EXHIBIT 10.11
CREDIT AGREEMENT
BETWEEN
HEALTH FITNESS CORPORATION
AS BORROWER;
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
AS BANK
CLOSING DATE: AUGUST 22, 2003
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$7,500,000 REVOLVING CREDIT FACILITY
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(XXXXX FARGO BANK LOGO)
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................................. 1
Section 1.1 Definitions........................................................... 1
Section 1.2 Times................................................................. 9
ARTICLE II AMOUNT AND TERMS OF THE FACILITY........................................... 9
Section 2.1 Revolving Facility.................................................... 9
Section 2.2 Procedure for Advances................................................ 10
Section 2.3 Advance to Fund Escrow Account........................................ 10
Section 2.4 Interest on Note...................................................... 10
Section 2.5 Payments.............................................................. 12
Section 2.6 Collateral............................................................ 12
Section 2.7 Fees.................................................................. 12
Section 2.8 Prepayments........................................................... 13
Section 2.9 Termination of the Facility or Reduction of the Facility Amount....... 13
Section 2.10 Payments............................................................. 13
Section 2.11 Increased Costs; Capital Adequacy; Advance Exceptions................ 14
Section 2.12 Advance Losses....................................................... 17
Section 2.13 Discretion of Bank as to Manner of Advance........................... 18
Section 2.14 Conclusiveness of Statements; Survival of Provisions................. 18
Section 2.15 Computation of Interest and Fees..................................... 18
ARTICLE III CONDITIONS PRECEDENT....................................................... 18
Section 3.1 Condition Precedent to Making Initial Advance......................... 18
Section 3.2 Condition Precedent to Depositing Funds in Escrow Account............. 20
Section 3.3 Condition Precedent to All Advances................................... 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................................. 21
Section 4.1 Existence and Power................................................... 21
Section 4.2 Authorization of Borrowing; No Conflict as to Law or Agreements....... 21
Section 4.3 Legal Agreements...................................................... 21
Section 4.4 Subsidiaries.......................................................... 21
Section 4.5 Financial Condition................................................... 22
Section 4.6 Adverse Change........................................................ 22
Section 4.7 Litigation............................................................ 22
Section 4.8 Hazardous Substances.................................................. 22
Section 4.9 Regulation U.......................................................... 22
Section 4.10 Taxes................................................................ 23
Section 4.11 Titles and Liens..................................................... 23
Section 4.12 ERISA................................................................ 23
ARTICLE V AFFIRMATIVE COVENANTS........................................................ 24
Section 5.1 Reporting............................................................. 24
Section 5.2 Books and Records; Inspection and Examination......................... 26
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Section 5.3 Compliance with Laws.................................................. 26
Section 5.4 Payment of Taxes and Other Claims..................................... 26
Section 5.5 Maintenance of Properties............................................. 26
Section 5.6 Insurance............................................................. 27
Section 5.7 Preservation of Corporate Existence................................... 27
Section 5.8 Deposit Accounts...................................................... 27
Section 5.9 Senior Cash Flow Leverage Ratio....................................... 27
Section 5.10 Senior Leverage Ratio................................................ 28
Section 5.11 Current Ratio........................................................ 28
ARTICLE VI NEGATIVE COVENANTS.......................................................... 28
Section 6.1 Liens................................................................. 28
Section 6.2 Indebtedness.......................................................... 30
Section 6.3 Guaranties............................................................ 30
Section 6.4 Investments........................................................... 30
Section 6.5 Dividends............................................................. 31
Section 6.6 Sale of Assets........................................................ 31
Section 6.7 Transactions with Affiliates.......................................... 32
Section 6.8 Consolidation and Merger.............................................. 32
Section 6.9 Sale and Leaseback.................................................... 32
Section 6.10 Subordinated Debt.................................................... 32
Section 6.11 Capital Expenditures................................................. 33
Section 6.12 Hazardous Substances................................................. 33
Section 6.13 Restrictions on Nature of Business................................... 33
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES..................................... 33
Section 7.1 Events of Default..................................................... 33
Section 7.2 Rights and Remedies................................................... 35
ARTICLE VIII MISCELLANEOUS............................................................. 36
Section 8.1 No Waiver; Cumulative Remedies........................................ 36
Section 8.2 Amendments, Etc....................................................... 36
Section 8.3 Notice................................................................ 37
Section 8.4 Participations........................................................ 37
Section 8.5 Disclosure of Information............................................. 37
Section 8.6 Costs and Expenses.................................................... 37
Section 8.7 Indemnification by Borrower........................................... 38
Section 8.8 Binding Effect, Assignment............................................ 38
Section 8.9 Governing Law......................................................... 38
Section 8.10 Consent to Jurisdiction.............................................. 38
Section 8.11 Severability of Provisions........................................... 39
Section 8.12 Headings............................................................. 39
Section 8.13 Arbitration.......................................................... 39
Section 8.14 Waiver of Jury Trial................................................. 41
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CREDIT AGREEMENT
Dated as of August 22, 2003
Health Fitness Corporation, a
Minnesota corporation (the
"Borrower"), and Xxxxx Fargo Bank, National Association, a national banking
association (the "Bank"), agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise expressly provided:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the
plural as well as the singular; and
(b) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP.
"Accounts" means, as to any Person, the aggregate unpaid
obligations of customers and other account debtors to such Person
arising out of the sale or lease of goods or rendition of services by
such Person on an open account or deferred payment basis.
"Acquisition" means the transaction contemplated by the
Acquisition Documents.
"Acquisition Documents" means the Asset Purchase Agreement, by
and between the Borrower and the Seller, and all other material
documents executed in connection therewith, expected to be executed and
delivered in August, 2003.
"Advance" means an advance by the Bank to the Borrower
pursuant to Article II, and with respect to interest rates means either
a Floating Rate Advance or a LIBO Rate Advance.
"Affiliate" means (a) any director or officer of the Borrower,
(b) any Person who, individually or with his immediate family, directly
or indirectly beneficially owns or holds 5% or more of the voting
interest of the Borrower, or (c) any corporation, partnership or other
Person in which any Person or group of Persons described above directly
or indirectly owns a 5% or greater equity interest.
"Agreement" means this
Credit Agreement.
"Base LIBO Rate" means the rate per annum for United States
dollar deposits quoted by the Bank as the Interbank Market Offered
Rate, with the understanding that such rate is quoted by the Bank for
the purpose of calculating effective rates of interest for loans making
reference thereto, on the first day of each month an Interest Period
for delivery of funds on said date for a period of time approximately
equal to the number of days in such Interest Period and in an amount
approximately equal to the principal amount to which such Interest
Period applies. The Borrower understands and agrees that the Agent may
base its quotation of the Interbank Market Offered Rate upon such
offers or other market indicators of the London interbank market as the
Agent in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London interbank
market.
"Base Rate" means the rate of interest publicly announced from
time to time by the Bank as its "prime" or "base" rate or, if the Bank
ceases to announce a rate so designated, any similar successor rate
designated by the Bank.
"Bayview" means Bayview Capital Partners LP.
