Exhibit 10.1
LOAN AND SECURITY AGREEMENT - TERM LOAN
DATED AS OF AUGUST 31, 2004
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. ("ACQUISITION SUBSIDIARY")
AHHC ACQUISITION CORPORATION ("AHHC")
CPS ACQUISITION CORPORATION ("CPS")
AS BORROWER
TABLE OF CONTENTS
Page
1. DEFINITIONS...........................................................1
(a) Defined Terms................................................1
(b) Accounting Terms.............................................1
(c) Terms Defined in UCC.........................................2
(d) Other Definitional Provisions; Construction..................2
(e) References to Agreements, Enactments, Etc....................3
2. LOANS.................................................................3
(a) Term Loan....................................................3
(b) Permitted Acquisitions.......................................3
(c) Repayments...................................................4
(d) Notes........................................................5
3. WARRANTS..............................................................5
4. INTEREST, FEES AND CHARGES............................................6
(a) Interest Rate................................................6
(b) Fees and Charges.............................................6
(c) Maximum Interest.............................................7
5. COLLATERAL............................................................7
(a) Grant of Security Interest to Lender.........................7
(b) Other Security...............................................8
(c) Possessory Collateral........................................8
(d) Electronic Chattel Paper.....................................8
(e) Letter-of-Credit Rights......................................9
(f) Third-Party Collateral.......................................9
(g) Deposit Account..............................................9
(h) Insurance Proceeds...........................................9
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN...............................................................9
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.........................10
8. COLLECTIONS..........................................................11
i
TABLE OF CONTENTS
(continued)
Page
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.........12
(a) Borrowing Base Reports......................................12
(b) Monthly Reports.............................................12
(c) Financial Statements........................................12
(d) Annual Projections..........................................13
(e) Explanation of Budgets and Projections......................13
(f) Invoices and Billing Statements.............................13
(g) Obligor Financial Statements and Tax Returns................13
(h) Other Information...........................................13
(i) Post-Closing Review.........................................13
(j) Public Reporting............................................13
10. TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE................14
11. REPRESENTATIONS AND WARRANTIES.......................................15
(a) Financial Statements and Other Information..................15
(b) Locations; Certain Collateral...............................16
(c) Loans by Borrower...........................................16
(d) [Left Blank]................................................16
(e) Liens.......................................................16
(f) Organization, Authority and No Conflict.....................16
(g) Litigation..................................................17
(h) Compliance with Laws and Maintenance of Permits.............17
(i) Affiliate Transactions......................................17
(j) Names and Trade Names.......................................17
(k) Equipment...................................................17
(l) Enforceability..............................................18
(m) Solvency....................................................18
(n) Indebtedness................................................18
(o) Margin Security and Use of Proceeds.........................18
(p) Parent, Subsidiaries and Affiliates.........................18
(q) No Defaults.................................................18
ii
TABLE OF CONTENTS
(continued)
Page
(r) Employee Matters............................................18
(s) Intellectual Property.......................................18
(t) Environmental Matters.......................................19
(u) ERISA Matters...............................................19
(v) Reimbursement...............................................19
(w) Compliance with Healthcare Regulations......................19
(x) Immigration Matters.........................................20
(y) Licenses, Permits, etc......................................20
(z) Collective Enterprise.......................................20
(aa) Acquisition.................................................20
(bb) Certain Financial Information...............................20
12. AFFIRMATIVE COVENANTS................................................21
(a) Maintenance of Records......................................21
(b) Notices.....................................................21
(c) Compliance with Laws and Maintenance of Permits.............22
(d) Inspection and Audits.......................................22
(e) Insurance...................................................23
(f) Collateral..................................................24
(g) Use of Proceeds.............................................24
(h) Taxes.......................................................25
(i) Intellectual Property.......................................25
(j) Staffing Contracts..........................................25
(k) Billing and Collection System Access........................25
(l) Integration of Systems......................................25
(m) Subordination Agreement.....................................25
13. NEGATIVE COVENANTS...................................................26
(a) Indebtedness................................................26
(b) Liens.......................................................26
iii
TABLE OF CONTENTS
(continued)
Page
(c) Mergers, Sales, Acquisitions, Subsidiaries and Other
Transactions Outside the Ordinary Course of Business........26
(d) Dividends and Distributions.................................27
(e) Investments; Loans..........................................27
(f) Fundamental Changes, Line of Business.......................27
(g) Equipment...................................................28
(h) Affiliate Transactions......................................28
(i) Settling of Accounts........................................28
(j) Restricted Payments.........................................28
(k) Restricted Locations........................................29
14. FINANCIAL COVENANTS..................................................29
(a) Tangible Net Worth..........................................29
(c) Minimum EBITDA..............................................30
(d) Acquisition Subsidiary Debt Service Coverage Ratio..........31
(e) Acquisition Subsidiary Debt Leverage Ratio..................31
(f) Acquisition Subsidiary Term Loan Debt Leverage Ratio........32
(g) Capital Expenditure Limitations.............................32
(h) Operating Lease Obligations.................................32
(i) Financial Reporting Consolidation...........................32
15. DEFAULT..............................................................33
(a) Payment.....................................................33
(b) Breach of This Agreement, the Other Agreements and the
Revolving Loan Agreement....................................33
(c) Breach of Subordination Agreement...........................33
(d) Breaches of Other Obligations...............................33
(e) Breach of Representations and Warranties....................33
(f) Loss of Collateral..........................................34
(g) Levy, Seizure or Attachment.................................34
(h) Bankruptcy or Similar Proceedings...........................34
(i) Appointment of Receiver.....................................34
iv
TABLE OF CONTENTS
(continued)
Page
(j) Judgment....................................................34
(k) Default or Revocation of Guaranty...........................34
(l) Change of Ownership/Management..............................35
(m) Material Adverse Change.....................................35
(n) Governmental Authorizations.................................35
(o) Failure to Maintain Third-Party Payroll Tax Service
Provider....................................................35
(p) Failure to Obtain Intercreditor Agreement...................35
16. REMEDIES UPON AN EVENT OF DEFAULT....................................35
17. CONDITIONS PRECEDENT.................................................36
18. JOINT AND SEVERAL LIABILITY..........................................39
19. RELEASES; INDEMNITIES................................................41
20. NOTICE...............................................................42
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION...............42
22. MODIFICATION AND BENEFIT OF AGREEMENT................................43
23. HEADINGS OF SUBDIVISIONS.............................................43
24. POWER OF ATTORNEY....................................................43
25. CONFIDENTIALITY......................................................43
26. BROKERAGE FEES.......................................................44
27. PUBLICITY............................................................44
28. LIMITATION OF ACTIONS................................................44
29. LIABILITY............................................................44
30. COUNTERPARTS.........................................................45
31. ELECTRONIC SUBMISSIONS...............................................45
32. WAIVER OF JURY TRIAL; OTHER WAIVERS..................................45
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(y) - LICENSES AND PERMITS
LOAN AND SECURITY AGREEMENT - TERM LOAN
THIS LOAN AND SECURITY AGREEMENT - TERM LOAN (as amended, modified or
supplemented from time to time, this "AGREEMENT") made this 31st day of August,
2004 by and between BRIDGE OPPORTUNITY FINANCE, LLC ("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. ("Acquisition Subsidiary"), CPS Acquisition
Corporation ("CPS"), and AHHC Acquisition Corporation ("AHHC"), each having its
principal place of business at 14114 Dallas Parkway, Suite 600, Dallas, Texas
75254 (individually and collectively, "BORROWER").
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;
WHEREAS, Borrower as of June 16, 2004, entered into that certain Loan
and Security Agreement - Revolving Loans (as amended, restated, supplemented or
otherwise modified from time to time, the "Revolving Loan Agreement") with
Bridge Healthcare Finance, LLC, which Revolving Loans shall be secured by a
first priority security interest in all assets of Borrower;
WHEREAS, Acquisition Subsidiary is a wholly owned Subsidiary of
Crdentia. AHHC is a wholly owned Subsidiary of Acquisition Subsidiary. Pursuant
to that certain proposed Agreement and Plan of Reorganization by and among
Crdentia, AHHC and Arizona Home Health Care / Private Duty, Inc., an Arizona
corporation ("Arizona Health"), AHHC will merge with and into Arizona Health
with Arizona Health being the surviving entity. CPS is a wholly owned Subsidiary
of Acquisition Subsidiary. Pursuant to that certain proposed Agreement and Plan
of Reorganization by and among Crdentia, CPS, Care Pros Staffing, Inc., a Texas
corporation ("Care Pros"), and the shareholders of Care Pros, Care Pros will
merge with and into CPS with CPS being the surviving entity and immediately
after such merger CPS will change its name to "Care Pros Staffing, Inc."
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
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
1
hereunder and the preparation of financial statements to be furnished to the
Lender pursuant hereto shall be made and prepared, both as to classification of
items and as to amount, in accordance with GAAP as used in the preparation of
the financial statements of the Borrower on the date of this Agreement. If any
changes in accounting principles or practices from those used in the preparation
of the financial statements are hereafter occasioned by the promulgation of
rules, regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or any successor thereto or agencies with similar functions), which
results in a material change in the method of accounting in the financial
statements required to be furnished to the Lender hereunder or in the
calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of the
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.
2
(e) REFERENCES TO AGREEMENTS, ENACTMENTS, ETC. Unless
otherwise expressly provided herein, (i) references to agreements (including
this Agreement) and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments, restatements, supplements and other modifications are not
prohibited by the terms of this Agreement or any Other Agreement, and (ii)
references to any statute or regulation shall be construed as including all
statutory and regulatory provisions amending, replacing, supplementing or
interpreting such statute or regulation.
2. LOANS.
(a) 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 ("PERMITTED ACQUISITION"): (A) the Target shall
have, on a pro forma basis, independent and separate from the existing Borrowers
hereunder: (x) a coverage ratio of Target Pro Forma EBITDA to Target Pro Forma
Debt Service of at least 1.5 to 1.0, (y) a ratio of Target Pro Forma Senior Debt
to Target Pro Forma EBITDA of not more than 4.0 to 1.0, and (z) a ratio of
Target Pro Forma Term Loan Debt to Target Pro Forma EBITDA of not more than 2.5
to 1.0; (B) Borrowers are in compliance, and shall be on the date of the
consummation of such proposed Acquisition, with all financial covenants set
forth in Section 14 hereof; (C) on a pro forma basis, as if the proposed
Acquisition had occurred, the Senior Debt Service Coverage Ratio of the
Borrowers, on a consolidated basis after giving effect to such proposed
Acquisition, equals or exceeds the required level set for the Borrowers in
Section 14(b) hereof; (D) pro forma financial projections, prepared by the
Borrower in good faith for the period from the date of the consummation of such
proposed Acquisition to the date which is one year thereafter, shall reflect
that the Borrowers shall be in compliance with all financial covenants set forth
in SECTION 14 hereof; (E) Excess Availability of Crdentia Proper Borrowers under
the Revolving Loan Agreement or any Replacement Revolving Loan Agreement shall
be an amount mutually agreed upon between Lender and Borrower but in no event
less than $250,000 after giving effect to the proposed Acquisition; (F) the
amount of (i) the revolving borrowing base attributable to Target, as determined
by the Lender in its good faith credit judgment, LESS (ii) the sum of the
outstanding Revolving Loans attributable to Target, shall be an amount mutually
agreed upon between Lender and Borrower; (G) the Target entity to be acquired in
such Acquisition shall be a separate, independent Subsidiary of Acquisition
Subsidiary or merged with and into Acquisition Subsidiary as of the date of such
acquisition; (H) the Target entity to be acquired in such Acquisition shall
become a new Borrower hereunder in accordance with the provisions and
requirements of Section 13(c)(ii) hereof, and Acquisition Subsidiary shall be
3
subject to a Revolving Borrowing Base Amount calculation (pursuant to the
Revolving Loan Agreement or any Replacement Revolving Loan Agreement) which is
calculated separate and independent from the Crdentia Proper Borrowers with
respect to any Revolving Loans thereafter advanced to such new Borrower; (I) any
Indebtedness to be issued by any Borrower in respect of such Acquisition (other
than Indebtedness under the Revolving Loan Agreement or any Replacement
Revolving Loan Agreement) shall be Subordinated Debt subject to Subordination
Agreements in form and substance satisfactory to Lender and substantially in the
form of EXHIBIT D attached hereto, including, without limitation, payment
blockage rights and indefinite standstill on remedies; (J) Lender shall have
reviewed and found satisfactory all Acquisition Documents in respect thereof
prior to Borrower entering into any such Acquisition Documents; (K) no Default
or Event of Default exists as of the proposed date of the Acquisition or would
result after giving effect thereto; (L) Crdentia shall deliver to Lender a
certificate of an officer of Crdentia certifying compliance with the foregoing;
(M) 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 (N) Borrower shall establish and maintain a separate Lockbox
with a Lockbox Bank for receivables from Account Debtors of Acquisition
Subsidiary in accordance with the requirements hereof and under the Revolving
Loan 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.
(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
4
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 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.
5
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 Closing Date,
Borrower shall pay Lender a 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.
6
(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 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.
(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
7
Lender or any agent or any parent, affiliate or subsidiary of Lender or any
participant with Lender in the Loans, for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise); and (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
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 or any Replacement Revolving Loan Agreement, or (ii) to
the extent both the Revolving Loan Agreement and Replacement Revolving Loan
Agreement have 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 the provisions of any
equivalent section of any Replacement Revolving Loan Agreement, or (ii) to the
extent both the Revolving Loan Agreement and Replacement Revolving Loan
Agreement have 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
8
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 the provisions of any equivalent
section of any Replacement Revolving Loan Agreement, or (ii) to the extent the
Revolving Loan Agreement or Replacement Revolving Loan Agreement have 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 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 or any Replacement Revolving Lender therein 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.
9
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, 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 or Replacement Revolving Loan Agreement, as applicable.
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.
10
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 Acquisition Subsidiary. Borrower shall execute with the Lockbox Bank
a lockbox agreement for the Acquisition Subsidiary 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
Acquisition Subsidiary are obligated are paid directly into the Lockbox for
deposit into the Acquisition Subsidiary Account Debtor Collection Lockbox
Account, and that all funds deposited into the Acquisition Subsidiary 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 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
11
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 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 Borrower and the Acquisition Subsidiary, on a consolidated and
consolidating basis certified by the Chief Financial Officer of Borrower; (ii)
no later than forty-five (45) days after the end of each of the first three
quarters of Borrower's Fiscal Year, copies of internally prepared financial
statements, including, without limitation, balance sheets, statements of income,
retained earnings, cash flows and reconciliation of surplus for Borrower and
Acquisition Subsidiary, on a consolidated and consolidating basis, certified by
the Chief Financial Officer of Borrower; and (iii) no later than ninety (90)
12
days after the end of each of Borrower's Fiscal Years, audited annual
consolidated and consolidating financial statements of the Borrower and the
Acquisition Subsidiary, 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 each of the Borrower and the Acquisition Subsidiary on a
separate basis, for each of the twelve (12) months during such Fiscal Year,
which shall include the assumptions used therein, together with appropriate
supporting details as reasonably requested by Lender.
(e) EXPLANATION OF BUDGETS AND PROJECTIONS. In conjunction
with the delivery of the annual presentation of projections or budgets referred
to in SUBSECTION 9(D) above, Borrower shall deliver a letter signed by the
President or a Vice President of Borrower and by the Treasurer or Chief
Financial Officer of Borrower, describing, comparing and analyzing, in detail,
all changes and developments between the anticipated financial results included
in such projections or budgets and the historical financial statements of
Borrower.
(f) INVOICES AND BILLING STATEMENTS. 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 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, 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
13
of its Subsidiaries files with the Securities and Exchange Commission, as well
as promptly providing to Lender copies of any reports and proxy statements
delivered to its shareholders.
10. TERMINATION; AUTOMATIC RENEWAL; EARLY TERMINATION FEE.
(a) This Agreement shall be in effect for a period of three
(3) years from the 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 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 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.
14
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 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, and replaces the Revolving Loan Agreement with a Replacement
Revolving Loan Agreement on terms and conditions satisfactory to Lender, the
Term Loan may remain in place hereunder and Lender shall execute any and all
documents reasonably requested by the lender or lenders under such Replacement
Revolving Loan Agreement, which documents shall be satisfactory to the Lender in
its sole discretion, to subordinate Lender's Lien granted pursuant to the Loan
Documents to the Lien to be granted to the lender or lenders (or if a syndicated
facility, agent and the lenders) under such Replacement Revolving Loan
Agreement, and to otherwise place the Lender hereunder in the same position
vis-a-vis such lender or lenders (or if a syndicated facility, agent and the
lenders) under such Replacement Revolving Loan Agreement as the Lender holds
with respect to BHF under the Revolving Loan Agreement; PROVIDED THAT, Borrower
shall be permitted to replace the Revolving Loan Agreement with a Replacement
Revolving Loan Agreement as permitted above only if (i) 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,
(ii) no Default or Event of Default exists at the time of such prepayment, and
(iii) such lender or lenders (or if a syndicated facility, agent and the
lenders) under any Replacement Revolving Loan Agreement execute an Intercreditor
Agreement with Lender in form and substance acceptable to the Lender, on or
before the date of such Replacement Revolving Loan Agreement; it being
understood that if a Default or Event of Default exists at the time of such
proposed prepayment of the Revolving Loan Obligation, then the Term Loan
Obligations must be paid in full in cash as of the date of such prepayment.
11. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this SECTION 11 or
elsewhere) shall be true at the time of Borrower's execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Obligations and
termination of this Agreement, and shall be remade by Borrower at the time each
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 at or prior to the date of this Agreement fairly present in all material
respects the financial condition of Borrowers, and there has been no material
15
adverse change in the financial condition, the operations or any other status of
Borrowers, taken as a whole, since the date of the financial statements
delivered to Lender most recently prior to the date of this Agreement. All
written information now or heretofore furnished by Borrower to Lender is true
and correct in all material respects as of the date with respect to which such
information was furnished, other than budgets and projections, which represent
Borrowers' good faith estimate of the matters contained therein.
(b) LOCATIONS; CERTAIN COLLATERAL. The office where Borrower
keeps its books, records and accounts (or copies thereof) concerning the
Collateral, Borrower's principal place of business and all of Borrower's other
places of business, locations of Collateral and post office boxes and locations
of bank accounts are as set forth in SCHEDULE 11(b) and at other locations
within the continental United States of which Lender has been advised by
Borrower in accordance with SUBSECTION 12(b)(i). The Collateral, including,
without limitation, the Equipment (except any part thereof which Borrower shall
have advised Lender in writing consists of Collateral normally used in more than
one state) is kept, or, in the case of vehicles, based, only at the addresses
set forth on SCHEDULE 11(b), and at other locations within the continental
United States of which Lender has been advised by Borrower in writing in
accordance with SUBSECTION 12(b)(i) hereof. SCHEDULE 11(b) hereto contains a
complete listing of all of the following assets of Borrower as of the Closing
Date: (a) Intellectual Property which is subject to registration statutes and
licenses of Intellectual Property to which Borrower is a party (whether as
licensor or licensee), (b) Instruments (other than Instruments deposited for
collection in the ordinary course of business), (c) Deposit Accounts, (d)
Investment Property, (e) Letter-of-Credit Rights, (f) Chattel Paper, (g)
Documents, (h) Commercial Tort Claims, (i) Collateral which is subject to
certificate of title statutes, and (j) tangible Collateral located with any
bailee, warehousemen or other third parties.
(c) LOANS BY BORROWER. Borrower has not made any loans or
advances to any Affiliate or other Person except for advances authorized
hereunder to employees, officers and directors of Borrower for travel and other
expenses arising in the ordinary course of Borrower's business.
(d) [LEFT BLANK].
(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
16
Agreement and the Other Agreements do not conflict with the provisions of the
organizational documents of Borrower, any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, except for conflicts with agreements, contracts or other
documents which would not have a Material Adverse Effect on Borrower, and
Borrower's execution, delivery and performance of this Agreement and the Other
Agreements shall not result in the imposition of any Lien upon any of Borrower's
property (other than Permitted Liens) under any existing indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument by
which Borrower or any of its property may be bound or affected.
(g) LITIGATION. Except as disclosed to Lender on SCHEDULE
11(g) hereto, as of the Closing Date there are no actions or proceedings which
are pending or, to the best of Borrower's knowledge, threatened in writing
against Borrower, which are, reasonably likely to have a Material Adverse Effect
on Borrower.
(h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower
has obtained all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on Borrower. Borrower is in compliance in all material respects
with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental
Laws and statutes, orders, regulations, rules and ordinances relating to taxes,
employer and employee contributions and similar items, securities, ERISA or
employee health and safety) the failure to comply with which would have a
Material Adverse Effect on Borrower.
(i) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE
11(i) hereto or as permitted pursuant to SUBSECTION 11(c) and SUBSECTION 13(h)
hereof, Borrower is not conducting, permitting or suffering to be conducted,
transactions with any Affiliate other than transactions with Affiliates for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to Borrower than the terms upon
which such transactions would have been made had they been made to or with a
Person that is not an Affiliate.
(j) NAMES AND TRADE NAMES. Borrower's name, for the past five
years, has always been as set forth on the first page of this Agreement and
Borrower uses no trade names, assumed names, fictitious names or division names
in the operation of its business, except as set forth on SCHEDULE 11(j) hereto.
(k) EQUIPMENT. Except for 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).
17
(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 the Closing Date,
including, without limitation, any Indebtedness permitted under Section 13(a)
outstanding as of the Closing Date.
(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 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.
18
(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. ss. 1320a-7b), the
False Claims Act (31 U.S.C. ss.ss. 3729 et seq.), the Health
Insurance Portability and Accountability Act of 1996 (Pub. L.
No. 104-191, 110 Stat. 1936 (1996)) and the federal physician
self-referral laws (42 U.S.C. ss. 1395nn);
(ii) Borrower has obtained all necessary licenses and
accreditations to operate its business as now conducted, and
currently is in compliance with all statutory and regulatory
requirements applicable to it, the failure of which would have
a Material Adverse Effect upon Borrower; and
(iii) All persons providing professional health care
services for or on behalf of Borrower (either as an employee
or independent contractor) are appropriately licensed in every
jurisdiction in which they hold themselves out as professional
health care providers.
19
(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. The Acquisition has been consummated
pursuant to the terms of the 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 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 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.
20
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
("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
21
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.
All of the foregoing notices shall be provided by Borrower to Lender in writing.
(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS. Borrower
shall maintain all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which would have a Material
Adverse Effect on Borrower, and Borrower shall remain in compliance with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, Environmental Laws and
statutes, orders, regulations, rules and ordinances relating to taxes, employer
and employee contributions and similar items, securities, ERISA or employee
health and safety) the failure with which to comply would have a Material
Adverse Effect on Borrower. Following any determination by Lender that there is
noncompliance, or any condition which requires any action by or on behalf of
Borrower in order to avoid noncompliance, with any Environmental Law, at
Borrower's expense, cause an independent environmental engineer acceptable to
Lender to conduct such tests of the relevant site(s) as are appropriate and
prepare and deliver a report setting forth the results of such tests, a proposed
plan for remediation and an estimate of the costs thereof.
