mean the office of
Lender located at 1749 38th Street Southwest, Post Office Box 6020, Fargo,
North Dakota 58108-6020 or such other location as to which Lender shall have
given written notice to Borrower.

 

“PBGC” shall mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA, and any successor entity
performing similar functions.

 

“Permits” shall mean all licenses, consents,
approvals authorizations and permits of Governmental Authorities which are
required of Borrower or useful for Borrower to obtain in connection with
operation of Borrower’s business, including but not limited to any of the
foregoing related to Environmental Laws, zoning and land-use laws (including
any requirement

 

11

 

to obtain a special exception, if applicable), water use laws, waste
disposal laws and occupancy certificates.

 

“Permitted Encumbrances” shall mean:

 

(i)                                     Liens imposed by
law for taxes not yet due (or with respect to real estate taxes, not yet
delinquent) or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being maintained in
accordance with GAAP;

 

(ii)                                  statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves are being maintained in accordance
with GAAP;

 

(iii)                               pledges and deposits
made in the ordinary course of business in compliance with workers’ compensation,
unemployment insurance and other social security laws or regulations;

 

(iv)                              deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;

 

(v)                                 judgment and
attachment liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP; and

 

(vi)                              easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or materially interfere with the ordinary conduct of business
of Borrower and its Subsidiaries taken as a whole;

 

provided, that the
term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted
Investments” shall
mean:

 

(i)                                     direct obligations
of, or obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States), in each case maturing within one year from the date of acquisition
thereof;

 

(ii)                                  commercial paper
having the highest rating, at the time of acquisition thereof, of S&P or
Moody’s and in either case maturing within six months from the date of acquisition thereof;

 

(iii)                               certificates of deposit,
bankers’ acceptances and time deposits maturing within 180 days of the date of
acquisition thereof issued or guaranteed by or placed with, and money

 

12

 

market deposit accounts issued or offered by, any domestic office of
any commercial bank organized under the laws of the United States of America or
any state thereof which has a combined capital and surplus and undivided
profits of not less than $500,000,000;

 

(iv)                              fully collateralized
repurchase agreements with a term of not more than 30 days for securities
described in clause (i) above and entered into with a financial
institution satisfying the criteria described in clause (iii) above; and

 

(v)                                 mutual funds investing
solely in any one or more of the Permitted Investments described in clauses (i) through
(iv) above.

 

“Person” shall mean any individual,
partnership, firm, corporation, association, joint venture, limited liability
company, trust or other entity, or any Governmental Authority.

 

“Plan” means any employee pension benefit plan
(other than a Multiemployer Plan) subject to the provisions of Title IV of
ERISA or Section 412 of the Code or Section 302 of ERISA, and in
respect of which Borrower or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an “
employer” as defined in Section 3(5) of ERISA.

 

“Power
Contracts” shall mean those certain contracts and
agreements which are material to the provision to Borrower of electricity,
natural gas, water, fuel oil, coal and other energy resources in connection
with the operation of Borrower’s plant, equipment and offices listed on Schedule 4.16(e) as
the same may be amended, restated, supplement and or otherwise modified from
time to time.

 

“Process
Guarantee” shall mean the Process Guarantee
provided by Broin and Associates, Inc. in favor of Borrower dated November 20,
2001.

 

“Projections”
shall mean Borrower’s forecasted (a) balance sheets; (b) profit and
loss statements; and (c) cash flow statements; all prepared on a combined
basis and otherwise consistent with the historical financial statements of
Borrower, together with appropriate supporting details and a statement of
underlying assumptions which are believed by Borrower to be reasonable and fair
in light of the current condition and past performance of Borrower and to
reflect a reasonable estimate of the projected balance sheets, results of
operations, cash flows and other information presented therein for five (5) years
following the Closing Date.

 

“Real
Estate” shall mean all real property owned or
leased by Borrower or its Subsidiaries.

 

“Real
Estate Documents” shall mean collectively, the
Mortgage and all other documents, instruments, agreements and certificates
executed and delivered by Borrower to Lender in connection with the Mortgage.

 

“Release” means any release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal,
leaching or migration into the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.

 

13

 

“Required
Stock” shall mean the member stock or
participation certificates in Lender, in amounts as Lender may require Borrower
to purchase (without using proceeds of a Loan) from time to time under the
capital plan adopted by the board of directors of Lender (currently 2% of the
amount borrowed up to $1,000) pursuant to bylaws applicable to Lender.

 

“Responsible Officer” shall mean any of the
president, the chief executive officer, the chief operating officer, the chief
financial officer, the treasurer or a vice president of Borrower or such other
representative of Borrower as may be designated in writing by any one of the
foregoing with the consent of Lender; and, with respect to the financial
covenants only, the chief financial officer or the treasurer of Borrower.

 

“Restricted Payment”
shall have the meaning set forth in Section 7.05.

 

“Revolving
Borrowing” shall mean a Borrowing pursuant to Section 2.03.

 

“Revolving  Commitment” shall mean the obligation of
Lender to make Revolving Loans to Borrower in accordance with the terms of Section 2.03
in an amount not to exceed $8,000,000, as reduced from time to time pursuant to
Section 2.09(c).

 

“Revolving Commitment Termination Date”
shall mean the Maturity Date.

 

“Revolving Credit Availability Period”
shall mean the period from October 1, 2003, to the Revolving Commitment
Termination Date.

 

“Revolving Draw Request” shall have the
meaning set forth in Section 2.04.

 

“Revolving Loan” shall mean a loan made by
Lender to Borrower under the Revolving Commitment.

 

“Security Agreement” shall mean that certain
Amended and Restated Security Agreement, dated as of the date hereof, executed
by Borrower in favor of Lender as amended, restated, supplemented or otherwise
modified from time to time.

 

“Security Documents” shall mean, collectively,
the Security Agreement, the Collateral Assignments, the Mortgage, the other
Real Estate Documents, and all other instruments and agreements now or
hereafter securing the whole or any part of the Obligations, all UCC-1
financing statements, fixture financing statements, stock powers, and all other
documents, instruments, agreements and certificates executed and delivered by
Borrower or any other person to Lender in connection with the foregoing.

 

“Simple Interest” shall mean interest that is
computed only on the outstanding principal balance.

 

“Subsidiary” shall
mean, with respect to any Person (the “parent”), any corporation, partnership, joint
venture, limited liability company, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s
consolidated financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other corporation,
partnership, joint venture, limited liability company, association

 

14

 

or other entity (i) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power, or in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, Controlled or held,
or (ii) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent. Unless otherwise indicated, all references to “Subsidiary”
hereunder shall mean a Subsidiary of Borrower (including subsidiaries formed
after the Closing Date).

 

“Supply
Contracts” shall
mean those certain agreements and contracts related to the supply of inputs
material to operation of Borrower’s business listed on Schedule 4.16(b),
as the same may be amended, restated, supplemental or otherwise modified from
time to time.

 

“Taxes” shall mean any and all present or
future taxes, levies, imposts, duties, deductions, charges or withholdings
imposed by any Governmental Authority.

 

“Ten-Year Adjustable Rate” shall have the
meaning set forth in Section 2.05(b)(iv).

 

“Term Loan” shall have the meaning set forth
in Section 2.02.

 

“Term Loans” shall mean the Term Loan and the
2005 Term Loan.

 

“Term Note” shall mean the Construction Loan
Note of Borrower payable to the order of Lender dated June 19, 2002, the
original form of which is attached hereto as Exhibit A.  If there is a discrepancy between the
original form of the Construction Loan Note and the original Construction Loan
Note as executed by Borrower, the original Construction Loan Note will control.

 

“Term Variable Rate” shall have the meaning
set forth in Section 2.05(b)(i).

 

“Three-Year Adjustable Rate” shall have the
meaning set forth in Section 2.05(b)(ii).

 

“Title Company”
shall mean Homestead Escrow and Exchange Company, a South Dakota corporation,
and its successors and assigns, and/or any other title or escrow company
selected by Lender from time to time.

 

“Total
Debt” shall mean, as of any date of determination,
all Indebtedness of Borrower and its Subsidiaries that would be reflected on a
consolidated balance sheet of Borrower prepared in accordance with GAAP as of
such date.

 

“Transportation Contracts” shall mean those
certain agreements and contracts related to the provision of transportation or
shipping services which are material to the operation of Borrower’s business
listed on Schedule 4.16(d), as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Uniform Commercial Code” or “UCC” means the
Uniform Commercial Code as in effect from time to time in the State of North
Dakota.

 

15

 

“Variable Rate” shall mean the per annum
floating rate of interest equal to LIBOR, as determined on the applicable
Determination Date, plus 300
basis points (3.00%) during the related Interest Period.

 

“Withdrawal Liability” shall mean liability to
a Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of Subtitle E of
Title IV of ERISA.

 

Section 1.02                            Accounting
Terms and Determination.  Unless
otherwise defined or specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP as in effect from time to time, applied on a basis
consistent (except for such changes approved by Borrower’s independent public
accountants) with the most recent audited combined financial statement of
Borrower delivered pursuant to Section 5.01(a); provided,
that if Borrower notifies Lender that Borrower wishes to amend any covenant in Article VI
to eliminate the effect of any change in GAAP on the operation of such
covenant, then Borrower’s compliance with such covenant shall be determined on
the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to Borrower and Lender.

 

Section 1.03                            Terms
Generally.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and
including” and the word “to” means “to but excluding.” Unless the context
requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as it was originally executed or as it
may from time to time be amended, supplemented or otherwise modified (subject
to any restrictions on such amendments, supplements or modifications set forth
herein), (ii) any reference herein to any Person shall be construed to
include such Person’s successors and permitted assigns, (iii) the words “hereof,”
“herein” and “hereunder” and words of similar import shall be construed to
refer to this Agreement as a whole and not to any particular provision hereof, (iv) all
references to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles, Sections, Exhibits and Schedules to this
Agreement, and (v) all references to a specific time shall be construed to
refer to the time in the city and state of Lender’s principal office, unless
otherwise indicated.

 

ARTICLE II.

 

AMOUNTS AND TERMS OF THE LOANS

 

Section 2.01                            General
Description of the Loans. 
Subject to and upon the terms and conditions herein set forth, (i) Lender
hereby establishes in favor of Borrower a term loan facility pursuant to which
Lender agrees to make a Term Loan to Borrower in accordance with Section 2.02;

 

16

 

(ii) Lender agrees to establish in favor
of Borrower a revolving credit facility in accordance with Section 2.03;
and (iii) Lender hereby establishes in favor of Borrower the 2005 Term
Loan facility in accordance with Section 2.06.

 

Section 2.02                            Term
Loan Conversion.  On October 1,
2003, Lender converted $26,500,000 to a term loan (the “Term Loan”) pursuant
to the terms of the credit agreement between Borrower and Lender dated June 19,
2002.  Lender and Borrower acknowledge
that after taking into account the transactions contemplated herein, the total
principal amount outstanding on the Term Loan is $20,984,846.77, of which
Borrower has previously determined pursuant to Section 2.05(b) that
the principal amount of $20,984,846.77 is subject to the Term Variable
Rate.  There is no availability for
additional Borrowings under the Term Loan.

 

Section 2.03                            Revolving
Commitment.  Borrower and Lender
acknowledge that Borrower’s Revolving Commitment is $8,000,000.  During the Revolving Credit Availability
Period, Borrower shall be entitled to borrow, prepay and reborrow Revolving
Loans from time to time in accordance with the terms and conditions of this
Agreement; provided, that Borrower may not borrow or reborrow should
there exist a Default or Event of Default; and provided further, that at
no time shall the aggregate principal amount of Revolving Loans outstanding
exceed the amount of the Revolving Commitment.

 

Section 2.04                            Procedure
for Revolving Borrowings.   The
Borrower shall give Lender written notice (or telephonic notice promptly
confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.04
attached hereto (a “Revolving
Draw Request”) prior to 11:00 a.m. one (1) Business
Day prior to the requested date of each Revolving Loan.  Each Revolving Draw Request shall be
irrevocable and shall specify: (i) the
aggregate principal amount of the related Borrowing and (ii) the date of
the related Borrowing (which shall be a Business Day).  The aggregate principal amount of each
Revolving Borrowing shall be not less than $100,000 or a larger multiple of
$100,000.  No advance under the Revolving
Loan will be made by Lender to the extent the aggregate amount of all Loans
outstanding exceeds 60% of Borrower’s net book value pursuant to the most
recent financial statement delivered under Section 5.01(a) or (b).