"Borrowing Base" means, at any time, the lesser of:
(i) the Facility Amount, or
(ii) the sum of:
(A) the product of the Eligible Accounts Advance
Rate and Eligible Accounts, plus
(B) from the date the Escrow Account is funded
by the Bank to the date the Escrow Agreement
terminates, the outstanding principal
balance of funds on deposit in the Escrow
Account that have been contributed by the
Bank, and for this purpose all disbursements
of funds from the Escrow Account shall be
deemed to come first from funds other than
those deposited by the Bank;
in each case computed on the basis of the most recent Borrowing Base
Certificate furnished to the Bank as required by Section 3.1 or 5.1(d).
"Borrowing Base Certificate" means a certificate in the form
of Exhibit D hereto correctly setting forth the Accounts and the
Eligible Accounts and the Borrowing Base of the Borrower as of a
particular date.
"Business Day" means a day other than a Saturday, Sunday,
United States national holiday or other day on which banks in
Minnesota
are permitted or required by law to close. Whenever the context relates
to a LIBO Rate Advances or the fixing of a LIBO Rate, "Business Day"
means a day (i) that meets the foregoing definition,
Health Fitness Corporation -
Credit Agreement - 2 -
and (ii) on which dealings in U.S. dollar deposits are carried on in
the London interbank eurodollar market.
"Capital Expenditure" means any expenditure of money for the
purchase or construction of fixed assets or for the purchase or
construction of any other assets, or for improvements or additions
thereto, which are capitalized on the Borrower's balance sheet.
"Closing Date" means the date of this Agreement.
"Compliance Certificate" means a certificate in substantially
the form of Exhibit C, or such other form as the Borrower and the Bank
may from time to time agree upon in writing, executed by the chief
financial officer of the Borrower, stating (i) that any financial
statements delivered therewith have been prepared in accordance with
GAAP, subject to year-end adjustments, (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto and (iii) all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the Financial
Covenants.
"Current Assets" of any Person means the aggregate amount of
assets of such Person which in accordance with GAAP may be properly
classified as current assets, after deducting adequate reserves where
proper, but in no event including any real estate.
"Current Liabilities" of any Person means (i) all Debt of such
Person due on demand or within one year from the date of determination
thereof, reduced by the outstanding principal balance of the Escrow
Account, and (ii) all other items (including taxes accrued as
estimated) which, in accordance with GAAP, may be properly classified
as current liabilities of such Person.
"Current Ratio" means the ratio of the Borrower's consolidated
Current Assets to consolidated Current Liabilities, as determined in
accordance with GAAP.
"Debt" of any Person means (i) all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined, (ii) indebtedness secured by any Lien on property owned by
such Person, whether or not the indebtedness secured thereby shall have
been assumed, (iii) obligations of such Person to pay money under
non-compete, consulting or similar agreements, and (iv) guaranties and
endorsements (other than for purposes of collection in the ordinary
course of business) by such Person and other contingent obligations of
such Person in respect of, or to purchase or otherwise acquire,
indebtedness of others. For purposes of determining a Person's
aggregate Debt at any time, "Debt" shall also include the aggregate
payments required to be made by such
Health Fitness Corporation -
Credit Agreement - 3 -
Person at any time under any lease that is considered a capitalized
lease under GAAP. Unless otherwise stated, Debt means Debt of the
Borrower and its Subsidiaries .
"Default" means an event that, with the giving of notice, the
passage of time or both, would constitute an Event of Default.
"Default Rate" means an annual rate of interest equal to the
sum of (i) the interest rate otherwise in effect with respect to each
portion of the Advances and (ii) 300 basis points (3.00%).
"EBITDA" means, as of any date, the sum of (i) pretax earnings
from continuing operations, (ii) Interest Expense and (iii)
depreciation, depletion, and amortization of tangible and Intangible
Assets, before (a) special extraordinary gains, (b) minority interests,
and (c) miscellaneous gains and losses, in each case for the
twelve-month period ending on such date, computed and calculated in
accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is, along with the Borrower, a member of a
controlled group of corporations or a controlled group of trades or
businesses, as described in sections 414(b) and 414(c), respectively,
of the Internal Revenue Code of 1986, as amended.
"Eligible Accounts" means the dollar value of the Accounts of
the Borrower in which the Bank holds a first perfected security
interest reduced by:
(a) the amount of any Account which is not paid by
the account debtor within the greater of 60 days from the
invoice date or 30 days from the due date, not to exceed 90
days from the invoice date;
(b) the amount of any Account as to which the account
debtor disputes liability or makes any claim with respect to
the Account;
(c) the amount of any Account as to which the
Borrower has knowledge that a petition in bankruptcy or other
application for relief under any insolvency law has been filed
with respect to the account debtor owing the Account or as to
which the account debtor on the Account has made an assignment
for the benefit of creditors, or failed, suspended or gone out
of business;
(d) the amount of any Account which is owed by a
Person that does not have its principal place of business in
the United States unless supported by a letter of credit in
the amount of the Account issued by a financial institution
reasonably satisfactory to the Bank;
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Credit Agreement - 4 -
(e) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount
due under Accounts from such debtor is ineligible under
clauses (a) or (b);
(f) the amount of any Account which arises from a
sale to an agency of the United States Government;
(g) the amount of any Account as to which the account
debtor is an Affiliate;
(h) the amount of any contra accounts;
(i) the amount of any Affiliate Accounts;
(j) Accounts which are subject to any Lien in favor
of any Person other than the Bank; and
(k) the amount of any creditor balances.
"Eligible Accounts Advance Rate" means, during each period
described below, the percentage set forth opposite such period:
PERIOD PERCENTAGE
from the date of this Agreement until the day before day the
Acquisition is consummated 80%
from the day the Acquisition is consummated until 30 days thereafter 100%
from the 31st day after the Acquisition is consummated until the 60th
day after the Acquisition is consummated 90%
thereafter 80%
"Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1802 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Federal Water Pollution Control Act, 33
U.S.C. Section 1252 et seq., the Clean Water Act, 33 U.S.C. Section
1321 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., and
any other federal, state, county, municipal, local or other statute,
law, ordinance or regulation which may relate to or deal with human
health or the environment, all as may be from time to time amended.
"Escrow Account" means the account or accounts established
under the Escrow Agreement.
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Credit Agreement - 5 -
"Escrow Agreement" means one or more Escrow Agreements by and
between the Bank, the Seller, Bayview and Xxxxx Fargo Bank
Minnesota,
National Association, substantially in the form of Exhibit B.
"Event of Default" has the meaning specified in Section 7.1.
"Facility" means the revolving credit facility established
under Article II.
"Facility Amount" means $7,500,000, reducing by $250,000 on
September 30, 2003, and on the last day of each calendar quarter
thereafter, unless said amount is further reduced pursuant to Section
2.9, in which event it means the amount to which said amount is
reduced.
"Financial Covenant" means any of the Borrower's obligations
set forth in Sections 5.9, 5.10, 5.11, and 6.11 of this Agreement
"Floating Rate" means an annual rate equal to the Base Rate,
which rate shall change when and as the Base Rate.
"Floating Rate Advance" means any portion of the principal
balance of the Note, bearing interest at the Floating Rate.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with the accounting practices applied in the
annual financial statements referred to in Section 4.5.
"Hazardous Substance" means any asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material, chemical
waste, radioactive material, explosives, known carcinogens, petroleum
products and by-products and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or
identified in, or regulated by, any Environmental Law.