(d) INSPECTION AND AUDITS. Upon five (5) Business Days prior
written notice so long as no Default or Event of Default exists, Borrower shall
permit Lender, or any Persons designated by it, to call at Borrower's places of
business at any reasonable times during normal business hours and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Borrower's business as Lender may consider
reasonable under the circumstances. Borrower shall furnish to Lender such
information relevant to Lender's rights under this Agreement and the Other
Agreements as Lender shall at any time and from time to time request. Lender,
through its officers, employees or agents, shall have the right, at any time and
22
from time to time, in Lender's name, to verify the validity, amount or any other
matter relating to any of Borrower's Accounts, by mail, telephone, telecopy,
electronic mail or otherwise, provided that, prior to the occurrence of an Event
of Default, Lender shall conduct such verification in the name of a nominee of
Lender or in Borrower's name. Borrower authorizes Lender to discuss the affairs,
finances and business of Borrower with any officers, employees or directors of
Borrower or with its Parent or any Affiliate or the officers, employees or
directors of its Parent or any Affiliate, and to discuss the financial condition
of Borrower with Borrower's independent public accountants, which shall be
attended by a representative of Borrower. Any such discussions shall be without
liability to Lender or to Borrower's independent public accountants. Borrower
shall pay to Lender all customary fees (currently Eight Hundred Fifty and No/100
Dollars ($850.00) per person, per day) and all reasonable costs and
out-of-pocket expenses incurred by Lender in the exercise of its rights
hereunder, and all of such fees, costs and expenses shall constitute Obligations
hereunder, shall be payable on demand and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder; PROVIDED, HOWEVER, that so
long as no Event of Default has occurred, Borrower shall not pay for more than
four (4) audits in any Fiscal Year, except for (i) a one-time spot check within
60 days of the Closing Date, or (ii) any audits of a Target in connection with a
proposed Acquisition.
(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 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 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,
23
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 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 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
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.
24
(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 Closing
Date and, if feasible based on Borrower's accounting system, Borrower shall
provide electronic access to Lender to its billing and collection system, on a
read-only basis, for purposes of permitting Lender to inspect and verify billing
and collections transactions and related data in connection with the Collateral,
from time to time.
(l) INTEGRATION OF SYSTEMS Within thirty (30) days after the
Closing Date, Borrower shall fully integrate the accounting and billing systems
of Care Pros Staffing, Inc. and Arizona Home Health Care / Private Duty, Inc.
onto the Crdentia accounting and billing system. Within sixty (60) days of the
Closing Date, Borrower shall have integrated the Closing Date Permitted
Acquisitions into Borrower's accounting system and general ledger.
(m) SUBORDINATION AGREEMENT. On or before October 31, 2004,
Borrower shall deliver to Lender a Subordination Agreement executed by Cindy
Permenter, in form and substance acceptable to Lender, with respect to the
Indebtedness (i) under that certain convertible subordinated promissory note
dated December 2, 2003 in the original principal amount of $2,525,000 made
payable to Professional Staffing Services, Inc. and (ii) under that certain
convertible subordinated promissory note dated December 2, 2003 in the original
principal amount of $200,000 made payable to Professional Staffing Services,
Inc. and Nursing Services Registry of Savannah, Inc.
25
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,
if the Revolving Loan Agreement is replaced by a Replacement Revolving Loan
Agreement, the Indebtedness thereunder; and (ii) incur purchase money
Indebtedness or Capital Lease Obligations in connection with Capital
Expenditures permitted pursuant to SECTION 14 hereof. Borrower shall not incur
any Subordinated Debt without the prior written consent of Lender (which shall
include an indefinite standstill of remedies and payment blockage rights during
any Event of Default), nor during the existence of an Event of Default, make any
payment of any part or all of any Subordinated Debt or take any other action or
omit to take any other action in respect of any Subordinated Debt, except in
accordance with any subordination agreement relative thereto or the
subordination provisions thereof or hereof, or grant any Liens on any of its
assets to secure such Subordinated Debt, or amend or modify any agreement,
instrument or document evidencing or relating to any Subordinated Debt after
Lender consents thereto.
(b) LIENS. Borrower shall not grant or permit to exist
(voluntarily or involuntarily) any Lien on any of its assets, other than
Permitted Liens.
(c) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
(i) Borrower shall not, without the prior written
consent of Lender: (A) enter into any merger or consolidation;
PROVIDED that (i) any Borrower which is a Borrower as of the
Closing Date may merge with and into Crdentia so long as
Crdentia is the surviving entity, and (ii) any Borrower other
than Crdentia which is a Borrower as of the Closing Date may
merge with another Borrower other than Crdentia which is a
Borrower as of the Closing Date, (B) change the state of
Borrower's organization or enter into any transaction which
has the effect of changing Borrower's state of organization,
except in connection with a merger permitted in clause (A)
above; (C) sell, lease or otherwise dispose of any of its
assets other than in the ordinary course of business or as
permitted under Section 7; (D) purchase the stock, other
equity interests or all or a material portion of the assets of
any Person or division of such Person; or (E) enter into any
other transaction outside the ordinary course of Borrower's
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)
26
Crdentia (or such other Borrower) pledges all of the equity
interests of such new Subsidiary to Lender, and (B) such
entity enters into a joinder agreement or similar agreement in
which such entity becomes a party to this Agreement, jointly
and severally liable for the Obligations and pledges to Lender
all of its assets as Collateral hereunder.
(iii) Notwithstanding the 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 which exists
as of the Closing Date may pay a dividend or other distribution (whether in cash
or in kind) on any class of its stock (if Borrower is a corporation) or on
account of any equity interest in Borrower (if Borrower is a partnership,
limited liability company or other type of entity) to another Borrower, (iii)
any Borrower which is not a Borrower as of the Closing Date may pay a dividend
or other distribution to Borrower (whether in cash or in kind) on any class of
its stock (if Borrower is a corporation) or on account of any equity interest in
Borrower (if Borrower is a partnership, limited liability company or other type
of entity) so long as (x) no Default or Event of Default exists or results from
such dividend or distribution, (y) Borrowers shall be in compliance with all
financial covenants set forth in SECTION 14 hereof, and (z) Borrower has
$250,000 of Excess Availability under the Revolving Loan Agreement or any
Replacement Revolving Loan Agreement after giving effect to such dividend or
other distribution, and (iv) Crdentia may pay customary stock dividends to
holders of its Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock and Series C Preferred Stock.
(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
27
have a Material Adverse Effect on the Borrower; (ii) would affect the
obligations of Borrower to Lender; or (iii) would affect the interpretation of
any of the terms of this Agreement or the Other Agreements unless Lender has
provided written consent after receiving not less than thirty (30) days' prior
written notice of such actions
(g) EQUIPMENT. Borrower shall not (i) permit any Equipment to
become a Fixture to real property unless such real property is owned by Borrower
and is subject to a mortgage in favor of Lender or, if such real estate is
leased, is subject to a landlord's agreement in favor of Lender on terms
acceptable to Lender, or (ii) permit any Equipment to become an accession to any
other personal property unless such personal property is subject to a first
priority Lien in favor of Lender.
(h) AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE
11(i) hereto or as permitted pursuant to SUBSECTION 11(c) hereof, Borrower shall
not conduct, permit or suffer to be conducted, transactions with Affiliates
other than (i) investments by Affiliates in a Borrower; (ii) the provision of
employment, management and consulting services approved by Borrower's
compensation committee; and (iii) other transactions for the purchase or sale of
Inventory or services in the ordinary course of business pursuant to terms that
are no less favorable to Borrower than the terms upon which such transactions
would have been made had they been made to or with a Person that is not an
Affiliate.
(i) SETTLING OF ACCOUNTS. Borrower will not make without
concurrent written notice provided to Lender, any agreement with any Account
Debtor for any extension of the time for payment of the Account, any compromise
or settlement for less than the full amount thereof, any release of any Account
Debtor from liability therefore, or any deduction therefrom except a discount or
allowance for prompt or early payment allowed by Borrower in the ordinary course
of its business consistent with its historical practices and as disclosed to
Lender in writing; PROVIDED, that following the occurrence and during the
continuance of a Default an Event of Default, Borrower shall not settle or
adjust any Account without the consent of Lender.
(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; and
(iii) SUBORDINATED DEBT. Scheduled payments in
respect of Subordinated Debt may be made only if either: (a)
the Borrowers have Excess Availability under the Revolving
28
Loan Agreement or any Replacement Revolving Loan Agreement of
$500,000, or (b) the Borrower (in the aggregate) have a ratio
of Operating Cash Flow to Total Debt Service of at least 1.00
to 1.00 as a result of such Subordinated Debt payment.
(k) RESTRICTED LOCATIONS. Borrower shall not move any of its
books or records or any of its other assets of any kind to its offices located
at (i) 3000 S. 31st St. #301, Temple, Arizona 76502 or (ii) 5151 E. Broadway
#1530, Tucson, Arizona 85711.
14. FINANCIAL COVENANTS.
Borrower shall maintain and keep in full force and effect each of the
financial covenants set forth below:
(a) TANGIBLE NET WORTH. Borrower's Tangible Net Worth, on a
Crdentia Proper Consolidated Basis, shall not at any time be less than the
Minimum Tangible Net Worth; "MINIMUM TANGIBLE NET WORTH" being defined for
purposes of this Subsection as (i) $(1,500,000) at all times from the Closing
Date through September 30, 2004 and (ii) thereafter, from the last day of each
fiscal quarter of the Crdentia Proper Borrowers through the day prior to the
last day of each immediately succeeding fiscal quarter of the Crdentia Proper
Borrowers, the Minimum Tangible Net Worth during the immediately preceding
period plus seventy-five percent (75%) of the Crdentia Proper Borrowers' net
income (but without reduction for any net loss) for the Fiscal Year ending on
the first day of such period as reflected on the Crdentia Proper Borrowers' s
audited year end financial statement; and "Tangible Net Worth" being defined for
purposes of this Subsection as the Crdentia Proper Borrowers' shareholders'
equity (including retained earnings) LESS the book value of all intangible
assets of the Crdentia Proper Borrowers as determined solely by Lender on a
consistent basis PLUS the amount of any Subordinated Debt, all as determined
under GAAP applied on a basis consistent with the financial statement dated
March 31, 2004 except as set forth herein;
(b) SENIOR DEBT SERVICE COVERAGE RATIO. As of the last day of
each applicable period, the ratio of the Borrower's Operating Cash Flow, on a
Crdentia Proper Consolidated Basis, to Borrower's Senior Debt Service, on a
Crdentia Proper Consolidated Basis, for each period set forth below (which ratio
shall be tested as of the last day of each such period) must be at least the
following:
29
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
SENIOR DEBT SERVICE
TIME FRAME DATE TESTED COVERAGE RATIO BASED ON
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 1/31/05 1.00 to 1.00 Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 2/28/05 1.00 to 1.00 Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 3/31/05 1.00 to 1.00 Trailing 3 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 4/30/05 1.00 to 1.00 Trailing 4 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 5/31/05 1.00 to 1.00 Trailing 5 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 6/30/05 1.25 to 1.00 Trailing 6 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 7/31/05 1.25 to 1.00 Trailing 7 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 8/31/05 1.25 to 1.00 Trailing 8 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 9/30/05 1.25 to 1.00 Trailing 9 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 10/31/05 1.25 to 1.00 Trailing 10 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 11/30/05 1.25 to 1.00 Trailing 11 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 12/31/05 1.25 to 1.00 Trailing 12 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 3/31/06 and each quarter 1.25 to 1.00 Trailing 12 months
thereafter
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
(c) MINIMUM EBITDA. Borrower shall not permit EBITDA (which
calculation shall include for the months ended 8/31/04 through 12/31/04 any
payment made by MedCap Partners L.P. pursuant to the terms of Makewell
Agreement), on a Crdentia Proper Consolidated Basis, to be less than the amount
set forth below for the corresponding period set forth below:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TIME FRAME DATE TESTED MINIMUM EBITDA BASED ON
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 8/31/04 $(151,662) Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 9/30/04 $(83,271) Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 10/31/04 $(28,059) Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 11/30/04 $1,875 Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Monthly 12/31/04 $39,212 Monthly
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 3/31/05 $82,501 Trailing 3 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 6/30/05 $99,393 Trailing 6 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 9/30/05 $158,708 Trailing months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly 12/31/05 $219,897 Trailing 12 months
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
30
Notwithstanding the foregoing, (i) to the extent that the Crdentia
Proper Borrowers maintain a Senior Debt Service Coverage Ratio of 1.50 to 1.00
or greater as determined at the end of any measuring period as set forth in
SECTION 14(b) above, the Crdentia Proper Borrowers shall not be required to
maintain minimum EBITDA as set forth in this Section for such corresponding
month and during the continuance of such compliance.
(d) ACQUISITION SUBSIDIARY DEBT SERVICE COVERAGE RATIO.
Commencing on the last day of the first fiscal quarter following the first
Permitted Acquisition, and continuing quarterly thereafter, Borrower shall not
permit the ratio of (i) Acquisition Subsidiary EBITDA to (ii) scheduled payments
of interest and fees, to the extent carried as interest expense on Acquisition
Subsidiary's consolidated financial statements, with respect to Acquisition
Subsidiary Debt (and, if the period of measurement is less than 12 months,
determined on an annualized basis), to be less than the amount set forth below
for the corresponding period set forth below:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TIME FRAME DATE TESTED Acquisition Subsidiary Deb BASED ON
Service Coverage RATIO
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Last day of the first 1.50 to 1.00 Trailing 3 months
Fiscal Quarter following
the first Permitted
Acquisition
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Next Fiscal Quarter 1.50 to 1.00 Trailing 6 months
Quarterly Thereafter
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Next Fiscal Quarter 1.50 to 1.00 Trailing 9 months
Quarterly Thereafter
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Quarterly Each Fiscal Quarter 1.50 to 1.00 Trailing 12 months
Thereafter
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
(e) ACQUISITION SUBSIDIARY DEBT LEVERAGE RATIO. Commencing on
the last day of the first fiscal quarter following the first Permitted
Acquisition, and continuing quarterly thereafter, Borrower shall not permit the
ratio of Acquisition Subsidiary Debt to Acquisition Subsidiary EBITDA to be more
than the following:
31
Period Date Tested Coverage Based on:
------ ----------- -------- ---------
Quarterly Last day of the first fiscal 4.0 to 1.0 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 12 months
(f) ACQUISITION SUBSIDIARY TERM LOAN DEBT LEVERAGE RATIO.
Commencing on the last day of the first fiscal quarter following the first
Permitted Acquisition, and continuing quarterly thereafter, Borrower shall not
permit the ratio of Acquisition Subsidiary Term Loan Debt to Acquisition
Subsidiary EBITDA to be more than the following:
Time Frame Date Tested Coverage Based on:
---------- ----------- -------- ---------
Quarterly Last day of the first fiscal 2.50 to 1 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 2.50 to 1 Trailing 12 months
(g) CAPITAL EXPENDITURE LIMITATIONS. Borrowers shall not make
any Capital Expenditures if, after giving effect to such Capital Expenditure,
the aggregate cost of all such fixed assets purchased or otherwise acquired
would exceed $200,000 during any Fiscal Year.
(h) OPERATING LEASE OBLIGATIONS. Borrower shall not incur
operating lease obligations requiring payments in excess of $100,000 in the
aggregate during any Fiscal Year of Borrower.
(i) FINANCIAL REPORTING CONSOLIDATION. Lender, in its sole
discretion, will consider permitting a consolidation of Crdentia, Acquisition
Subsidiary, and each of their direct and indirect Subsidiaries for purposes of
financial reporting and financial covenant tests under this Agreement; PROVIDED
THAT, (i) the Borrower's Senior Debt Service Coverage Ratio (determined on a
Crdentia Proper Consolidated Basis) as set forth under SECTION 14(b) of this
Agreement is 1.25 to 1.00 or greater for a period of six (6) consecutive months,
(ii) the Acquisition Subsidiary Debt Service Coverage Ratio as set forth under
SECTION 14(d) of this Agreement is 1.50 to 1.00 or greater for a period of six
(6) consecutive months, (iii) the Acquisition Subsidiary Debt Leverage Ratio as
set forth in SECTION 14(e) of this Agreement is no more than 4.0 to 1.0 for six
(6) consecutive months, (iv) the Acquisition Subsidiary Term Loan Debt Leverage
Ratio as set forth in SECTION 14(f) of this Agreement is no more than 2.50 to
32
1.0 for six consecutive months, (v) no Event of Default, which has not been
cured or waived, exists, (vi) Borrower, on a Crdentia Proper Consolidated Basis,
has Excess Availability of at least $250,000, and (vii) Lender is satisfied with
the Operating Cash Flow of all Borrowers, on a consolidated basis, based upon
the completion of a cash flow audit of Borrowers.
15. DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" by Borrower hereunder:
(a) PAYMENT. The failure of any Obligor to pay when due,
declared due, or demanded by Lender, any of the Obligations or the 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 (or, if the Revolving Loan Agreement has been replaced by a
Replacement Revolving Loan Agreement, under the similar provisions of such
Replacement 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 Loan Agreement, or, if the Revolving Loan Agreement has been
replaced by a Replacement Revolving Loan Agreement, under such Replacement
Revolving 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, or, if
the Revolving Loan Agreement has been replaced by a Replacement Revolving Loan
Agreement, under similar provisions of such Replacement 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
33
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.
(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.
34
(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) FAILURE TO OBTAIN INTERCREDITOR AGREEMENT The failure of
any lender or lenders (or if a syndicated facility, agent and the lenders) party
to any Replacement Revolving Loan Agreement to execute on or prior to the date
of such Replacement Revolving Loan Agreement an Intercreditor Agreement, in form
and substance acceptable to Lender.
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
35
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.
17. CONDITIONS PRECEDENT.
The obligation of Lender to fund any Term Loan is subject to the
satisfaction or waiver on or before the date hereof, of the following conditions
precedent:
(a) Prior to the funding of the first Term Loan hereunder,
Lender shall have received four (4) originals of each of the agreements (other
than the Subordination Agreements and the Account Control Agreements for the
deposit accounts listed therein), opinions, reports, approvals, consents,
certificates and other documents set forth on the closing document list attached
hereto as EXHIBIT 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, including, without limitation, a post-closing
balance sheet for each Closing Date Permitted Acquisition, 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;
36
(d) Lender shall have received evidence satisfactory to it
that the insurance policies required under Section 5 are in full force and
effect, together with written evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender as required under such
section;
(e) Lender shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the Closing Document List with respect to the Permitted Acquisition, in
each case in form and substance satisfactory to Lender;
(f) Since March 31, 2004, no event shall have occurred which
has had or could reasonably be expected to have a Material Adverse Effect on any
Obligor, as determined by Lender in its reasonable credit judgment, determined
in good faith;
(g) Lender shall have received payment in full of all fees and
expenses payable to it by Borrower or any other Person in connection herewith,
on or before disbursement of the initial Loans hereunder, including, without
limitation, payment of all underwriting fees as agreed to by the parties;
(h) Lender shall have determined that immediately after giving
effect to the proposed Acquisition, Acquisition Subsidiary has Acquisition
Subsidiary Excess Availability of not less than Two Hundred Fifty Thousand
Dollars ($250,000);
(i) The Obligors shall have executed and delivered to Lender
all such other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby;
(j) Lender shall have reviewed 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;
(k) 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;
(l) There is no material default in any of the Borrower's
obligations under any contract to which Borrower is a party;
(m) Borrower shall be in compliance with all applicable laws;
(n) 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;
(o) 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;
37
(p) Borrower shall have delivered all due diligence materials
pertaining to the Target and to Borrower to the Lender as Lender has requested;
(q) Lender shall have reviewed general background
verifications of select principals, officers and directors of the Target that
will remain after the closing of the Acquisition;
(r) Lender shall have received the Warrant Agreement, together
with the Warrant Certificate contemplated therein, fully executed by Crdentia;
(s) Lender shall have received the following stock pledges:
(i) by Crdentia of each of its direct and indirect Subsidiaries (including
Acquisition Subsidiary), and (ii) by Acquisition Subsidiary of each of its
direct and indirect Subsidiaries;
(t) The Acquisition shall have been completed in accordance
with the terms of the Acquisition documents and in compliance with all
applicable laws subject only to the funding of the Term Loan hereunder;
(u) Lender shall have received satisfactory evidence that
Borrower has secured the services of a third-party payroll tax service provider;
(v) As of the closing of the initial Term Loan hereunder,
Lender shall have received satisfactory evidence that not less than Two Million
One Hundred Thousand Dollars ($2,100,000) of the outstanding indebtedness under
the Seller Notes has been extinguished and converted to equity interests in
Crdentia;
(w) Lender shall have received a Subordination Agreement, in
form and substance acceptable to Lender, with respect to any seller Indebtedness
(i) issued in connection with each Closing Date Permitted Acquisition, and (ii)
all other seller Indebtedness outstanding as of the Closing Date;
(x) 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; (y) Lender shall have received evidence of the investments by
(i) MedCap Partners L.P. of not less than $1,900,000 in equity in Crdentia and
(ii) James Durham of not less than $250,000 in equity in Crdentia, together, in
each case, with all documents related thereto, all on terms and conditions
reasonably satisfactory to Lender;
(z) Lender shall have received the Makewell Agreement, in form
and substance acceptable to Lender, executed by MedCap Partners L.P.; and
(aa) Lender shall have determined that immediately after
giving effect to each of the respective Closing Date Permitted Acquisitions, (i)
Arizona Acquisition Subsidiary has Arizona Acquisition Subsidiary Excess
Availability of not less than $300,000, and (ii) Care Pros Acquisition
Subsidiary has Care Pros Acquisition Subsidiary Excess Availability of not less
than $75,000.
38
(bb) Lender shall have received a pledge agreement of the
equity ownership interests or issued and outstanding capital stock, as
applicable, of each direct and indirect Subsidiary of Crdentia, together with
stock powers (undated and in blank), any original certificates evidencing such
equity interests and UCC investment property financing statements in connection
therewith.
18. JOINT AND SEVERAL LIABILITY.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Lender to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Lender shall not
incur liability to Borrowers as a result thereof. To induce Lender to do so and
in consideration thereof, each Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all liabilities, expenses, losses,
damages and claims of damage or injury asserted against Lender by any Person
arising from or incurred by reason of the handling of the financing arrangements
of Borrowers as provided herein, reliance by Lender on any request or
instruction from Borrowing Agent or any other action taken by Lender with
respect to this Section 18 except due to willful misconduct or gross (not mere)
negligence by the indemnified party.
(c) Notwithstanding anything to the contrary contained herein,
all Obligations of each Borrower hereunder shall be joint and several
obligations of Borrowers.
(d) Notwithstanding any provisions of this Agreement to the
contrary, it is intended that the joint and several nature of the Obligations of
Borrowers, and the liens and security interests granted by Borrowers to secure
the Obligations, not constitute a "Fraudulent Conveyance" (as defined below).
Consequently, Lender and Borrowers agree that if the Obligations of a Borrower,
or any liens or security interests granted by such Borrower securing the
Obligations, would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Obligations of such Borrower and the liens and
security interests securing such Obligations shall be valid and enforceable only
to the maximum extent that would not cause such Obligations or such lien or
security interest to constitute a Fraudulent Conveyance, and the Obligations of
such Borrower and this Agreement shall automatically be deemed to have been
amended accordingly. For purposes hereof, "Fraudulent Conveyance" means a
fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United
States Code (11 U.S.C. ss. 101, et seq.), as amended (the "BANKRUPTCY CODE"), or
a fraudulent conveyance or fraudulent transfer under the applicable provisions
of any fraudulent conveyance or fraudulent transfer law or similar law of any
state, nation or other governmental unit, as in effect from time to time.