 

Section 2.05                            Interest
Rates

 

(a)                                  Revolving Loans.  Interest on the Revolving Loans shall accrue
at the Variable Rate, as determined on the applicable Determination Date,
during the related Interest Period.

 

(b)                                 Term Loan. 
With respect to the Term Loan, Borrower may elect (an “Interest Election”),
from time to time, any one or more (as limited by Section 2.05(c))
of the variable, adjustable or fixed interest rates to be applied to amounts of
not less than $1,000,000 owing on the Term Loan, as set forth in (i) and (ii) below,
and interest on such amounts shall accrue at such rate selected by Borrower
during the related Interest Period. 
Interest on the Term Loan shall accrue at the Term Variable Rate for
such portion of the Term Loan for which no Interest Election shall be in
effect.

 

17

 

(i)                                     the per annum
floating rate of interest equal to LIBOR, as determined on the applicable
Determination Date, plus 264
basis points (2.64%) during the related Interest Period (the “Term Variable Rate”);
or

 

(ii)                                  the
per annum rate of interest equal to the Base Rate as determined on the
applicable Determination Date plus
300 basis points (3.00%) during the period commencing on the effective date of
the applicable Interest Election and continuing thereafter until the date three
(3) years following such date (the “Three-Year Adjustable Rate”), and thereafter
at the Term Variable Rate;

 

(iii)                               the
per annum rate of interest equal to the Base Rate as determined on the
applicable Determination Date plus
300 basis points (3.00%) during the period commencing on the effective date of
the applicable Interest Election and continuing thereafter until the date five (5) years
following such date (the “Five-Year
Adjustable Rate”), and thereafter at the Term Variable Rate;

 

(iv)                              the
per annum rate of interest equal to the Base Rate as determined on the
applicable Determination Date plus
300 basis points (3.00%) during the period commencing on the effective date of
the applicable Interest Election and continuing thereafter until the date ten (10) years
following such date (the “Ten-Year
Adjustable Rate”), and thereafter at the Term Variable Rate;

 

(v)                                 the
per annum rate of interest equal to the Fixed Base Rate as determined on the
applicable Determination Date plus
300 basis points (3.00%) during the period commencing on the Closing Date and continuing thereafter until the date
ten (10) years following the Closing Date (the “Fixed Rate”), and
thereafter at the Term Variable Rate.

 

The interest rate applicable to the Term Loan will be reduced by twenty
five basis points (0.25%) per annum at such time as Borrower has reached, and
has maintained as of the next fiscal year end, 50% owners equity, and by an
additional twenty five basis points (0.25%) per annum at such time the Borrower
has reached, and has maintained as of the next fiscal year end, 60% owners
equity, in each case based on audited financials statements after consideration
of the reduction for an annual dividend declaration; provided, that
subsequent to any interest rate reduction pursuant to this Section 2.05(b),
the interest rate applicable to the Term Loan will be increased by (x) twenty
five basis points (0.25%) per annum if Borrower’s owners equity falls below 60%
as of any subsequent quarterly period, and (y) an additional twenty five basis
points (0.25%) per annum if Borrower’s owners equity falls below 50% as of any
subsequent quarterly period.

 

(c)                                  Procedure for Election of Interest Rate.  To make an election pursuant to subsection (b) above,
Borrower shall give Lender prior written notice (or telephonic notice promptly
confirmed in writing) of its Interest Election, in the form of Exhibit 2.05(c) attached
hereto, no later than five (5) Business Days prior to the desired
effective date (which shall be a Business Day) of such election.  Borrower may make such Interest Elections at
any time and from time to time, without penalty, except as provided in Section 2.11(c);
provided, that Borrower may not elect an interest rate in which the
related Interest Period for such interest rate would extend beyond the Maturity
Date.  Borrower acknowledges that the
terms of this

 

18

 

Agreement may require Borrower to pay a prepayment fee, and that
payments received pursuant to Section 2.10 may be subject to such
prepayment fee.  Lender shall determine
the rate of interest pursuant to this Section 2.05 and shall notify
Borrower of the same, in writing, upon any request by Borrower.  Lender’s determination of the rate of
interest hereunder shall be deemed conclusive, absent manifest error.

 

Section 2.06                            2005
Term Loan.

 

(a)                                  2005 Term Loan. The Lender agrees to lend
to Borrower an amount up to $5,000,000.00 for the purpose of funding certain
Capital Expenditures as set forth on Schedule 2.06 (the “2005 Term Loan”).  The 2005 Term Loan shall be loaned pursuant
to the terms and conditions set forth in this Agreement.

 

(b)                                 Interest Rate.  Subject to the provisions of Section 2.10,
the 2005 Term Loan shall bear interest at a rate equal to the Variable Rate
until the earlier of (i) December 31, 2005, or (ii) the 2005
Term Loan Commitment has been fully funded, and then Borrower may elect the
Variable Rate, the Three-Year Adjustable Rate, the Five-Year Adjustable Rate,
the Ten-Year Adjustable Rate, or the Fixed Rate to be applied to the amounts
owing on the 2005 Term Loan, but may not elect the Term Variable Rate to be
applied to the amounts owing on the 2005 Term Loan.  Borrower shall make such interest election by
following the procedures set forth in Section 2.05(c).  Borrower must elect an interest rate provided
for in this Section 2.06(b) to apply to the entire amount of
the 2005 Term Loan outstanding and may not designate a different rate for any
partial amount of the 2005 Term Loan outstanding.  The computation of interest, amortization,
maturity and other terms and conditions of 2005 Term Loan shall be as provided
in a promissory note of Borrower payable to the order of Lender in substantially
the form of Exhibit C.

 

(c)                                  2005 Term Loan  Advances.  The
Borrower shall give Lender written notice (or telephonic notice promptly
confirmed in writing) of each 2005 Term Loan advance substantially in the form
of Exhibit 2.06(c) attached hereto (a “2005 Term Loan Draw Request”)
prior to 11:00 a.m. five (5) Business Days prior to the requested
date of advance.  Each 2005 Term Loan
Draw Request shall be irrevocable and shall
specify: (i) the aggregate principal amount of the related Borrowing, and (ii) the
date of the related Borrowing (which shall be a Business Day).  In addition, Borrower shall attach to its
written, notice lien waivers relating to all construction-related expenses paid
from the proceeds of the immediately preceding 2005 Term Loan advance.  The aggregate principal amount of each 2005
Term Loan advance shall be not less than $100,000 or a larger multiple of
$100,000.  No advance under the 2005 Term
Loan will be made by Lender to the extent the aggregate amount of all Loans
outstanding exceeds 60% of Borrower’s net book value pursuant to the most
recent financial statement delivered under Section 5.01(a) or (b).

 

(d)                                 Use of Proceeds.  The proceeds of 2005 Term Loan Advances shall
be used by the Borrower to finance certain Capital Expenditures set forth on Schedule 2.06.

 

(e)                                  Multiple Advances Under 2005 Term Loan.  Multiple advances will be permitted during
2005 Term Loan Funding Period; provided however, that the aggregate amount of
2005 Term Loan advances shall not exceed $5,000,000.00. During the 2005 Term
Loan

 

19

 

Funding Period, Borrower may borrow and
prepay, but may not reborrow, the 2005 Term Loan in accordance with the terms
and conditions of this Agreement; provided, that Borrower may not borrow
should there exist a Default or Event of Default.

 

(f)                                    Incentive Interest Rate Reduction.  The interest rate applicable to the 2005 Term
Loan will be reduced by twenty five basis points (0.25%) per annum at such time
as Borrower has reached, and has maintained as of the next fiscal year end, 50%
owners equity, and by an additional twenty five basis points (0.25%) per annum
at such time the Borrower has reached, and has maintained as of the next fiscal
year end, 60% owners equity, in each case based on audited financials
statements after consideration of the reduction for an annual dividend
declaration; provided, that subsequent to any interest rate reduction
pursuant to this Section 2.06(f), the interest rate applicable to
the 2005 Term Loan will be increased by (x) twenty five basis points (0.25%)
per annum if Borrower’s owners equity falls below 60% as of any subsequent
quarterly period, and (y) an additional twenty five basis points (0.25%) per
annum if Borrower’s owners equity falls below 50% as of any subsequent
quarterly period.

 

Section 2.07                            Repayment
of Loans.

 

(a)                                  Term Loans.  With respect to the Term Loan, Borrower shall
pay, on the first day of each calendar quarter, beginning on October 1,
2003, 40 level amortized quarterly payments of principal and interest based on
the applicable interest rate in effect from time to time pursuant to Section 2.05(b).  The amount of such payments shall be adjusted
from time to time as the interest rate is changed or adjusted pursuant to Section 2.05(b) or
Section 2.10(b).  All
remaining principal and accrued interest outstanding on the Term Loan shall be
due and payable on the Maturity Date. 
With respect to the 2005 Term Loan, Borrower shall pay, on the first day
of each calendar quarter, beginning on January 1, 2006, a principal
payment of $156,250 plus accrued interest at the applicable interest rate in
effect from time to time pursuant to Section 2.06(b).  All remaining principal and accrued interest
outstanding on the 2005 Term Loan shall be due and payable on the Maturity
Date.

 

(b)                                 Revolving Facility.  During the Revolving Credit Availability
Period, Borrower shall pay in arrears, not later than the first day of each
month, interest at the rate in effect from time to time pursuant to Section 2.05(a) based
on the average daily balance of the Revolving Loans outstanding during the
related monthly period.  Borrower shall
pay, not later than October 1 of 2012 and 2013, annual principal payments
of $4,000,000, and the amount of the Revolving Commitment shall be permanently
reduced by the amount of such annual principal payments.  All remaining principal and accrued and
unpaid interest on the Revolving Loans shall be due and payable on the Maturity
Date.

 

Section 2.08                            Evidence
of Indebtedness.  Lender shall
maintain in accordance with its usual practice appropriate records evidencing
the indebtedness of Borrower to Lender resulting from each Loan made by Lender
from time to time, including the amounts of principal and interest payable
thereon and paid to Lender from time to time under this Agreement. Lender shall
also maintain appropriate records in which shall be recorded (i) the
Revolving Commitment and the 2005 Term Loan Commitment (ii) the amount of
each Loan made hereunder by Lender, the Class thereof and, in the case of
the Term Loan, the interest rate election (pursuant to Section 2.05(b))
applicable thereto, (iii) the date of each conversion Interest Election of
all or a

 

20

 

portion thereof to another pursuant to Section 2.05,
(iv) the date and amount of any principal or interest due and payable or
to become due and payable from Borrower to Lender hereunder in respect of such
Loans and (v) both the date and amount of any sum received by Lender from
Borrower in respect of the Loans.  The
entries made in such records shall be prima
facie evidence of the existence and amounts of the obligations of
Borrower therein recorded; provided, that the failure or delay of Lender
in maintaining or making entries into any such record or any error therein
shall not in any manner affect the obligation of Borrower to repay the Loans
(both principal and unpaid accrued interest) of Lender in accordance with the
terms of this Agreement.

 

Section 2.09                            Prepayments.

 

(a)                                  Borrower may at any
time and from time to time prepay any Loan, in whole or in part, without
premium or penalty (except as provided in Section 2.11(c)), by
giving irrevocable written notice (or telephonic notice promptly confirmed in
writing) to Lender no later than 11:00 a.m. (Central Time) not less than
three (3) Business Days prior to any such prepayment; provided,
that the amount of any such prepayment shall not be less than $100,000.  Each such notice shall be irrevocable and
shall specify the proposed date of such prepayment and the principal amount of
each Loan or portion thereof to be prepaid. 
If such notice is given, the aggregate amount specified in such notice
shall be due and payable on the date designated in such notice, together with
accrued interest to such date on the amount so prepaid in accordance with Section 2.10(a) and
any prepayment fee pursuant to Section 2.11(c).

 

(b)                                 If Borrower issues any
membership interests, any other equity interests, or any debt securities, then
no later than the Business Day following the date of receipt of the proceeds
thereof, Borrower shall prepay the Loans in an amount equal to all such
proceeds, net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith provided, that no
such prepayment shall be required in the event Borrower issues membership
interests or other equity interests and the proceeds of such issuance are
invested in assets that constitute either plant or equipment of Borrower and
such assets become Collateral subject to Lender’s security interest
hereunder.  Any such prepayment shall be
applied in accordance with paragraph (c) below.

