[9/10/98]
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
AMENDMENT dated September 10, 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, Amendment No. 2 to Loan and Security Agreement, dated June 4, 1998, and
Amendment No. 3 to Loan and Security Agreement, dated June 26, 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.
(a) All references to the term "Special Availability Reserve"
in the Loan Agreement and each such reference is hereby amended to mean a
reserve calculated as follows (to the extent such calculation results in a
positive number): (i) the Borrowing Base (calculated without regard to the
Special Availability Reserve) minus (ii) the amount equal to (A) $8,000,000
minus (B) the amount equal to $200,000 plus an additional $100,000 as of the
opening of business on Tuesday of each week, commencing with Tuesday, September
15, 1998, for four (4) consecutive weeks, until the amount calculated pursuant
to this clause (ii) equals $7,400,000. Without limiting any other rights or
remedies of Lender, in the event that the Borrowing Base calculated as of August
31, 1998 is greater than $7,700,000, Lender may, at its option, elect to
decrease the Special Availability Reserve by decreasing the amount of the
Special Availability Reserve by up to $300,000, or such other amount as Lender
may determine.
(b) 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. Waivers.
(a) Subject to the terms and conditions contained herein,
Lender hereby waives the Event of Default arising under Section 9.1(b) of the
Loan Agreement as a result of the failure of Borrower to comply with Section
8.10 and Section 8.10A of the Loan Agreement as of July 31, 1998, provided,
that, (i) such waiver shall only apply to the failure of Borrower to comply with
such Sections for the period from January 1, 1998 through and including July 31,
1998 (and not as of the end of any month thereafter) and (ii) such waiver shall
not be effective unless and until Lender shall have received an original of this
Amendment duly executed and delivered by Borrower and Guarantors.
(b) Lender has not waived, is not by this letter waiving, and
has no intention of waiving any Event of Default which may have occurred on or
prior to the date hereof, whether or not continuing on the date hereof, or which
may occur after the date hereof (whether the same or similar to the Events of
Default referred to above or otherwise), other than the Events of Default
specifically referred to above for the period ending July 31, 1998. Upon the
occurrence of any other Event of Default, whether or not continuing on the date
hereof, or which may occur on or after the date hereof (whether the same or
similar to the Event of Default described above, including an Event of Default
pursuant to the failure of Borrower and Guarantors to comply with Section 8.10
or Section 8.10A of the Loan Agreement as of the last day of any month after
July 31, 1998), Lender shall have and hereby specifically reserves the right in
its discretion, to exercise any and all of its rights and remedies under the
Loan Agreement, the other Financing Agreements, applicable law or otherwise.
(c) The foregoing waiver shall not be construed as a bar to or
a waiver of any other or further Event of Default on any future occasion,
whether similar in kind or otherwise and shall not constitute a waiver, express
or implied of any of the rights and remedies of Lender arising under the terms
of the Financing Agreements on any future occasion or otherwise.
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 & ASSOCIATED 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
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:
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