(e) Each Borrower assumes responsibility for keeping itself
informed of the financial condition of the each other Borrower, and any and all
endorsers and/or guarantors of any instrument or document evidencing all or any
part of such other Borrower's Obligations, and of all other circumstances
39
bearing upon the risk of nonpayment by such other Borrowers of their Obligations
and each Borrower agrees that Lender shall not have any duty to advise such
Borrower of information known to Lender regarding such condition or any such
circumstances or to undertake any investigation not a part of its regular
business routine. If Lender, in its sole discretion, undertakes at any time or
from time to time to provide any such information to a Borrower, Lender shall
not be under any obligation to update any such information or to provide any
such information to such Borrower on any subsequent occasion.
(f) Lender is hereby authorized, without notice or demand and
without affecting the liability of a Borrower hereunder, to, at any time and
from time to time, (i) renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to, a Borrower's Obligations or
otherwise modify, amend or change the terms of any promissory note or other
agreement, document or instrument now or hereafter executed by a Borrower and
delivered to Lender; (ii) accept partial payments on a Borrower's Obligations;
(iii) take and hold security or collateral for the payment of a Borrower's
Obligations hereunder or for the payment of any guaranties of a Borrower's
Obligations or other liabilities of a Borrower and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as Lender, in its sole
discretion, may determine; and (v) settle, release, compromise, collect or
otherwise liquidate a Borrower's Obligations and any security or collateral
therefor in any manner, without affecting or impairing the obligations of the
other Borrowers. Lender shall have the exclusive right to determine the time and
manner of application of any payments or credits, whether received from a
Borrower or any other source, and such determination shall be binding on such
Borrower. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of a Borrower's Obligations as Lender shall
determine in its sole discretion without affecting the validity or
enforceability of the Obligations of the other Borrowers.
(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
40
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, 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.
41
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, 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.
42
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.
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.
43
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 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.
44
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 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
45
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.
(e) Lender's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement or any
of the Other Agreements shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of Lender in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrower specifying such suspension or waiver.
SIGNATURE PAGES FOLLOW
46
SIGNATURE PAGE TO TERM LOAN AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
CRDENTIA CORP.,
a Delaware corporation
By: /S/ JAMES D. DURHAM
-------------------
James D. Durham
Chief Executive Officer
BAKER ANDERSON CHRISTIE, INC.,
a California corporation
By: /S/ JAMES D. DURHAM
-------------------
James D. Durham
Chief Executive Officer
NURSES NETWORK, INC.,
California corporation
By: /S/ JAMES D. DURHAM
-------------------
James D. Durham
Chief Executive Officer
NEW AGE STAFFING, INC.,
a Delaware corporation
By: /S/ JAMES D. DURHAM
--------------------
James D. Durham
Chief Executive Officer
SIGNATURE PAGE TO TERM LOAN AGREEMENT
PSR NURSES, LTD.,
a Texas limited partnership
By: PSR NURSE RECRUITING, INC.
Its: General Partner
By: /S/ JAMES D. DURHAM
----------------------------
James D. Durham
Chief Executive Officer
PSR NURSE RECRUITING, INC.,
a Texas corporation
By: /S/ JAMES D. DURHAM
----------------------------
James D. Durham
Chief Executive Officer
PSR NURSES HOLDINGS CORP.,
a Texas corporation
By: /S/ JAMES D. DURHAM
----------------------------
James D. Durham
Chief Executive Officer
CRDE CORP.,
a Delaware corporation
By: /S/ JAMES D. DURHAM
----------------------------
Name: JAMES D. DURHAM
----------------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------
AHHC ACQUISITION CORPORATION,
a Delaware corporation
By: /S/ JAMES D. DURHAM
----------------------------
Name: JAMES D. DURHAM
----------------------------
Title: CHIEF EXECUTIVE OFFICER
----------------------------
CPS ACQUISITION CORPORATION,
a Texas corporation
By: /S/ WILLIAM S. LEFTWICH
----------------------------
Name:
Title:
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 I-DEFINED TERMS
"ACCOUNT" shall mean all present and future accounts and payment
intangibles (in respect of Staffing Services), as such terms are defined in the
UCC, of Borrower, including, without limitation, all obligations for the payment
of money (including, without limitation, all amounts due and owing from
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.
"ACQUISITION SUBSIDIARY" shall mean CRDE Corp., the Subsidiary of
Crdentia formed to hold all Target entities acquired in Permitted Acquisitions,
and shall mean, collectively, CRDE Corp. and each of its direct or indirect
subsidiaries.
"ACQUISITION SUBSIDIARY ACCOUNT DEBTOR COLLECTION LOCKBOX ACCOUNT"
shall mean an account or accounts maintained at the Lockbox Bank into which all
collections of Accounts of Acquisition Subsidiary are paid directly; the
Acquisition Subsidiary Account Debtor Collection Lockbox Account shall be an
account in the name of Lender (or Borrower for the sole benefit of Lender), and
shall be the sole and exclusive property of Lender.
"ACQUISITION SUBSIDIARY DEBT" shall mean and include, collectively (a)
the outstanding Revolving Loans to Acquisition Subsidiary, PLUS (b) the
aggregate principal amount of the Term Loan then outstanding, PLUS (c) all
Capitalized Lease Obligations of Acquisition Subsidiary, PLUS (d) all other
Indebtedness for Borrowed Money of Acquisition Subsidiary, excluding the
Subordinated Debt.
"ACQUISITION SUBSIDIARY EBITDA" shall mean, with respect to any period,
Acquisition Subsidiary's, on a consolidated basis, net income after taxes for
such period (excluding any after-tax gains or losses and excluding other
after-tax extraordinary gains or losses) PLUS interest expense, income tax
expense, depreciation and amortization for such period, PLUS or MINUS any other
non-cash charges or gains which have been subtracted or added in calculating net
income after taxes for such period. In the event that the period of measurement
is less than 12 months, the Acquisition Subsidiary EBITDA shall be determined on
an annualized basis. Upon each Permitted Acquisition and the addition of a
Target to the consolidated financial reporting of the Acquisition Subsidiary,
the portion of the Acquisition Subsidiary EBITDA attributable to the Target
shall be calculated on an annualized basis, until such Target has been a part of
the Acquisition Subsidiary for 12 months.
Annex I - 1
"ACQUISITION SUBSIDIARY EXCESS AVAILABILITY" shall mean, as of any date
of determination by BHF (or if the Revolving Loan Agreement has been replaced by
a Replacement Revolving Loan Agreement, under such Replacement Revolving Loan
Agreement), the excess, if any, of the Revolving Borrowing Base Amount
attributable to the Acquisition Subsidiary less the sum of the outstanding
Revolving Loans to the Acquisition Subsidiary, as of the close of business on
such date and assuming, for purposes of calculation, that all accounts payable
of the Acquisition Subsidiary which remain unpaid more than thirty (30) days
after the due dates thereof (except for professional fees and amounts contested
in good faith) as of the close of business on such date are treated as
additional Revolving Loans outstanding on such date.
"ACQUISITION SUBSIDIARY TERM LOAN DEBT" shall mean and include,
collectively, the aggregate principal amount of the Term Loan outstanding
hereunder.
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, Borrower, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of Borrower, or
(iii) five percent (5%) or more of the voting control or equity interests of
which is beneficially owned or held by Borrower.
"ARIZONA ACQUISITION SUBSIDIARY" means Arizona Home Health Care /
Private Duty, Inc., an Arizona corporation, including all its successors and
assigns.
"ARIZONA ACQUISITION SUBSIDIARY EXCESS AVAILABILITY" shall mean, as of
any date of determination by BHF (or if the Revolving Loan Agreement has been
replaced by a Replacement Revolving Loan Agreement, under such Replacement
Revolving Loan Agreement), the excess, if any, of the Revolving Borrowing Base
Amount attributable to the Arizona Acquisition Subsidiary less the sum of the
outstanding Revolving Loans to the Arizona Acquisition Subsidiary, as of the
close of business on such date and assuming, for purposes of calculation, that
all accounts payable of the Arizona Acquisition Subsidiary which remain unpaid
more than thirty (30) days after the due dates thereof (except for professional
fees and amounts contested in good faith) as of the close of business on such
date are treated as additional Revolving Loans outstanding on such date.
"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. Notwithstanding the
foregoing, in the event that the Revolving Loan Agreement has been replaced by a
Replacement Revolving Loan Agreement, BHF shall mean the lender or lenders (or,
if a syndicated facility, the agent and lenders) under such Replacement
Revolving Loan Agreement.
"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
Annex I - 2
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.
"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.
"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.
"CARE PROS ACQUISITION SUBSIDIARY" means Care Pros Staffing, Inc., a
Texas corporation, including all its successors and assigns.
"CARE PROS ACQUISITION SUBSIDIARY EXCESS AVAILABILITY" shall mean, as
of any date of determination by BHF (or if the Revolving Loan Agreement has been
replaced by a Replacement Revolving Loan Agreement, under such Replacement
Revolving Loan Agreement), the excess, if any, of the Revolving Borrowing Base
Amount attributable to the Care Pros Acquisition Subsidiary less the sum of the
outstanding Revolving Loans to the Care Pros Acquisition Subsidiary, as of the
close of business on such date and assuming, for purposes of calculation, that
all accounts payable of the Care Pros Acquisition Subsidiary which remain unpaid
more than thirty (30) days after the due dates thereof (except for professional
fees and amounts contested in good faith) as of the close of business on such
date are treated as additional Revolving Loans outstanding on such date.
Annex I - 3
"CLOSING DATE" shall mean August 31, 2004.
"CLOSING DATE PERMITTED ACQUISITIONS" shall mean the Permitted
Acquisition by Borrower of (i) Arizona Home Health Care / Private Duty, Inc. and
(ii) Care Pros Staffing, Inc.
"CLOSING DOCUMENT LIST" shall have the meaning set forth in SECTION 17
hereof.
"COLLATERAL" shall mean all of the property of Borrower described in
SECTION 5 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Lender to secure, either
directly or indirectly, repayment of any of the Obligations.
"CONCENTRATION ACCOUNT" shall have the meaning set forth in Section
8(a) 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.
"CRDENTIA PROPER BORROWERS" shall mean Crdentia and all of its
Subsidiaries, except for Acquisition Subsidiary.
"CRDENTIA PROPER CONSOLIDATED BASIS" shall mean the financial reporting
by the Borrowers of Crdentia and all of its Subsidiaries, except for Acquisition
Subsidiary, on a consolidated basis.
"DEFAULT" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"DERIVATIVE OBLIGATIONS" shall mean every obligation of a Person under
any forward contract, futures contract, exchange contract, swap, option or other
financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices.
"EBITDA" shall mean, with respect to any period, Borrowers', on a
consolidated basis, net income after taxes for such period (excluding any
after-tax gains or losses and excluding other after-tax extraordinary gains or
losses) PLUS interest expense, income tax expense, depreciation and amortization
for such period, PLUS or MINUS any other non-cash charges or gains which have
been subtracted or added in calculating net income after taxes for such period.
Annex I - 4
"ELIGIBLE ACCOUNT" shall have the meaning set forth in the Revolving
Loan Agreement or, if the Revolving Loan Agreement has been replaced by a
Replacement Revolving Loan Agreement, as set forth in the Replacement 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 (or, if the Revolving Loan Agreement has been replaced by a Replacement
Revolving Loan Agreement, under the Replacement Revolving Loan Agreement), the
excess, if any, of the lesser of (i) the Maximum Revolving Loan Limit less the
sum of the outstanding Revolving Loans and (ii) the Revolving Borrowing Base
Amount less the sum of the outstanding Revolving Loans, in each case as of the
close of business on such date and assuming, for purposes of calculation, that
all accounts payable of the Borrower which remain unpaid more than thirty (30)
days after the due dates thereof (except for professional fees and amounts
contested in good faith) as of the close of business on such date are treated as
additional Revolving Loans outstanding on such date.
"FISCAL YEAR" shall mean each twelve (12) month accounting period of
Borrower, which ends on December 31st of each year.
"GAAP" shall mean generally accepted accounting principles, using the
accrual basis of accounting and consistently applied with prior periods to the
extent required under SECTION 1(B); provided, however, that GAAP with respect to
any interim financial statements or reports shall be deemed subject to fiscal
year-end adjustments and footnotes made in accordance with GAAP.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, registration,
authorization, certificate, accreditation, plan, directive, consent order or
consent decree of or from, or notice to, any Government Authority.
"GOVERNMENT AUTHORITY" means any federal, state, District of Columbia,
municipal, national or other government, governmental department, commission,
board, bureau, court, agency or instrumentality or political subdivision thereof
or any entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.
Annex I - 5
"GOVERNMENT REIMBURSEMENT PROGRAM" shall mean (i) the Medicare program
established under the Title XVIII of the Federal Social Security Act, the
Federal Employees Health Benefit Program under 5 U.S.C. ss.ss. 8902 et seq., the
TRICARE program established by the Department of Defense under 10 U.S.C. ss.ss.
1071 et seq. or the Civilian Health and Medical Program of the Uniformed
Services under 10 U.S.C. ss.ss. 1079 and 1086, (ii) the Medicaid program of any
state or the District of Columbia acting pursuant to a health plan adopted
pursuant to Title XIX of the Federal Social Security Act or (iii) any agent,
administrator, intermediary or carrier for any of the foregoing.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are, or become, regulated under any Environmental Law (including, without
limitation any that are, or become, classified as hazardous or toxic under any
Environmental Law).
"HEALTHCARE REGULATIONS" means any and all current or future Laws
relating to HMOs, healthcare service providers, Government Reimbursement
Programs, Persons engaged in the Healthcare Service Business, healthcare-related
insurance companies, or any other similar Person and any rule, regulation,
directive, order or decision promulgated or issued pursuant thereto. Healthcare
Regulations shall include the Food, Drug and Cosmetic Act (21 U.S.C. ss. 301 et
seq.), federal anti-kickback statute (42 U.S.C. ss. 1320a-7b), the False Claims
Act (31 U.S.C. ss.ss. 3729 et seq.), the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. No. 104-191, 110 Stat. 1936 (1996)) and the
federal physician self-referral laws (42 U.S.C. ss. 1395nn).
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
indebtedness of such Person for borrowed money, whether or not evidenced by
bonds, debentures, notes or similar instruments, (b) all Capital Lease
Obligations of such Person, (c) all obligations of such Person to pay the
deferred purchase price of property or services (excluding trade accounts
payable in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall have
been assumed by such Person, (e) all obligations, contingent or otherwise, with
respect to the face amount of all letters of credit (whether or not drawn) and
banker's acceptances issued for the account of such Person, (f) all Derivative
Obligations of such Person, (g) all Contingent Obligations, and (h) all
liabilities of any partnership or joint venture of which such Person is a
general partner or joint venturer.
"INFORMATION CERTIFICATE" means the document attached hereto as EXHIBIT
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
Annex I - 6
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.
"INTERCREDITOR AGREEMENT" shall mean any Intercreditor Agreement to be
executed by and among the lenders or lenders (or if a syndicated facility, agent
and the lenders) party to any Replacement Revolving Loan Agreement and Lender,
which Intercreditor Agreement shall be in form and substance acceptable to the
Lender.
"LENDER AFFILIATE" shall mean Lender's directors, officers, employees,
agents, attorneys or any other Person or entity affiliated with or representing
Lender.
"LIEN" shall mean any mortgage, pledge, claim, hypothecation, judgment
lien or similar legal process, title retention lien, or other lien or security
interest, including, without limitation, the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a lessor
under a lease of any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, that is, or should be, accounted
for as a Capital Lease.
"LOAN DOCUMENTS" shall mean this Agreement and the Other Agreements.
"LOANS" shall mean all loans and advances made by Lender to or on
behalf of Borrower hereunder or under the Revolving Loan Agreement or, if the
Revolving Loan Agreement has been replaced by a Replacement Revolving Loan
Agreement, under the Replacement 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.
Annex I - 7
"MAXIMUM REVOLVING LOAN LIMIT" means the maximum commitments of BHF
under the Revolving Loan Agreement or, if the Revolving Loan Agreement is
replaced by a Replacement Revolving Loan Agreement, under such Replacement
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 net income or
loss (excluding the effect of any extraordinary gains or losses), determined in
accordance with GAAP, PLUS or MINUS each of the following items, to the extent
deducted from or added to the revenues of Borrower in the calculation of net
income or loss: (i) depreciation; (ii) amortization and other non-cash charges;
(iii) interest and fee expenses paid or accrued; (iv) total federal and state
income tax expense determined as the accrued liability of Borrower in respect of
such period, regardless of what portion of such expense has actually been paid
by Borrower during such period; and (v) gain or loss on the sale of property,
plant or equipment of Borrower; and (vi) management fees and other fees paid to
subordinating creditors to the extent permitted hereunder, and under the
applicable subordination agreement(s), but only to the extent any such item was
expensed in the calculation of net income and after deduction for each of (a)
federal and state income taxes, to the extent actually paid during such period;
(b) any non-cash income and gains from the sale of property; and (c) all actual
Capital Expenditures made during such period and not financed.
"OTHER AGREEMENTS" shall mean all agreements, 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, 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.
Annex I - 8
"PERMITTED LIENS" shall mean (i) statutory Liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder in excess of fifteen (15) days or amounts
which are being contested in good faith and by appropriate proceedings and for
which Borrower has maintained adequate reserves; (ii) Liens in favor of Lender;
(iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on Borrower's ability to use such
real property for its intended purpose in connection with Borrower's business;
(iv) Liens in connection with purchase money indebtedness and Capital Leases
otherwise permitted pursuant to this Agreement, provided, that such Liens attach
only to the assets the purchase of which was financed by such purchase money
indebtedness or which is the subject of such Capital Leases; (v) Liens set forth
on SCHEDULE 1; (vi) Liens specifically permitted by Lender in writing; (vii)
involuntary Liens securing amounts less than $50,000 and which are released or
for which a bond acceptable to Lender in its reasonable credit judgment,
determined in good faith, has been posted within ten (10) days of its creation;
(viii) Liens for taxes not yet due and payable or for taxes being contested in
good faith by appropriate proceedings and as to which the Borrower has deposited
with the Lender an amount sufficient in the Lender's sole discretion to pay such
taxes, together with all estimated interest and penalties in connection
therewith; and (ix) Liens in favor of BHF (including any such Liens granted in
connection with a Replacement Revolving Loan Agreement).
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or foreign or United
States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PLAN" shall have the meaning specified in SUBSECTION 12(B)(IV) hereof.
"PRIME RATE" shall mean the prime rate publicly announced by LaSalle
Bank, N.A., in effect from time to time.
"PROPERTY" shall mean, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including capital stock in, and other securities of, any
other Person.
"REVOLVING BORROWING BASE AMOUNT" shall have the meaning set forth in
the Revolving Loan Agreement. In the event that the Revolving Loan Agreement is
replaced by a Replacement Revolving Loan Agreement, "Revolving Borrowing Base
Amount" shall mean the maximum amount available for borrowing by Borrowers under
such Replacement Revolving Loan Agreement and such term is reasonably
satisfactory to the Lender.
"REPLACEMENT REVOLVING LOAN AGREEMENT" shall mean any revolving loan or
credit agreement that replaces the Revolving Loan Agreement, and which is in
form and substance reasonably satisfactory to the Lender, in the event that the
Revolving Loan Obligations under the Revolving Loan Agreement are prepaid solely
as a result of the circumstances described in Section 10(e) of the Revolving
Loan Agreement.
Annex I - 9
"REVOLVING LOAN AGREEMENT" shall have the meaning set forth in the
recitals hereto.
"REVOLVING LOAN DOCUMENTS" shall mean the Revolving Loan Agreement, the
Revolving Pledge 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.
In the event that the Revolving Loan Agreement is replaced by a Replacement
Revolving Loan Agreement, "Revolving Loan Documents" shall mean the Replacement
Revolving Loan Agreement and all agreements, instruments and documents, which
Replacement Revolving Loan Agreement and all agreements, instruments and
documents shall each be in form and substance reasonably acceptable to the
Lender, executed by or on behalf of Borrower or any other Person and delivered
to the lenders thereunder in connection with the transactions contemplated by
the Replacement 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 or any Replacement Revolving
Loan Agreement.
"REVOLVING PLEDGE AGREEMENT" shall mean that certain Pledge Agreement,
dated as of June 16, 2004 by and among Crdentia and any other entity named as a
"Pledgor" thereunder, and BHF.
"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
Crdentia Proper Borrowers, the sum of payments made or required to be made by
Borrower during such period for (i) interest only payments due on the Revolving
Loans facility, and (ii) interest and scheduled principal payments due on any
and all other Indebtedness for Borrowed Money excluding the Subordinated Debt.
"STAFFING SERVICES" means arranging to provide healthcare-related
staffing services, long-term care or any business or activity that is reasonably
similar thereto or a reasonable extension, development or expansion thereof or
ancillary thereto.
"SUBORDINATED DEBT" shall mean Indebtedness of Borrower or any
Subsidiary of Borrower that is subordinated to the Obligations in a manner
satisfactory to Lender, and contains terms, including, without limitation,
payment terms, satisfactory to Lender.
"SUBORDINATION AGREEMENTS" shall mean, individually and collectively,
all subordination agreements, intercreditor agreements, consent and similar
agreements among either Borrower, Lender and any holder of Indebtedness, whether
entered into on or prior to the date hereof or from time to time hereafter,
together with all modifications, amendments and restatements of any of the
foregoing, including, without limitation, the Subordination Agreements listed on
SCHEDULE 11(n) hereto in respect of the Seller Notes existing on the Closing
Date.
Annex I - 10
"SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower, or any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by Borrower or any partnership of which Borrower is a general partner.
"TANGIBLE NET WORTH" shall have the meaning specified in SUBSECTION
14(A) hereof.
"TARGET" shall mean, the entity which is the subject of an Acquisition.
"TARGET PRO FORMA DEBT SERVICE" means, for any period, the sum of
payments that will be made or required to be made by the Acquisition Subsidiary
during such period for (i) interest, fees and scheduled principal payments due
on the Term Loans that will be made to the Acquisition Subsidiary in connection
with the Permitted Acquisition of such Target, and (ii) interest only payments
due on the Revolving Loans that will be made to the Acquisition Subsidiary
during such period (assuming that the maximum principal amount of Revolving
Loans will be made to the Acquisition Subsidiary during such 12-month period,
based on the Acquisition Subsidiary's anticipated borrowing base of Eligible
Accounts), and (iii) interest and schedule principal payments due on any and all
other Indebtedness for Borrowed Money of the Acquisition Subsidiary anticipated
during such period, excluding the Subordinated Debt of the Acquisition
Subsidiary.
"TARGET PRO FORMA EBITDA" shall mean, with respect to any period, the
Acquisition Subsidiary's net income after taxes for such period (excluding any
after-tax gains or losses and excluding other after-tax extraordinary gains or
losses) PLUS interest expense, income tax expense, depreciation and amortization
for such period, PLUS or MINUS any other non-cash charges or gains which have
been subtracted or added in calculating net income after taxes for such period.