 

(c)                                  Any prepayment made
by Borrower shall be applied as follows: first, to fees and reimbursable
expenses of Lender then due and payable pursuant to any of the Loan Documents; second,
to interest then due and payable on Loans made to Borrower; third, to
the principal balance of the Term Loan, in inverse order of maturity, until the
same shall have been paid in full; fourth, to the principal balance of
the 2005 Term Loan, in inverse order of maturity, until the same shall have
been paid in full; and fifth, to the principal balance of the Revolving
Loans until the same shall have been paid in full. The applicable Commitments
shall be permanently reduced by the amount of any prepayments made pursuant to
clauses fourth and fifth above.

 

21

 

Section 2.10                            Interest
on Loans.

 

(a)                                  Interest on the
principal amount of all Loans shall accrue from and including the date such
Loans are made to but excluding the date of any repayment thereof.  Interest on all outstanding Loans shall be
payable pursuant to Section 2.07. 
All Default Interest shall be payable on demand.

 

(b)                                 While an Event of
Default exists or after acceleration, Borrower shall pay interest (“Default Interest”)
with respect to all Loans at the rate otherwise applicable plus an additional 2% per annum.  All Default Interest shall be payable on
demand.

 

Section 2.11                            Fees.

 

(a)                                  Commitment Fee. Borrower agrees to pay to
Lender a commitment fee, which shall accrue at a rate of one-half of one
percent (0.50%) per annum on the daily amount of the unused amount of the
Revolving Commitment during the Revolving Credit Availability Period.  Accrued commitment fees shall be payable in
arrears on the last day of each of March, June, September and December of
each year and on the Revolving Commitment Termination Date, commencing on the
first such date after the Closing Date; provided, that any commitment
fees accruing after the Revolving Commitment Termination Date shall be payable
on demand.

 

(b)                                 Fee Letter.  Borrower agrees to pay Lender the fees described
in the Fee Letter from Lender to Borrower dated as of the 2005 Closing Date.

 

(c)                                  Prepayment Fee.  If Borrower refinances or otherwise prepays
any Loan with sources other than funds internally generated by Borrower’s
operations, in whole or in part, Borrower agrees to pay a prepayment fee as
follows (i) if the prepayment is received within one year from the date
hereof, 2.0% of the amount prepaid, and (ii) if the prepayment is received
more than one year following the date hereof but less than two years from the
date hereof, 1.0% of the prepaid amount. 
In all other cases, in the event any Loan subject to the Three-Year
Adjustable Rate, Five-Year Adjustable Rate or Fixed Rate is paid, in whole or
in part, whether voluntarily or involuntarily, or if Borrower changes its
Interest Election with respect to such Loan, prior to the end of the related
Interest Period, Borrower shall pay to Lender a prepayment fee in an amount
which would result in Lender being made whole (on a present value basis) for
the actual or imputed funding losses incurred by Lender as a result
thereof.   Notwithstanding the
foregoing, in the event any Loan subject to the Three-Year Adjustable Rate,
Five-Year Adjustable Rate or Fixed Rate is paid as a result of the Borrower
refinancing the Loan with another lender or by other means, then in lieu of the
foregoing, Borrower shall pay to Lender a fee in an amount sufficient (on a
present value basis) to enable Lender to maintain the yield it would have
earned during the applicable interest period on the amount paid.  Such
fees will be calculated in accordance with methodology established by Lender (a
copy of which will be made available to the Borrower upon request).

 

(d)                                 Out-of-Pocket Costs.  Borrower shall pay, on demand, all of Lender’s
out-of-pocket costs in connection with the Loans, including but not limited to (i) fees,
charges and disbursements of Lender’s counsel related to the negotiation,
documentation, closing and

 

22

 

collection of the Loans in an amount not to exceed $10,000, (ii) fees,
charges and disbursements of the Inspecting Architect, and (iii) fees,
charges and disbursements of the Title Company.

 

(e)                                  2005 Closing Fee.  Borrower shall pay to Lender a closing fee
equal to $20,000 (the “2005
Closing Fee”) on or before the 2005 Closing Date.

 

Section 2.12                            Computation
of Interest and Fees.  All
computations of interest and fees hereunder shall be made on a Simple Interest
basis and on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest or fees are payable (to the extent computed on the
basis of days elapsed).  Each
determination by Lender of an interest amount or fee hereunder shall be made in
good faith and, except for manifest error, shall be final, conclusive and
binding for all purposes.

 

Section 2.13                            Increased
Costs.

 

(a)                                  If Lender shall have
determined that on or after the date of this Agreement any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of
return on Lender’s capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such Change in Law
(taking into consideration Lender’s policies with respect to capital adequacy)
then, from time to time, within five (5) Business Days after receipt by
Borrower of written demand by Lender, Borrower shall pay to Lender such
additional amounts as will compensate Lender for any such reduction suffered.

 

(b)                                 A certificate of
Lender setting forth the amount or amounts necessary to compensate Lender
specified in paragraph (a) of this Section shall be delivered to
Borrower, together with the written demand referred to in paragraph (a) of
this section, and shall be conclusive, absent manifest error.

 

(c)                                  Failure or delay on
the part of Lender to demand compensation pursuant to this Section shall
not constitute a waiver of Lender’s right to demand such compensation.

 

Section 2.14                            Taxes.

 

(a)                                  Any and all payments
by or on account of any obligation of Borrower hereunder shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided,
that if Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) Lender shall receive
an amount equal to the sum it would have received had no such deductions been
made, (ii) Borrower shall make such deductions and (iii) Borrower
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

 

(b)                                 In addition, Borrower
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable law.

 

(c)                                  Borrower shall
indemnify Lender, within five (5) Business Days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by

 

23

 

Lender, as the case may be, on or with respect to any payment by or on
account of any obligation of Borrower hereunder (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to Borrower by Lender,
shall be conclusive absent manifest error.

 

(d)                                 As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by Borrower to a
Governmental Authority, Borrower shall deliver to Lender the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to Lender.

 

Section 2.15                            Payments
Generally.

 

(a)                                  Borrower shall make
each payment required to be made by it hereunder (whether of principal,
interest, fees or reimbursement of amounts payable under Section 2.11,
2.13 or 2.14, or otherwise) prior to 11:00 a.m. (Central Time),
on the date when due, in immediately available funds, without set-off or
counterclaim.  Any amounts received after
such time on any date may, in the discretion of Lender, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made to Lender at the Payment Office. 
If any payment hereunder shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding Business
Day, and, in the case of any payment accruing interest, interest thereon shall
be made payable for the period of such extension.  All payments hereunder shall be made in
Dollars.

 

(b)                                 If at any time
insufficient funds are received by and are available to Lender to pay fully all
amounts of principal, interest and fees then due hereunder, such funds shall be
applied first to payment of interest and fees then due hereunder.

 

ARTICLE III.

 

CONDITIONS PRECEDENT TO LOANS

 

Section 3.01                            Conditions
To Effectiveness.

 

The obligations of Lender to make Loans
hereunder shall not become effective until the date on which each of the
following additional conditions is satisfied (or waived in accordance with Section 9.02):

 

(a)                                  Lender has received
all fees and other amounts due and payable on or prior to the 2005 Closing
Date, including the 2005 Closing Fee and amounts for reimbursement or payment
of all out-of-pocket expenses (including reasonable fees, charges and
disbursements of counsel to Lender) required to be reimbursed or paid by
Borrower hereunder, under any other Loan Document and under any agreement with
Lender.

 

(b)                                 Lender (or its
counsel) shall have received the following:

 

24

 

(i)                                     a counterpart of
this Agreement signed by or on behalf of Borrower or written evidence
satisfactory to Lender (which may include telecopy transmission of a signed
signature page of this Agreement) that Borrower has signed a counterpart
of this Agreement;

 

(ii)                                  the Amended and
Restated Revolving Credit Note, duly executed by Borrower payable to the order
of Lender, and the 2005 Term Loan Note, duly executed by Borrower payable to
the order of Lender;

 

(iii)                               the duly executed
Security Agreement, together with (A) UCC-1 financing statements and other
applicable documents under the laws of the jurisdictions with respect to the
perfection of the Liens granted under the Security Agreement, as requested by
Lender in order to perfect such Liens, duly executed by Borrower and all other
parties, (B) copies of favorable UCC, tax, judgment and fixture lien
search reports in all necessary or appropriate jurisdictions and under all
legal and trade names of Borrower and all other parties requested by Lender,
indicating that there are no prior Liens on any of the Collateral other than
Permitted Encumbrances, (C) duly executed landlord waivers and/or
warehouseman, or bailee agreements with respect to all inventory of Borrower or
any Subsidiary located at leased locations or other locations not owned by
Borrower in fee simple, and (D) a certified copy of all leases of Borrower
and each Subsidiary.

 

(iv)                              the duly executed
Mortgage covering all of the Real Estate owned or leased by Borrower and duly
executed counterparts of the other Real Estate Documents together with: (A) appropriate
endorsements to update the title insurance policies issued in favor of Lender
on the Closing Date; and (B) evidence that counterparts of the Mortgage
have been recorded in all places to the extent necessary or desirable, in the
judgment of Lender, to create a valid and enforceable first priority lien
(subject to Permitted Encumbrances) on the fee simple estate of each Mortgage
Property in favor of Lender for the benefit of Lender (or in favor of such other
trustee as may be required or desired under local law);

 

(v)                                 Collateral Assignments
of all Material Contracts in existence as of the 2005 Closing Date, together
with executed copies of the Material Contracts, other than those which have
previously been provided to Lender;

 

(vi)                              certificates of good
standing or existence, as may be available from the Secretary of State of the
jurisdiction of organization of Borrower and each other jurisdiction where
Borrower is required to be qualified to do business as a foreign entity;

 

(vii)                           a certificate, substantially
in the form of Exhibit 3.01(b)(vii), dated as of the 2005 Closing
Date and signed by an appropriate Responsible Officer, attaching and certifying
copies of the appropriate resolutions authorizing the execution, delivery and
performance of the Loan Documents and certifying the name, title and the
signature of each officer executing the Loan Documents.

 

(viii)                        a certificate, substantially in
the form of Exhibit 3.01(b)(viii), dated the 2005 Closing Date and
signed by an appropriate Responsible Officer, confirming compliance with the
conditions set forth in paragraphs (a), (b) and (c) of Section 3.02;

 

25

 

(ix)                                duly
executed Draw Requests, if applicable; and

 

(x)                                   the
Control Agreements.

 

(c)                                  The
revolving credit line of credit provided by AgCountry Farm Credit Services, PCA
shall have been terminated.

 

Section 3.02                            Each
Loan.   The obligation of Lender
to make a Loan on the occasion of any Borrowing is subject to the satisfaction
of the following conditions:

 

(a)                                  at the time of and
immediately after giving effect to such Borrowing, no Default or Event of
Default shall exist; and

 

(b)                                 all representations
and warranties of Borrower set forth in the Loan Documents are true and correct
in all material respects on and as of the date of such Borrowing before and
after giving effect thereto;

 

(c)                                  since the date of the
most recent financial statements of Borrower provided pursuant to Section 5.01(a),
there shall have been no change which has had or could reasonably be expected
to have a Material Adverse Effect; and

 

(d)                                 Lender shall have
received such other documents, certificates, information or legal opinions as
Lender may reasonably request, all in form and substance reasonably
satisfactory to Lender.

 

Each Borrowing shall be deemed to constitute
a representation and warranty by Borrower on the date thereof as to the
satisfaction of the matters specified in paragraphs (a), (b) and (c) of
this Section 3.02.

 

Section 3.03                            Delivery
of Documents.  All of the Loan
Documents, certificates, legal opinions and other documents and papers referred
to in this Article III, unless otherwise specified, shall be
delivered to Lender and shall be in form, substance and detail satisfactory in
all respects to Lender.

 

ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Lender,
as of the 2005 Closing Date, and the date of each Borrowing, as follows:

 

Section 4.01                            Existence;
Power. Borrower and each Subsidiary (i) are duly organized,
validly existing and in good standing as a corporation, partnership or limited
liability company, as the case may be, in each case under the laws of the
jurisdiction of its organization, (ii) have all requisite power and
authority to carry on their businesses as now conducted, and (iii) have
duly qualified to do business, and are in good standing, in each jurisdiction
where such qualification is required, except where a failure to be so qualified
could not reasonably be expected to result in a Material Adverse Effect.