"Intangible Assets" means all intangible assets as determined
in accordance with GAAP and including intellectual property rights,
goodwill, accounts due from Affiliates or employees, deposits, deferred
charges or treasury stock or any securities or Debt of the Borrower or
its Subsidiaries or any other securities unless the same are readily
marketable in the US or entitled to be used as a credit against federal
income tax liabilities, non-compete agreements and any other assets
designated from time to time by the Bank.
"Interest Expense" means, as of any date, the Borrower's total
gross interest expense during the twelve-month period ending on such
date (excluding interest income), and shall in any event include (i)
interest expensed (whether or not paid) on all Debt, (ii) the
amortization of debt discounts, (iii) the amortization of all fees
payable in connection with the incurrence of Debt to the extent
included in interest
Health Fitness Corporation -
Credit Agreement - 6 -
expense, and (iv) the portion of any capitalized lease obligation
allocable to interest expense.
"Interest Period" means, with respect to any LIBO Rate
Advance, a period of one month beginning on a Business Day, as elected
by the Borrower.
"LIBO Rate" means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/16 of 1%) and determined pursuant to
the following formula:
Base LIBO Rate
LIBO Rate = ------------------------------- + applicable Margin
100% - LIBOR Reserve Percentage
"LIBO Rate Advance" means any portion of the principal balance
of the Note bearing interest at a LIBO Rate.
"LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for "Eurocurrency Liabilities" (as defined in Regulation
D of the Federal Reserve Board, as amended), adjusted by the Agent for
expected changes in such reserve percentage during the applicable
Interest Period.
"Lien" means any mortgage, deed of trust, lien, pledge,
security interest or other charge or encumbrance, of any kind
whatsoever, including but not limited to the interest of the lessor or
titleholder under any Capitalized Lease, title retention contract or
similar agreement.
"Loan Documents" means this Agreement, the Note and the
Security Agreement.
"Margin" means an amount determined pursuant to Section 2.4
that is added to other amounts to determine the interest rates
applicable hereunder.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), properties, or operations
of the Borrower or any Subsidiary, (ii) the ability of the Borrower to
perform its obligations under the Loan Documents, or (iii) the validity
or enforceability of any of the Loan Documents or the rights or
remedies of the Bank thereunder.
"Maturity Date" means June 30, 2007.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.
"Net Worth" means the aggregate of capital and retained
earnings of the Borrower and its Subsidiaries, as determined on a
consolidated basis in accordance with GAAP.
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Credit Agreement - 7 -
"Note" means the Borrower's promissory note in the form of
Exhibit A hereto.
"Obligations" means each and every debt, liability and
obligation of every type and description arising under or in connection
with any of the Loan Documents which the Borrower may now or at any
time hereafter owe to the Bank, whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it
is direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several, and including but not limited to
principal of and interest on the Note and all fees due under this
Agreement or any related agreement.
"Permitted Liens" has the meaning specified in Section 6.1.
"Xxxxxxx" means Xxxxxxx Capital Management, Inc.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency
or political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for employees of the Borrower or any Subsidiary or ERISA Affiliate and
covered by Title IV of ERISA.
"Purchased Assets" means the assets that the Borrower
purchases from the Seller pursuant to the Acquisition Documents.
"Reportable Event" means (i) a "reportable event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) a
withdrawal from any Plan, as described in Section 4063 of ERISA, (iii)
an action to terminate a Plan for which a notice is required to be
filed under Section 4041 of ERISA, (iv) any other event or condition
that might constitute grounds for termination of, or the appointment of
a trustee to administer, any Plan, or (v) a complete or partial
withdrawal from a Multiemployer Plan as described in Sections 4203 and
4205 of ERISA.
"Security Agreement" means a security agreement of the
Borrower in favor of the Bank, granting the Bank a security interest in
property generally described as all of the Borrower's inventory,
accounts, equipment and general intangibles.
"Seller" means Xxxxxxx & Xxxxxxx Health Care Systems Inc..
"Senior Cash Flow Leverage Ratio" means, as of any date, the
ratio of the Borrower's Senior Funded Debt as of such date to its
EBITDA.
"Senior Debt" means all Debt of the Borrower or any Subsidiary
other than Subordinated Debt.
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Credit Agreement - 8 -
"Senior Funded Debt" means all interest-bearing Debt of the
Borrower or any Subsidiary other than Subordinated Debt.
"Senior Leverage Ratio" means, as of any date, the ratio of
the Borrower's consolidated Senior Debt, reduced by the outstanding
principal balance of the portion of the Escrow Account funded by the
Bank, to its consolidated Tangible Net Worth plus Subordinated Debt.
"Subordinated Debt" means Debt of the Borrower or any
Subsidiary which is subordinated in right of payment to all
indebtedness of the Borrower to the Bank, on terms that have been
approved in writing by the Bank and that have been noted by appropriate
legend on all instruments evidencing the Subordinated Debt.
"Subsidiary" means (i) any corporation of which more than 50%
of the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries,
(ii) any partnership of which 50% or more of the partnership interests
therein are directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries, and (iii) any limited liability company or other form of
business organization the effective control of which is held by the
Borrower, the Borrower and one or more other Subsidiaries, or by one or
more other Subsidiaries.
"Tangible Net Worth" means the difference between (i) Net
Worth and (ii) Intangible Assets.
"Welfare Plan" means a "welfare plan" as defined in Section
3(1) of ERISA.
SECTION 1.2 TIMES
All references to times of day in this Agreement shall be references to
Minneapolis,
Minnesota time unless otherwise specifically provided.
ARTICLE II
AMOUNT AND TERMS OF THE FACILITY
SECTION 2.1 REVOLVING FACILITY.
The Bank agrees, on the terms and subject to the conditions hereinafter set
forth, to make Advances to the Borrower from time to time during the period from
the date hereof to the day before the Maturity Date in an aggregate amount not
to exceed at any time outstanding the Borrowing Base. The proceeds of each
Advance shall be used to finance the Acquisition
Health Fitness Corporation - Credit Agreement - 9 -
and for working capital needs. Each Advance shall be in the amount of $25,000 or
a multiple thereof. Within the limits of the Borrowing Base, the Borrower may
borrow, prepay pursuant to Section 2.8 and reborrow under this Section 2.1. The
Borrower's obligation to pay the Advances shall be evidenced by the Note. The
Note shall bear interest on the unpaid principal amount thereof from the date
thereof until paid as set forth in Section 2.4.
SECTION 2.2 PROCEDURE FOR ADVANCES.
Each Advance shall be made by prior written request from the Borrower to the
Bank or telephonic request from any person purporting to be authorized to
request Advances on behalf of the Borrower, which request shall specify the date
of the requested Advance and the amount thereof. Except as set forth in Section
2.3, each such request by the Borrower shall be made not later than 1:00 p.m. on
the Business Day on which the Advance is to be made. Upon fulfillment of the
applicable conditions set forth in Article III, the Bank shall disburse the
amount of the requested Advance by crediting the same to the Borrower's demand
deposit account maintained with the Bank or in such other manner as the Bank and
the Borrower may from time to time agree. The Borrower shall promptly confirm
each telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Bank. The Borrower shall be
obligated to repay all Advances notwithstanding the failure of the Bank to
receive such confirmation and notwithstanding the fact that the person
requesting same was not in fact authorized to do so. Any request for an Advance
shall be deemed to be a representation that the statements set forth in Section
3.3 are correct.
SECTION 2.3 ADVANCE TO FUND ESCROW ACCOUNT.