"TARGET PRO FORMA SENIOR DEBT" means (a) the maximum amount of
Revolving Loans that will be made to the Acquisition Subsidiary under the
Revolving Loan Agreement or any Replacement Revolver Loan Agreement (based on
the Acquisition Subsidiary's anticipated borrowing base of Eligible Accounts),
PLUS (b) the aggregate principal amount of the Term Loans that will be made to
the Acquisition Subsidiary in connection with the Permitted Acquisition of
Target, PLUS (c) all Capitalized Lease Obligations of the Acquisition Subsidiary
that are anticipated during such 12-month period, PLUS (d) all other
Indebtedness for Borrowed Money of the Acquisition Subsidiary, excluding the
Subordinated Debt of the Acquisition Subsidiary.
"TARGET PRO FORMA TERM LOAN DEBT" means for the projected period from
the closing date of a Permitted Acquisition to the date that is 12 months from
such closing date, the aggregate principal amount of the Term Loan that will be
made to the Acquisition Subsidiary in connection with the Permitted Acquisition
of Target.
Annex I - 11
"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 during
such period for (i) Senior Debt Service, (ii) interest, fees and scheduled
principal payments due on the Term Loans, (iii) pursuant to the scheduled
Subordinated Debt payments permitted by this Agreement and the applicable
subordination agreement, and (iv) interest and scheduled principal payments due
on any and all other Indebtedness for Borrowed Money of Borrower.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of Illinois.
"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 I - 12
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A Compliance Certificate
Exhibit B Closing Checklist
Exhibit C Information Certificate
Exhibit D Subordination Agreement
SCHEDULES
- ---------
Schedule 1 Permitted Liens
Schedule 11(b) Business and Collateral Locations
Schedule 11(b) Certain Collateral
Schedule 11(g) Litigation
Schedule 11(i) Affiliate Transactions
Schedule 11(j) Names & Trade Names
Schedule 11(n) Indebtedness
Schedule 11(p) Parent, Subsidiaries and Affiliates
Schedule 11(q) Defaults
Schedule 11(x) Government Reimbursement Program Matters
Schedule 11(t) Environmental Matters
Schedule 11(x) Healthcare Compliance
Schedule 11(y) Healthcare Regulatory Matters
Schedule 11(z) Licenses and Permits
EXHIBIT A - COMPLIANCE CERTIFICATE
Date:
TO: Bridge Healthcare Finance, LLC, Agent
233 South Wacker Drive, Suite 5350
Chicago, Illinois 60606
Gentlemen and Ladies:
The undersigned Borrower hereby certifies to you the following pursuant to
Section 9(c) of the Loan and Security Agreement-Term Loans (the "AGREEMENT")
dated as of August 31, 2004, among and Crdentia Corp., Baker Anderson Christie,
Inc., Nurses Network, Inc., New Age Staffing, Inc., PSR Nurses, Ltd., PSR Nurse
Recruiting, Inc., PSR Nurses Holdings Corp., CRDE Corp., AHHC Acquisition
Corporation and CPS Acquisition Corporation (collectively, the "BORROWER"),
Bridge Healthcare Finance, LLC (the "LENDER").
1. As of ___, no event of default or event which with the lapse of time or
the giving of notice, or both, would become an event of default (an
"unmatured event of default") has occurred or, if such a change has
occurred, a writing attached hereto specifies the nature thereof and
the action that Borrower has taken or proposes to take with respect
thereto.
2. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrower has occurred
since [date of last Compliance Certificate/last financial statements
delivered prior to closing], or, if such a change has occurred, a
writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.
3. Borrower is in compliance with the representations, warranties and
covenants in the Agreement or, if Borrower is not in compliance with
any representations, warranties or covenants in the Agreement, a
writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.
4. As of __________, Borrower maintains the following financial covenants
pursuant to Section 14 of the Agreement.
a. Borrower shall maintain a Minimum Tangible Net Worth, on a
Crdentia Proper Consolidated Basis, of (i) $(1,500,000) at all
times from the Closing Date through September 30, 2004 and
(ii) thereafter, from the last day of each fiscal quarter of
the Crdentia Proper Borrowers through the day prior to the
last day of each immediately succeeding fiscal quarter of the
Crdentia Proper Borrowers, the Minimum Tangible Net Worth
during the immediately preceding period plus seventy-five
percent (75%) of the Crdentia Proper Borrowers' net income
EXHIBIT A - 1
(but without reduction for any net loss) for the Fiscal Year
ending on the first day of such period as reflected on the
Crdentia Proper Borrowers' audited year end financial
statement. (See attached SCHEDULE A for calculation of
Tangible Net Worth)
Compliance Yes: No:
-------- -------
b. SENIOR DEBT SERVICE COVERAGE RATIO. As of the last day of each
applicable period, the ratio of Borrower's Operating Cash
Flow, on a Crdentia Proper Consolidated Basis, to Borrower's
Senior Debt Service, on a Crdentia Proper Consolidated Basis,
for each period set forth below (which ratio shall be tested
as of the last day of each such period) must be at least the
following: (See attached SCHEDULE B for calculation)
- ---------------------------- ------------------------- --------------------------- --------------------------
TIME FRAME DATE TESTED SENIOR DEBT SERVICE BASED ON
COVERAGE RATIO
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 1/31/05 1.00 to 1.00 Monthly
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 2/28/05 1.00 to 1.00 Monthly
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 3/31/05 1.00 to 1.00 Trailing 3 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 4/30/05 1.00 to 1.00 Trailing 4 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 5/31/05 1.00 to 1.00 Trailing 5 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 6/30/05 1.25 to 1.00 Trailing 6 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 7/31/05 1.25 to 1.00 Trailing 7 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 8/31/05 1.25 to 1.00 Trailing 8 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 9/30/05 1.25 to 1.00 Trailing 9 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 10/31/05 1.25 to 1.00 Trailing 10 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 11/30/05 1.25 to 1.00 Trailing 11 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Monthly 12/31/05 1.25 to 1.00 Trailing 12 months
- ---------------------------- ------------------------- --------------------------- --------------------------
Quarterly 3/31/06 and each 1.25 to 1.00 Trailing 12 months
quarter thereafter
- ---------------------------- ------------------------- --------------------------- --------------------------
Actual Debt Service Coverage Ratio: Compliance: Yes: No:
----- ----- -----
EXHIBIT A - 2
c. MINIMUM EBITDA. Borrower shall not permit EBITDA (which
calculation shall include for the months ended 8/31/04 through
12/31/04 any payment made by MedCap Partners L.P. pursuant to
the terms of Makewell Agreement), on a Crdentia Proper
Consolidated Basis, to be less than the amount set forth below
for the corresponding period set forth below (See attached
SCHEDULE C for calculation):
- ---------------------------- -------------------------- --------------------------- -------------------------
TIME FRAME DATE TESTED MINIMUM EBITDA BASED ON
- ---------------------------- -------------------------- --------------------------- -------------------------
Monthly 8/31/04 $(151,662) Monthly
- ---------------------------- -------------------------- --------------------------- -------------------------
Monthly 9/30/04 $(83,271) Monthly
- ---------------------------- -------------------------- --------------------------- -------------------------
Monthly 10/31/04 $(28,059) Monthly
- ---------------------------- -------------------------- --------------------------- -------------------------
Monthly 11/30/04 $1,875 Monthly
- ---------------------------- -------------------------- --------------------------- -------------------------
Monthly 12/31/04 $39,212 Monthly
- ---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 3/31/05 $82,501 Trailing 3 months
- ---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 6/30/05 $99,393 Trailing 6 months
- ---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 9/30/05 $158,708 Trailing months
- ---------------------------- -------------------------- --------------------------- -------------------------
Quarterly 12/31/05 $219,897 Trailing 12 months
- ---------------------------- -------------------------- --------------------------- -------------------------
Notwithstanding the foregoing, to the extent the Crdentia Proper
Borrowers maintain a Senior Debt Service Coverage Ratio of 1.50 to 1.00 or
greater as determined at the end of any measuring period as set forth in Section
4(b) above, the Crdentia Proper Borrowers shall not be required to maintain
minimum EBITDA as set forth in this Section for such corresponding month and
during the continuance of such compliance.
Compliance Yes: No:
-------- -------
d. ACQUISITION SUBSIDIARY DEBT SERVICE COVERAGE RATIO. Commencing
on the last day of the first fiscal quarter following the
first Permitted Acquisition, and continuing quarterly
thereafter, Borrower shall not permit the ratio of (i)
Acquisition Subsidiary EBITDA to (ii) scheduled payments of
interest and fees, to the extent carried as interest expense
on Acquisition Subsidiary's consolidated financial statements,
with respect to Acquisition Subsidiary Debt (and, if the
period of measurement is less than 12 months, determined on an
annualized basis), to be less than the amount set forth below
for the corresponding period set forth below (See Schedule D
for calculation) :
EXHIBIT A - 3
- ---------------------------- --------------------------- -------------------------- -------------------------
TIME FRAME DATE TESTED ACQUISITION SUBSIDIARY BASED ON
DEBT SERVICE COVERAGE
RATIO
- ---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Last day of the first 1.50 to 1.00 Trailing 3 months
Fiscal Quarter following
the first Permitted
Acquisition
- ---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 6 months
Thereafter
- ---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Next Fiscal Quarter 1.50 to 1.00 Trailing 9 months
Thereafter
- ---------------------------- --------------------------- -------------------------- -------------------------
Quarterly Each Fiscal Quarter 1.50 to 1.00 Trailing 12 months
Thereafter
- ---------------------------- --------------------------- -------------------------- -------------------------
Actual Acquisition Subsidiary Debt
Service Coverage Ratio: Compliance: Yes: No:
----- ------ ------
e. ACQUISITION SUBSIDIARY DEBT LEVERAGE RATIO. Commencing on the
last day of the first fiscal quarter following the first
Permitted Acquisition, and continuing quarterly thereafter,
Borrower shall not permit the ratio of Acquisition Subsidiary
Debt to Acquisition Subsidiary EBITDA to be more than the
following (See Schedule E for calculation):
Period Date Tested Coverage Based on:
------ ----------- -------- ---------
Quarterly Last day of the first fiscal 4.0 to 1.0 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 4.0 to 1.0 Trailing 12 months
Actual Acquisition Subsidiary Debt
Leverage Ratio: Compliance: Yes: No:
----- ------ ------
EXHIBIT A - 4
f. ACQUISITION SUBSIDIARY TERM LOAN DEBT LEVERAGE RATIO.
Commencing on the last day of the first fiscal quarter
following the first Permitted Acquisition, and continuing
quarterly thereafter, Borrower shall not permit the ratio of
Acquisition Subsidiary Term Loan Debt to Acquisition
Subsidiary EBITDA to be more than the following:
Time Frame Date Tested Coverage Based on:
---------- ----------- -------- ---------
Quarterly Last day of the first fiscal 2.50 to 1 Trailing 3 Months
quarter following the first
Permitted Acquisition
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 6 months
Quarterly Next Fiscal Quarter Thereafter 2.50 to 1 Trailing 9 months
Quarterly Thereafter Each Fiscal Quarter Thereafter 2.50 to 1 Trailing 12 months
Actual Acquisition Subsidiary Term
LoanDebt Leverage Ratio: Compliance: Yes: No:
----- ------ ------
g. Capital Expenditure Limitation: the aggregate cost of all
fixed assets purchased or otherwise acquired shall not exceed
$200,000 during any Fiscal Year.
Total Capital Expenditures (YTD): Compliance: Yes: No:
---------- ---- ----
h. Operating Lease Obligations: payments made pursuant to
operating lease obligations shall not exceed $100,000 during
any Fiscal Year.
Operating Lease Payments (YTD): Compliance: Yes: No:
----------- ----- ----
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.
EXHIBIT A - 5
Any and all initially capitalized terms set forth in this certificate without
definition shall have the respective meanings ascribed thereto in the Agreement.
CRDENTIA CORP.
By:
-----------------------------
Its:
-----------------------------
EXHIBIT A - 6
SCHEDULE A
----------
TANGIBLE NET WORTH
------------------
TANGIBLE NET WORTH
- ------------------
Shareholders' equity (including retained earnings and preferred
stock) of Crdentia Proper Borrowers
-------------------------
Less: Book value of all intangible assets
-------------------------
Add: Amount of debt of Crdentia Proper Borrowers subordinated to
Lender
-------------------------
-------------------------
TANGIBLE NET WORTH
- ------------------
-------------------------
EXHIBIT A - 7
SCHEDULE B
----------
SENIOR DEBT SERVICE COVERAGE RATIO
----------------------------------
OPERATING CASH FLOW
- -------------------
Net income (Loss) of the Crdentia Proper Borrowers excluding
extraordinary gains or losses
-------------------------
Add: Depreciation
-------------------------
Amortization and other non-cash charges
-------------------------
Interest and fee expenses paid or accrued
-------------------------
Total federal and state income tax expenses accrued regardless of
whether paid during such period
-------------------------
Management fees and other fees paid to
subordinated creditors
-------------------------
Add/Less:
Gain or loss on the sale of property, plant or
Equipment
Subtotal
-------------------------
Less: Cash Capital Expenditures made during such period of the
Crdentia Proper Borrowers
-------------------------
All taxes paid or required to be paid during
such period and all non-cash income of the Crdentia
Proper Borrowers
-------------------------
TOTAL OPERATING CASH FLOW
-------------------------
SENIOR DEBT SERVICE
Add: Interest due on Revolving Loans of the Crdentia
Proper Borrowers
-------------------------
-------------------------
-------------------------
Scheduled principal and interest payments made
or required to be made on all other indebtedness
- ---------------------------------------------------------------------
of the Crdentia Proper Borrowers
(excluding Subordinated Debt)
-------------------------
-------------------------
TOTAL SENIOR DEBT SERVICE
-------------------------
-------------------------
TOTAL OPERATING CASH FLOW:
TOTAL SENIOR DEBT SERVICE = to 1.0
----------
SCHEDULE C
EBITDA
EBITDA
Net income (Loss) of the Crdentia Proper Borrowers (excluding any
after-tax gains or losses and excluding other after-tax
extraordinary gains or losses)
-------------------------
-------------------------
Add: Interest expense
-------------------------
-------------------------
Income tax expense
-------------------------
-------------------------
Depreciation
-------------------------
-------------------------
Amortization
-------------------------
Add/Less:
Other non-cash charges or gains
-------------------------
-------------------------
Add: (for months ending 8/31/04 through 12/31/04 only)
Payments from MedCap Partners L.P.
TOTAL EBITDA
-------------------------
Minimum EBITDA $____________ Total EBITDA $______________
SCHEDULE D
ACQUISITION SUBSIDIARY DEBT SERVICE COVERAGE RATIO
ACQUISITION SUBSIDIARY EBITDA
Net income (Loss)of the Acquisition Subsidiary (excluding any
after-tax gains or losses and excluding other after-tax
extraordinary gains or losses)
-------------------------
-------------------------
Add: Interest expense
-------------------------
-------------------------
Income tax expense
-------------------------
-------------------------
Depreciation
-------------------------
-------------------------
Amortization
-------------------------
Add/Less:
Other non-cash charges or gains
-------------------------
-------------------------
TOTAL EBITDA
-------------------------
ACQUISITION SUBSIDIARY DEBT SERVICE
Add: Scheduled payments of interest and fees (carried as
an interest expense on Acquisition Subsidiaries
consolidated financials) with respect to:
-------------------------
-------------------------
Revolving Loans to Acquisition Subsidiary
Aggregate principal amount of Term Loan
Capitalized Lease Obligations of Acquisition
Subsidiary
Indebtedness for Borrowed Money of Acquisition
Subsidiary (excluding Subordinated Debt)
-------------------------
TOTAL ACQUISITION SUBSIDIARY DEBT SERVICE
-------------------------
TOTAL ACQUISITION SUBSIDIARY EBITDA TO = to 1.0
----------
ACQUISITION SUBSIDIARY DEBT SERVICE:
SCHEDULE E
ACQUISITION SUBSIDIARY DEBT LEVERAGE RATIO
ACQUISITION SUBSIDIARY DEBT
ACQUISITION SUBSIDIARY DEBT (
- ---------------------------
-------------------------
-------------------------
ACQUISITION SUBSIDIARY DEBT
-------------------------
-------------------------
Outstanding Revolving Loan to Acquisition Subsidiary
-------------------------
-------------------------
Aggregate principal amount of Term Loan outstanding
-------------------------
-------------------------
Capitalized Lease Obligations of Acquisition Subsidiary
-------------------------
-------------------------
Indebtedness for Borrowed Money of Acquisition
Subsidiary (excluding the Subordinated Debt)
-------------------------
ACQUISITION SUBSIDIARY DEBT TO:
ACQUISITION SUBSIDIARY EBITDA = to 1.0
----------
EXHIBIT A - 13
sd-217849
SCHEDULE F
ACQUISITION SUBSIDIARY TERM LOAN DEBT LEVERAGE RATIO
ACQUISITION SUBSIDIARY TERM LOAN DEBT
Aggregate principal amount of Term Loan outstanding
-------------------------
-------------------------
ACQUISITION SUBSIDIARY EBITDA (FROM SCHEDULE D)
-------------------------
-------------------------
ACQUISITION SUBSIDIARY TERM LOAN DEBT TO
ACQUISITION SUBSIDIARY EBITDA = to 1.0
----------
EXHIBIT B
---------
CLOSING CHECKLIST
(SEE ATTACHED)
EXHIBIT B - 1
EXHIBIT C
---------
INFORMATION CERTIFICATE
(SEE ATTACHED)
EXHIBIT C - 1
EXHIBIT D
---------
SUBORDINATION AGREEMENT
(SEE ATTACHED)
EXHIBIT D - 1
SCHEDULE 1 - PERMITTED LIENS
Receivables Allocation Agreement dated August 31, 2004 between William C.
Crocker, Crdentia Corp., CRDE Corp., AHHC Acquisition Corporation, Bridge
Healthcare Finance, LLC and Bridge Opportunity Finance.
SCHEDULE 11(B) - BUSINESS AND COLLATERAL LOCATIONS;
CERTAIN COLLATERAL
A. Borrower's business locations (please indicate which location is the
principal place of business and at which locations originals and all
copies of Borrower's books, records and accounts are kept).
1. Principal place of business and location of originals and all
copies of books, records and accounts:
14114 Dallas Parkway
Dallas, TX 75254
2. 2124 Union Street, Suite D
San Francisco, CA 94123
3. 3522 Vann Road
Birmingham, AL 35235
4. 174 Bellevue Avenue, Suite 315
Newport, RI 02840
5. 1114 Seventeenth Avenue
Nashville, TN 37212
6. 5829 N. 7th St., #1E
Phoenix, AZ 85014
7. 808 S. College St. #122
McKinney, TX
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post
office boxes of Borrower. NONE
C. Bank Accounts of Borrower:
BANK (WITH ADDRESS) ACCOUNT NUMBER TYPE OF ACCOUNT
------------------- -------------- ---------------
1. Comerica Bank 1892275403 Operating
2. Legacy Bank of Texas 888321 Payroll
3. Legacy Bank of Texas 888339 Operating
4. LaSalle Bank 5800678400 Operating
5. LaSalle Bank 5800678392 Lockbox
6. West American Bank 924-00703-02 Credit card clearing
7. Bank One, NA 000000636694283 Operating
8. Bank One, NA 000000649350550 ATM/Debit Cards
9. Regions Bank 03-0499-2709 Payroll
10. First American Bank 1032016243
11. First American Bank 1038027375
12. First American Bank 1038030851
13. Bank One, NA 07590138
14. Bank One, NA 28644166
D. Certain Collateral
a. Intellectual Property -- NONE
b. Instruments -- NONE
c. Deposit Accounts --SEE ACCOUNTS LISTED
UNDER C ABOVE
d. Investment Property - NONE
e. Letter-of-Credit Rights -- NONE
f. Chattel Paper -- NONE
g. Documents -- NONE
h. Commercial Tort Claims -- NONE
i. Certificate of Title Goods -- NONE
j. Collateral with Third Parties - NONE
SCHEDULE 11(G) - LITIGATION
NONE.
SCHEDULE 11(I) - AFFILIATE TRANSACTIONS
Registration rights granted pursuant to that certain Amended and
Restated Registration Rights Agreement, dated as of August 31, 2004 by and
between Crdentia Corp. and the investors listed on Schedule A thereto.
Subscription Agreement dated August 31, 2004 by and between Crdentia
Corp. and MedCap Partners L.P.
Subscription Agreement dated August 31, 2004 by and between Crdentia
Corp. and James D. Durham.
Warrant to Purchase Shares of Series B-1 Preferred Stock dated August
31, 2004 issued by Crdentia Corp. to MedCap Partners L.P.
Warrant to Purchase Shares of Series C Preferred Stock dated August 31,
2004 issued by Crdentia Corp. to MedCap Partners L.P.
Warrant to Purchase Shares of Series C Preferred Stock dated August 31,
2004 issued by Crdentia Corp. to James D. Durham.
Stock Purchase Agreement, dated as of May 18, 2003, by and between
Crdentia Corp., MedCap Partners L.P. and the stockholders listed on EXHIBIT A
thereto.
Options to purchase 2,333,333 shares of Crdentia Corp.'s Common Stock
granted to James D. Durham, Crdentia Corp.'s Chairman and Chief Executive
Officer, on December 31, 2003 and a bonus agreement executed in connection
therewith.
Option to purchase up to 66,666 shares of Crdentia Corp.'s Common Stock
made by Crdentia Corp. to each of two members of its Board of Directors on
December 16, 2003.
Option to purchase up to 206,074 shares of Crdentia Corp.'s Common
Stock made by Crdentia Corp. to Pamela Atherton, its President, on December 16,
2003.
Executive Employment Agreement by and between Crdentia Corp. and Ms.
Atherton dated on or about December 16, 2003.
Agreement and Plan of Reorganization, dated as of September 15, 2003,
by and among Crdentia Corp., New Age Staffing, Inc., NAS Acquisition Corporation
and the shareholders of New Age Staffing, Inc. (the "NAS Merger Agreement").
Agreement and Plan of Reorganization dated as of November 4, 2003 by
and among Crdentia Corp., PSR Acquisition Corporation, PSR Holdings Acquisition
Corporation, PSR Nurse Recruiting, Inc. and PSR Nurses Holdings Corp. (the "PSR
Merger Agreement"), pursuant to which Crdentia Corp. obtained a 100% ownership
interest in PSR Nurses, Ltd. (through its acquisition of PSR Nurse Recruiting,
Inc., the sole general partner of PSR Nurses, Ltd. and PSR Nurses Holdings
Corp., the sole limited partner of PSR Nurses, Ltd.). Crdentia Corp. uses
offices leased by PSR Nurses, Ltd. as its principal executive offices, a
substantial number of Crdentia Corp.'s staff is PSR Nurses, Ltd. personnel, and
Crdentia Corp. uses some PSR Nurses, Ltd. deposit accounts. In addition,
Crdentia Corp. uses the personnel and bank accounts of several of its other
subsidiaries.
Agreement and Plan of Reorganization dated as of July 16, 2003, by and
among Crdentia Corp., Nurses Network, Inc., NNI Acquisition Corporation and
certain shareholders of Nurses Network, Inc.
Common Stock Purchase Agreement dated May 15, 2002 by and between
Crdentia Corp. and the parties thereto.
Convertible Subordinated Promissory Note dated August 28, 2003 in the
original principal amount of $50,000 made payable to James D. Durham.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
original principal amount of $50,000 made payable to the DeLuca Trust, dated
1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the
original principal amount of $50,000 made payable to the R.P. Oliver Community
Propoerty Trust dated 5/5/75.