 

26

 

Section 4.02                            Organizational
Power; Authorization.  The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party are within its organizational powers and have been duly
authorized by all necessary organizational, and if required, member
action.  This Agreement has been duly
executed and delivered by Borrower, and constitutes,
and each other Loan Document to which Borrower is a party, when executed and
delivered by Borrower, will constitute, valid and binding obligations of
Borrower, enforceable against it in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity.

 

Section 4.03                            Governmental
Approvals; No Conflicts.  The
execution, delivery and performance by Borrower of this Agreement, (a) does
not require any consent or approval of, registration or filing with, or any
action by, any Governmental Authority, except those as have been obtained or
made and are in full force and effect or where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of
Borrower or any of its Subsidiaries or any order of any Governmental Authority,
(c) will not violate or result in a default under any indenture, material
agreement or other material instrument binding on Borrower or any of its
Subsidiaries or any of its assets or give rise to a right thereunder to require
any payment to be made by Borrower or any of its Subsidiaries and (d) will
not result in the creation or imposition of any Lien on any asset of Borrower
or any of its Subsidiaries, except Liens (if any) created under the Loan
Documents.

 

Section 4.04                            Financial
Statements. Borrower has furnished to Lender copies of Borrower’s (a) audited
financial statements (consistent with the requirements of Section 5.01(a))
as of its most recent fiscal year end, and (b) internally prepared
financial statements (consistent with the requirements of Section 5.01(b))
as of the last day of the most recent quarter. 
Such financial statements fairly present the financial condition of
Borrower and its Subsidiaries as of such dates and the results of operations
for such periods in conformity with GAAP consistently applied, subject to year
end audit adjustments and the absence of footnotes.  Since the date of such financial statements,
there have been no changes with respect to Borrower and its Subsidiaries which
have had or could reasonably be
expected to have, singly or in the aggregate, a material adverse effect on the
business, results of operations, financial condition, assets, liabilities or
prospects of Borrower and its Subsidiaries taken as a whole.

 

Section 4.05                            Litigation
and Environmental Matters.

 

(a)                                  No litigation,
investigation or proceeding of or before any arbitrators or Governmental
Authorities is pending against or, to the knowledge of Borrower, threatened
against or affecting Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination that could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or (ii) which in any manner draws into question
the validity or enforceability of this Agreement or any other Loan Document.

 

(b)                                 Except for the matters
set forth on Schedule 4.05(b), neither Borrower nor any Subsidiary (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental
Law,

 

27

 

including without limitation, all permits, licenses and approvals
required by the state of South Dakota, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.

 

Section 4.06                            Compliance
with Laws and Agreements. 
Borrower and each Subsidiary is in compliance with (a) all
applicable laws, rules, regulations and orders of any Governmental Authority,
and (b) all indentures, agreements or other instruments (including but not
limited to the Material Contracts) binding upon it or its properties, except
where non-compliance, either singly or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.

 

Section 4.07                            Investment
Company Act, Etc.  Neither
Borrower nor any Subsidiary is (a) an “investment company”, as defined in,
or subject to regulation under, the Investment Company Act of 1940, as amended,
(b) a “holding company” as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935, as amended, or (c) otherwise
subject to any other regulatory scheme limiting its ability to incur debt.

 

Section 4.08                            Taxes.
Borrower and its Subsidiaries and each other Person for whose taxes Borrower or
any Subsidiary could become liable have timely filed or caused to be filed all
Federal income tax returns and all other material tax returns that are required
to be filed by any of them, and have paid all taxes shown to be due and payable
(or with respect to real estate taxes, have paid all taxes prior to the time
the same become delinquent) on such returns or on any assessments made against
it or its property and all Other Taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority, except (i) to the
extent the failure to do so would not have a Material Adverse Effect or (ii) where
the same are currently being contested in good faith by appropriate proceedings
and for which Borrower or such Subsidiary, as the case may be, has set aside on
its books adequate reserves.  The
charges, accruals and reserves on the books of Borrower and its Subsidiaries in
respect of such taxes are adequate, and no tax liabilities that could be
materially in excess of the amount so provided are anticipated.

 

Section 4.09                            Margin
Regulations.  None of the
proceeds of any of the Loans will be used, directly or indirectly, for “purchasing”
or “carrying” any “margin stock” with the respective meanings of each of such
terms under Regulation U of the Board as now and from time to time hereafter in
effect, or for any purpose that violates the provisions of Regulation U, T or X
of the Board.

 

Section 4.10                            ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.  The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Standards No. 87) did not, as of the date of the
most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Standards No. 87)
did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $50,000 the fair market value of the assets of all
such underfunded Plans.

 

28

 

Section 4.11                            Ownership
of Property.

 

(a)                                  Borrower and each
Subsidiary have good title to, or valid leasehold interests in, all of their
real and personal property material to the operation of their businesses.

 

(b)                                 Borrower and each
Subsidiary own, or are licensed, or otherwise have the right, to use, all
patents, trademarks, service marks, tradenames, copyrights and other
intellectual property material to their businesses and the use thereof by
Borrower and any Subsidiary does not infringe on the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, would not have a Material Adverse Effect.

 

Section 4.12                            Disclosure.  Borrower has disclosed to Lender all
agreements, instruments, and corporate or other restrictions to which Borrower
or any of Subsidiary is subject, and all other matters known to any of them,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.  None of
the reports, financial statements, certificates or other information furnished
by or on behalf of Borrower to Lender in connection with the negotiation of
this Agreement or any other Loan Document, or delivered hereunder or thereunder
(as modified or supplemented by any other information so furnished) contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, taken as a whole, in light of the circumstances
under which they were made, not misleading.

 

Section 4.13                            Labor
Relations.  There are no strikes,
lockouts or other material labor disputes or grievances against Borrower or any
Subsidiary, or, to the knowledge of Borrower, threatened against or affecting
Borrower or any Subsidiary, and no significant unfair labor practice, charges
or grievances are pending against Borrower or any Subsidiary, or to the
knowledge of Borrower, threatened against any of them before any Governmental
Authority.  All payments due from
Borrower or any Subsidiary pursuant to the provisions of any collective
bargaining agreement have been paid or accrued as a liability on the books of
Borrower or any such Subsidiary, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

Section 4.14                            Subsidiaries.  As of the 2005 Closing Date, Borrower has no
Subsidiaries and as of any subsequent date, Borrower has no Subsidiaries other
than those for which Borrower has complied with the requirements of Section 5.10.

 

Section 4.15                            Projections.  The Projections fairly present Borrower’s
reasonable forecast of the most probable results of operations and changes in
cash flows for the periods covered thereby, based on the assumptions set forth
therein, which assumptions are reasonable based on historical experience and
presently known facts. Since the date of such Projections, there have been no
changes with respect to Borrower or its Subsidiaries which could reasonably be
expected to result in, singly or in the aggregate, a material discrepancy
between such Projections and Borrower’s actual results for the periods stated.

 

Section 4.16                            Material
Contracts.  There are no Material
Contracts other than the License Agreement, the Process Guarantee, and those
agreements and contracts disclosed to Lender pursuant to this Section 4.16.

 

29

 

(a)                                  Management Contracts.  There are no agreements or contracts which
are material to the management of Borrower’s or any Subsidiary’s business other
than those listed on Schedule 4.16(a).

 

(b)                                 Supply Contracts.  There are no agreements or contracts which
are material to the provision or supply of inputs related to the operation of
Borrower’s or any Subsidiary’s business other than those listed on Schedule 4.16(b).

 

(c)                                  Off-Take Contracts.  There are no agreements or contracts which
are material to the sale or disposal of products or by-products produced by
Borrower or any Subsidiary other than those listed on Schedule 4.16(c).

 

(d)                                 Transportation Contracts.  There are no agreements or contracts related
to the provision of transportation or shipping services which are material to
the operation of Borrower’s or any Subsidiary’s business other than those
listed on Schedule 4.16(d).

 

(e)                                  Power Contracts.  There are no agreements or contracts related
to the provision of water, electricity, fuel oil, coal or other energy
resources which are material to the operation of Borrower’s or any Subsidiary’s
business other than those listed on Schedule 4.16(e).

 

Section 4.17                            Permits.  Each Permit is listed on Schedule 4.17.

 

ARTICLE V.

 

AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees that until the
Commitments are permanently terminated and the principal of and interest on all
Loans and fees are indefeasibly paid:

 

Section 5.01                            Financial
Statements and Other Information. 
The Borrower will deliver to Lender:

 

(a)                                  as soon as available
and in any event (i) within 120 days after the end of each fiscal year of
Borrower, a copy of the annual audited report for such fiscal year for Borrower
and its Subsidiaries, containing a combined and combining balance sheet of
Borrower and its Subsidiaries as of the end of such fiscal year and the related
combined and combining statements of income, owners’ equity and cash flows
(together with all footnotes thereto) of Borrower and its Subsidiaries for such
fiscal year, (ii) setting forth in comparative form the figures for the
previous fiscal year, all in reasonable detail and reported on by Christianson &
Associates, PLLP, Willmar, Minnesota, or other independent public accountants
acceptable to Lender (without a “going concern” or like qualification,
exception or explanation and without any qualification or exception as to scope
of such audit) to the effect that such financial statements present fairly in
all material respects the financial condition and the results of operations of
Borrower and its Subsidiaries, for such fiscal year on a combined basis in
accordance with GAAP and that the examination by such accountants in connection
with such combined financial statements has been made in accordance with GAAP;

 

30

 

(b)                                 as soon as available
and in any event within 45 days after the end of each calendar quarter, an
unaudited combined balance sheet of Borrower and its Subsidiaries as of the end
of such calendar quarter and the related unaudited combined statements of
income, stockholder’s equity and cash flow of Borrower and its Subsidiaries for
such calendar quarter and the then elapsed portion of such fiscal year, setting
forth in each case in comparative form the figures for the corresponding quarter
and the corresponding portion of Borrower’s previous fiscal year, all certified
by an appropriate Responsible Officer of Borrower as presenting fairly in all
material respects the financial condition and results of operations of Borrower
and its Subsidiaries on a combined basis in accordance with GAAP, subject to
normal year-end audit adjustments and the absence of footnotes;

 

(c)                                  concurrently with the
delivery of the financial statements referred to in clauses (a) and (b) above,
a certificate of a Responsible Officer, (i) certifying as to whether there
exists a Default or Event of Default on the date of such certificate, and if a
Default or an Event of Default then exists, specifying the details thereof and
the action which Borrower has taken or proposes to take with respect thereto, (ii) 
setting forth in reasonable detail calculations demonstrating compliance with Article VI
and (iii) stating whether any change in GAAP or the application
thereof has occurred since the date of Borrower’s audited financial statements
referred to in Section 4.04 and, if any change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;

 

(d)                                 concurrently with the
delivery of the financial statements referred to in clause (a) above,
a certificate of the accounting firm that reported on such financial statements
stating whether they obtained any knowledge during the course of their
examination of such financial statements of any Default or Event of Default
(which certificate may be limited to the extent required by accounting rules or
guidelines);

 

(e)                                  promptly after the
same become available, copies of all periodic and other reports, and other
materials distributed by Borrower to its members generally, or to any
Governmental Authority or national securities exchange, as applicable; and

 

(f)                                    promptly following
any request therefor, such other information regarding the results of
operations, business affairs and financial condition of Borrower or any
Subsidiary as Lender may reasonably request.

 

Section 5.02                            Notices
of Material Events. Borrower will furnish to Lender prompt written
notice of the following:

 

(a)                                  the occurrence of any
Default or Event of Default;

 

(b)                                 the filing or
commencement of any action, suit or proceeding by or before any arbitrator or
Governmental Authority against or, to the knowledge of Borrower, affecting
Borrower or any Subsidiary which, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

 

(c)                                  the occurrence of any
event or any other development by which Borrower or any Subsidiary (i) fails
to comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law,

 

31

 

(ii) becomes subject to any Environmental Liability, (iii) receives
notice of any claim with respect to any Environmental Liability, or (iv) becomes
aware of any basis for any Environmental Liability and in each of the preceding
clauses, which individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect;

 

(d)                                 the occurrence of any
ERISA Event that alone, or together with any other ERISA Events that have
occurred, could reasonably be expected to result in liability of Borrower and
its Subsidiaries in an aggregate amount exceeding $100,000; and

 

(e)                                  any other development
that results in, or could reasonably be expected to result in, a Material
Adverse Effect.

 

Each notice delivered under this Section shall
be accompanied by a written statement of a Responsible Officer setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.