On the date the conditions in Section 3.2 are satisfied, the Bank shall, without
further request from the Borrower, make an Advance in the amount of $2,250,000
and deposit the proceeds thereof in the Escrow Account. The funds in the Escrow
Account shall at all times be subject to the Escrow Agreement and the Borrower
shall have no rights in such funds except that, to the extent any amount is
refunded to the Bank, the Bank shall apply such amount to the Obligations.
SECTION 2.4 INTEREST ON NOTE.
(a) Floating Rate Advances. Unless the Borrower elects a LIBO
Rate pursuant to this Section, the principal balance of the Note shall
bear interest at the Floating Rate.
(b) LIBO Rate Advances. So long as no Default or Event of
Default exists, the Borrower may request that a portion of any
requested Advance constitute a LIBO Rate Advance, or may convert all or
any part of any outstanding Floating Rate Advance into a LIBO Rate
Advance, or may request that a LIBO Rate Advance be converted at the
end of
Health Fitness Corporation - Credit Agreement - 10 -
the applicable Interest Period to another LIBO Rate Advance. When the
Borrower requests an Advance or wishes to convert a Floating Rate
Advance to a LIBO Rate Advance or to convert a LIBO Rate Advance at the
end of the applicable Interest Period to another LIBO Rate Advance, the
Borrower shall give the Bank notice specifying: (i) the date of the
Advance or conversion, (ii) the Interest Period selected by Borrower;
and (iii) the principal amount of the Advance, which shall not be less
than $500,000. Any such notice may be given by telephone or such other
electronic method as the Bank may permit. Each such notice shall be
given to Bank prior to 10:00 a.m. on the Business Day the Advance is to
be made or converted. If the Borrower does not immediately accept a
LIBO Rate when quoted by the Bank, the quoted rate shall expire and any
subsequent request shall be subject to a redetermination by the Bank of
the applicable LIBO Rate. If no specific designation of interest is
made at the time any Advance is requested, the Borrower shall be deemed
to have requested a Floating Rate Advance. Subject to the terms and
conditions hereof, the principal amount specified by the Borrower in
the applicable request for a LIBO Rate Advance shall bear interest from
and including the first day of the Interest Period specified therein to
but not including the last day of such Interest Period, at the LIBO
Rate applicable thereto, determined as set forth herein, (subject to
fluctuations in the applicable Margin). Unless the Borrower requests a
new LIBO Rate Advance in accordance with the procedures set forth
above, or prepays the principal of an outstanding LIBO Rate Advance at
the expiration of an Interest Period, the Bank shall automatically and
without request of the Borrower convert each LIBO Rate Advance to a
Floating Rate Advance on the last day of the relevant Interest Period.
(c) Limitations on LIBO Rate Advances. In no event shall more
than four LIBO Rate Advances be outstanding at any one time.
(d) Margins. The Margin through and including the first
adjustment occurring as specified below shall be two and three-quarters
percent (2.75%) with respect to LIBO Rate Advances. The Margin shall be
adjusted each calendar quarter of the Borrower on the basis of the
Senior Leverage Ratio of the Borrower in accordance with the following
table:
LIBO Rate Advances
Senior Leverage Ratio Margin
--------------------- ------------------
3.00 to 1 or more 2.75%
2.00 to 1 or more, but less than 2.50%
3.00 to 1
Less than 2.00 to 1 2.25%
Reductions and increases in the Margins will be made on the first day
of the calendar quarter following receipt of the Borrower's financial
statements and quarterly Compliance Certificates required under Section
5.1. Notwithstanding the foregoing, (i) if the Borrower fails to
deliver any financial statements or Compliance Certificates when
required under Section 5.1, the Bank may, by notice to the Borrower,
increase the Margins to the highest rates set forth above until such
time as the Bank has
Health Fitness Corporation - Credit Agreement - 11 -
received all such financial statements and Compliance Certificates, and
(ii) no reduction in the Margins will be made if a Default or an Event
of Default has occurred and is continuing at the time that such
reduction would otherwise be made.
(e) Default Rate. From and after the occurrence of any Default
or Event of Default and continuing thereafter until such Default or
Event of Default shall be remedied to the written satisfaction of the
Bank, in the Bank's sole discretion, the outstanding principal balance
of the Note shall bear interest, until paid in full, at the Default
Rate. Calculation of interest at the Default Rate shall not be deemed a
waiver or excuse of any such Default or Event of Default.
SECTION 2.5 PAYMENTS.
(a) Interest. Interest accruing on the principal balance of
the Note each month shall be due and payable on the last day of that
month, commencing on the last day of the month hereof. Notwithstanding
any other provision of this Agreement or the Note, interest on any LIBO
Rate Advance shall be due and payable on the last day of the applicable
Interest Period.
SECTION 2.6 COLLATERAL.
Payment of the Note and all other amounts now or hereafter owing by the Borrower
to the Banks shall be secured by the Liens granted under the Loan Documents, and
may also now or hereafter be secured by one or more other Liens. Each such Lien
shall be prior to all other Liens of any kind whatsoever, subject only to such
exceptions as the Bank may expressly approve in writing.
SECTION 2.7 FEES.
(a) Origination Fee. Concurrent with the execution hereof, the
Borrower shall pay the Bank an origination fee in the amount of $5,000.
Such fee shall be deemed fully earned by the Bank upon entering into
this Agreement.
(b) Non-Usage Fees. The Borrower shall pay the Bank a
non-usage fee at the rate of 0.125% per annum on the average daily
unused amount of the Facility Amount from the Closing Date to and
including the Maturity Date, payable quarterly on the last day of each
calendar quarter, commencing on September 30, 2003. Any non-usage fee
remaining unpaid on the Maturity Date shall be due and payable on that
date.
(c) Audit Fees. The Borrower shall pay to the Bank, on written
demand, reasonable fees charged by the Bank in connection with any
audits or inspections by the Bank of any collateral or the operations
or businesses of the Borrower, together with actual out-of-pocket costs
and expenses incurred in conducting any such audit or inspection. All
such audits and inspections shall be for the sole benefit of the Bank.
Health Fitness Corporation - Credit Agreement - 12 -
SECTION 2.8 PREPAYMENTS.
(a) Voluntary Prepayments. Subject to the conditions set forth
herein, the Borrower from time to time may voluntarily prepay the Note
in whole or in part; provided that (i) the Borrower may not prepay any
LIBO Rate Advance in part, and (ii) any prepayment of the full amount
of the Note shall include accrued interest thereon.
(b) Mandatory Prepayments. If the principal balance of the
Note shall on any date exceed the Borrowing Base, the Borrower shall on
that date repay the Note to the extent necessary to eliminate such
excess.
(c) Prepayments Generally. All prepayments hereunder (whether
voluntary or mandatory) shall be applied, first, to the principal
installments of the Note in inverse order of their maturities, and
second, to interest and fees with respect thereto. Any prepayment of a
LIBO Rate Advance shall be accompanied by accrued interest on such
prepayment through the date of prepayment and additional compensation
calculated in accordance with Section 2.12.
SECTION 2.9 TERMINATION OF THE FACILITY OR REDUCTION OF THE FACILITY AMOUNT.
The Borrower may at any time and from time to time upon three Business Days'
prior notice to the Bank permanently terminate the Facility in whole or
permanently reduce the Facility Amount in part, provided that (i) each partial
reduction shall be in the amount of $500,000 or a multiple thereof, and (ii) no
reduction shall reduce the Facility Amount to an amount less than the principal
balance of the Note outstanding at the time.