Subscription Agreement dated June 16, 2004 by and between Crdentia
Corp. and MedCap Partners, L.P.
Subscription Agreement dated August 9, 2004 by and between Crdentia
Corp. and Durham Properties, LLC.
Subscription Agreement dated August 9, 2004 by and between Crdentia
Corp. and Nick Liuzza, Sr.
Subscription Agreement dated August 9, 2004 by and between Crdentia
Corp. and Nick Liuzza, Jr.
Subscription Agreement dated August 9, 2004 by and between Crdentia
Corp. and Robin Riddle.
Subscription Agreement dated August 9, 2004 by and between Crdentia
Corp. and Robert Kenneth.
Registration Rights Agreement dated August 9, 2004 by and between
Crdentia Corp. and the investors listed on Schedule A thereto.
Option to purchase 866,666 shares of Crdentia Corp.'s common stock
granted to James D. Durham on August 3, 2004.
Option to purchase 433,333 shares of Crdentia Corp.'s common stock
granted to Pamela Atherton on August 3, 2004.
Option to purchase 8,333 shares of Crdentia Corp.'s common stock
granted to Robert. Oliver on May 27, 2004.
Option to purchase 16,667 shares of Crdentia Corp.'s common stock
granted to Joseph DeLuca on May 27, 2004.
Option to purchase 8,333 shares of Crdentia Corp.'s common stock
granted to Robert Kenneth on May 27, 2004.
Option to purchase 8,333 shares of Crdentia Corp.'s common stock
granted to C. Fred Toney on May 27, 2004.
Option to purchase 8,333 shares of Crdentia Corp.'s common stock
granted to Thomas Herman on May 27, 2004.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and James D. Durham.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Thomas Herman.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and C. Fred Toney.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Robert Oliver.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Joseph DeLuca.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Robert Kenneth.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Pamela Atherton.
Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and William S. Leftwich.
Option to purchase up to 110,504 shares of Common Stock granted by
Crdentia Corp. to William S. Leftwich.
16,666 shares of Common Stock issued by Crdentia Corp. to MedCap
Partners L.P. in May 2004 pursuant to the terms of the Certificate of
Designations, Preferences and Rights of Series A Preferred Stock of Crdentia
Corp., as amended.
SCHEDULE 11(J) - NAMES & TRADE NAMES
- -------------------------------------- -----------------------------------------
BORROWER NAME AND TRADE NAMES
- -------------------------------------- -----------------------------------------
Crdentia Corp. Crdentia Corp.
Lifen, Inc.
Digivision International, Ltd.
- -------------------------------------- -----------------------------------------
Baker Anderson Christie, Inc. Baker Anderson Christie, Inc.
- -------------------------------------- -----------------------------------------
Nurses Network, Inc. Nurses Network, Inc.
- -------------------------------------- -----------------------------------------
New Age Staffing, Inc. New Age Staffing, Inc.
NAS Acquisition Corporation
- -------------------------------------- -----------------------------------------
PSR Nurses, Ltd. PSR Nurses, Ltd.
PSR Nurses Limited Partnership
- -------------------------------------- -----------------------------------------
PSR Nurse Recruiting, Inc. PSR Nurse Recruiting, Inc.
- -------------------------------------- -----------------------------------------
PSR Nurses Holdings Corp. PSR Nurses Holdings Corp.
- -------------------------------------- -----------------------------------------
CRDE Corp. CRDE Corp.
- -------------------------------------- -----------------------------------------
AHHC Acquisition Corporation AHHC Acquisition Corporation
- -------------------------------------- -----------------------------------------
CPS Acquisition Corporation CPS Acquisition Corporation
- -------------------------------------- -----------------------------------------
SCHEDULE 11(N) - INDEBTEDNESS
Convertible Subordinated Promissory Note dated December 2, 2003 in the original
principal amount of $2,525,000 made payable to Professional Staffing Services,
Inc. and Nursing Services Registry of Savannah, Inc. ("Permenter Note No. 1").
Convertible Subordinated Promissory Note dated December 2, 2003 in the original
principal amount of $200,000 made payable to Professional Staffing Services,
Inc. and Nursing Services Registry of Savannah, Inc. ("Permenter Note No. 2",
and collectively with Permenter Note No. 1, the "Permenter Notes").
Convertible Subordinated Promissory Note dated August 28, 2003 in the original
principal amount of $50,000 made payable to James D. Durham.
Convertible Subordinated Promissory Note dated September 2, 2003 in the original
principal amount of $50,000 made payable to the DeLuca Trust, dated 1/7/00.
Convertible Subordinated Promissory Note dated September 2, 2003 in the original
principal amount of $50,000 made payable to the R.P. Oliver Community Propoerty
Trust dated 5/5/75.
Convertible Subordinated Promissory Note dated September 2, 2003 in the original
principal amount of $300,000 made payable to Robert Dillon.
Convertible Subordinated Promissory Note dated September 2, 2003 in the original
principal amount of $200,000 made payable to Anthony D. Errico.
Convertible Subordinated Promissory Note dated September 2, 2003 in the original
principal amount of $25,000 made payable to Health Care Investment Visions, LLC
Convertible Subordinated Promissory Note dated September 30, 2003 in the
original principal amount of $25,000 made payable to David A. Levenson and Ron
E. Rubinstein, Tenants in Common.
Convertible Subordinated Promissory Note dated October 16, 2003 in the original
principal amount of $120,000 made payable to Aydah Kytay
Convertible Subordinated Promissory Note dated December 12, 2003 in the original
principal amount of $25,000 made payable to Donald L. Bolich IRA.
Convertible Subordinated Promissory Note dated December 12, 2003 in the original
principal amount of $25,000 made payable to Steven P. Covey.
Convertible Subordinated Promissory Note dated December 3, 2003 in the original
principal amount of $15,000 made payable to Dorothy E. Elliot Revocable Trust
U/A dated 10/02/98.
Convertible Subordinated Promissory Note dated December 3, 2003 in the original
principal amount of $25,000 made payable to Donald B. Gustafson and Beverly J.
Gustafson, Co-Trustees of the Gustafson Family Trust, dated 04/03/85. Revolving
Note dated June 16, 2004 made payable to Bridge Healthcare Finance, LLC.
Term Note dated August 31, 2004 made payable to Bridge Opportunity Finance, LLC.
Subordinated Promissory Notes dated August 16, 2004 in the aggregate original
principal amount of $275,000.
SCHEDULE 11(P) - PARENT, SUBSIDIARIES AND AFFILIATES
Crdentia Corp., directly or indirectly, controls the following entities:
Baker Anderson Christie, Inc.
Nurses Network, Inc.
New Age Staffing, Inc.
PSR Nurses, Ltd.
PSR Nurse Recruiting, Inc.
PSR Nurses Holdings Corp.
CRDE Corp.
AHHC Acquisition Corporation
CPS Acquisition Corporation
Reference is made to the ownership by MedCap Partners L.P. of more than
10% of the outstanding securities of Crdentia Corp.
SCHEDULE 11(Q) - DEFAULTS
In August 2004, Crdentia Corp. tendered the scheduled principal and/or interest
payments under the Permenter Notes to the holder thereof, subject to the holder
executing and returning the form of Subordination Agreement required by Bridge
Healthcare Finance, LLC. By the terms of the Permenter Notes, the holder is
required to execute any documents required by Crdentia Corp.'s senior lender,
including the Subordination Agreement.
The holder of the Permenter Notes has refused to (i) execute the Subordination
Agreement, and (ii) accept the tendered payments under the Permenter Notes.
SCHEDULE 11(T) - ENVIRONMENTAL MATTERS
NONE.
SCHEDULE 11(X) - GOVERNMENT REIMBURSEMENT PROGRAM MATTERS
NONE.
SCHEDULE 11(Z) - LICENSES AND PERMITS
Reference is made to license number NR 00000530 issued by the State of
Washington to PSR Nurses, Ltd. on March 19, 2003, which was valid until March
19, 2004.
BRIDGE OPPORTUNITY FINANCE, LLC ("BOF")
with
CRDENTIA CORP. ("CRDENTIA")
BAKER ANDERSON CHRISTIE, INC.("BAKER")
NURSES NETWORK, INC.("NURSES NEWTORK")
NEW AGE STAFFING, INC. ("NEW AGE")
PSR NURSES, LTD. ("PSR LTD.")
PSR NURSE RECRUITING, INC. ("PSR RECRUITING")
PSR NURSES HOLDINGS CORP. ("PSR HOLDING"),
CRDE CORP. ("CRDE")
AHHC ACQUISITION, INC. ("AHHC")
CPS ACQUISITION, INC. ("CPS")
(COLLECTIVELY, THE "BORROWERS")
Term Loan Credit Facility
Document Checklist
August 31, 2004
1. DEAL TEAM
Borrowers CRDENTIA CORP.
("B") 14114 DALLAS PARKWAY, SUITE 600
DALLAS, TEXAS 75254
Tel: (800) 803-1777
Fax: (972) 392-2722
Attn: William Leftwich
Title: Chief Financial Offier
E-Mail: bleftwich@crdentia.com
Borrower Counsel: MORRISON & FORESTER LLP
("BC") 425 Market Street
San Francisco, California 94105
Jill Feldman, Esq.
Tel: (415) 268-6474
Fax: (415) 276-7298
E-Mail: jfeldman@mofo.com
1
Lender: BRIDGE OPPORTUNITY FINANCE, LLC
("L") 233 South Wacker Drive, Suite 5350
Chicago, Illinois 60606
Attn: Kim Gordon
Tel: (312) 334-4455 ext. 209
Fax: (312) 334-4450
E-Mail: KGORDON@BRIDGEHCF.COM
Attn: Shawn Andrews
Tel: (312) 334-4452 ext. 204
Cel: (312) 282-3614
E-Mail: SANDREWS@BRIDGEHCF.COM
Counsel to Lender: VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C.
("CL") 222 N. LaSalle Street
Chicago, Illinois 60601
Tel: (312) 609-7500
Fax: (312) 609-5005
Thomas E. Schnur, Esq.
Dir: (312) 609-7715
E-Mail: TSCHNUR@VEDDERPRICE.COM
A.J. Gable, Esq. Dir: (312)
609-7852 E-Mail:
AGABLE@VEDDERPRICE.COM
Diana Schoendorff, Paralegal
Dir: (312) 609-7859
E-Mail: DSCHOENDORFF@VEDDERPRICE.COM
2
2. FINANCING DOCUMENTATION RESPONSIBLE PARTY
-----------------
(a) LOAN DOCUMENTATION CL
(i) Loan and Security Agreement - Term Loan (BOF), together with:
(1) ANNEX I - Definitions CL
(2) Exhibit A - Borrowing Base Certificate L/B
Exhibit B - Compliance Certificate CL
Exhibit C - Closing Document List CL
(3) Schedule 1 - Permitted Liens B
Schedule 11(b) - Business and Collateral B
Locations B
Schedule 11(b) - Certain Collateral B
Schedule 11(g) - Litigation B
Schedule 11(i) - Affiliate Transactions B
Schedule 11(j) - Names & Trade Names B
Schedule 11(n) - Indebtedness B
Schedule 11(p) - Parent, Subsidiaries & Affiliates B
Schedule 11(x) - Government Reimbursement B
Program Matters B
(ii) Term Loan Note (BOF) CL
(iii) Warrant Agreement CL
(iv) Makewell Agreement from MedCap Partners L.P. CL
(v) Stock Pledge Agreement VPKK
(1) Original Stock Certificates B
(2) Stock Powers B
(vi) Intercreditor and Subordination Agreement VPKK
(vii) Assignment of Rights under Purchase Agreement with respect to
each of the following Acquisitions: CL
(1) Acquisition of Care Pros Staffing, Inc.
(2) Acquisition of Arizona Home Health Care / Private
Duty, Inc.
(viii) Officer's Certificate (BOF) CL
(ix) Accountant's Access Letter (BOF) CL/Form
3
(x) Borrowing Base Certificate (confirming Acquisition Subsidiary
Excess Availability) B
(xi) Disbursement Request CL
(b) ACCOUNT DOCUMENTATION CL/B
(i) Lockbox Agreements (in addition to account documents with BHF
also for the benefit of BOF) with respect to each of the
following: CL/B
(1) CRDE Corp.
(ii) Deposit Account Control Agreement with respect to each of the
following bank accounts: CL/B
(1) Care Pros Staffing, Inc. bank accounts with First
American Bank: Account Numbers 1038016243, 1038027375
and 1038030851
(2) Arizona Home Health Care / Private Duty, Inc. bank
accounts with Bank One: Account Numbers 07590138 and
28644166
(c) INSURANCE DOCUMENTATION
(i) Certificates of Insurance or Binders naming Bridge B/BC
Healthcare Opportunity, LLC and Bridge Healthcare Finance,
LLC as "additional insureds" with respect to liability
insurance and a "lender's loss payee" with respect to
casualty insurance, together with (i) a lender's loss
payee endorsement in favor of Bridge Opportunity Finance,
LLC and Bridge Healthcare Finance, LLC executed by the
insurance company or authorized insurance agent and
(ii) copies of the insurance policies (shared docs with BHF)
(d) THIRD PARTY DOCUMENTATION
(i) Opinion Letter from Morrison & Foerster LLP BC
(ii) Opinion Letter from Texas counsel TC
(iii) Landlord Agreements (in favor of BHF also for the benefit
of BOF) for each of the following locations: CL/B
(1) Care Pros Staffing, Inc:
a. 808 S. College St. #122, McKinney, TX
b. 3000 S. 31st St. #301, Temple, TX 76502
4
(2) Arizona Home Health Care / Private Duty, Inc
a. 5151 E. Broadway #1530, Tucson, AZ 85711
b. 5829 N. 7th St. #1E, Phoenix, AZ 85014
3. UCC, TAX LIEN AND JUDGMENTS
(i) UCC, Tax Lien and Judgment Searches CL
(1) Borrower - BHF Loan
(2) CRDE Corp.
(3) Care Pros Staffing, Inc.
(4) Arizona Home Health Care / Private Duty, Inc.
(ii) UCC Pre-Filing Authorization, together with UCC-1 Financing Statements B/CL
(1) Crdentia - Delaware
(2) Baker Anderson Christie, Inc. - California
(3) Nurses Network, Inc. - California
(4) New Age Staffing, Inc. - Delaware
(5) PSR Nurses, Ltd. - Texas
(6) PSR Nurse Recruiting, Inc. - Texas
(7) PSR Nurses Holdings Corp. - Texas
(8) CRDE Corp. - Delaware
(9) AHHC Acquisition Corporation - Delaware (to be amended to
Arizona Home Health Care / Private Duty, Inc. following
consummation of the merger.)
(10) CPS Acquisition Corporation - Texas (to be amended to Care
Pros Staffing, Inc. following consummation of the merger.)
4. CORPORATION AUTHORIZATION
(i) Good Standing Certificates BC
5
(1) CRDENTIA - Delaware
(2) BAKER ANDERSON CHRISTIE, INC. - California
(3) NURSES NETWORK, INC. - California
(4) NEW AGE STAFFING, INC. - Delaware
(5) PSR NURSES, LTD. - Texas
(6) PSR NURSE RECRUITING, INC. - Texas
(7) PSR NURSES HOLDINGS CORP. - Texas
(8) CRDE CORP. - Delaware
(9) AHHC ACQUISITION CORPORATION - Delaware
(10) CPS ACQUISITION CORPORATION - Texas
(11) CARE PROS STAFFING, INC. - Texas (delivered upon
consummation of merger)
(12) ARIZONA HOME HEALTH CARE / PRIVATE DUTY, INC. - Arizona
(delivered upon consummation of merger)
(13) MEDCAP PARTNERS L.P.
(ii) Certificate of Secretary, together with (i) Certified
Certificate/Articles of BC Incorporation, (ii) By-Laws, and
(iii) Borrowing resolutions (shared doc with BHF)
(1) Crdentia
(2) Baker Anderson Christie, Inc.
(3) Nurses Network, Inc.
(4) New Age Staffing, Inc.
(5) PSR Nurses, Ltd.
(6) PSR Nurse Recruiting, Inc.
(7) PSR Nurses Holdings Corp.
6
(8) CRDE Corp.
(9) AHHC Acquisition Corporation
(10) CPS Acquisition Corporation
(11) MedCap Partners L.P. (with resolutions only)
(iii) Post-Closing Agreement CL
(iv) Information Certificates B
(1) Care Pros Staffing, Inc.
(2) Arizona Home Health Care / Private Duty, Inc.
(v) Healthcare Related Documents with respect to each of Care Pros Staffing, B
Inc. and Arizona Home Health Care / Private Duty, Inc.
(1) Copies of all state licenses required by Borrowers to operate
business
(2) Copies of service agreements with hospitals and healthcare
entities
(vi) Arizona Home Health Care / Private Duty, Inc. Acquisition B
(1) Copies of all of the Acquisition Documents, certified as true B
and complete by an officer of Borrower
(2) Receivables Allocation Agreement B/CL
(vii) Care Pros Staffing, Inc. Acquisition B
(1) Copies of all of the Acquisition Documents, certified as B
true and complete by an officer of Borrower
(2) Subordination Agreement B/CL
(viii) Other Documents all
(1) William Crocker Employment Agreement
(2) Dan Ross Employment Agreement
7
BRIDGE HEALTHCARE FINANCE, LLC
CREDIT FACILITY
BRIDGE HEALTHCARE FINANCE, LLC
INFORMATION CERTIFICATE
Dated: July 2, 2004
PLEASE COMPLETE AND RETURN
AS SOON AS POSSIBLE TO:
(a) Thomas E. Schnur, Esq. (b) Ms. Kim Gordon
Vedder, Price, Kaufman & Kammholz, P.C. Bridge Healthcare Finance, LLC
222 N. LaSalle Street 233 South Wacker Drive, 53rd Floor
Chicago, Illinois 60601 Chicago, Illinois 60606
Tel: 312-609-7715 Tel: 847-317-9984
Fax: 312-609-5005 Fax: 847-943-9678
e-mail: tschnur@vedderprice.com e-mail: kgordon@bridgehcf.com
Ladies and Gentlemen:
Reference is hereby made to the proposed draft Loan and Security
Agreement of even date herewith (the "LOAN AND SECURITY AGREEMENT"; capitalized
terms used in this Information Certificate and not otherwise defined in this
Information Certificate shall have the meanings assigned thereto in the Loan and
Security Agreement) by and among Bridge Healthcare Finance, LLC ("BANK"). To
induce Bank to enter into the Loan and Security Agreement and fund the Loans
provided for thereunder, Borrower hereby provides you with the following
information regarding (collectively as the "CREDIT PARTIES" and each, a "CREDIT
PARTY"): Arizona Home Health Care/Private Duty, Inc. and EACH PARENT ENTITY AND
EACH OF ITS DIRECT AND INDIRECT SUBSIDIARIES Borrower represents and warrants to
Bank that the information provided in this Information Certificate is true,
correct and complete as of the date hereof.
1
A. IDENTIFICATION MATTERS
1. The full, correct and current name of each Credit Party as it appears
in such Credit Party's Organizational Documents is:
[PLEASE PROVIDE OUR COUNSEL WITH A COPY OF EACH CREDIT PARTY'S
ORGANIZATIONAL DOCUMENTS, CERTIFIED AS OF A RECENT DATE BY THE
JURISDICTION ISSUING SUCH ORGANIZATIONAL DOCUMENTS]
2. Each Credit Party's type of organization is:
- -------------------------------------------- -----------------------------------
CREDIT PARTY TYPE OF ORGANIZATION
- -------------------------------------------- -----------------------------------
Arizona Home and Health Care Private Duty S Corp
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
3. Each Credit Party's jurisdictions of organization are:
- -------------------------------------------- -----------------------------------
CREDIT PARTY JURISDICTION OF ORGANIZATION
- -------------------------------------------- -----------------------------------
Arizona Home and Health Care Private Duty Arizona
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
4. Each Credit Party's jurisdictions of qualification are:
- -------------------------------------------- -----------------------------------
CREDIT PARTY JURISDICTIONS OF QUALIFICATION
- -------------------------------------------- -----------------------------------
Arizona Home and Health Care Private Duty Arizona only
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
5. Each Credit Party's organizational identification number is:
- -------------------------------------------- -----------------------------------
ORGANIZATIONAL IDENTIFICATION
CREDIT PARTY NUMBER
- -------------------------------------------- -----------------------------------
Arizona Home and Health Care Private Duty 86-0980138
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
6. Any names of a Credit Party (as appearing in such Person's
Organizational Documents) not specified above in Item 1 that such
Credit Party has had during the 5 year period preceding the Closing
Date are:
2
- -------------------------------------------- -----------------------------------
CREDIT PARTY ADDITIONAL NAMES
- -------------------------------------------- -----------------------------------
N/A
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
B. LEGAL MATTERS
7. The officers of each Credit Party and their respective titles are:
- ------------------------- ------------------- ----------------------------------
CREDIT PARTY TITLE NAME
- ------------------------- ------------------- ----------------------------------
William W. Crocker Chairman Arizona Home and Health Care
- ------------------------- ------------------- ----------------------------------
William C. Crocker CEO Arizona Home and Health Care
- ------------------------- ------------------- ----------------------------------
Toni Brunner EVP Arizona Home and Health Care
- ------------------------- ------------------- ----------------------------------
- ------------------------- ------------------- ----------------------------------
8. The members of the Board of Directors of each Credit Party (or, if such
Credit Party is a limited partnership, the general partner or, if such
Credit Party is a limited liability company, the managers) are:
- -------------------------------------------- -----------------------------------
BOARD OF DIRECTORS /
CREDIT PARTY GENERAL PARTNER / MANAGERS
- -------------------------------------------- -----------------------------------
See attached
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
9. The Affiliates of each Credit Party are as follows and, except as set
forth below, no Credit Party is party to any agreements with any such
Affiliate:
- ------------------------- --------------------------- --------------------------
CREDIT PARTY AFFILIATES AGREEMENTS WITH AFFILIATES
- ------------------------- --------------------------- --------------------------
None
- ------------------------- --------------------------- --------------------------
- ------------------------- --------------------------- --------------------------
- ------------------------- --------------------------- --------------------------
- ------------------------- --------------------------- --------------------------
3
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ANY AGREEMENTS IDENTIFIED ABOVE]
10. A list of all of the material contracts to which any Credit Party is a
party or by which such Credit Party is bound is set forth below. For
purposes of this Item 10, the list of "material contracts" should
include any long term or significant customer agreements, long term or
significant supply agreements, real estate leases, agreements pursuant
to which intellectual property is licensed or other material licensing
agreements, employment agreements, collective bargaining agreements,
management and consulting agreements requiring payment of more than
$25,000 in any year and equity holders' agreements.
CPS
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE MATERIAL CONTRACTS LISTED ABOVE]
11. Except as set forth below, the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated thereby
will not violate, conflict with or cause a breach of, or result in the
creation of a Lien under, any of the agreements identified in Item 10,
any Credit Party's Organizational Documents or applicable law:
None
12. The following consents shall have been obtained on or prior to the
Closing Date in connection with the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated
thereby:
See attached - ?