 

Section 5.03                            Existence;
Conduct of Business.  Borrower
will, and will cause each Subsidiary to, do or cause to be done all things
necessary to preserve, renew and maintain in full force and effect its legal
existence and its respective rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business and will continue to engage in the same business as presently
conducted or such other businesses that are reasonably related thereto.

 

Section 5.04                            Compliance
with Laws, Etc.  Borrower will,
and will cause each Subsidiary to, comply with all laws, rules, regulations and
requirements of any Governmental Authority applicable to its properties, except
where the failure to do so, either individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

 

Section 5.05                            Payment
of Obligations.  Borrower will,
and will cause each Subsidiary to, pay and discharge at or before maturity, all
of its obligations and liabilities (including without limitation all tax
liabilities and claims that could result in a statutory Lien) before the same
shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b) Borrower
or such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.

 

Section 5.06                            Books
and Records.  Borrower will, and
will cause each Subsidiary to, keep proper books
of record and account in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities to the
extent necessary to prepare the combined financial statements of Borrower in
conformity with GAAP.

 

Section 5.07                            Visitation,
Inspection, Audit, Etc.

 

(a)                                  Borrower will, and
will cause each Subsidiary to, permit any representative of Lender to visit and
inspect its properties, to conduct audits of the Collateral (including without
limitation all Accounts and Inventory and all records relating thereto), to
examine its books and records and to make copies and take extracts therefrom,
and to discuss its

 

32

 

affairs, finances and accounts with any of its officers and with its
independent certified public accountants, all at such reasonable times and as
often as Lender, may reasonably request after reasonable prior notice to Borrower;
provided, if a Default or an Event of Default has occurred and is
continuing, no prior notice shall be required. 
All reasonable expenses incurred by Lender in connection with any such
visit, inspection, audit, examination and discussions shall be borne by
Borrower.

 

(b)                                 Borrower will, and
will cause each Subsidiary to, deliver to Lender such appraisals of the Real
Estate and other fixed assets of Borrower as Lender may reasonably request at
any time and from time to time, such appraisals to be conducted by an
appraiser, and in form and substance, reasonably satisfactory to Lender, in
each case conducted at the expense of Borrower if Lender requests such
appraisal in connection with a request for an accommodation, waiver or other
credit action by Borrower.

 

Section 5.08                            Maintenance
of Properties; Insurance. 
Borrower will, and will cause each Subsidiary to, (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear except where the failure to do so,
either individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect and (b) maintain with financially
sound and reputable insurance companies, insurance with respect to its
properties and business, and the properties and business of its Subsidiaries,
against loss or damage of the kinds customarily insured against by companies in
the same or similar businesses operating in the same or similar locations.

 

Section 5.09                            Use
of Proceeds. Borrower will use the proceeds of 2005 Term Loan to
finance certain Capital Expenditures as set forth in Schedule 2.06
of this Agreement.   No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that would violate Regulation T, U or X of the Board.

 

Section 5.10                            Subsidiaries.  If any Subsidiary is acquired or formed after
the 2005 Closing Date, Borrower will, within ten (10) business days after
such Subsidiary is acquired or formed, notify Lender and will cause such Subsidiary
to execute a guarantee of the Obligations, a joinder to the Security Agreement,
and a joinder to such other Security Documents as Lender shall require, each in
form and substance satisfactory to Lender, and will cause such Subsidiary to
deliver simultaneously therewith similar documents applicable to such
Subsidiary required under Section 3.01 as requested by Lender.

 

Section 5.11                            Assignment
of Material Contracts.  Borrower
shall notify Lender of any Material Contract promptly upon entering into the same.  Borrower agrees to promptly execute and
deliver to Lender such Collateral Assignments and take such other actions as
Lender may reasonably request to perfect Lender’s security interest in Borrower’s
rights under such Material Contracts. 
Borrower authorizes Lender to file such Uniform Commercial Code
financing statements (and amendments to the same) and continuation statements
as Lender may deem necessary or appropriate from time to time to perfect Lender’s
security interest in such Material Contracts.

 

Section 5.12                            Food
Security Act Compliance.  If
Borrower acquires any Collateral which may have constituted Farm Products in
the possession of the seller or supplier thereof,

 

33

 

Borrower shall, at its own expense, use its
best efforts to take such steps to insure that all Liens (except the Liens
granted pursuant hereto) in such acquired Collateral are terminated or
released, including, without limitation, in the case of such Farm Products
produced in a state which has established a Central Filing System (as defined
in the Food Security Act), registering with the Secretary of State of such
state (or such other party or office designated by such state) and otherwise
take such reasonably actions necessary, as prescribed by the Food Security Act,
to purchase Farm Products free of Liens (except the Liens granted pursuant
hereto); provided, that Borrower may contest and need not obtain the
release or termination of any Lien asserted by any creditor of any seller of
such Farm Products, so long as it shall be contesting the same by proper
proceedings and maintain appropriate accruals and reserves therefor in
accordance with the GAAP.  Upon Lender’s
request, Borrower agrees to forward to Lender promptly after receipt copies of
all notices of Liens and master lists of Effective Financing Statements
delivered to Borrower pursuant to the Food Security Act, which notices and/or
lists pertain to any of the Collateral. 
Upon Lender’s request, Borrower agrees to provide Lender with the names
of Persons who supply Borrower with such Farm Products and such other
information as Lender may reasonably request with respect to such Persons.

 

ARTICLE VI.

 

FINANCIAL COVENANTS

 

Borrower covenants and agrees that until the
Commitments are permanently terminated and the principal of and interest on all
Loans and fees are indefeasibly paid:

 

Section 6.01                            Fixed
Charge Coverage Ratio.  Borrower
will maintain a Fixed Charge Coverage Ratio
of not less than 1.15:1.00 tested annually at fiscal year end.  When an Owner’s Equity Ratio of 60% and
Working Capital of $6,000,000 is reached and maintained, then the minimum Fixed
Charge Coverage Ratio shall be maintained at 1.00:1.00.  Should the Owner’s Equity Ratio decline below
60% or Working Capital decline below $6,000,000 the minimum Fixed Charge
Coverage Ratio of 1.15:1.00 shall be reinstated.

 

Section 6.02                            Owner’s
Equity Ratio.  Borrower must
maintain an Owner’s Equity Ratio of at least (a) 40% on December 31,
2004, (b) 42% on December 31, 2005, (c) 44% on December 31,
2006, (d) 46% on December 31, 2007, (e) 48% on December 31,
2008, and (f) 50% on December 31, 2009, and at all times thereafter.

 

Section 6.03                            Capital
Expenditures.  In Borrower’s
fiscal year 2005, Borrower may finance certain Capital Expenditures as set
forth in Schedule 2.06 in an amount not to exceed $6,000,000
without Lender’s prior written approval. 
Borrower will not make Capital Expenditures in excess of $750,000 during
any fiscal year period following December 31, 2005, without Lender’s prior
written approval.

 

Section 6.04                            Current
Ratio.  Borrower will maintain a
ratio of current assets to current liabilities of not less than 1.2:1.  For purposes of this Section 6.04,
the current ratio calculation includes the un-advanced portion of the Revolving
Commitment other than amounts due under the Amended and Restated Revolving
Credit Note within 12 months following the date of determination.

 

34

 

Section 6.05                            Working
Capital.  Borrower will maintain
working capital in an amount of not less than $5,000,000.  For purposes of this Section 6.05,
working capital includes the un-advanced portion of the Revolving Commitment
other than amounts due under the Amended and Restated Revolving Credit Note
within 12 months following the date of determination.

 

Compliance with the financial covenants set
forth in this Article VI shall be determined based on financial
statements dated as of the close of business on the last day of the quarter for
the related period.

 

ARTICLE VII.

 

NEGATIVE COVENANTS

 

Borrower covenants and agrees that until the
Commitments are permanently terminated and the principal of and interest on all
Loans and fees are indefeasibly paid:

 

Section 7.01                            Indebtedness.
Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Indebtedness, except:

 

(a)                                  Indebtedness created
pursuant to the Loan Documents;

 

(b)                                 Indebtedness
acceptable to Lender in its sole discretion and existing on the date hereof and
set forth on Schedule 7.01(b) and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof (immediately prior to giving effect to such extension,
renewal or replacement) or shorten the maturity or the weighted average life
thereof;

 

(c)                                  Indebtedness of
Borrower incurred to finance the acquisition, construction or improvement of
any fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets
secured by a Lien on any such assets prior to the acquisition thereof; provided,
that such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvements or
extensions, renewals, and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof (immediately prior to giving
effect to such extension, renewal or replacement) or shorten the maturity or
the weighted average life thereof; provided further, that the aggregate
principal amount of such Indebtedness does not exceed $100,000 at any time
outstanding.

 

Section 7.02                            Negative
Pledge. Borrower will not, and will not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien on any of its assets or
property now owned or hereafter acquired, except:

 

(a)                                  Liens created in
favor of Lender pursuant to the Loan Documents;

 

(b)                                 Permitted
Encumbrances;

 

35

 

(c)                                  Liens on any property
or asset of Borrower existing on the 2005 Closing Date set forth on Schedule 7.02(c);
provided, that such Lien shall not apply to any other property or asset
of Borrower;

 

(d)                                 purchase money Liens
upon or in any fixed or capital assets to secure the purchase price or the cost
of construction or improvement of such fixed or capital assets or to secure
Indebtedness incurred solely for the purpose of financing the acquisition,
construction or improvement of such fixed or capital assets (including Liens
securing any Capital Lease
Obligations); provided, that (i) such Lien secures Indebtedness
permitted by Section 7.01(c), (ii) such Lien attaches
to such asset concurrently or within 90 days after the acquisition, improvement
or completion of the construction thereof; (iii) such Lien does not extend
to any other asset; and (iv) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets;

 

(e)                                  any Lien (i) existing
on any asset of any Person at the time such Person becomes a Subsidiary, (ii) existing
on any asset of any Person at the time such Person is merged with or into
Borrower or any Subsidiary or (iii) existing on any asset prior to the
acquisition thereof by Borrower or any Subsidiary; provided, that any
such Lien was not created in the contemplation of any of the foregoing and any
such Lien secures only those obligations which it secures on the date that such
Person becomes a Subsidiary or the date of such merger or the date of such
acquisition; and

 

(f)                                    extensions,
renewals, or replacements of any Lien referred to in paragraphs (a) through
(d) of this Section; provided, that the principal amount of the
Indebtedness secured thereby is not increased and that any such extension,
renewal or replacement is limited to the assets originally encumbered thereby.

 

Section 7.03                            Fundamental
Changes. Borrower will not, and will not permit any Subsidiary to,
engage in any business other than businesses of the type conducted by Borrower
and its Subsidiaries on the date hereof and businesses reasonably related
thereto.

 

Section 7.04                            Investments,
Loans, Etc. Borrower will not, and will not permit any Subsidiary to,
purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any common stock,
evidence of indebtedness or other securities (including any option, warrant, or
other right to acquire any of the foregoing) of, make or permit to exist any loans
or advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person (all of the foregoing
being collectively called “Investments”),
or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person that constitute a business unit,
or create or form any Subsidiary, except:

 

(a)                                  Investments (other
than Permitted Investments) existing on the date hereof and set forth on Schedule 7.04(a);

 

(b)                                 Permitted Investments
in which Lender maintains a first priority, perfected security interest
therein;

 

36

 

(c)                                  loans or advances to
employees, officers or directors of Borrower or any Subsidiary in the ordinary
course of business for travel, relocation and related expenses; provided,
however, that the aggregate amount of all such loans and advances does not
exceed $100,000 at any time;

 

(d)                                 Investments in other
business organizations whose primary business is the production of ethanol and
byproducts related thereto and in which Lender maintains a first priority,
perfected security interest in such Investments; provided, at the time any such Investment is made, the
aggregate book value of the sum of all such Investments may not, without the
prior written consent of Lender, exceed five percent (5.0%) of the Net Worth of
Borrower;

 

(e)                                  other Investments
which in the aggregate do not exceed $100,000 in any fiscal year of Borrower.