SECTION 2.10 PAYMENTS.
(a) Making of Payments. All payments of principal of and
interest due under the Note shall be made to the Bank at its office in
Minneapolis,
Minnesota, not later than 12:00 noon on the date due, in
immediately available funds, and funds received after that hour shall
be deemed to have been received by the Bank on the next following
Business Day. The Borrower hereby authorizes the Bank to charge the
Borrower's demand deposit account maintained with the Bank for the
amount of any such payment on its due date, or (at the option of the
Bank) to make an Advance in such amount, all without receipt of any
request for such charge or Advance, but the Bank's failure to so charge
such account or make such Advance shall in no way affect the obligation
of the Borrower to make any such payment.
(b) Setoff. The Borrower agrees that the Bank shall have all
rights of setoff and bankers' lien provided by applicable law, and in
addition thereto, the Borrower agrees that if at any time any amount is
due and owing by the Borrower under this Agreement to the Bank at a
time when an Event of Default has occurred and is continuing hereunder,
the Bank may apply any and all balances, credits, and deposits,
accounts or moneys of the Borrower then or thereafter in the possession
of the Bank
Health Fitness Corporation - Credit Agreement - 13 -
(excluding, however, any trust or escrow accounts held by the Borrower
for the benefit of any third party) to the payment thereof.
(c) Due Date Extension. If any payment of principal of or
interest on any Floating Rate Advance or any fees payable hereunder
falls due on a day which is not a Business Day, then such due date
shall be extended to the next following Business Day, and (in the case
of principal) additional interest shall accrue and be payable for the
period of such extension.
(d) Application of Payments. Except as otherwise provided
herein, so long as no Default or Event of Default has occurred and is
continuing hereunder, each payment received from the Borrower shall be
applied to such obligation as the Borrower shall specify by notice
received by the Bank on or before the date of such payment, or in the
absence of such notice, as the Bank shall determine in its discretion.
Except as otherwise provided herein, after the occurrence of a Default
or Event of Default, the Bank shall have the right to apply all
payments received by the Bank from the Borrower as the Bank may
determine in its discretion. The Borrower agrees that the amount shown
on the books and records of the Bank as being the principal balance of
and interest on the Note shall be conclusive absent demonstrable error.
SECTION 2.11 INCREASED COSTS; CAPITAL ADEQUACY; ADVANCE EXCEPTIONS.
(a) Increased Costs on LIBO Rate Advances. If Regulation D of
the Board of Governors of the Federal Reserve System or after the date
of this Agreement the adoption of any applicable law, rule or
regulation, or any change in any existing law, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or
directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall:
(i) subject the Bank to or cause the withdrawal or
termination of any exemption previously granted to
the Bank with respect to, any tax, duty or other
charge with respect to its LIBO Rate Advances or its
obligation to make LIBO Rate Advances, or shall
change the basis of taxation of payments to the Bank
of the principal of or interest under this Agreement
in respect of its LIBO Rate Advances or its
obligation to make LIBO Rate Advances (except for
changes in the rate of tax on the overall net income
of the Bank imposed by the jurisdictions in which the
Bank's principal executive office is located); or
(ii) impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed
by the Board of Governors of the Federal Reserve
System, but excluding any reserve included in the
determination of interest rates pursuant to Section
2.4), special deposit
Health Fitness Corporation - Credit Agreement - 14 -
or similar requirement against assets of, deposits
with or for the account of, or credit extended by,
the Bank; or
(iii) impose on the Bank any other condition affecting its
making, maintaining or Advance of its LIBO Rate
Advances or its obligation to make LIBO Rate
Advances;
and the result of any of the foregoing is to increase the cost to the
Bank of making or maintaining any LIBO Rate Advance, or to reduce the
amount of any sum received or receivable by the Bank under this
Agreement or under its Note with respect to a LIBO Rate Advance, then
the Bank will notify the Borrower of such increased cost and within
fifteen (15) days after demand by the Bank (which demand shall be
accompanied by a statement setting forth the basis of such demand and
representing that the Bank has made similar demand on one or more other
commercial borrowers with revolving or term loans in excess of
$500,000) the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such increased cost or such
reduction; provided, however, that no such increased cost or such
reduction shall be payable by the Borrower for any period longer than
ninety (90) days prior to the date on which notice thereof is delivered
to the Borrower. The Bank will promptly notify the Borrower of any
event of which it has knowledge, occurring after the date hereof, which
will entitle the Bank to compensation pursuant to this Section 2.11. If
the Borrower receives notice from the Bank of any event which will
entitle the Bank to compensation pursuant to this Section 2.11, the
Borrower may prepay any then outstanding LIBO Rate Advances or notify
the Bank that any pending request for a LIBO Rate Advance shall be
deemed to be a request for a Floating Rate Advance, in each case
subject to the provisions of Section 2.12.
(b) Capital Adequacy. If the Bank determines at any time that
its Return has been reduced as a result of any Capital Adequacy Rule
Change, the Bank may require the Borrower to pay it the amount
necessary to restore the Bank's Return to what it would have been had
there been no Capital Adequacy Rule Change. For purposes of this
Section 2.11, the following definitions shall apply:
(i) "Bank" includes (but is not limited to) the Bank, as
defined elsewhere in this Agreement, and any assignee
of any interest of the Bank hereunder and any
participant in the loans made hereunder.
(ii) "Capital Adequacy Rule" means any law, rule,
regulation or guideline regarding capital adequacy
that applies to the Bank, or the interpretation
thereof by any governmental or regulatory authority.
Capital Adequacy Rules include rules requiring
financial institutions to maintain total capital in
amounts based upon percentages of outstanding loans,
binding loan commitments.
(iii) "Capital Adequacy Rule Change" means any change in
any Capital Adequacy Rule occurring after the date of
this Agreement, but does not
Health Fitness Corporation - Credit Agreement - 15 -
include any changes in applicable requirements that
at the date hereof are scheduled to take place under
the existing Capital Adequacy Rules or any increases
in the capital that the Bank is required to maintain
to the extent that the increases are required due to
a regulatory authority's assessment of the Bank's
financial condition.
(iv) "Return", for any calendar quarter or shorter period,
means the percentage determined by dividing (A) the
sum of interest and ongoing fees earned by the Bank
under this Agreement during such period by (B) the
average capital the Bank is required to maintain
during such period as a result of its being a party
to this Agreement, as determined by the Bank based
upon its total capital requirements and a reasonable
attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be
calculated for each calendar quarter and for the
shorter period between the end of a calendar quarter
and the date of termination in whole of this
Agreement.
The initial notice sent by the Bank shall be sent as promptly as
practicable after the Bank learns that its Return has been reduced,
shall include a demand for payment of the amount necessary to restore
the Bank's Return for the quarter in which the notice is sent, shall
state in reasonable detail the cause for the reduction in the Bank's
Return and the Bank's calculation of the amount of such reduction, and
shall include the Bank's representation that it has made similar demand
on one or more other commercial borrowers with revolving or term loans
in excess of $500,000. Thereafter, the Bank may send a new notice
during each calendar quarter setting forth the calculation of the
reduced Return for that quarter and including a demand for payment of
the amount necessary to restore the Bank's Return for that quarter. The
Bank's calculation in any such notice shall be conclusive and binding
absent demonstrable error.