13. Each Credit Party's fiscal year ends on December 31, of each year.
14. The authorized equity securities of each Credit Party, and the identity
of the holders of issued equity securities with the percentage of their
fully-diluted ownership of such Credit Party, are as set forth on the
Capitalization Schedule attached hereto. Any preemptive or other
outstanding rights, warrants, options, conversion rights or similar
agreements or understandings are described on the Capitalization
Schedule. [PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ANY SHAREHOLDERS'
AGREEMENTS OR OTHER AGREEMENTS EVIDENCING ANY PREEMPTIVE OR OTHER
OUTSTANDING RIGHTS, WARRANTS, OPTIONS OR CONVERSION RIGHTS SET FORTH ON
THE CAPITALIZATION SCHEDULE]
See attached
15. A brief description of each Credit Party's Pension Plans is:
4
16. During the 5 year period preceding the Closing Date neither any Credit
Party has been party to any merger, consolidation, stock acquisition or
purchase of all or a substantial portion of the assets of any Person,
except:
No
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE MATERIAL DOCUMENTS
RELATING TO THE TRANSACTIONS DESCRIBED ABOVE]
C. NATURE OF OPERATIONS AND LOCATIONS
17. The following is a brief description of each Credit Party's business:
- ----------------------------------------- --------------------------------------
CREDIT PARTY BUSINESS DESCRIPTION
- ----------------------------------------- --------------------------------------
Arizona Home and Health Care Private Medical Staffing Agency
Duty
- ----------------------------------------- --------------------------------------
- ----------------------------------------- --------------------------------------
- ----------------------------------------- --------------------------------------
- ----------------------------------------- --------------------------------------
18. Each location at which any Credit Party maintains any books, records,
inventory, equipment or other assets is set forth in the table below,
including for each such location a street address, the approximate
size, an indication of whether the location is owned by the applicable
Credit Party, leased by the applicable Credit Party (and, if so, the
name and address of the owner of the location) or operated by a third
party, such as a warehouseman or processor (and, if so, the name and
address of such third party). The chief executive office of each Credit
Party is indicated in the table below with an asterisk (*). In
addition, the legal descriptions for any leased or owned real estate at
which any Credit Party maintains any equipment are set forth on the
Real Estate Schedule attached hereto.
- ------------------ -------------------- -------- ------------------- --------------------------------
CREDIT PARTY ADDRESS SIZE OWNED/LEASED/ NAME AND ADDRESS OF OWNER (IF
OPERATED LEASED) OR THIRD-PARTY OPERATOR
BY THIRD PARTY (IF OPERATED BY A THIRD PARTY)
- ------------------ -------------------- -------- ------------------- --------------------------------
5151 E. Broadway, 1,000 Copy of Lease
#1530
Tucson, AZ 85711
- ------------------ -------------------- -------- ------------------- --------------------------------
5829 N. 7th Street, 1,000 Copy of Lease
#1E
Phoenix, AZ 85014
- ------------------ -------------------- -------- ------------------- --------------------------------
- ------------------ -------------------- -------- ------------------- --------------------------------
- ------------------ -------------------- -------- ------------------- --------------------------------
5
[WITH RESPECT TO PROPERTIES OPERATED BY A THIRD PARTY, PLEASE PROVIDE
OUR COUNSEL WITH COPIES OF ANY AGREEMENTS BETWEEN SUCH THIRD PARTY AND
THE APPLICABLE CREDIT PARTY. WE WILL SEPARATELY ADVISE YOU REGARDING
OUR REQUIREMENTS FOR OWNED REAL ESTATE]
19. The addresses of any locations not specified in Item 18 where any
Credit Party has maintained inventory, books, records, equipment or
other assets during the 4 month period preceding the Closing Date are:
- ------------------------------------- ------------------------------------------
CREDIT PARTY ADDRESS
- ------------------------------------- ------------------------------------------
N/A
- ------------------------------------- ------------------------------------------
- ------------------------------------- ------------------------------------------
- ------------------------------------- ------------------------------------------
- ------------------------------------- ------------------------------------------
D. FINANCING MATTERS
20. No Credit Party has any Debt or any contingent obligations which would
become Debt if they were non-contingent, except as set forth on the
Debt Schedule attached hereto. [PLEASE PROVIDE OUR COUNSEL WITH COPIES
OF THE MATERIAL DOCUMENTATION RELATING TO DEBT IDENTIFIED ON THE DEBT
SCHEDULE THAT WILL REMAIN OUTSTANDING AFTER THE CLOSING DATE]
None
21. Any current creditors of any Credit Party that will be refinanced in
connection with the funding of the initial Loans and any letters of
credit currently outstanding on behalf of any Credit Party (together
with an indication of whether any such letters of credit will be
replaced or collateralized on the Closing Date) are as follows:
- ---------------------- ---------------------------- ----------------------------
CREDIT PARTY CREDITORS TO BE REFINANCED LETTERS OF CREDIT / REPLACED
OR COLLATERALIZED
- ---------------------- ---------------------------- ----------------------------
None
- ---------------------- ---------------------------- ----------------------------
- ---------------------- ---------------------------- ----------------------------
- ---------------------- ---------------------------- ----------------------------
- ---------------------- ---------------------------- ----------------------------
22. Each Credit Party's assets are owned free and clear of any consensual
Liens, except for the consensual Liens set forth on the Lien Schedule
attached hereto. [PLEASE INDICATE WHICH LIENS DISCLOSED ON THE LIEN
SCHEDULE WILL BE DISCHARGED AT CLOSING. PLEASE ALSO PROVIDE OUR COUNSEL
WITH COPIES OF THE DOCUMENTS EVIDENCING THE LIENS DISCLOSED ON THE LIEN
SCHEDULE THAT WILL NOT BE DISCHARGED AT CLOSING.]
None
6
23. No Credit Party has made any loans to, or otherwise made any
Investments in, any other Persons, except as follows:
None
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE DOCUMENTATION RELATING
TO ANY MATERIAL INVESTMENTS DESCRIBED ABOVE]
24. No Credit Party is obligated to pay any management, consulting or
similar professional advisory fees, except:
Ongoing business activity to accountant and lawyer.
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE AGREEMENTS EVIDENCING
THE FEES DESCRIBED ABOVE]
25. Any broker's or similar fees which will be owing in connection with the
consummation of the transactions contemplated by the Loan Documents
are:
None
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE AGREEMENTS EVIDENCING
ANY FEES DESCRIBED ABOVE]
E. REGULATORY MATTERS AND DISPUTES
26. Any actions, suits, judgments or proceedings pending against, or, to
Borrower's knowledge, threatened against or affecting, any Credit Party
before any court or arbitrator or any governmental body, agency or
official, are described on the Litigation Schedule attached hereto.
[FOR EACH OF THE MATTERS DISCLOSED ON THE LITIGATION SCHEDULE, PLEASE
PROVIDE A BRIEF SUMMARY OF SUCH MATTER WHICH INCLUDES THE CURRENT
STATUS OF THE PROCEEDINGS, AN INDICATION OF WHETHER ANY LIABILITY
RESULTING FROM SUCH MATTER WOULD BE COVERED BY INSURANCE, AND, IF AN
INSURANCE POLICY WOULD APPLY, AN INDICATION OF WHETHER THE INSURANCE
CARRIER HAS ACKNOWLEDGED RESPONSIBILITY UNDER SUCH POLICY]
None
27. All of the material licenses, permits and certificates necessary to the
operation of any Credit Party's business are:
- --------------------------------------- ----------------------------------------
CREDIT PARTY LICENSES / PERMITS / CERTIFICATES
- --------------------------------------- ----------------------------------------
State of Arizona Business License
- --------------------------------------- ----------------------------------------
- --------------------------------------- ----------------------------------------
- --------------------------------------- ----------------------------------------
7
28. Any strikes or other labor disputes pending or, to Borrower's
knowledge, threatened, against any Credit Party are:
None
29. Any notices of non-compliance received by any Credit Party from any
governmental authority during the 5 year period preceding the Closing
Date with respect to any Environmental Laws, securities laws or
regulations, tax laws or regulations, laws or regulations addressing
the sale or distribution of durable medical equipment, health and
safety laws or regulations or ERISA are as follows:
N/A
[PLEASE PROVIDE OUR COUNSEL WITH ANY NOTICES OF NON-COMPLIANCE
DESCRIBED ABOVE]
F. SPECIAL COLLATERAL
30. All of the financial institutions at which any Credit Party maintains
any deposit accounts, investment accounts, securities accounts or
similar accounts, together with the account number and a description
for each such account, are:
- --------------------------- -------------------------------- ---------------------------- ----------------------------
CREDIT PARTY FINANCIAL INSTITUTION(S) WHERE ACCOUNT NUMBERS DESCRIPTIONS OF ACCOUNTS
ACCOUNTS MAINTAINED
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Rt# for both 122100024
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Bank One 07590138 Operating
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Bank One 28644166 Bill paying
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
31. All of the items of intellectual property owned by or licensed to any
Credit Party, together with the registration or application number for
each such item of intellectual property (if registered or if an
application for registration has been submitted), are:
- --------------------- ------------------------------ ------------------------------- ---------------------------------
CREDIT PARTY PATENTS / REGISTRATION OR TRADEMARKS / REGISTRATION OR COPYRIGHTS / REGISTRATION OR
APPLICATION NUMBERS APPLICATION NUMBERS APPLICATION NUMBERS
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
N/A
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
8
32. No Credit Party has any chattel paper (whether tangible or electronic)
or instruments as of the date hereof, except:
33. No Credit Party owns any equipment subject to a certificate of title
statute (including, without limitation, any motor vehicles), except:
Chrysler PT Cruiser/paid in full
34. No Credit Party owns any assets that are of a type in which a lien may
be registered, recorded or filed under, or notice thereof given under,
any federal statute or regulation, except for the intellectual property
identified in Item 31 above and except:
N/A
35. No Credit Party has any letter of credit rights, any interests in
commercial tort claims or any documents of title, except:
None
G. HEALTHCARE MATTERS
36. Each Credit Party is certified for participation in the Medicare program in
the following jurisdictions:
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
CREDIT PARTY REGION (A, B, C, D) CARRIER/INTERMEDIARY NAME SUPPLIER/PROVIDER NUMBER
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
None
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF CMS FORM 855 (OR EARLIER
VERSION USED BY HCFA) AND ALL RELATED CORRESPONDENCE FROM EACH
CARRIER/INTERMEDIARY DEMONSTRATING ENROLLMENT AND GOOD STANDING]
37. Each Credit Party is certified for participation in the Medicaid
programs offered by the following states:
9
- ---------------------------- ------------------------ --------------------------
CREDIT PARTY STATE MEDICAID SUPPLIER NUMBER
- ---------------------------- ------------------------ --------------------------
None
- ---------------------------- ------------------------ --------------------------
- ---------------------------- ------------------------ --------------------------
- ---------------------------- ------------------------ --------------------------
- ---------------------------- ------------------------ --------------------------
- ---------------------------- ------------------------ --------------------------
- ---------------------------- ------------------------ --------------------------
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ALL RELATED CORRESPONDENCE
FROM EACH STATE MEDICAID AGENCY DEMONSTRATING ENROLLMENT] N/A
38. No Credit Party is accredited by a private health care organization
accreditation agency, except:
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF CURRENT CERTIFICATES OF
ACCREDITATION, MOST RECENT ACCREDITATION SURVEY REPORT, DEFICIENCY LISTS, IF
ANY, AND PLAN(S) OF CORRECTION, IF ANY]
39. No Credit Party has received notice of non-compliance with state or
federal laws or regulations addressing health care fraud and abuse,
except: None
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF EACH CREDIT PARTY'S
CORPORATE HEALTHCARE REGULATORY COMPLIANCE PROGRAM].
40. No Credit Party has received notice of non-compliance with any of the
regulations promulgated under the Health Insurance Portability and
Accountability Act which currently are in effect, except: N/A
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF EACH CREDIT PARTY'S HIPAA
COMPLIANCE PLAN]
H. CONTACT INFORMATION
41. Legal Counsel for the Company is as follows:
Name of the Firm: SEE ATTACHED
Address: __________________________
Partner Handling Relationship: __________________________
Telephone: __________________________
Telecopier: __________________________
E-Mail: __________________________
10
42. The Certified Public Accountant for the Company is as follows:
Name of the Firm: SEE ATTACHED
Address: __________________________
Partner Handling Relationship: __________________________
43. The Insurance Broker/Bank for the Corporation is as follows:
Name of the Firm: VOIGHT INS. SERVICES LLC
Address: 72819 CAMELBACK ROAD, #210
SCOTTSDALE, AZ 85251
Partner Handling Relationship: WALLY VOIGHT
Telephone: (480) 421-0200
Telecopier: (480) 421-0219
E-Mail: ?
[Signature page follows]
11
(SIGNATURE PAGE TO INFORMATION CERTIFICATE)
Bank shall be entitled to rely upon the foregoing in all respects and
the undersigned is duly authorized to execute and deliver this Information
Certificate.
Very truly yours,
Arizona Home Health Care/Private Duty, Inc.
By:
-----------------------------------------
Name: William Crocker
Title: President
LIST OF SCHEDULES TO
--------------------
INFORMATION CERTIFICATE
-----------------------
Capitalization Schedule
Real Estate Schedule
Debt Schedule
Lien Schedule
Litigation Schedule
ARIZONA HOME & HEALTH CARE/PRIVATE DUTY
5829 N. 7th Street, Suite 1E
Phoenix, AZ 85014
PH: 602-248-9027 - FAX: 602-248-9331
ACCOUNTANT
----------
DOXEY & CO.
Marv Doxey
Kimala Christopherson
668 N. 44th Street, Suite 300
Phoenix, AZ 85008
602-685-1191
August 2002 - Present (June 2004)
MR. HARRY INGOLD, CPA
May 2000 - July 2002 (deceased)
CLIFTON GUNDERSON, LLP
(formerly Zolondek, Strassels, Greene & Freed, PC)
3636 N. Central Avenue, Suite 400
Phoenix, AZ 85012
602-266-2248
May 2000 - May 2002
ATTORNEY
--------
KELLER ROHRBACK, PLC
Leon Silver, Esq.
3101 N. Central Avenue, Suite 900
Phoenix, AZ 85012
602-230-6378
May 2000 - Present (June 2004)
BRIDGE HEALTHCARE FINANCE, LLC
CREDIT FACILITY
BRIDGE HEALTHCARE FINANCE, LLC
INFORMATION CERTIFICATE
Dated: July 14, 2004
PLEASE COMPLETE AND RETURN
AS SOON AS POSSIBLE TO:
(a) Thomas E. Schnur, Esq. (b) Ms. Kim Gordon
Vedder, Price, Kaufman & Kammholz, P.C. Bridge Healthcare Finance, LLC
222 N. LaSalle Street 233 South Wacker Drive, 53rd Floor
Chicago, Illinois 60601 Chicago, Illinois 60606
Tel: 312-609-7715 Tel: 847-317-9984
Fax: 312-609-5005 Fax: 847-943-9678
e-mail: tschnur@vedderprice.com e-mail: kgordon@bridgehcf.com
Ladies and Gentlemen:
Reference is hereby made to the proposed draft Loan and Security
Agreement of even date herewith (the "LOAN AND SECURITY AGREEMENT"; capitalized
terms used in this Information Certificate and not otherwise defined in this
Information Certificate shall have the meanings assigned thereto in the Loan and
Security Agreement) by and among Bridge Healthcare Finance, LLC ("BANK"). To
induce Bank to enter into the Loan and Security Agreement and fund the Loans
provided for thereunder, Borrower hereby provides you with the following
information regarding (collectively as the "CREDIT PARTIES" and each, a "CREDIT
PARTY"): Arizona Home Health Care/Private Duty, Inc. and EACH PARENT ENTITY AND
EACH OF ITS DIRECT AND INDIRECT SUBSIDIARIES Borrower represents and warrants to
Bank that the information provided in this Information Certificate is true,
correct and complete as of the date hereof.
1
A. IDENTIFICATION MATTERS
1. The full, correct and current name of each Credit Party as it appears
in such Credit Party's Organizational Documents is: Care Pros Staffing,
Inc.
[PLEASE PROVIDE OUR COUNSEL WITH A COPY OF EACH CREDIT PARTY'S
ORGANIZATIONAL DOCUMENTS, CERTIFIED AS OF A RECENT DATE BY THE
JURISDICTION ISSUING SUCH ORGANIZATIONAL DOCUMENTS]
2. Each Credit Party's type of organization is:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY TYPE OF ORGANIZATION
- ------------------------------------------------------------ ---------------------------------------------------------
Care Pros Staffing, Inc. S. Corporation
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
3. Each Credit Party's jurisdictions of organization are:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY JURISDICTION OF ORGANIZATION
- ------------------------------------------------------------ ---------------------------------------------------------
Care Pros Staffing, Inc. Texas
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
4. Each Credit Party's jurisdictions of qualification are:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY JURISDICTIONS OF QUALIFICATION
- ------------------------------------------------------------ ---------------------------------------------------------
Care Pros Staffing, Inc. Texas
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
5. Each Credit Party's organizational identification number is:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY ORGANIZATIONAL IDENTIFICATION NUMBER
- ------------------------------------------------------------ ---------------------------------------------------------
Care Pros Staffing, Inc. Fed Id: 75-2950403
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
2
6. Any names of a Credit Party (as appearing in such Person's
Organizational Documents) not specified above in Item 1 that such
Credit Party has had during the 5 year period preceding the Closing
Date are:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY ADDITIONAL NAMES
- ------------------------------------------------------------ ---------------------------------------------------------
(N/A)
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
B. LEGAL MATTERS
7. The officers of each Credit Party and their respective titles are:
- ---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY TITLE NAME
- ---------------------------------------- -------------------------------------- --------------------------------------
Care Pros Staffing, Inc. President Dan Ross
- ---------------------------------------- -------------------------------------- --------------------------------------
Care Pros Staffing, Inc. Chairman David Kingery
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
8. The members of the Board of Directors of each Credit Party (or, if such
Credit Party is a limited partnership, the general partner or, if such
Credit Party is a limited liability company, the managers) are:
- ------------------------------------------------------------ ---------------------------------------------------------
CREDIT PARTY BOARD OF DIRECTORS / GENERAL PARTNER / MANAGERS
- ------------------------------------------------------------ ---------------------------------------------------------
Care Pros Staffing, Inc. Dan Ross & David Kingery
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
9. The Affiliates of each Credit Party are as follows and, except as set
forth below, no Credit Party is party to any agreements with any such
Affiliate:
- ---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY AFFILIATES AGREEMENTS WITH AFFILIATES
- ---------------------------------------- -------------------------------------- --------------------------------------
Care Pros Staffing, Inc. Telesis Financial Services, Inc. Provides CPS with Financial and
Accounting Services, Owned by David
Kingery
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
3
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ANY AGREEMENTS IDENTIFIED
ABOVE]
(PROVIDED TO CRDENTIA)
10. A list of all of the material contracts to which any Credit Party is a
party or by which such Credit Party is bound is set forth below. For
purposes of this Item 10, the list of "material contracts" should
include any long term or significant customer agreements, long term or
significant supply agreements, real estate leases, agreements pursuant
to which intellectual property is licensed or other material licensing
agreements, employment agreements, collective bargaining agreements,
management and consulting agreements requiring payment of more than
$25,000 in any year and equity holders' agreements. (SEE ADDENDUM
ATTACHED)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE MATERIAL CONTRACTS
LISTED ABOVE]
11. Except as set forth below, the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated thereby
will not violate, conflict with or cause a breach of, or result in the
creation of a Lien under, any of the agreements identified in Item 10,
any Credit Party's Organizational Documents or applicable law:
(N/A)
12. The following consents shall have been obtained on or prior to the
Closing Date in connection with the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated
thereby: (N/A)
13. Each Credit Party's fiscal year ends on 12/31 of each year.
14. The authorized equity securities of each Credit Party, and the identity
of the holders of issued equity securities with the percentage of their
fully-diluted ownership of such Credit Party, are as set forth on the
Capitalization Schedule attached hereto. Any preemptive or other
outstanding rights, warrants, options, conversion rights or similar
agreements or understandings are described on the Capitalization
Schedule. [PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ANY SHAREHOLDERS'
AGREEMENTS OR OTHER AGREEMENTS EVIDENCING ANY PREEMPTIVE OR OTHER
OUTSTANDING RIGHTS, WARRANTS, OPTIONS OR CONVERSION RIGHTS SET FORTH ON
THE CAPITALIZATION SCHEDULE]
David Kingery 25,000 shares 25%
Dan Ross 25,000 shares 25%
David Gorman 25,000 shares 25%
John Pencsak 25,000 shares 25%
4
15. A brief description of each Credit Party's Pension Plans is: (N/A)
16. During the 5 year period preceding the Closing Date neither any Credit
Party has been party to any merger, consolidation, stock acquisition or
purchase of all or a substantial portion of the assets of any Person,
except: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE MATERIAL DOCUMENTS
RELATING TO THE TRANSACTIONS DESCRIBED ABOVE]
C. NATURE OF OPERATIONS AND LOCATIONS
17. The following is a brief description of each Credit Party's business:
- ----------------------------------------- ----------------------------------------------------------------------------
CREDIT PARTY BUSINESS DESCRIPTION
- ----------------------------------------- ----------------------------------------------------------------------------
Care Pros Staffing, Inc. Temp. Nurse Staffing
- ----------------------------------------- ----------------------------------------------------------------------------
- ----------------------------------------- ----------------------------------------------------------------------------
- ----------------------------------------- ----------------------------------------------------------------------------
- ----------------------------------------- ----------------------------------------------------------------------------
- ----------------------------------------- ----------------------------------------------------------------------------
18. Each location at which any Credit Party maintains any books, records,
inventory, equipment or other assets is set forth in the table below,
including for each such location a street address, the approximate
size, an indication of whether the location is owned by the applicable
Credit Party, leased by the applicable Credit Party (and, if so, the
name and address of the owner of the location) or operated by a third
party, such as a warehouseman or processor (and, if so, the name and
address of such third party). The chief executive office of each Credit
Party is indicated in the table below with an asterisk (*). In
addition, the legal descriptions for any leased or owned real estate at
which any Credit Party maintains any equipment are set forth on the
Real Estate Schedule attached hereto.