 

Section 7.05                            Restricted
Payments. Other than dividends or distributions payable by Borrower
solely in units of any class of its membership interests, Borrower will not
declare or make, or agree to pay or make, directly or indirectly, any dividend
or distribution on any class of its membership interests, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, retirement, defeasance or other acquisition of, any
membership interest, or any options, warrants, or other rights to purchase any
of the foregoing, whether now or hereafter outstanding, or any payment in
respect of Indebtedness subordinated to the Obligations (each such dividend,
distribution, set aside or payment, a “Restricted Payment”), except Borrower
may, so long as no Default or Event of Default has occurred and is then
continuing or would result from such payment, declare and pay distributions to
its members in respect of their membership interests as follows:

 

(a)                                  Borrower may
distribute an amount of up to 75% of Net Income; and

 

(b)                                 So
long as Borrower achieves and maintains an Owner’s Equity Ratio that exceeds
60% and working capital that exceeds $6,000,000 (in each case as reported on
audited fiscal year end financial statements), Borrower may distribute up to
100% of Net Income; provided, the limitations set forth in (a) above will
be reinstated if Borrower’s Owner’s Equity Ratio falls below 60% or working
capital falls below $6,000,000 at any quarterly reporting period.

 

(c)                                  Distributions for any
prior fiscal year must be declared by Borrower’s board of managers within 120
days of such fiscal year end or allowance hereunder to declare and pay the
distribution for such prior fiscal year will be deemed waived by Borrower and
disallowed.  Distributions for any
current fiscal year may be declared and paid by Borrower’s board of managers at
any time during such fiscal year. 
Minutes of Borrower’s board of managers’ meeting, or a writing in lieu
of meeting signed by all members of the board of managers, for which any distribution
is declared must, at a minimum, state the fiscal year period for which any
distribution will be made.

 

Such distributions may not be paid until
after confirmation of Net Income in Borrower’s financial statements submitted
pursuant to Section 5.01(a). 
In addition, notwithstanding the

 

37

 

foregoing, Borrower may make payments on subordinate Indebtedness to
the extent such payments are allowed under an intercreditor agreement between
Lender and the other lender or creditor to which such payments are made.

 

Section 7.06                            Sale
of Assets. Borrower will not, and will not permit any Subsidiary to,
convey, sell, lease, assign, transfer or otherwise dispose of, any of its
assets, business or property, whether now owned or hereafter acquired, or, in
the case of any Subsidiary, issue or sell any shares of such Subsidiary’s
common stock to any Person other than Borrower (or to qualify directors if
required by applicable law), except (a) the sale or other disposition for
fair market value of obsolete or worn out property or other property not
necessary for operations disposed of in the ordinary course of business; and (b) the
sale of inventory and Permitted Investments in the ordinary course of business.

 

Section 7.07                            Transactions
with Affiliates. Borrower will not, and will not permit any Subsidiary
to, sell, lease or otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or otherwise engage in
any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less
favorable to Borrower or such Subsidiary than could be obtained on an arm’s-length
basis from unrelated third parties in comparable transactions, (b) transactions
between Borrower and its wholly owned Subsidiaries not involving any other
Affiliates and (c) any Restricted Payment permitted by Section 7.05.

 

Section 7.08                            Restrictive
Agreements. Borrower will not, and will not permit any Subsidiary to,
directly or indirectly, enter into, incur or permit to exist any agreement that
prohibits, restricts or imposes any condition upon (a) the ability of
Borrower or any Subsidiary to create, incur or permit any Lien upon any of its
assets or properties, whether now owned or hereafter acquired, or (b) the
ability of any Subsidiary to pay dividends or other distributions with
respect to its common stock, to make or repay loans or advances to Borrower or
any other Subsidiary, to Guarantee Indebtedness of Borrower or any other
Subsidiary or to transfer any of its property or assets to Borrower or any
Subsidiary; provided, that (i) the foregoing shall not apply to
restrictions or conditions imposed by law or by this Agreement or any
other Loan Document, (ii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause
(a) shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions and conditions apply only to the property or assets securing such
Indebtedness, and (iv) clause (a) shall not apply to customary
provisions in leases restricting the assignment thereof.

 

Section 7.09                            Sale
and Leaseback Transactions. 
Borrower will not, and will not permit any Subsidiary to, enter into any
arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
or hereinafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred.

 

Section 7.10                            Lease
Obligations. Borrower will not, and will not permit any Subsidiary to,
create or suffer to exist any obligations for the payment under operating leases
or agreements

 

38

 

to lease (but excluding any obligations under
leases required to be classified as capital leases under GAAP) having a term of
five years or more which would cause the direct or contingent liabilities of
Borrower and its Subsidiaries under such leases or agreements to lease, on a
consolidated basis, to exceed $200,000 in the aggregate in any year.

 

Section 7.11                            Hedging
Agreements. Borrower will not, and will not permit any Subsidiary to, enter
into any Hedging Agreement, other than Hedging Agreements entered into in the
ordinary course of business to hedge or mitigate risks to which Borrower or any
Subsidiary is exposed in the conduct of its business or the management of its
liabilities.

 

Section 7.12                            Amendment
to Material Documents.  Borrower
will not, and will not permit any Subsidiary to, amend, modify or waive any of
its rights under (i) its certificate of organization, operating agreement,
bylaws or other organizational documents, or (ii) any Material Contract.

 

Section 7.13                            Accounting
Changes. Borrower will not, and will not permit any Subsidiary to, make
any significant change in accounting treatment or reporting practices, except
as required by GAAP, or change the fiscal year of Borrower or any Subsidiary,
except to change the fiscal year of a Subsidiary to conform its fiscal year to
that of Borrower.

 

Section 7.14                            Deposit
and Investment Accounts. 
Borrower will not, and will not permit any Subsidiary to, maintain,
deposit or invest funds into any Deposit Account or Investment Account other
than those listed on Schedule 7.14 without the prior written
consent of Lender.

 

ARTICLE VIII.

 

EVENTS OF DEFAULT

 

Section 8.01                            Events
of Default.  If any of the
following events (each an “Event
of Default”) shall occur:

 

(a)                                  Borrower shall fail
to pay any principal of any Loan when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment or
otherwise and such failure shall continue unremedied for a period of ten (10) days;
or

 

(b)                                 Borrower shall fail to
pay any interest on any Loan or any fee or any other amount (other than an
amount payable under clause (a) of this Article) payable under this
Agreement or any other Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of ten (10) days;
or

 

(c)                                  any representation or
warranty made or deemed made by or on behalf of Borrower in or in connection
with this Agreement or any other Loan Document (including the Schedules
attached thereto) and any amendments or modifications hereof or waivers
hereunder, or in any certificate, report, financial statement or other document
submitted to Lender by Borrower or any representative of Borrower pursuant to
or in connection with this Agreement or any other Loan Document shall prove to
be incorrect when made or deemed made or submitted; or

 

39

 

(d)                                 Borrower shall fail to
observe or perform any covenant or agreement contained in Sections 5.01,
5.02, or 5.03 (with respect to Borrower’ existence) or Articles
VI or VII; or

 

(e)                                  Borrower shall fail
to observe or perform any covenant or agreement contained in this Agreement
(other than those referred to in clauses (a), (b) and (d) above) or
in any other Loan Document, and such failure shall remain unremedied for
30 days after the earlier of (i) any officer of Borrower becomes
aware of such failure, or (ii)  notice thereof shall have been given to
Borrower by Lender; or

 

(f)                                    any Default or
Event of Default (after giving effect to any grace period) shall have occurred
and be continuing under any Loan Document or Material Contract; or

 

(g)                                 Borrower or any
Subsidiary (whether as primary obligor or as guarantor or other surety) shall
fail to pay any principal of or premium or interest on any Material
Indebtedness that is outstanding, when and as the same shall become due and
payable (whether at scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument evidencing such
Indebtedness; or any other event shall occur or condition shall exist under any
agreement or instrument relating to such Indebtedness and shall continue after
the applicable grace period, if any, specified in such agreement or instrument,
if the effect of such event or condition is to accelerate, or permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable; or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or redemption),
purchased or defeased, or any offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case prior to the stated
maturity thereof; or

 

(h)                                 Borrower or any
Subsidiary shall (i) commence a voluntary case or other proceeding or file
any petition seeking liquidation, reorganization or other relief under any federal,
state or foreign bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a custodian, trustee, receiver,
liquidator or other similar official of it or any substantial part of its
property, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in clause (i) of
this Section 8.01(h), (iii) apply for or consent to the
appointment of a custodian, trustee, receiver, liquidation or other similar
official for Borrower or any such Subsidiary or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, or (vi) take any action for the
purpose of effecting any of the foregoing; or

 

(i)                                     an involuntary
proceeding shall be commenced or an involuntary petition shall be filed seeking
(i) liquidation, reorganization or other relief in respect of Borrower or
any Subsidiary or its debts, or any substantial part of its assets,  under any federal, state or foreign
bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the
appointment of a custodian, trustee, receiver, liquidator or other similar
official for Borrower or any Subsidiary or for a substantial part of its
assets, and in any such case, such proceeding or petition shall remain
undismissed for a period of 60 days or an order or decree approving or ordering
any of the foregoing shall be entered; or

 

40

 

(j)                                     Borrower or any
Subsidiary shall become unable to pay, shall admit in writing its inability to
pay, or shall fail to pay, its debts as they become due; or

 

(k)                                  an ERISA Event shall have
occurred that, in the opinion of the Lender, when taken together with other
ERISA Events that have occurred, could reasonably be expected to result in
liability to Borrower and its Subsidiaries in an aggregate amount exceeding
$100,000; or

 

(l)                                     any judgment or order for the payment of money
in excess of $100,000 in the aggregate shall be rendered against Borrower or
any Subsidiary, and either (i) such judgment or order is final and
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order, or (ii) there shall be a period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or

 

(m)                               any non-monetary judgment or order shall be rendered against Borrower or any
Subsidiary that could reasonably be expected to have a Material Adverse Effect,
and there shall be a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

 

(n)                                 a Change in Control
shall occur or exist; or

 

(o)                                 any event which could
reasonably be expected to result in a Material Adverse Effect shall occur and
be continuing;

 

then, and in every such event (other than an
event described in clause (h) or (i) of this Section) and at any time
thereafter during the continuance of such event, Lender may, by notice to
Borrower, take any or all of the following actions, at the same or different
times:  (i) terminate the Commitments, whereupon
the Commitments shall terminate immediately; (ii) declare the principal of
and any accrued interest on the Loans, and all other Obligations owing
hereunder, to be due and payable, whereupon the same shall become due and
payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by Borrower and (iii) exercise
all remedies provided for in any other Loan Document or as otherwise provided
by law; and that, if an Event of Default specified in either clause (h) or
(i) shall occur, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest
thereon, and all fees, and all other Obligations shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by Borrower.

 

ARTICLE IX.

 

MISCELLANEOUS

 

Section 9.01                            Notices.

 

Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications to any party herein to be effective shall be in

 

41

 

writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

 

	
  To Borrower:

  	
   

  	
  Great Plains Ethanol, LLC

  
	
   

  	
   

  	
  c/o Broin and Associates, Inc.

  
	
   

  	
   

  	
  Attention: Jeffrey S. Broin

  
	
   

  	
   

  	
  2209 East 57th Street North

  
	
   

  	
   

  	
  Sioux Falls, SD 57104

  
	
   

  	
   

  	
  Facsimile No. (605)
  965-2203

  
	
   

  	
   

  	
   

  
	
  With a Copy to:

  	
   

  	
  James M. Wiederrich, Esq.

  
	
   

  	
   

  	
  Woods, Fuller, Shultz & Smith P.C.

  
	
   

  	
   

  	
  300 South Phillips Avenue

  
	
   

  	
   

  	
  Post Office Box 5027

  
	
   

  	
   

  	
  Sioux Falls, South Dakota 57117

  
	
   

  	
   

  	
  Facsimile No. (605)
  339-3357

  
	
   

  	
   

  	
   

  
	
  To the Lender:

  	
   

  	
  AgCountry Farm Credit Services, FLCA

  
	
   

  	
   

  	
  Attention: Randolph L. Aberle

  
	
   

  	
   

  	
  Post Office Box 6020

  
	
   

  	
   

  	
  1749 38th Street Southwest

  
	
   

  	
   

  	
  Fargo, North Dakota 58108-6020

  
	
   

  	
   

  	
  Facsimile No. (701)
  282-9618

  

 

Any party hereto may change its address or
telecopy number for notices and other communications hereunder by notice to the
other parties hereto.  All such notices
and other communications shall, when transmitted by overnight delivery, or
faxed, be effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the mails or if
delivered, upon delivery; provided, that notices delivered to Lender shall not
be effective until actually received by such Person at its address specified in
this Section 9.01.