(c) Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period:
(i) the Bank determines that deposits in U.S. dollars (in
the applicable amounts) are not being offered in the
London interbank eurodollar market for such Interest
Period; or
(ii) the Bank otherwise determines that by reason of
circumstances affecting the London interbank
eurodollar market adequate and reasonable means do
not exist for ascertaining the applicable LIBO Rate;
or
(iii) the Bank determines that the LIBO Rate as determined
by the Bank will not adequately and fairly reflect
the cost to the Bank of maintaining or Advance a LIBO
Rate Advance for such Interest Period, or that the
making or Advance of LIBO Rate Advances has become
Health Fitness Corporation - Credit Agreement - 16 -
impracticable as a result of an event occurring after
the date of this Agreement which in the opinion of
the Bank materially affects such LIBO Rate Advances;
then the Bank shall promptly notify the Borrower and (A) upon the
occurrence of any event described in the foregoing clause (i) the
Borrower shall enter into good faith negotiations with the Bank in
order to determine an alternate method to determine the LIBO Rate for
the Bank, and during the pendency of such negotiations with the Bank,
the Bank shall be under no obligation to make any new LIBO Rate
Advances, and (B) upon the occurrence of any event described in the
foregoing clauses (ii) or (iii), for so long as such circumstances
shall continue, the Bank shall be under no obligation to make any new
LIBO Rate Advances.
(d) Illegality. If any change in (including the adoption of
any new) applicable laws or regulations, or any change in the
interpretation of applicable laws or regulations by any governmental
authority, central bank, comparable agency or any other regulatory body
charged with the interpretation, implementation or administration
thereof, or compliance by the Bank with any request or directive
(whether or not having the force of law) of any such authority, central
bank, comparable agency or other regulatory body, should make it or, in
the good faith judgment of the Bank, shall raise a substantial question
as to whether it is unlawful for the Bank to make, maintain or fund
LIBO Rate Advances, then (i) the Bank shall promptly notify the
Borrower, (ii) the obligation of the Bank to make, maintain or convert
into LIBO Rate Advances shall, upon the effectiveness of such event, be
suspended for the duration of such unlawfulness, and (iii) for the
duration of such unlawfulness, any notice by the Borrower requesting
the Bank to make or convert into LIBO Rate Advances shall be construed
as a request to make or to continue making Floating Rate Advances.
SECTION 2.12 ADVANCE LOSSES.
Upon demand by the Bank (which demand shall be accompanied by a statement
setting forth the basis for the calculations of the amount being claimed), the
Borrower shall indemnify the Bank against any loss or expense which the Bank may
have sustained or incurred (including, without limitation, any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Bank to fund or maintain LIBO Rate Advances) or
which the Bank may be deemed to have sustained or incurred, as reasonably
determined by the Bank, (i) as a consequence of any failure by the Borrower to
make any payment when due of any amount due hereunder in connection with any
LIBO Rate Advances, (ii) due to any failure of the Borrower to borrow or convert
any LIBO Rate Advances on a date specified therefor in a notice thereof or (iii)
due to any payment or prepayment of any LIBO Rate Advance on a date other than
the last day of the applicable Interest Period for such LIBO Rate Advance. For
this purpose, all notices under Section 2.4(b) shall be deemed to be
irrevocable.
Health Fitness Corporation - Credit Agreement - 17 -
SECTION 2.13 DISCRETION OF BANK AS TO MANNER OF ADVANCE.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
be entitled to fund and maintain all or any part of its LIBO Rate Advances in
any manner it deems fit, it being understood, however, that for the purposes of
this Agreement (specifically including, without limitation, Section 2.12 hereof)
all determinations hereunder shall be made as if the Bank had actually funded
and maintained each LIBO Rate Advance during each Interest Period for such LIBO
Rate Advance through the purchase of deposits having a maturity corresponding to
such Interest Period and bearing an interest rate equal to the appropriate LIBO
Rate for such Interest Period.
SECTION 2.14 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.
Determinations and statements of the Bank pursuant to Section 2.11 and 2.12
shall be conclusive absent demonstrable error. Without limiting the generality
of the foregoing, the Borrower shall have no right to review any records of the
Bank or its other customers to determine the accuracy of any statement by the
Bank under Section 2.11(a) or 2.11(b) regarding the Bank's demands upon other
customers of the Bank. The Bank may use reasonable averaging and attribution
methods in determining compensation pursuant to such Sections 2.11 and 2.12 and
the provisions of Sections 2.11 and 2.12 shall survive termination of this
Agreement.
SECTION 2.15 COMPUTATION OF INTEREST AND FEES.
Interest under the Note and the fees hereunder shall be computed on the basis of
actual number of days elapsed in a year of 360 days.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1 CONDITION PRECEDENT TO MAKING INITIAL ADVANCE.
The obligation of the Bank to make the initial Advance is subject to the
condition precedent that the Bank shall have received on or before the day of
such Advance all of the following, each dated (unless otherwise indicated) as of
the date hereof, in form and substance satisfactory to the Bank:
(a) The Note, properly executed on behalf of the Borrower.
(b) The Security Agreement, properly executed on behalf of the
Borrower.
(c) A financing statement or statements sufficient when filed
to perfect the security interests granted under the Security Agreement
to the extent such security interests are capable of being perfected by
filing.
(d) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower or any
Health Fitness Corporation - Credit Agreement - 18 -
Subsidiary, and (ii) no financing statements have been filed and remain
in effect against the Borrower or any Subsidiary except financing
statements perfecting only Permitted Liens.
(e) A certificate of the secretary of the Borrower (i)
certifying that the execution, delivery and performance of the Loan
Documents and other documents contemplated hereunder to which it is a
party have been duly approved by all necessary action of the Board of
Directors of the Borrower and attaching true and correct copies of the
applicable resolutions granting such approval, (ii) certifying that
attached to such certificate are true and correct copies of the
articles of incorporation and bylaws of the Borrower together with such
copies, and (iii) certifying the names of the officers of the Borrower
that are authorized to sign the Loan Documents and other documents
contemplated hereunder, including requests for Advances, together with
the true signatures of such officers. The Bank may conclusively rely on
such certificate until it shall receive a further certificate of the
Secretary or Assistant Secretary of the Borrower canceling or amending
the prior certificate and submitting the signatures of the officers
named in such further certificate.
(f) Evidence that (i) The Preferred Companies, Inc., an
Arizona corporation, has merged into Health Fitness Rehab, Inc., a
Minnesota corporation, with Health Fitness Rehab, Inc. being the
survivor; (ii) that Xxxxx & Associates Physical Therapy Corp., an Iowa
corporation, and Medlink Corporation, an Iowa corporation, have been
merged into Health Fitness Rehab of Iowa, Inc., an Iowa corporation,
with Health Fitness Rehab of Iowa, Inc. being the survivor; and (iii)
that Sports & Orthopedic Physical Therapy, Inc., a
Minnesota
corporation, and Health and Fitness Rehab of Iowa, Inc. have merged
into the Borrower, with the Borrower being the survivor.
(g) Certificates of good standing of the Borrower and its
Subsidiaries, dated not more than ten days before such date.
(h) A guaranty, in form satisfactory to the Bank, duly
executed by all Subsidiaries of the Borrower.
(i) A security agreement, in form satisfactory to the Bank,
duly executed by all Subsidiaries of the Borrower.