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
CREDIT PARTY ADDRESS SIZE OWNED/LEASED/OPERATED NAME AND ADDRESS OF OWNER (IF
BY THIRD PARTY LEASED) OR THIRD-PARTY OPERATOR (IF
OPERATED BY A THIRD PARTY)
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
Care Pros 808 S. College St. 500 Sq. Feet Leased Park Board Limited. - Richard Dill
Staffing, Inc. #122
McKinney, TX
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
Care Pros 3000 S. 31st St. #301 346 Sq. Feet Leased Charter Property Management
Staffing, Inc. Temple, TX 76502
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
- ----------------- ----------------------- ------------- ----------------------- --------------------------------------
5
[WITH RESPECT TO PROPERTIES OPERATED BY A THIRD PARTY, PLEASE PROVIDE
OUR COUNSEL WITH COPIES OF ANY AGREEMENTS BETWEEN SUCH THIRD PARTY AND
THE APPLICABLE CREDIT PARTY. WE WILL SEPARATELY ADVISE YOU REGARDING
OUR REQUIREMENTS FOR OWNED REAL ESTATE]
19. The addresses of any locations not specified in Item 18 where any
Credit Party has maintained inventory, books, records, equipment or
other assets during the 4 month period preceding the Closing Date are:
- ------------------------------------------- --------------------------------------------------------------------------
CREDIT PARTY ADDRESS
- ------------------------------------------- --------------------------------------------------------------------------
(N/A)
- ------------------------------------------- --------------------------------------------------------------------------
- ------------------------------------------- --------------------------------------------------------------------------
- ------------------------------------------- --------------------------------------------------------------------------
- ------------------------------------------- --------------------------------------------------------------------------
D. FINANCING MATTERS
20. No Credit Party has any Debt or any contingent obligations which would
become Debt if they were non-contingent, except as set forth on the
Debt Schedule attached hereto. [PLEASE PROVIDE OUR COUNSEL WITH COPIES
OF THE MATERIAL DOCUMENTATION RELATING TO DEBT IDENTIFIED ON THE DEBT
SCHEDULE THAT WILL REMAIN OUTSTANDING AFTER THE CLOSING DATE] (N/A)
21. Any current creditors of any Credit Party that will be refinanced in
connection with the funding of the initial Loans and any letters of
credit currently outstanding on behalf of any Credit Party (together
with an indication of whether any such letters of credit will be
replaced or collateralized on the Closing Date) are as follows:
- ---------------------------------------- -------------------------------------- --------------------------------------
CREDIT PARTY CREDITORS TO BE REFINANCED LETTERS OF CREDIT / REPLACED OR
COLLATERALIZED
- ---------------------------------------- -------------------------------------- --------------------------------------
(N/A)
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
22. Each Credit Party's assets are owned free and clear of any consensual
Liens, except for the consensual Liens set forth on the Lien Schedule
attached hereto. [PLEASE INDICATE WHICH LIENS DISCLOSED ON THE LIEN
SCHEDULE WILL BE DISCHARGED AT CLOSING. PLEASE ALSO PROVIDE OUR COUNSEL
WITH COPIES OF THE DOCUMENTS EVIDENCING THE LIENS DISCLOSED ON THE LIEN
SCHEDULE THAT WILL NOT BE DISCHARGED AT CLOSING.] (N/A)
6
23. No Credit Party has made any loans to, or otherwise made any
Investments in, any other Persons, except as follows:(N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE DOCUMENTATION RELATING
TO ANY MATERIAL INVESTMENTS DESCRIBED ABOVE]
24. No Credit Party is obligated to pay any management, consulting or
similar professional advisory fees, except: (None that will survive the
closing)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE AGREEMENTS EVIDENCING
THE FEES DESCRIBED ABOVE]
25. Any broker's or similar fees which will be owing in connection with the
consummation of the transactions contemplated by the Loan Documents
are: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF THE AGREEMENTS EVIDENCING
ANY FEES DESCRIBED ABOVE]
E. REGULATORY MATTERS AND DISPUTES
26. Any actions, suits, judgments or proceedings pending against, or, to
Borrower's knowledge, threatened against or affecting, any Credit Party
before any court or arbitrator or any governmental body, agency or
official, are described on the Litigation Schedule attached hereto.
[FOR EACH OF THE MATTERS DISCLOSED ON THE LITIGATION SCHEDULE, PLEASE
PROVIDE A BRIEF SUMMARY OF SUCH MATTER WHICH INCLUDES THE CURRENT
STATUS OF THE PROCEEDINGS, AN INDICATION OF WHETHER ANY LIABILITY
RESULTING FROM SUCH MATTER WOULD BE COVERED BY INSURANCE, AND, IF AN
INSURANCE POLICY WOULD APPLY, AN INDICATION OF WHETHER THE INSURANCE
CARRIER HAS ACKNOWLEDGED RESPONSIBILITY UNDER SUCH POLICY]
(N/A)
27. All of the material licenses, permits and certificates necessary to the
operation of any Credit Party's business are:
- --------------------------------------- ------------------------------------------------------------------------------
CREDIT PARTY LICENSES / PERMITS / CERTIFICATES
- --------------------------------------- ------------------------------------------------------------------------------
(N/A)
- --------------------------------------- ------------------------------------------------------------------------------
- --------------------------------------- ------------------------------------------------------------------------------
- --------------------------------------- ------------------------------------------------------------------------------
- --------------------------------------- ------------------------------------------------------------------------------
28. Any strikes or other labor disputes pending or, to Borrower's
knowledge, threatened, against any Credit Party are:(N/A)
7
29. Any notices of non-compliance received by any Credit Party from any
governmental authority during the 5 year period preceding the Closing
Date with respect to any Environmental Laws, securities laws or
regulations, tax laws or regulations, laws or regulations addressing
the sale or distribution of durable medical equipment, health and
safety laws or regulations or ERISA are as follows: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH ANY NOTICES OF NON-COMPLIANCE
DESCRIBED ABOVE]
F. SPECIAL COLLATERAL
30. All of the financial institutions at which any Credit Party maintains
any deposit accounts, investment accounts, securities accounts or
similar accounts, together with the account number and a description
for each such account, are:
- --------------------------- -------------------------------- ---------------------------- ----------------------------
CREDIT PARTY FINANCIAL INSTITUTION(S) WHERE ACCOUNT NUMBERS DESCRIPTIONS OF ACCOUNTS
ACCOUNTS MAINTAINED
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Care Pros Staffing, Inc. First American Bank 1038016243 Operating
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Care Pros Staffing, Inc. First American Bank 1038027375 Temple Daily Pay
- --------------------------- -------------------------------- ---------------------------- ----------------------------
Care Pros Staffing, Inc. First American Bank 1038030851 McKinney Daily Pay
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
- --------------------------- -------------------------------- ---------------------------- ----------------------------
31. All of the items of intellectual property owned by or licensed to any
Credit Party, together with the registration or application number for
each such item of intellectual property (if registered or if an
application for registration has been submitted), are:
- --------------------- ------------------------------ ------------------------------- ---------------------------------
CREDIT PARTY PATENTS / REGISTRATION OR TRADEMARKS / REGISTRATION OR COPYRIGHTS / REGISTRATION OR
APPLICATION NUMBERS APPLICATION NUMBERS APPLICATION NUMBERS
- --------------------- ------------------------------ ------------------------------- ---------------------------------
(N/A)
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
- --------------------- ------------------------------ ------------------------------- ---------------------------------
32. No Credit Party has any chattel paper (whether tangible or electronic)
or instruments as of the date hereof, except: (N/A)
8
33. No Credit Party owns any equipment subject to a certificate of title
statute (including, without limitation, any motor vehicles), except:
(N/A)
34. No Credit Party owns any assets that are of a type in which a lien may
be registered, recorded or filed under, or notice thereof given under,
any federal statute or regulation, except for the intellectual property
identified in Item 31 above and except: (N/A)
35. No Credit Party has any letter of credit rights, any interests in
commercial tort claims or any documents of title, except: (N/A)
G. HEALTHCARE MATTERS
36. Each Credit Party is certified for participation in the Medicare
program in the following jurisdictions:
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
CREDIT PARTY REGION (A, B, C, D) CARRIER/INTERMEDIARY NAME SUPPLIER/PROVIDER NUMBER
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
(N/A)
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF CMS FORM 855 (OR EARLIER
VERSION USED BY HCFA) AND ALL RELATED CORRESPONDENCE FROM EACH
CARRIER/INTERMEDIARY DEMONSTRATING ENROLLMENT AND GOOD STANDING]
37. Each Credit Party is certified for participation in the Medicaid
programs offered by the following states:
- ------------------------------- ---------------------------- ---------------------------------------------------------
CREDIT PARTY STATE MEDICAID SUPPLIER NUMBER
- ------------------------------- ---------------------------- ---------------------------------------------------------
(N/A)
- ------------------------------- ---------------------------- ---------------------------------------------------------
- ------------------------------- ---------------------------- ---------------------------------------------------------
- ------------------------------- ---------------------------- ---------------------------------------------------------
- ------------------------------- ---------------------------- ---------------------------------------------------------
- ------------------------------- ---------------------------- ---------------------------------------------------------
- ------------------------------- ---------------------------- ---------------------------------------------------------
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF ALL RELATED CORRESPONDENCE
FROM EACH STATE MEDICAID AGENCY DEMONSTRATING ENROLLMENT]
9
38. No Credit Party is accredited by a private health care organization
accreditation agency, except: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF CURRENT CERTIFICATES OF
ACCREDITATION, MOST RECENT ACCREDITATION SURVEY REPORT, DEFICIENCY LISTS, IF
ANY, AND PLAN(S) OF CORRECTION, IF ANY]
39. No Credit Party has received notice of non-compliance with state or
federal laws or regulations addressing health care fraud and abuse,
except: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF EACH CREDIT PARTY'S
CORPORATE HEALTHCARE REGULATORY COMPLIANCE PROGRAM].
40. No Credit Party has received notice of non-compliance with any of the
regulations promulgated under the Health Insurance Portability and
Accountability Act which currently are in effect, except: (N/A)
[PLEASE PROVIDE OUR COUNSEL WITH COPIES OF EACH CREDIT PARTY'S HIPAA
COMPLIANCE PLAN]
H. CONTACT INFORMATION
41. Legal Counsel for the Company is as follows:
Name of the Firm: SHAMOUN & KLATSKEY
Address: SUITE 1210 AT REGENCY PLAZA, 3710
RAWLINS ST., DALLAS, TX 75219
Partner Handling Relationship: DAN ROSS
Telephone: 214-987-1745
Telecopier: 214-521-9033
E-Mail: attorney@shamounandklatsky.com
42. The Certified Public Accountant for the Company is as follows:
Name of the Firm: BRIAN DOBRY, CPA
Address: 321 N. PORTER, NORMAN, OK 73071
Partner Handling Relationship: DAVID KINGERY
10
43. The Insurance Broker/Bank for the Corporation is as follows:
Name of the Firm: THE SOLUTIONS GROUP
Address: 2101 LOCKHILL-SELMA RD., SUITE 210,
SAN ANTONIO, TX 78213
Partner Handling Relationship: DAN ROSS / DAVID KINGERY
Telephone: 800-866-2682
Telecopier: 866-847-7232
E-Mail:
[Signature page follows]
11
(SIGNATURE PAGE TO INFORMATION CERTIFICATE)
Bank shall be entitled to rely upon the foregoing in all respects and
the undersigned is duly authorized to execute and deliver this Information
Certificate.
Very truly yours,
Care Pros Staffing, Inc.
By:
----------------------------
Name: Dan Ross
Title: President
LIST OF SCHEDULES TO
--------------------
INFORMATION CERTIFICATE
-----------------------
Capitalization Schedule
Real Estate Schedule
Debt Schedule
Lien Schedule
Litigation Schedule
SUBORDINATION AGREEMENT
-----------------------
This Subordination Agreement is made as of this ____ day of
________________, 2004 among Bridge Healthcare Finance, LLC ("SENIOR REVOLVER
LENDER"), and Bridge Opportunity Finance, LLC ("SENIOR TERM LENDER"; and
together with Senior Revolver Lender, collectively, "SENIOR LENDER"), [NAME OF
SUBORDINATED LENDER] (the "SUBORDINATED 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"), and PSR Nurses Holdings Corp., a
Texas corporation ("PSR Holding") (Crdentia, Baker, Nurses Network, New Age, PSR
Ltd, PSR Recruiting and PSR Holding each individually, and referred to
collectively as, "BORROWER").
W I T N E S S E T H:
WHEREAS, Senior Revolving Lender and Borrower have entered into a Loan
and Security Agreement, dated as of June ___, 2004 (as from time to time
amended, modified, extended, renewed, or restated, the "REVOLVING LOAN
AGREEMENT"), and Senior Term Lender and Borrower may enter into a Loan and
Security Agreement after the date hereof (as from time to time amended,
modified, extended, renewed, or restated, the "TERM LOAN AGREEMENT", and
together with the Revolving Loan Agreement, collectively the "LOAN AGREEMENT")
together with the other Loan Documents (as defined below), whereby Senior Lender
has made and shall make available to Borrower a credit facility (as from time to
time amended, modified, extended, renewed, or restated the "SENIOR LOAN")
therein set forth, which Senior Loan is secured by certain assignments of and
security interests in the assets of Borrower, now or hereafter existing, all as
more fully set forth in the Loan Documents; and
WHEREAS, Borrower has issued one or more promissory note(s)
(individually and/or collectively, the "NOTES") in favor of Subordinated Lender
as described on SCHEDULE I attached hereto (such Notes together with all other
documents or instruments executed in connection therewith as from time to time
modified, extended, renewed or restated, collectively the "SUBORDINATED
DOCUMENTS"); and
WHEREAS, as set forth in SECTION 18 hereof, Subordinated Lender shall
benefit from the execution and delivery of the Loan Agreement and the making of
the Senior Loan; and
WHEREAS, as a condition of the financing accommodations under the Loan
Documents, the parties hereto are required to enter into this Agreement to
establish the priority of the repayment of the Borrower's debt, and to address
certain related matters; and
WHEREAS, Subordinated Lender and Borrower desire to enter into this
Agreement in order to induce Senior Lender to enter into the Loan Agreement with
Borrower and to make the Senior Loan.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree as follows:
1
1. DEFINITIONS. Except as otherwise provided herein, all capitalized
terms used in this Agreement shall have the meanings ascribed to such terms in
the Loan Agreement, provided that the following terms shall have the meanings
set forth below:
"ALLOWED PAYMENT" shall have the meaning set forth in Section 5 below.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code as it
may be amended and/or restated from time to time, including any successor
provisions.
"BORROWER" shall have the meaning set forth in the recitals above.
"BORROWER'S PROPERTY" means all assets, property and property rights,
of any kind or nature, tangible or intangible, now or hereafter existing, in
which Borrower owns, asserts or maintains an interest.
"FINALLY PAID" or "FINAL PAYMENT," when used in connection with the
Senior Indebtedness shall mean the full, final and indefeasible payment in cash
of all of the Senior Indebtedness and the irrevocable termination of Senior
Lender's obligation to make loans or other advances under the Loan Agreement; in
each case subject to such waiting periods as are necessary to prevent such
actions being subject to avoidance under Section 547 of the Bankruptcy Code, or
its successor.
"INSOLVENCY PROCEEDING" shall mean any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"LIENS" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge, set-off right or other encumbrance, whether now existing or
hereafter created, acquired or arising.
"LOAN DOCUMENTS" means all agreements, instruments and documents,
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements, subordination agreements, and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of Borrower or any other Person and delivered to Lender or to any parent,
affiliate or subsidiary of Lender in connection with the Obligations or the
transactions contemplated hereby, as each of the same may be amended, modified
or supplemented from time to time
"NOTES" shall have the meaning set forth in the recitals hereof.
"OBLIGATIONS" means all "Obligations" as such term is defined in the
Term Loan Agreement and Revolving Loan Agreement.
"REVOLVING LOAN AGREEMENT" shall have the meaning set forth in the
recitals hereof.
2
"SENIOR INDEBTEDNESS" means all principal, interest and other
obligations at any time due and owing by Borrower to Senior Lender arising out
of or incurred in connection with the Loan Documents or other documents executed
in favor of Senior Lender in connection with the Senior Loan (and any
indebtedness which refinances such principal, interest or other obligations), as
modified, extended, renewed or restated, whether direct or contingent, and
whether now existing or hereafter created. Senior Indebtedness shall include,
without limitation: (i) interest which accrues on the principal amount of the
Senior Indebtedness, and (ii) other obligations arising out of or in connection
with the Loan Documents or other documents executed in favor of Senior Lender in
connection with the Senior Loan, in each instance subsequent to the commencement
of a case under Chapter 11 of the Bankruptcy Code, whether or not such interest
is allowed as a claim in such case.
"SENIOR LENDER" shall have the meaning set forth in the recitals
hereof.
"SENIOR REVOLVER LENDER" shall have the meaning set forth in the
recitals hereof.
"SENIOR TERM LENDER" shall have the meaning set forth in the recitals
hereof.
"SUBORDINATED DOCUMENTS" shall have the meaning set forth in the
recitals hereof.
"SUBORDINATED INDEBTEDNESS" means all indebtedness of Borrower to
Subordinated Lender pursuant to the Subordinated Documents and all present and
future loans, advances, debts, liabilities, indemnification obligations (under
the Purchase Agreement or otherwise), claims and causes of action, otherwise
owing to or arising in favor of Subordinated Lender in respect of Borrower,
whether evidenced by any note, or other instrument or document, whether absolute
or contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorneys' fees and any other sums chargeable
to Borrower. Subordinated Indebtedness shall include, without limitation: (i)
all interest which accrues on the principal amount of the Subordinated
Indebtedness, (ii) all amounts due under the Notes, and (iii) all other
obligations arising out of or in connection with the Subordinated Documents
incurred in connection with the Subordinated Indebtedness, in each instance
subsequent to the commencement of a case under Chapter 11 of the Bankruptcy
Code, whether or not such interest is allowed as a claim in such case.
"SUBORDINATED LENDER" means, individually and collectively, the
individuals and entities named on the signature page hereto, and each reference
herein to "Subordinated Lender" shall be deemed to mean each Subordinated
Lender, individually and collectively, as the context requires.
"SUBORDINATED LENDER REMEDIES" means any action which results in (A)
the sale, foreclosure, realization on or liquidation of any of Borrower's
Property, (B) the execution on any judgment obtained against Borrower, (C) the
acceleration of the Subordinated Indebtedness, (D) the filing of any petition or
lien under any bankruptcy, insolvency or creditors' rights laws with respect to
Borrower, or (E) the institution or exercise against Borrower of any suit, legal
action, arbitration or other enforcement remedy.
"TERM LOAN AGREEMENT" shall have the meaning set forth in the recitals
hereof.
3
"UCC" shall mean Article 9 of the Uniform Commercial Code, as in effect
in the State of Illinois from time to time.
2. SUBORDINATION.
(a) Subordinated Lender hereby postpones and subordinates in
right of payment all of the Subordinated Indebtedness to the Final Payment of
all of the Senior Indebtedness. Subordinated Lender does not, as of the date
hereof, hold any Liens or security interests in Borrower's Property. If at any
time after the date hereof Senior Lender agrees in writing in its sole
discretion to permit such Liens, Subordinated Lender hereby agrees that any
Liens, security interests, claims and rights of any kind in favor of, or for the
benefit of, Subordinated Lender in, to or against Borrower or Borrower's
Property shall be junior, subordinate and subject in all respects to the Liens,
security interests, claims and rights against Borrower and/or Borrower's
Property of Senior Lender arising from or out of the Senior Indebtedness, which
shall under all circumstances be and remain superior and prior in right of
payment and enforcement to any Liens arising in favor of Subordinated Lender
regardless of the order or time as of which any Liens attach to any of
Borrower's Property, and notwithstanding the usual application of the priority
provisions of the Uniform Commercial Code as in effect in any jurisdiction or
any other applicable law or judicial decision of any jurisdiction, or whether
the Subordinated Lender is perfected without filing or possession in any part of
the Collateral, the order or time of UCC filings or any other filings or
recordings, the order or time of granting of any such Liens, or the physical
possession of any of Borrower's Property until this Agreement is terminated in
accordance with Section 25 hereof.
(b) Subordinated Lender agrees that the priority of the Senior
Indebtedness set forth herein shall continue during any Insolvency Proceeding
(including without limitation for any interest which accrues or is paid after
the commencement of an Insolvency Proceeding). Subordinated Lender further
agrees to execute and deliver such documents, instruments, lien releases,
assignments and financing statements and do such acts as may be necessary in
order for the Senior Lender to establish and maintain a first, valid, prior and
perfected security interest in the Collateral. If, after the date of this
Agreement, Borrower issues any instrument or document evidencing or pertaining
to the Subordinated Indebtedness each such instrument and document shall bear a
conspicuous legend, substantially in the form attached hereto as EXHIBIT A, that
it is subordinated to the Senior Indebtedness in accordance with the terms of
this Agreement.
(c) Borrower agrees that Borrower's books shall be marked to
evidence the subordination of all of the Subordinated Indebtedness to the holder
of Senior Indebtedness, in accordance with the terms of this Agreement. Senior
Lender is authorized to examine such books from time to time and to make any
notations required by this Agreement.
3. WARRANTIES AND REPRESENTATIONS OF BORROWER AND SUBORDINATED LENDER.
Borrower and Subordinated Lender each hereby severally represents and warrants
to the Senior Lender that the Senior Lender has been furnished with a true and
correct copy of all the Subordinated Documents (attached hereto as EXHIBIT B)
with the legend described in EXHIBIT A affixed thereto and all instruments and
securities evidencing or pertaining to the Subordinated Indebtedness. Borrower
hereby represents and warrants to the Senior Lender that this Agreement has been
duly executed and delivered by Borrower and constitutes a legal, valid and
4
binding obligation of Borrower enforceable in accordance with its terms except
to the extent that the enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies and general principles of equity. Subordinated Lender represents and
warrants to the Senior Lender that: (A) this Agreement has been duly executed
and delivered by Subordinated Lender and constitutes a legal, valid and binding
obligation of Subordinated Lender enforceable against the Subordinated Lender in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting generally the
enforcement of creditors' rights and remedies and general principles of equity;
(B) Subordinated Lender has an address set forth below his, her or its name on
the signature page hereto; (C) Subordinated Lender is acquiring the Subordinated
Indebtedness for its, his or her own account and not with a view to the
distribution thereof and has no present intention of distributing the
Subordinated Indebtedness; and (D) Subordinated Lender has not relied and shall
not rely on any representation or information of any nature made by or received
from Senior Lender relative to Borrower in deciding to execute this Agreement or
to permit it to continue in effect.
4. NEGATIVE COVENANTS. Until all of the Senior Indebtedness has been
Finally Paid: (A) Borrower shall not, directly or indirectly, grant a security
interest in, mortgage, pledge, assign or transfer any properties, to secure or
satisfy all or any part of the Subordinated Indebtedness; (B) Subordinated
Lender shall not demand or accept from Borrower any collateral; (C) Borrower
shall not discharge the Subordinated Indebtedness other than in accordance with
its terms; (D) Subordinated Lender shall not demand or accept from Borrower or
other person any consideration which would result in a discharge of the
Subordinated Indebtedness other than in accordance with its terms; (E)
Subordinated Lender shall not hereafter give any subordination in respect of the
Subordinated Indebtedness or convert any or all of the Subordinated Indebtedness
to capital stock, equity, ownership interest or other securities of Borrower;
(F) Subordinated Lender shall not transfer or assign any of the Subordinated
Indebtedness to any person, except upon the prior written consent of Senior
Lender and subject to the condition that such transferee or assignee shall have
agreed in writing to be bound by the terms of this Agreement as a Subordinated
Lender hereunder; (G) Borrower shall not hereafter issue any instrument,
security or other writing evidencing any part of the Subordinated Indebtedness,
and Subordinated Lender shall not receive any such writing, except upon the
condition that such security shall bear the legend attached hereto as Exhibit A
and a true copy thereof shall be furnished to Senior Lender; and (H) neither
Borrower nor Subordinated Lender otherwise shall take any action contrary to
Senior Lender's priority position over Subordinated Lender that is created by
this Agreement, except with respect to the exercise by Subordinated Lender of
the rights granted to it in this Agreement.