 

(a)                                  Any agreement of
Lender herein to receive certain notices by telephone or facsimile is solely
for the convenience and at the request of Borrower.  Lender shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by Borrower to
give such notice and Lender shall not have any liability to Borrower or other
Person on account of any action taken or not taken by Lender in reliance upon
such telephonic or facsimile notice.  The
obligation of Borrower to repay the Loans and all other Obligations hereunder
shall not be affected in any way or to any extent by any failure of Lender to
receive written confirmation of any telephonic or facsimile notice or the
receipt by Lender of a confirmation which is at variance with the terms
understood by Lender to be contained in any such telephonic or facsimile
notice.

 

Section 9.02                            Waiver;
Amendments.

 

(a)                                  No failure or delay
by Lender in exercising any right or power hereunder or any other Loan
Document, and no course of dealing between Borrower and Lender, shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power or

 

42

 

any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power hereunder or thereunder. 
The rights and remedies of Lender hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies
provided by law. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by Borrower therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default or Event of Default, regardless of whether Lender may
have had notice or knowledge of such Default or Event of Default at the time.

 

(b)                                 No amendment or waiver
of any provision of this Agreement or the other Loan Documents, nor consent to
any departure by Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by Borrower and Lender and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.

 

Section 9.03                            Expenses;
Indemnification.

 

(a)                                  The Borrower shall
pay (i) all reasonable, out-of-pocket costs and expenses of Lender,
including the reasonable fees, charges and disbursements of counsel for Lender
and in connection with the preparation and administration of the Loan Documents
and any amendments, modifications or waivers thereof (whether or not the
transactions contemplated in this Agreement or any other Loan Document shall be
consummated), and (ii) all reasonable out-of-pocket costs and expenses
(including, without limitation, the reasonable fees, charges and disbursements
of outside counsel and the allocated cost of inside counsel) incurred by Lender
in connection with the enforcement or protection of its rights in connection
with this Agreement, including its rights under this Section, or in connection
with the Loans made hereunder, including all such reasonable out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans.  Nothing in this Section 9.03
shall be deemed to obligate Borrower to pay costs of any Participant in any
Loan.

 

(b)                                 The Borrower shall
indemnify Lender against, and hold Lender harmless from, any and all costs,
losses, liabilities, claims, damages and related expenses, including the fees,
charges and disbursements of any counsel for Lender, which may be incurred by
or asserted against Lender arising out of, in connection with or as a result of
(i) the execution or delivery of this Agreement or any other agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of any of the transactions
contemplated hereby, (ii) any Loan or any actual or proposed use of the
proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned by Borrower or any Subsidiary
or any Environmental Liability related in any way to Borrower or any Subsidiary or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and regardless
of whether any Lender is a party thereto; provided,  that
Borrower shall not be obligated to indemnify Lender for any of the foregoing
arising out of

 

43

 

Lender’s gross negligence or willful misconduct as determined by a
court of competent jurisdiction in a final and nonappealable judgment.

 

(c)                                  The Borrower shall
pay, and hold Lender harmless from and against, any and all present and future
stamp, documentary, and other similar taxes with respect to this Agreement and
any other Loan Documents, any collateral described therein, or any payments due
thereunder, and save Lender harmless from and against any and all liabilities
with respect to or resulting from any delay or omission to pay such taxes.

 

(d)                                 To the extent
permitted by applicable law, Borrower shall not assert, and Borrower hereby
waives, any claim against Lender, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to actual or direct
damages) arising out of, in connection with or as a result of, this Agreement
or any agreement or instrument contemplated hereby, the transactions
contemplated therein, any Loan or the use of proceeds thereof.

 

(e)                                  All amounts due under
this Section 9.03 shall be payable promptly after written demand
therefor.

 

Section 9.04                            Successors
and Assigns.

 

(a)                                  The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that Borrower may
not assign or transfer any of its rights hereunder without the prior written
consent of Lender (and any attempted assignment or transfer by Borrower without
such consent shall be null and void).

 

(b)                                 Lender may at any time
assign to one or more assignees all or a portion of its rights and obligations
under this Agreement and the other Loan Documents (including all or a portion
of its Commitment and the Loans at the time owing to it).

 

(c)                                  Lender may at any
time, without the consent of Borrower, sell participations to one or more banks
or other entities (a “Participant”)
in all or a portion of Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it); provided, that (i) Lender ‘s obligations
under this Agreement shall remain unchanged, (ii) Borrower shall continue
to deal solely and directly with Lender in connection with Lender’s rights and
obligations under this Agreement and the other Loan Documents.  Borrower agrees that each Participant shall
be entitled to the benefits of Section 2.13 to the same extent as
if it were the Lender hereunder and had acquired its interest by assignment
pursuant to paragraph (b).  To the
extent permitted by law, Borrower agrees that each Participant shall be
entitled to the benefits of Section 2.14 as though it were the
Lender.

 

(d)                                 Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement and the Notes without complying with this Section; provided,
that no such pledge or assignment shall release Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for Lender as
a party hereto.

 

44

 

Section 9.05                            Governing
Law; Jurisdiction; Consent to Service of Process.

 

(a)                                  This Agreement and
the other Loan Documents shall be construed in accordance with and be governed
by the law (without giving effect to the conflict of law principles thereof) of
the State of North Dakota.

 

(b)                                 Borrower hereby
irrevocably and unconditionally submits, for itself and its property, to the
non-exclusive jurisdiction of the United States District Court of the District
of North Dakota, and of any state court of the State of North Dakota located in
Cass County and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan
Document or the transactions contemplated hereby or thereby, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such North Dakota state
court or, to the extent permitted by applicable law, such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against Borrower or its properties in the courts of any
jurisdiction.

 

(c)                                  Borrower irrevocably
and unconditionally waives any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding described in
paragraph (b) of this Section and brought in any court referred to in
paragraph (b) of this Section. Each of the parties hereto irrevocably
waives, to the fullest extent permitted by applicable law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

Section 9.06                            WAIVER
OF JURY TRIAL.  EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

 

Section 9.07                            Right
of Setoff.  In addition to any
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, Lender shall have the right, at any time or from
time to time upon the occurrence and during the continuance of an Event of
Default, without prior notice to Borrowers, any such notice being expressly
waived by Borrower

 

45

 

to the extent permitted by applicable law, to
set off and apply against all deposits (general or special, time or demand,
provisional or final) of Borrower at any time held or other obligations at any
time owing by Lender to or for the credit or the account of Borrower against
any and all Obligations held by Lender, irrespective of whether Lender shall
have made demand hereunder and although such Obligations may be unmatured.  Lenders agree promptly to notify the Lender
and Borrower after any such set-off and any application made by Lender; provided,
that the failure to give such notice shall not affect the validity of such
set-off and application.

 

Section 9.08                            Counterparts;
Integration.  This Agreement may
be executed by one or more of the parties to this Agreement on any number of
separate counterparts (including by telecopy), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. This
Agreement, the other Loan Documents, and any separate letter agreement(s)
relating to any fees payable to the Lender constitute the entire agreement
among the parties hereto and thereto regarding the subject matters hereof and
thereof and supersede all prior agreements and understandings, oral or written,
regarding such subject matters.

 

Section 9.09                            Survival.  All covenants, agreements, representations
and warranties made by Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by Lender and shall survive the execution
and delivery of this Agreement and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated.  The provisions of
Sections 2.13, 2.14, and 9.03 shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, and the Commitments or the
termination of this Agreement or any provision hereof.  All representations and warranties made
herein, in the certificates, reports, notices, and other documents delivered
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the other Loan Documents, and the making of the Loans.

 

Section 9.10                            Severability.  Any provision of this Agreement or any other
Loan Document held to be illegal, invalid or unenforceable in any jurisdiction,
shall, as to such jurisdiction, be ineffective to the extent of such
illegality, invalidity or unenforceability without affecting the legality,
validity or enforceability of the remaining provisions hereof or thereof; and
the illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

Section 9.11                            Confidentiality.
Lender agrees to take normal and reasonable precautions to maintain the
confidentiality of any information designated in writing as confidential and
provided to it by Borrower or any Subsidiary, except that such information may
be disclosed (i) to any Affiliate, participant or advisor of Lender,
including without limitation accountants, legal counsel and other advisors, provided
that Lender shall have taken reasonable steps to assure that such Affiliates,
participants, and advisors will maintain such information in confidence to the
same extent required of Lender hereunder, (ii) to the extent required by
applicable laws or

 

46

 

regulations or by any subpoena or similar
legal process, (iii) to the extent requested by any regulatory agency or
authority, (iv) to the extent that such information becomes publicly
available other than as a result of a breach of this Section 9.11,
or which becomes available to Lender of any of the foregoing on a
nonconfidential basis from a source other than Borrower, (v) in connection
with the exercise of any remedy hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, and (vi) subject
to provisions substantially similar to this Section 9.11, to any
actual or prospective assignee or Participant, or (vii) with the consent
of Borrower.  Any Person required to
maintain the confidentiality of any information as provided for in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
information as such Person would accord its own confidential information.

 

Section 9.12                            Interest
Rate Limitation.  Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which may be
treated as interest on such Loan under applicable law (collectively, the “Charges”), shall
exceed the maximum lawful rate of interest (the “Maximum Rate”) which may be contracted
for, charged, taken, received or reserved by Lender in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would
have been payable in respect of such Loan but were not payable as a result of
the operation of this Section shall be cumulated and the interest and
Charges payable to Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the Maximum Rate to the date of
repayment, shall have been received by Lender.

 

Section 9.13                            Termination.  Upon satisfaction of all of Borrower’s
obligations hereunder and the related documents and instruments, Lender shall (a) mark
the Notes “PAID” and return the same to Borrower, (b) release its security
interests and file appropriate documentations of the same, and (c) redeem
the Required Stock.

 

Section 9.14                            Other
Agreements.  This Amended and
Restated Credit Agreement supercedes all prior credit agreements.

 

[Signature Page Follows]

 

47

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

 

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
  GREAT PLAINS ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
  Name:

  	
  Darrin Ihnen

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AGCOUNTRY FARM CREDIT SERVICES, FLCA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Randolph L. Aberle

  	
   

  
	
   

  	
  Name:

  	
  Randolph L. Aberle

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

48

 

EXHIBIT A

 

CONSTRUCTION
NOTE

 

 

	
  $32,500,000

  	
   

  	
  Fargo, North Dakota

  
	
   

  	
   

  	
  June 19, 2002

  

 

FOR VALUE RECEIVED, the undersigned, Great Plains
Ethanol, LLC, a South Dakota limited liability company (“Borrower”), hereby
promises to pay to AgCountry Farm Credit Services, FLCA (together with any
subsequent holder hereof, “Lender”) or its successors and
assigns, at Post Office Box 6020, 1749 38th Street Southwest, Fargo, North
Dakota 58108, (i) on the Maturity Date (as defined in the Credit Agreement
dated as of June 19, 2002 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
between Borrower and Lender, the lesser of the principal sum of Thirty Two
Million Five Hundred Thousand and No/100 Dollars ($32,500,000.00) and the
aggregate unpaid principal amount of the Construction Loans (as defined in the
Credit Agreement) made by Lender to Borrower pursuant to the Credit Agreement,
and (ii) on each date specified in the Credit Agreement prior to the
Maturity Date, the principal amount of the Construction Loans payable to Lender
on such date as specified therein, in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
hereof on the principal amount thereof from time to time outstanding, in like
funds, at said office, at the rate or rates per annum and payable on such dates
as provided in the Credit Agreement. In addition, should legal action or an
attorney-at-law be utilized to collect any amount due hereunder, Borrower
further promises to pay all costs of collection, including the reasonable
attorneys’ fees of Lender.

 

Borrower promises to pay Default Interest (as
defined in the Credit Agreement), on demand, on the terms and conditions set
forth in the Credit Agreement.

 

All borrowings evidenced by this Construction Loan
Note and all payments and prepayments of the principal hereof and the date
thereof shall be recorded by Lender in its internal records; provided,
that the failure of Lender to make such a notation or any error in such
notation shall not affect the obligations of the Borrowers to make the payments
of principal and interest in accordance with the terms of this Construction
Loan Note and the Credit Agreement.

 

This Construction Loan Note is issued in connection
with, and is entitled to the benefits of, the Credit Agreement which, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events, and for the amendment or waiver of
certain provisions of the Credit Agreement, all upon the terms and conditions
therein specified.