(j) Financing statements sufficient when filed to perfect the
security interests granted under the security agreement signed by the
Subsidiaries to the extent such security interests are capable of being
perfected by filing.
(k) A signed copy of an opinion of counsel for the Borrower,
addressed to the Bank as to matters referred to in Sections 4.1, 4.2,
4.3 and 4.7, and as to such other matters as the Bank may reasonably
request, with that opinion being acceptable to the Bank's counsel. In
the case of Section 4.7, the opinion may be to the best knowledge of
such counsel, and, in the case of Section 4.3, insofar as it relates to
Health Fitness Corporation - Credit Agreement - 19 -
enforcement of remedies, it may be subject to applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally from time to time, and to usual equity principles.
(l) Certificates of the insurance required under the Security
Agreement, naming the Bank as lender's loss payee.
(m) A Borrowing Base Certificate as of a date not more than
thirty days before that date.
(n) Evidence satisfactory to the Bank that both immediately
before and immediately after making such Advance no Default or Event of
Default exists or shall exist.
(o) Payment of the fee described in Section 2.7(a).
SECTION 3.2 CONDITION PRECEDENT TO DEPOSITING FUNDS IN ESCROW ACCOUNT.
The obligation of the Bank to deposit funds in the Escrow Account is subject to
the condition precedent that the Bank shall have received on or before the date
of such deposit all of the following, in form and substance satisfactory to the
Bank:
(a) Such subordination agreements as the Bank may require to
evidence that all of the Borrower's Debt, other than its indebtedness
arising hereunder, has been subordinated to payment of the Obligations
on terms satisfactory to the Bank, together with all original
promissory notes or other documents evidencing such Debt.
(b) The Escrow Agreement, duly executed by all parties
thereto.
(c) Evidence that Bayview has deposited at least $3,000,000 in
the Escrow Account.
(d) Copies of the Acquisition Documents, properly executed on
behalf of the parties thereto, certified by the Secretary or Assistant
Secretary of the Borrower as being true and correct copies thereof.
(e) The conditions in Section 3.3 are satisfied.
SECTION 3.3 CONDITION PRECEDENT TO ALL ADVANCES.
The obligation of the Bank to make any Advance shall be subject to the further
condition precedent that on the date of such Advance:
(a) the representations and warranties contained in Article IV
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
Health Fitness Corporation - Credit Agreement - 20 -
(b) no event has occurred and is continuing, or would result
from such Advance, which constitutes a Default or an Event of Default.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank as follows:
SECTION 4.1 EXISTENCE AND POWER.
The Borrower and its Subsidiaries are each corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and are each duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or
qualification necessary. The Borrower has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents.
SECTION 4.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR AGREEMENTS.
The execution, delivery and performance by the Borrower of the Loan Documents
and the borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the stockholders of the Borrower, or any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law,
rule or regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
articles of incorporation or bylaws of the Borrower, (iii) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected, or (iv) result in, or
require, the creation or imposition of any Lien or other charge or encumbrance
of any nature (other than those in favor of the Bank) upon or with respect to
any of the properties now owned or hereafter acquired by the Borrower.
SECTION 4.3 LEGAL AGREEMENTS.
This Agreement and the other Loan Documents constitute, the legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
SECTION 4.4 SUBSIDIARIES.
Schedule 4.4 hereto is a complete and correct list of all present Subsidiaries
and of the percentage of the ownership of the Borrower or any other Subsidiary
in each as of the date of this Agreement. Except as otherwise indicated in that
Schedule, all shares of each Subsidiary
Health Fitness Corporation - Credit Agreement - 21 -
owned by the Borrower or by any such other Subsidiary are validly issued and
fully paid and nonassessable.
SECTION 4.5 FINANCIAL CONDITION.
The Borrower has heretofore furnished to the Bank (i) the audited financial
statement of the Seller as of December 31, 2002, (ii) the unaudited interim
financial statement of the Borrower as of June 30, 2003, and (iii) the unaudited
pro forma financial statement of the Borrower immediately following the
consummation of the Acquisition. The financial statements described in clauses
(i) and (ii) fairly present the financial condition of the Borrower and its
Subsidiaries on the dates thereof and the results of their operations and cash
flows for the periods then ended, and were prepared in accordance with generally
accepted accounting principles. The financial statements described in clause
(iii) are identical to "the most likely scenario" projections used by the
Borrower for internal planning purposes.
SECTION 4.6 ADVERSE CHANGE.
There has been no material adverse change in the business, properties or
condition (financial or otherwise) of the Borrower any Subsidiary or, to the
knowledge of the Borrower, the Seller, since the date of the latest financial
statement of the Borrower referred to in Section 4.5.
SECTION 4.7 LITIGATION.
Except as set forth on Schedule 4.7, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower, any Subsidiary or the Seller with respect to the Purchased Assets,
or the properties of the Borrower or any Subsidiary or the Purchased Assets
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrower, that Subsidiary or the Seller, would have a Material Adverse Effect.
SECTION 4.8 HAZARDOUS SUBSTANCES.
To the best of the Borrower's knowledge after reasonable inquiry, neither the
Borrower nor any Subsidiary nor any other Person has ever caused or permitted
any Hazardous Substance to be disposed of in any manner which might result in
any material liability to the Borrower or any Subsidiary on, under or at any
real property which is operated by the Borrower or any Subsidiary or in which
the Borrower or any Subsidiary has any interest; and no such real property has
ever been used (either by the Borrower, any Subsidiary or any other Person) as a
dump site or permanent or temporary storage site for any Hazardous Substance.
SECTION 4.9 REGULATION U.
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of
the Board of
Health Fitness Corporation - Credit Agreement - 22 -
Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.
SECTION 4.10 TAXES.
The Borrower and its Subsidiaries have each paid or caused to be paid to the
proper authorities when due all federal, state and local taxes required to be
withheld by them. The Borrower and its Subsidiaries have each filed all federal,
state and local tax returns which to the knowledge of the officers of the
Borrower are required to be filed, and the Borrower and its Subsidiaries have
each paid or caused to be paid to the respective taxing authorities all taxes as
shown on said returns or on any assessment received by them to the extent such
taxes have become due, other than taxes whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for which the
Borrower or Subsidiary has provided adequate reserves in accordance with GAAP.
SECTION 4.11 TITLES AND LIENS.
Upon consummation of the Acquisition, the Borrower or one of its Subsidiaries
will have good title to the Purchased Assets (other than any sold, as permitted
by Section 6.6), free and clear of all Liens except for Permitted Liens. No
financing statement naming the Borrower or any Subsidiary as debtor is on file
in any office except to perfect only Permitted Liens.
SECTION 4.12 ERISA.
No Plan established or maintained by the Borrower, any Subsidiary or any ERISA
Affiliate that is subject to Part 3 of Subtitle B of Title I of ERISA had an
accumulated Advance deficiency (as such term is defined in Section 302 of ERISA)
in excess of $1,000,000 as of the last day of the most recent fiscal year of
such Plan ended prior to the date hereof, and no liability to the Pension
Benefit Guaranty Corporation or the Internal Revenue Service in excess of such
amount has been, or is expected by the Borrower, any Subsidiary or any ERISA
Affiliate to be, incurred with respect to any Plan of the Borrower, any
Subsidiary or any ERISA Affiliate. The Borrower has no contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Subtitle B of Title I
of ERISA.
