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AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
AMENDMENT dated June 26, 1998, by and among Health Fitness Corporation,
a Minnesota corporation ("Borrower"), Health Fitness Rehab, Inc., a Minnesota
corporation ("HF Rehab"), The Preferred Companies, Inc., an Arizona corporation
("TPC"), Health Fitness Rehab of Iowa, Inc., an Iowa corporation ("HF Rehab
Iowa"), Duffy & Associates Physical Therapy Corp., an Iowa corporation
("Duffy"), Medlink Corporation, an Iowa corporation ("Medlink"), Medlink
Services, Inc., an Iowa corporation ("Medlink Services"), Midlands Physical
Therapy, Inc., a Nebraska corporation ("Midlands"), Fitness Centers of America,
a California corporation ("Fitness Centers"), Sports & Orthopedic Physical
Therapy, Inc., a Minnesota corporation ("Sports Therapy") and International
Fitness Club Network, Inc., a Rhode Island corporation, formerly known as David
W. Pickering, Inc. ("IFCN", and together with Sports Therapy, HF Rehab, TPC, HF
Rehab Iowa, Duffy, Medlink, Medlink Services, Midlands and Fitness Centers,
collectively, "Guarantors" and sometimes referred to individually as a
"Guarantor") and Madeleine L.L.C., a New York limited liability company
("Lender").
W I T N E S S E T H
WHEREAS, Lender and Borrower have entered into financing arrangements
pursuant to which Lender may make loans and advances and provide other financial
accommodations to Borrower as set forth in the Loan and Security Agreement,
dated February 17, 1998, by and among Lender, Borrower and Guarantors, as
amended by Amendment No. 1 to Loan and Security Agreement, dated February 28,
1998 and Amendment No. 2 to Loan and Security Agreement, dated June 4, 1998 (and
as amended hereby and as the same may be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and
the agreements, documents and instruments at any time executed and/or delivered
in connection therewith or related thereto (collectively, together with the Loan
Agreement, the "Financing Agreements");
WHEREAS, Borrower and Guarantors have requested certain amendments to
the Loan Agreement and Lender is willing to agree to such amendments, subject to
the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Definitions.
1.1 Additional Definition. As used herein, the term "Special
Availability Reserve" shall mean a reserve in an amount equal to the Borrowing
Base (calculated without regard to the Special Availability Reserve) minus
$8,000,000, and the Loan Agreement shall be deemed and is hereby amended to
include, in addition and not in limitation, such definition.
1.2 Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals above, shall have the respective
meanings assigned to such terms in the Loan Agreement.
2. Amendments.
(a) Borrowing Base. Section 1.8(b) of the Loan Agreement is
hereby amended to add the following at the end thereof: "and including the
Special Availability Reserve."
(b) Loan, Investments, Guarantees. Section 8.7(e) of the Loan
Agreement is hereby deleted in its entirety and the following substituted
therefor: "intentionally omitted."
(c) Change in Retained Earnings. Section 8.10 of the Loan
Agreement is hereby amended by deleting the reference to the figure "($200,000)"
contained therein and substituting the following therefor: "$(650,000)". The
parentheses with the number indicate that it is a negative number.
(d) Fixed Charge Coverage Ratio. The Section of the Loan
Agreement titled "8.10 Fixed Charged Coverage Ratio" is hereby deleted in its
entirety and the following substituted therefor:
"8.10A Fixed Charged Coverage Ratio. Borrower and each
Guarantor shall not permit the Fixed Charge Coverage Ratio for any
fiscal quarter to be less than the ratio set forth opposite such fiscal
quarter:
Fiscal Quarter Ending Ratio
March 31, 1998 1.75 to 1
June 30, 1998 .8 to 1
September 30, 1998 1.75 to 1
December 31, 1998 and each
fiscal quarter thereafter 2 to 1"
3. Binding Effect. This Amendment has been duly executed and delivered
by Borrower and Guarantors and is in full force and effect as of the date
hereof, and the agreements and obligations of Borrower and Guarantors contained
herein constitute the legal, valid and binding obligations of Borrower and
Guarantors enforceable against Borrower and Guarantors in accordance with their
respective terms.
4. Conditions Precedent. The effectiveness of the other provisions of
this Amendment shall be subject to the receipt by Lender of an original of this
Amendment, duly authorized, executed and delivered by Borrower and Guarantors.
5. Effect of this Amendment. Except as modified pursuant hereto, no
other changes or modifications to the Financing Agreements are intended or
implied and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
6. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
proper to effectuate the provisions and purposes of this Amendment.
7. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York (without giving effect to
principles of conflicts of law or choice of law).
8. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
9. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
IN WITNESS WHEREOF, each of the undersigned have caused this agreement
to be duly authorized, executed and delivered as of the day and year first above
written.
HEALTH FITNESS CORPORATION HEALTH FITNESS REHAB, INC.
By: /s/ Charles E. Bidwell By: /s/ Charles E. Bidwell
Title: Chief Financial Officer Title: Chief Financial Officer
DUFFY & ASSOCIATES PHYSICAL THE PREFERRED COMPANIES, INC.
THERAPY SERVICES CORP.
By: /s/ Charles E. Bidwell By: /s/ Charles E. Bidwell
Title: Chief Financial Officer Title: Chief Financial Officer
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MEDLINK CORPORATION HEALTH FITNESS REHAB OF IOWA, INC.
By: /s/ Charles E. Bidwell By: /s/ Charles E. Bidwell
Title: Chief Financial Officer Title: Chief Financial Officer
MEDLINK SERVICES, INC. FITNESS CENTERS OF AMERICA
By: /s/ Charles E. Bidwell By: /s/ Charles E. Bidwell
Title: Chief Financial Officer Title: Chief Financial Officer
SPORTS & ORTHOPEDIC PHYSICAL INTERNATIONAL FITNESS CLUB
THERAPY, INC. NETWORK, INC.
By: /s/ Charles E. Bidwell By: /s/ Charles E. Bidwell
Title: Chief Financial Officer Title: Chief Financial Officer
MIDLANDS PHYSICAL THERAPY, INC.
By: /s/ Charles E. Bidwell
Title: Chief Financial Officer
MADELEINE, L.L.C.
By: /s/ Daniel E. Wolf
Title: Managing Director