5. PAYMENTS OF SUBORDINATED INDEBTEDNESS. Until all of the Senior
Indebtedness has been Finally Paid, Borrower shall not make and Subordinated
Lender shall not accept any direct or indirect payment or prepayment in cash,
property or securities, by set-off or otherwise, with respect to any
Subordinated Indebtedness, except that scheduled payments under the Notes may be
paid as due ("ALLOWED PAYMENT") if, and only to the extent that at the time of
any such Allowed Payment: (a) no "Event of Default" has occurred and is
continuing under the Loan Agreement and no Event of Default would result from
the making of such Allowed Payment, (b) according to the monthly financial
5
statements submitted to Senior Lender by Borrower pursuant to the Loan Agreement
Borrower will be in compliance with all the financial covenants set forth in
Section 14 of the Revolving Loan Agreement after giving effect to all of the
Allowed Payments Borrower proposes to make, and (c) Borrower will have at least
$500,000 of Excess Availability (as such term is defined in the Revolving Loan
Agreement) after giving effect to all the Allowed Payments Borrower proposes to
make. Compliance with the foregoing requirements must be reflected in the most
recent financial statements and compliance certificate submitted to Senior
Lender by Borrower pursuant to the Loan Agreement prior to the making of any
Allowed Payment.
6. PROHIBITION ON PAYMENTS.
(a) Notwithstanding the provisions of Section 5 above, upon
the happening of any Event of Default under and as defined in the Loan
Agreement, no direct or indirect payment or prepayment in cash, property or
securities, by set-off or otherwise, shall be made or agreed to be made by the
Borrower or accepted by the Subordinated Lender on account of the principal of,
premium or interest on, or any other amounts in respect of the Subordinated
Indebtedness, and the Borrower shall not segregate or hold in trust money for
any such payment or distribution, unless and until Subordinated Lender has
received a written notice from the Senior Lender that the Event of Default has
been cured or waived by Senior Lender, and thereafter Subordinated Lender shall
be entitled to the payment of suspended payments of the Subordinated
Indebtedness from Borrower, to the extent permitted as an Allowed Payment under
Section 5 hereof, provided that no Event of Default will result from the making
of such payments by Borrower.
(b) In the event that the Borrower shall make or Subordinated
Lender shall collect any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness in
contravention of this Section 6, such payments shall be paid over and delivered
to the Senior Lender immediately upon receipt thereof.
(c) In the event that any failure of the Borrower to make or
the Subordinated Lender to receive any payment with respect to the Subordinated
Indebtedness as a result of the provisions of this Section 6 shall be deemed a
default under the Subordinated Documents, such event shall not give rise to any
right of Subordinated Lender to exercise any Subordinated Lender Remedies, any
provision of the Subordinated Documents to the contrary notwithstanding.
7. FORBEARANCE OF LEGAL REMEDIES. The Subordinated Lender shall not
exercise any Subordinated Lender Remedies or other remedies it may have for a
default under the Subordinated Documents, except as permitted below.
Subordinated Lender may exercise one or more or all of the following rights and
remedies (in each case, subject at all times to the payment subordination and
lien subordination provisions set forth in this Agreement), but only the
following rights and remedies, after prior written notice to Senior Lender and
upon the occurrence of any of the following conditions: (A) an Insolvency
Proceeding shall occur, or (B) the Senior Lender commences legal proceedings
against the Borrower:
(i) accelerate payment of the Subordinated Indebtedness;
6
(ii) commence legal proceedings against the Borrower and, if
requested by the Senior Lender, become a co-plaintiff in any legal
proceedings commenced by the Senior Lender, provided, that in no event
shall Subordinated Lender be permitted to execute on any judgment
obtained against Borrower until the Senior Indebtedness shall have been
Finally Paid unless the proceeds of such execution of judgment are paid
to the Senior Lender for application against the Senior Indebtedness,
and further provided that Subordinated Lender shall not be permitted to
execute on any judgment obtained against Borrower if the only predicate
act above is the acceleration of payment of the Senior Indebtedness;
and
(iii) file a proof of claim and otherwise participate in any
Insolvency Proceeding, to the extent not inconsistent with this
Agreement.
The Subordinated Lender agrees to provide the Senior Lender
with not less than ten (10) days prior written notice of its intent to
exercise any legal remedy.
8. SUBORDINATED INDEBTEDNESS SUBORDINATED TO PRIOR PAYMENT OF ALL
SENIOR INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE
BORROWER. Upon any distribution of assets of the Borrower in any dissolution,
winding up, liquidation or reorganization of the Borrower (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for the
benefit of creditors or otherwise) tending toward liquidation of the business
and assets of Borrower:
(a) the holder of all Senior Indebtedness shall first be
entitled to receive payment in full (or to have such payment duly provided for
in a manner previously agreed upon or otherwise satisfactory to it) of the
principal thereof, and premium and interest due thereon, and other amounts
payable comprising such Senior Indebtedness, before the Subordinated Lender is
entitled to receive any payment on account of the principal of, premium or
interest on or any other amounts due under the Subordinated Indebtedness; and
(b) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, to which the
Subordinated Lender would be entitled except for these provisions, shall be paid
by the liquidating trustee or agent or other person making such payment or
distribution directly to the holder of the Senior Indebtedness, to the extent
necessary to make payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution or provision
therefor to the holders of such Senior Indebtedness.
The Borrower shall give prompt written notice to the Senior
Lender and the Subordinated Lender of any dissolution, winding up, liquidation
or reorganization of the Borrower or any assignment for the benefit of any of
the creditors of the Borrower tending toward the liquidation of the business and
assets of the Borrower.
9. OBLIGATION OF BORROWER UNCONDITIONAL. Nothing contained herein or in
the Loan Documents is intended to or shall impair, as between the Borrower and
the Subordinated Lender only, the obligation of the Borrower, which is absolute
and unconditional, to pay to the holder of the Subordinated Indebtedness the
7
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with their terms, or to affect the relative rights of the
Subordinated Lender and creditors of the Borrower other than the Senior Lender.
10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF BORROWER
OR HOLDER OF SENIOR INDEBTEDNESS. No right of any present or future holder of
any Senior Indebtedness to enforce subordination as provided herein shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Borrower; by any act or failure to act, which act or failure is in
good faith, by any such holder; by any act or failure to act by any other holder
of the Senior Indebtedness; or by any noncompliance by the Borrower with the
terms hereof, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with. Subordinated Lender hereby agrees that the Senior
Lender shall have the right, but shall have no obligation, to cure any default
under the Subordinated Documents. Further, Subordinated Lender hereby agrees
that Subordinated Lender shall not be released, nor shall Subordinated Lender's
obligation hereunder be in anyway diminished, by any of the following: (A) the
exercise or the failure to exercise by Senior Lender of any rights or remedies
conferred on it or them under the Loan Documents hereunder or existing at law or
otherwise, or against any of Borrower's Property; (B) the commencement of an
action at law or the recovery of a judgment at law against Borrower or any
obligor ("OBLIGOR") for the performance of the Senior Indebtedness and the
enforcement thereof through levy or execution or otherwise; (C) the taking or
institution or any other action or proceeding against Borrower or any Obligor;
or (D) any delay in taking, pursuing, or exercising any of the foregoing
actions, rights, powers, or remedies (even though requested by Subordinated
Lender) by Senior Lender or anyone acting for Senior Lender. Without limiting
the generality of the foregoing, and anything else contained herein to the
contrary notwithstanding, Senior Lender, from time to time, without prior notice
to or the consent of Subordinated Lender, may take all or any of the following
actions without in any manner affecting or impairing the obligation or liability
of Subordinated Lender hereunder: (i) obtain a lien or a security interest in
any property to secure any of the Senior Indebtedness; (ii) obtain the primary
and secondary liability of any party or parties with respect to any of the
Senior Indebtedness; (iii) increase the amount of the Senior Loan or renew,
extend, or otherwise change the time for payment of the Senior Loan or any
installment thereof for any period; (iv) release or compromise any liability of
any nature of any person or entity with respect to the Senior Indebtedness; (v)
exchange, enforce, waive, release, and apply any of Borrower's Property and
direct the order or manner of sale thereof as Senior Lender may in its
discretion determine; (vi) enforce its rights hereunder, whether or not Senior
Lender shall proceed against any other person or entity; (vii) exercise its
rights to consent to any action or non-action of Borrower which may violate the
covenants and agreements contained in the Loan Documents, with or without
consideration, on such terms and conditions as may be acceptable to it; or
(viii) exercise any of its rights conferred by the Loan Documents or by law.
11. AUTHORITY TO ACT FOR SUBORDINATED LENDER. Until the Senior
Indebtedness has been Finally Paid, in the event an Insolvency Proceeding shall
occur and be continuing, Subordinated Lender shall file all claims it may have
against Borrower and shall direct the debtor in possession or trustee in
bankruptcy, as appropriate, to pay over to Senior Lender all amounts due to
Subordinated Lender on account of the Subordinated Indebtedness until the Senior
Indebtedness has been Finally Paid. If Subordinated Lender fails to file such
claims as requested by Senior Lender, Senior Lender may file such claims on
Subordinated Lender's own behalf. Subordinated Lender acknowledges and agrees
that so long as any Senior Indebtedness is owed to Senior Lender by Borrower,
8
Senior Lender shall have the right to vote the Subordinated Lender's claim in
any Insolvency Proceeding, and Subordinated Lender shall execute any and all
future documents and/or instruments requested by Senior Lender at any time to
further evidence and confirm such right. Until the Senior Indebtedness has been
Finally Paid, in the event an Insolvency Proceeding shall occur and be
continuing, Subordinated Lender hereby (i) expressly consents to the granting by
Borrower to Senior Lender of senior liens and priorities in connection with any
post-petition financing of Borrower by Senior Lender and (ii) agrees that
adequate notice of such financing to Subordinated Lender shall have been
provided if Subordinated Lender received notice in accordance with Section 17
hereof two (2) Business Days prior to the entry of any order approving such cash
collateral usage or financing. In the event that Subordinated Lender has or at
any time acquires any security for the Subordinated Indebtedness, Subordinated
Lender agrees not to assert any right it may have to "adequate protection" of
its interest in such security in any Insolvency Proceeding and agrees that it
will not seek to have the automatic stay lifted with respect to such security,
in each case without the prior written consent of Senior Lender. Subordinated
Lender waives any claim or defense Subordinated Lender may now or hereafter have
arising out of the election by the Senior Lender in any Insolvency Proceeding
instituted under Chapter 11 of the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code, and/or any use of cash collateral,
any borrowing or any grant of a security interest under Sections 363 and/or 364
of the Bankruptcy Code by Borrower, as debtor-in-possession. To the extent that
Senior Lender receives payments on, or proceeds of collateral for, the Senior
Indebtedness which are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law, or
equitable cause, then as between Senior Lender and Subordinated Lender
hereunder, to the extent of such payment or proceeds received, the Senior
Indebtedness, or part thereof, intended to be satisfied shall be revived and
continue in full force and effect as if such payments or proceeds had not been
received by the Senior Lender.
12. WAIVERS. Borrower and Subordinated Lender each hereby waives, to
the fullest extent permitted by law, any defense based on the adequacy of a
remedy at law which might be asserted as a bar to the remedy of specific
performance of this Agreement in any action brought therefor by Senior Lender.
To the fullest extent permitted by law and except as to any notices specified in
this Agreement, notices regarding the intended sale or disposition of any
portion of the Collateral by Senior Lender, or any notice which may not be
waived in accordance with the UCC, Borrower and Subordinated Lender each hereby
further waives: presentment, demand, protest, notice of protest, notice of
default or dishonor, notice of payment or nonpayment and any and all other
notices and demands of any kind in connection with all negotiable instruments
evidencing all or any portion of the Senior Indebtedness or the Subordinated
Indebtedness to which Borrower or Subordinated Lender may be a party; prior
notice of and consent to any loans made, extensions granted or other action
taken in reliance thereon; and all other demands and notices of every kind in
connection with this Agreement, the Senior Indebtedness or the Subordinated
Indebtedness. Subordinated Lender consents to any release, renewal, extension,
compromise or postponement of the time of payment of the Senior Indebtedness, to
any substitution, exchange or release of collateral therefor, and to the
addition or release of any person primarily or secondarily liable thereon.
9
13. INDULGENCES NOT WAIVERS. Neither the failure nor any delay on the
part of Senior Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with respect
to any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party making such
waiver, and then only to the extent specifically stated in such writing.
14. DEFAULT. If any material representation or warranty of Borrower or
Subordinated Lender in this Agreement or in any instrument evidencing, securing
or relating to the Senior Indebtedness proves to have been materially false when
made, or, in the event of a material breach by either the Borrower or
Subordinated Lender in the performance of any of the material terms of this
Agreement, or any instrument or agreement evidencing, securing or relating to
the Senior Indebtedness, all of the Senior Indebtedness shall, at the option of
Senior Lender, become immediately due and payable without presentment, demand,
protest, or notices of any kind, notwithstanding any time or credit otherwise
allowed. At any time Subordinated Lender fails to comply with any provision of
this Agreement that is applicable to Subordinated Lender, Senior Lender may
demand specific performance of this Agreement, whether or not Borrower has
complied with this Agreement, and may exercise any other remedy available at law
or equity.
15. AMENDMENT OF THE SUBORDINATED DOCUMENTS. Subordinated Lender agrees
that it will not, without the consent of the Senior Lender, amend the
Subordinated Documents, so as to modify the financial terms thereof (including,
without limitation, the amount of principal, rate of interest, dividends, fees
and prepayment premiums, if any), extend the maturity thereof, add or change any
covenants in a manner materially more restrictive to the Borrower, or effect any
other modification to the Subordinated Documents, which would be materially
adverse to the Senior Lender.
16. INCONSISTENT OR CONFLICTING PROVISIONS. In the event a provision of
the Loan Documents or the Subordinated Documents, is inconsistent or conflicts
with the provisions of this Agreement, the provisions of this Agreement shall
govern and prevail.
17. NOTICES. Any written notice, consent or other communication
provided for in this Agreement shall be delivered personally (effective upon
delivery), via facsimile (effective upon confirmation of transmission), via
overnight courier (effective the next Business Day after dispatch if instructed
to deliver on next Business Day) or via U.S. Mail (effective three (3) days
after mailing, postage prepaid, first class) to each party at its address(es)
and/or facsimile number(s) set forth below its signature, or to such other
address as either party shall specify to the other in writing from time to time.
18. BENEFIT. Subordinated Lender represents and warrants that the
making of the Senior Loan will benefit Subordinated Lender in that Subordinated
Lender is financially interested in Borrower and will benefit from the financial
success of Borrower. Subordinated Lender acknowledges that Senior Lender would
not make the Senior Loan but for the execution of this Agreement. Therefore,
Subordinated Lender has received good, sufficient and adequate consideration for
the making of this Agreement.
10
19. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement in
writing signed by Senior Lender and Subordinated Lender; provided, however, any
such change, waiver or amendment shall be binding upon the Borrower by its
written consent thereto.
20. ADDITIONAL DOCUMENTATION. Borrower and Subordinated Lender shall
execute and deliver to Senior Lender such further instruments and shall take
such further action as Senior Lender may at any time or times reasonably request
in order to carry out the provisions and intent of this Agreement.
21. EXPENSES. Borrower agrees to pay Senior Lender on demand all
expenses of every kind, including reasonable attorneys' fees, that Senior Lender
may incur in enforcing any of its rights against Borrower under this Agreement.
As between Senior Lender and the Subordinated Lender, the court may, in the
exercise of its discretion, award attorneys' fees to a prevailing party, in a
manner consistent with Illinois law governing actions arising out of a contract,
and the prevailing party shall have the right to petition the court to make such
award.
22. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of Senior Lender, its successors and assigns, and shall be binding upon Borrower
and its successors and assigns, and each Subordinated Lender and their
respective heirs, legatees, distributees, transferees, executors, administrators
and personal representatives and assigns, including without limitation, any
subsequent holders of any Note. Senior Lender, without prior notice or consent
of any kind, may sell, assign or transfer the Senior Indebtedness, and in such
event each and every immediate and successive assignee or transferee thereof may
be given the right by Senior Lender to enforce this Agreement in full against
Borrower and Subordinated Lender, by suit or otherwise, for its own benefit,
provided that such successor, assignee or transferee agrees to be bound by the
terms of this Agreement.
23. COVENANT NOT TO CHALLENGE. This Agreement has been negotiated by
the parties with the expectation and in reliance upon the assumption that the
instruments and documents evidencing the Senior Indebtedness are valid and
enforceable. In determining whether to enter into this Agreement, Subordinated
Lender has assumed such validity and enforceability, and has agreed to the
provisions contained herein, without relying upon any reservation of a right to
challenge or call into question such validity or enforceability. As between
Senior Lender and Subordinated Lender, Subordinated Lender hereby covenants and
agrees, to the fullest extent permitted by law, that it shall not (x) initiate
in any proceeding a challenge to the validity or enforceability of the documents
and instruments evidencing the Senior Indebtedness, the right of Senior Lender
to be paid the Senior Indebtedness in full in cash, or the priority or amount of
Senior Lender's claim in respect of the Senior Indebtedness (y) instigate other
parties to raise any such challenges, (z) participate in or otherwise assert any
such challenges which are raised by other parties.
24. SUBROGATION. Subject to the foregoing provisions hereof, provided
that the Senior Indebtedness has been Finally Paid, the Subordinated Lender
shall be subrogated, to the extent of such Senior Indebtedness so paid, to the
11
rights of the holder of such Senior Indebtedness to receive payments or
distributions or assets of the Borrower that secure such Senior Indebtedness
until all amounts owing on the Subordinated Indebtedness shall be paid in full.
For the purpose of such subrogation no payments or distributions to the holder
of the Senior Indebtedness by or on behalf of the Borrower or by or on behalf of
Subordinated Lender by virtue of the provisions hereof which otherwise would
have been made to the Subordinated Lender shall, as between the Borrower, a
creditor of the Borrower (other than Subordinated Lender and the Senior Lender)
and the Subordinated Lender, be deemed to be payment by the Borrower to or on
account of the Subordinated Indebtedness, it being understood that the
provisions of this Agreement are, and are intended solely, for the purpose of
defining the relative rights of Subordinated Lender on the one hand, and Senior
Lender on the other hand. In the event that Subordinated Lender turns over to
any Senior Lender any payment or contributions received by it in accordance with
this Agreement, Subordinated Lender shall, for purposes of determining whether
any default under the Subordinated Documents has occurred, be deemed never to
have received such payment or distribution. In the event that Borrower fails to
make any payment on account of the Subordinated Indebtedness by reason of any
provision contained herein, such failure shall, notwithstanding such provision
contained herein, constitute a default with respect to the Subordinated
Indebtedness if and to the extent such failure would otherwise constitute such a
default in accordance with the terms of the Subordinated Indebtedness.
25. TERMINATION OF AGREEMENT. This Agreement shall continue and shall
be irrevocable until the date all of the Senior Indebtedness has been Finally
Paid by Borrower or otherwise discharged and released by the Senior Lender.
26. REINSTATEMENT. The obligations of Subordinated Lender under this
Agreement shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Senior Indebtedness is rescinded or
must otherwise be restored or returned by Senior Lender by reason of any
bankruptcy, reorganization, arrangement, composition or similar proceeding or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, Borrower or any substantial part of its
property, or otherwise, all as though such payment had not been made.
27. GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. EACH
PARTY HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY ANY PARTY AND
ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT SHALL BE LITIGATED IN A
COOK COUNTY, ILLINOIS SUPREME COURT OR THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS OR, IF SENIOR LENDER INITIATES SUCH ACTION, IN
ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH SENIOR LENDER SHALL
INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. EACH PARTY
HERETO HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED BY ANY OTHER PARTY HERETO AND HEREBY WAIVES
ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED
UPON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM AS SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY ANY PARTY, OF ANY JUDGMENT
12
OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY ANY PARTY, OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH PARTY HERETO
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK SUCH JUDGMENT OR ACTION.
28. JURY TRIAL. SENIOR LENDER, SUBORDINATED LENDER AND BORROWER WAIVE
TRIAL BY JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WITH THIS
AGREEMENT.
29. SEVERABILITY. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provision hereof, and that this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
30. CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and have participated jointly in the
negotiations and drafting of this Agreement and hereby agree that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or exhibits hereto.
31. COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of separate counterparts, all of which, when taken together, shall
constitute one and the same instrument, notwithstanding the fact that all
parties did not sign the same counterpart. Each of the parties agrees that a
signature transmitted to the other parties or their respective counsel by
facsimile transmission shall be effective to bind the party whose signature was
transmitted, as a duly executed and delivered original. Each party further
agrees to promptly deliver its original signature pages to this Agreement to
counsel for the other parties promptly following execution, but any failure to
do so shall not affect the binding effect of such signature.
[SIGNATURES PAGES FOLLOW]
13
SUBORDINATION AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUBORDINATED LENDER:
_____________________________________
ROBERT KENNETH
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
SUBORDINATED LENDER:
_____________________________________
DEBORAH A. MCDONNELL
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
SUBORDINATED LENDER:
_____________________________________
NICK LIUZZA, JR.
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
SUBORDINATED LENDER: PROFESSIONAL STAFFING RESOURCES, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
SUBORDINATED LENDER: NURSING SERVICES REGISTRY OF
SAVANNAH, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
SUBORDINATED LENDER:
_____________________________________
ROBIN RIDDLE
Address for Notices:
[Please specify contact information:]
Facsimile:
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: CRDENTIA CORP.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: BAKER ANDERSON CHRISTIE, INC.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: NURSES NETWORK, INC.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: NEW AGE STAFFING, INC.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: PSR NURSES, LTD.,
a Texas limited partnership
By: PSR NURSE RECRUITING, INC.
Its: General Partner
By: ______________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: PSR NURSE RECRUITING, INC.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
BORROWER: PSR NURSES HOLDINGS CORP.
By: _________________________________
James D. Durham
Chief Executive Officer
Address for Notices:
14114 Dallas Parkway, Suite 600
Dallas, Texas 75254
Attn: William Leftwich
Facsimile: (972) 392-2722
SUBORDINATION AGREEMENT SIGNATURE PAGE
SENIOR LENDER: BRIDGE HEALTHCARE FINANCE, LLC
By: _________________________________
Kim Gordon
Executive Vice President/Chief
Credit Officer
Address: 233 South Wacker Drive
Suite 5350
Chicago, Illinois 60606
Attention: Chief Credit Officer
Facsimile: (312) 334-4455
SUBORDINATION AGREEMENT SIGNATURE PAGE
SENIOR LENDER: BRIDGE OPPORTUNITY FINANCE, LLC
By: _________________________________
Kim Gordon
Executive Vice President/Chief
Credit Officer
Address: 233 South Wacker Drive
Suite 5350
Chicago, Illinois 60606
Attention: Chief Credit Officer
Facsimile: (312) 334-4455
EXHIBIT A
---------
LEGEND TO BE INSERTED
AT THE TOP OF
SUBORDINATED DOCUMENTS
----------------------
ALL INDEBTEDNESS EVIDENCED HEREBY AND REFERENCED HEREIN IS SUBORDINATED IN RIGHT
OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL INDEBTEDNESS OWED TO BRIDGE
HEALTHCARE FINANCE, LLC AS SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT
AMONG BRIDGE HEALTHCARE FINANCE, LLC, BRIDGE OPPORTUNITY FINANCE, LLC, THE
[______________] UNDER THIS DOCUMENT AND THE OTHER PARTIES NAMED THEREIN.
A-1
EXHIBIT B
---------
SUBORDINATED DOCUMENTS
----------------------
SEE ATTACHED
B-1
SCHEDULE I
----------
NOTES
- -----