 

THIS CONSTRUCTION LOAN NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NORTH DAKOTA AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

	
   

  	
  GREAT PLAINS ETHANOL, LLC

   

   

  
	
   

  	
  By:

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
  Name:

  	
  Darrin Ihnen

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  

 

A-1

 

EXHIBIT B

 

AMENDED
AND RESTATED REVOLVING CREDIT NOTE

 

	
  $8,000,000

  	
   

  	
  Fargo, North
  Dakota

  
	
   

  	
   

  	
  July 12,
  2005

  

 

FOR VALUE RECEIVED, the undersigned, Great Plains
Ethanol, LLC, a South Dakota limited liability company (“Borrower”), hereby
promises to pay to the order of AgCountry Farm Credit Services, FLCA (together
with any subsequent holder hereof, “Lender”) or its successors and
assigns, at Post Office Box 6020, 1749 38th Street Southwest, Fargo, North
Dakota 58108 on the Revolving Commitment Termination Date (as defined in the
Amended and Restated Credit Agreement between Borrower and Lender dated as of July 12,
2005, as the same may be amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), the lesser
of the principal sum of $8,000,000 and the aggregate unpaid principal amount of
all Revolving Loans (as defined in the Credit Agreement) made by Lender to
Borrower pursuant to the Credit Agreement, in lawful money of the United States
of America in immediately available funds, and to pay interest from the date
hereof on the principal amount thereof from time to time outstanding, in like
funds, at said office, at the rate or rates per annum and payable on such dates
as provided in the Credit Agreement.  In
addition, should legal action or an attorney-at-law be utilized to collect any
amount due hereunder, Borrower further promises to pay all costs of collection,
including the reasonable attorneys’ fees of Lender.

 

Borrower promises to pay Default Interest (as
defined in the Credit Agreement), on demand, on the terms and conditions set
forth in the Credit Agreement.

 

All borrowings evidenced by this Amended and
Restated Revolving Credit Note and all payments and prepayments of the
principal hereof and the date thereof shall be recorded by Lender in its
internal records; provided, that the failure of Lender to make such a
notation or any error in such notation shall not affect the obligations of
Borrower to make the payments of principal and interest in accordance with the
terms of this Amended and Restated Revolving Credit Note and the Credit
Agreement.

 

This Amended and Restated Revolving Credit Note is issued in connection
with, and is entitled to the benefits of, the Credit Agreement which, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events, for prepayment of the principal hereof
prior to the maturity hereof and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the terms and conditions therein
specified.

 

THIS AMENDED AND RESTATED REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NORTH DAKOTA AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

	
   

  	
  GREAT PLAINS ETHANOL, LLC

   

   

  
	
   

  	
  By:

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
  Name:

  	
  Darrin Ihnen

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  

 

B-1

 

EXHIBIT C

 

2005
TERM LOAN NOTE

 

	
  $5,000,000

  	
   

  	
  Fargo, North
  Dakota

  
	
   

  	
   

  	
  July 12,
  2005

  

 

FOR VALUE RECEIVED, the undersigned, Great Plains
Ethanol, LLC, a South Dakota limited liability company (“Borrower”), hereby
promises to pay to the order of AgCountry Farm Credit Services, FLCA (together
with any subsequent holder hereof, “Lender”) or its successors and
assigns, at Post Office Box 6020, 1749 38th Street Southwest, Fargo, North
Dakota 58108 on the 2005 Term Loan Commitment Termination Date (as defined in
the Amended and Restated Credit Agreement between Borrower and Lender dated as
of July 12, 2005, as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), the lesser
of the principal sum of $5,000,000 and the aggregate unpaid principal amount of
all 2005 Term Loans (as defined in the Credit Agreement) made by Lender to Borrower
pursuant to the Credit Agreement, in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
hereof on the principal amount thereof from time to time outstanding, in like
funds, at said office, at the rate or rates per annum and payable on such dates
as provided in the Credit Agreement.  In
addition, should legal action or an attorney-at-law be utilized to collect any
amount due hereunder, Borrower further promises to pay all costs of collection,
including the reasonable attorneys’ fees of Lender.

 

Borrower promises to pay Default Interest (as
defined in the Credit Agreement), on demand, on the terms and conditions set
forth in the Credit Agreement.

 

All borrowings evidenced by this 2005 Term Loan Note
and all payments and prepayments of the principal hereof and the date thereof
shall be recorded by Lender in its internal records; provided, that the
failure of Lender to make such a notation or any error in such notation shall
not affect the obligations of Borrower to make the payments of principal and
interest in accordance with the terms of this 2005 Term Loan Note and the
Credit Agreement.

 

This 2005 Term Loan Note is issued in connection with, and is entitled
to the benefits of, the Credit Agreement which, among other things, contains
provisions for the acceleration of the maturity hereof upon the happening of
certain events, for prepayment of the principal hereof prior to the maturity
hereof and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified.

 

THIS 2005 TERM LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NORTH DAKOTA AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.

 

	
   

  	
  GREAT PLAINS ETHANOL, LLC

   

   

  
	
   

  	
  By:

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
  Name:

  	
  Darrin Ihnen

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  

 

C-1

 

EXHIBIT 2.04

 

REVOLVING
DRAW REQUEST

 

[Date]

 

AgCountry Farm Credit Services, FLCA

Post Office Box 6020

1749 38th Street Southwest

Fargo, North Dakota 58108

Attention: 
David Rupp

 

Dear Sir:

 

Reference is made to the Amended and Restated
Credit Agreement dated as of July       ,
2005 (as amended and in effect on the date hereof, the “Credit Agreement”),
between the undersigned, as Borrower, and AgCountry Farm Credit Services, FLCA
as Lender.  Terms defined in the Credit
Agreement are used herein with the same meanings.  This notice constitutes a Revolving Draw
Request, and Borrower hereby requests a Revolving Borrowing under the Credit
Agreement, and in that connection Borrower specifies the following information
with respect to the Revolving Borrowing requested hereby:

 

(A)                              Aggregate principal
amount of Revolving Borrowin (1):                                   

 

(B)                                Date of Revolving
Borrowing  (which is a Business Day):                                                   

 

(C)                                Location and number of
Borrower’s account to which proceeds of Revolving Borrowing are to be
disbursed:                                                                              

 

Borrower hereby represents and warrants that
the conditions specified in Section 3.02 of the Credit Agreement are
satisfied.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  GREAT PLAINS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

(1)                                  Not less than
$100,000 and an integral multiple of $100,000.

 

1

 

EXHIBIT 2.05(c)

 

INTEREST
ELECTION

 

[Date]

 

AgCountry Farm Credit Services, FLCA

Post Office Box 6020

1749 38th Street Southwest

Fargo, North Dakota  58108

 

Attention:  David Rupp

 

Dear Sir:

 

Reference is made to the Amended and Restated
Credit Agreement dated as of July      , 2005 (as
amended and in effect on the date hereof, the “Credit Agreement”), between the
undersigned, as Borrower,  and AgCountry
Farm Credit Services, FLCA, as Lender. 
Terms defined in the Credit Agreement are used herein with the same
meanings.  This notice constitutes an
Interest Election pursuant to Section 2.05 of the Credit Agreement, and
Borrower hereby elects the [Term Variable Rate](1) [Three-Year Adjustable
Rate] [Five-Year Adjustable Rate] [Ten-Year Adjustable Rate] [Fixed Rate] for
application to $                          
in principal amount now outstanding under the Term Loan, and in that connection
Borrower specifies the following information with respect to the amount to be
converted or continued as requested hereby:

 

The effective date of election (which is a
Business Day):                                                 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  GREAT PLAINS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

(1)  The Term Variable Rate may not be applied to the 2005
Term Loan pursuant to Section 2.06(b) of the Credit Agreement.

 

1

 

EXHIBIT 2.06(c)

 

2005
TERM LOAN DRAW REQUEST

 

[Date]

 

AgCountry Farm Credit Services, FLCA

Post Office Box 6020

1749 38th Street Southwest

Fargo, North Dakota 58108

 

Attention:  David Rupp

 

Dear Sir:

 

Reference is made to the Amended and Restated
Credit Agreement dated as of July         ,
2005 (as amended and in effect on the date hereof, the “Credit Agreement”),
between the undersigned, as Borrower, and AgCountry Farm Credit Services, FLCA
as Lender.  Terms defined in the Credit
Agreement are used herein with the same meanings.  This notice constitutes a 2005 Term Loan Draw
Request, and Borrower hereby requests an advance under the Credit Agreement,
and in that connection Borrower specifies the following information with respect
to the advance requested hereby:

 

(A)                              Aggregate principal
amount of Borrowing:

 

(B)                                Date of Borrowing  (which is a Business Day):

 

(C)                                Location and number of
Borrower’s account to which proceeds of Borrowing are to be disbursed:

 

Borrower hereby represents and warrants that
the conditions specified in Section 3.02 of the Credit Agreement are
satisfied.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  GREAT PLAINS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
						

 

1

 

EXHIBIT 3.01(b)(vii)

 

FORM OF
SECRETARY’S CERTIFICATE

 

Reference is made to the Amended and Restated
Credit Agreement dated as of July 12, 2005 (the “Credit Agreement”), by
and between Great Plains Ethanol, LLC, a South Dakota limited liability company
(“Borrower”)
and AgCountry Farm Credit Services, FLCA (“Lender”). 
Terms defined in the Credit Agreement are used herein with the same
meanings.  This certificate is being
delivered pursuant to Section 3.01(b)(vii) of the Credit Agreement.

 

I, Steve Sinning, the Secretary of Borrower,
DO HEREBY CERTIFY that:

 

(a)           no
proceeding have been instituted or are pending or contemplated with respect to
the dissolution, liquidation or sale of all or substantially all the assets of
Borrower or threatening its existence or the forfeiture or any of its
organizational rights;

 

(b)                                 annexed hereto as Exhibit A
is a true and correct copy of the unanimous written consent of the board of
managers of Borrower, which consent is the only consent adopted by the board of
managers of Borrower or any committee thereof relating to the Credit Agreement
and the other Loan Documents to which Borrower is a party and the transactions
contemplated therein and have not been revoked, amended, supplemented or
modified and are in full force and effect on the date hereof; and

 

(c)                                  each of the persons
named below is as of the date hereof a duly elected and qualified officer of
Borrower holding the respective office set forth opposite his or her name and
the signature set forth opposite of each such person is his or her genuine
signature:

 

	
  Name

  	
   

  	
  Title

  	
   

  	
  Specimen Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Darrin Ihnen

  	
   

  	
  President

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Larry Ward

  	
   

  	
  Vice-President

  	
   

  	
  /s/ Larry Ward

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Steve
  Sinning

  	
   

  	
  Secretary

  	
   

  	
  /s/ Steve
  Sinning

  	
   

  

 

1

 

IN WITNESS WHEREOF, I have hereunto signed my
name this 12th day of July, 2005.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  /s/ Steve
  Sinning

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Secretary

  

 

I, Darrin Ihnen, the President of Borrower,
do hereby certify that Steve Sinning has been duly elected, is duly qualified
and is the Secretary of Borrower, that the signature set forth above is his
genuine signature and that he has held such office at all times since April 16,
2003.

 

IN WITNESS WHEREOF, I have hereunto signed my
name this 12th day of July, 2005.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  /s/ Darrin
  Ihnen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  

 

2

 

Exhibit A

 

Board of Managers’
Consent

 

3

 

EXHIBIT 3.01(b)(viii)

 

FORM OF
OFFICER’S CERTIFICATE

 

Reference is made to the Amended and Restated
Credit Agreement dated as of July 12, 2005 (the “Credit Agreement”), by
and between Great Plains Ethanol, LLC (“Borrower”) and AgCountry Farm Credit
Services, FLCA (“Lender”).  Terms defined in the Credit Agreement are
used herein with the same meanings.  This
certificate is being delivered pursuant to Section 3.01(b)(viii) of
the Credit Agreement.

 

I, Darrin Ihnen, the President of Borrower,
DO HEREBY CERTIFY that:

 

(a)                                  the representations
and warranties of Borrower set forth in the Loan Documents are true and correct
in all material respects on and as of the date hereof; and

 

(b)           no
Default or Event of Default has occurred and is continuing at the date hereof;
and

 

(c)                                  since December 31,
2004, which is the date of the most recent financial statements described in Section 5.01(a) of
the Credit Agreement, there has been no change which has had or could
reasonably be expected to have a Material Adverse Effect.

 

IN WITNESS WHEREOF, I have hereunto signed my
name this 12th day of July, 2005.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Darrin Ihnen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  President

  

 

1

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