Health Fitness Corporation - Credit Agreement - 23 -
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Note shall remain unpaid or any Facility shall
be outstanding, the Borrower will comply with the following requirements, unless
the Bank shall otherwise consent in writing:
SECTION 5.1 REPORTING.
The Borrower will deliver to the Bank:
(a) As soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the annual
audit report of the Borrower prepared on a consolidated basis with the
unqualified opinion of independent certified public accountants
selected by the Borrower and acceptable to the Bank, which annual
report shall include the consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, shareholders' equity and cash flows
of the Borrower and its Subsidiaries for the fiscal year then ended,
all in reasonable detail and all prepared in accordance with GAAP,
together with (A) a report signed by such accountants stating that in
making the investigations necessary for said opinion they obtained no
knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the Financial Covenants; (B) if requested by the Bank,
a copy of such accountants' management letter issued to the Borrower
for such year; and (C) a statement of such accountants stating that
they understand that the Bank is relying on such audit report.
(b) As soon as available and in any event within 30 days after
the end of each calendar month, consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such month and related
consolidated statements of earnings and cash flows of the Borrower and
its Subsidiaries for such month and for the year to date, in reasonable
detail and stating in comparative form the figures for the
corresponding date and period in the previous year, all prepared in
accordance with GAAP, subject to year-end audit adjustments.
(c) Concurrent with the delivery of any financial statements
under paragraph (a) or (b), a Compliance Certificate, duly executed by
the chief financial officer of the Borrower.
(d) Within 30 days after the end of each calendar month, a
Borrowing Base Certificate as at the end of such calendar month,
properly executed by the chief financial officer of the Borrower,
together with such agings of accounts receivable and other supporting
documentation as the Bank may require.
Health Fitness Corporation - Credit Agreement - 24 -
(e) Not less than 30 days prior to the end of each fiscal year
of the Borrower, projections for the Borrower's financial performance
during the following fiscal year, including projections of income, cash
flows and balance sheets, all presented on a month-by-month basis in
such detail as the Bank may request and certified by the chief
financial officer of the Borrower as being identical to the "the most
likely scenario" projections used by the Borrower for internal planning
purposes, together with a statement of underlying assumptions and such
supporting schedules and information as the Bank may reasonably
require.
(f) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any
Subsidiary shall have sent to its stockholders.
(g) Promptly after the sending or filing thereof, copies of
all regular and periodic financial reports which the Borrower or any
Subsidiary shall file with the Securities and Exchange Commission or
any national securities exchange.
(h) Immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower or any
Subsidiary of the type described in Section 4.7 or which seek a
monetary recovery against the Borrower or any Subsidiary in excess of
$50,000.
(i) As promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower or any
Subsidiary obtains knowledge of the occurrence of any Default or Event
of Default, notice of such occurrence, together with a detailed
statement by a responsible officer of the Borrower or the appropriate
Subsidiary of the steps being taken by the Borrower or the appropriate
Subsidiary to cure the effect of such event.
(j) Promptly upon becoming aware of any Reportable Event or
any prohibited transaction (as defined in Section 4975 of the Internal
Revenue Code or Section 406 of ERISA) in connection with any Plan or
any trust created thereunder, a written notice specifying the nature
thereof, what action the Borrower has taken, is taking or proposes to
take with respect thereto, and, when known, any action taken or
threatened by the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the Department of Labor with respect thereto.
(k) Promptly upon their receipt or filing, copies of (i) all
notices received by the Borrower, any Subsidiary or any ERISA Affiliate
of the Pension Benefit Guaranty Corporation's intent to terminate any
Plan or to have a trustee appointed to administer any Plan, and (ii)
all notices received by the Borrower, any Subsidiary or any ERISA
Affiliate from a Multiemployer Plan concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA.
Health Fitness Corporation - Credit Agreement - 25 -
(l) Upon request of the Bank, copies of the most recent annual
report (Form 5500 Series), including any supporting schedules, filed by
the Borrower, any Subsidiary or any ERISA Affiliate with the Internal
Revenue Service with respect to any Plan.
(m) Such information (in addition to that specified elsewhere
in this Section) respecting the financial condition and results of
operations of the Borrower or any Subsidiary as the Bank may from time
to time reasonably request.
SECTION 5.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION.
The Borrower will keep, and will cause each Subsidiary to keep, accurate books
of record and account for itself in which true and complete entries will be made
in accordance with GAAP and, upon request of the Bank, will give any
representative of the Bank access to, and permit such representative to examine,
copy or make extracts from, any and all books, records and documents in its
possession, to inspect any of its properties and to discuss its affairs,
finances and accounts with any of its principal officers, all at such times
during normal business hours and as often as the Bank may reasonably request.
SECTION 5.3 COMPLIANCE WITH LAWS.
The Borrower will, and will cause each Subsidiary to, comply with the
requirements of applicable laws and regulations, the noncompliance with which
would have a Material Adverse Effect.
SECTION 5.4 PAYMENT OF TAXES AND OTHER CLAIMS.
The Borrower will pay or discharge, and will cause each Subsidiary to pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, (b) all
federal, state and local taxes required to be withheld by it, and (c) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
Lien or charge upon any properties of the Borrower or any Subsidiary; provided,
that neither the Borrower nor any Subsidiary shall be required to pay any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which the
Borrower or such Subsidiary has provided adequate reserves in accordance with
GAAP.
SECTION 5.5 MAINTENANCE OF PROPERTIES.
The Borrower will keep and maintain, and will cause each Subsidiary to keep and
maintain, all of its properties necessary or useful in its business in good
condition, repair and working order; provided, however, that nothing in this
Section shall prevent the Borrower or any Subsidiary from discontinuing the
operation and maintenance of any of its properties if such discontinuance is, in
the judgment of the Borrower or the appropriate Subsidiary, desirable in
Health Fitness Corporation - Credit Agreement - 26 -
the conduct of its business and not disadvantageous in any material respect to
the Bank as holder of the Note.
SECTION 5.6 INSURANCE.
The Borrower will, and will cause each Subsidiary to, obtain and maintain
insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as is usually carried by
companies engaged in similar business and owning similar properties in the same
general areas in which the Borrower or such Subsidiary operates. All casualty
insurance policies required hereunder shall include a standard lenders' loss
payable clause in favor of the Bank to the extent of its interest. All liability
policies required hereunder shall name the Bank as an additional insured.
SECTION 5.7 PRESERVATION OF CORPORATE EXISTENCE.
The Borrower will, and will cause each Subsidiary to, preserve and maintain its
corporate existence and all of its rights, privileges and franchises; provided,
however, that neither the Borrower nor any Subsidiary shall be required to
preserve any of its rights, privileges and franchises if its Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or the appropriate Subsidiary and that
the loss thereof is not disadvantageous in any material respect to the Bank as a
holder of the Note.
SECTION 5.8 DEPOSIT ACCOUNTS.
The Borrower will, and will cause each Subsidiary to, maintain all of its
deposit accounts of any type (whether for working capital, payroll or other
purposes, and whether held jointly or individually) with the Bank or one or more
affiliates of the Bank.
SECTION 5.9 SENIOR CASH FLOW LEVERAGE RATIO.
The Borrower will at all times maintain its Senior Cash Flow Leverage Ratio,
determined as of the end of each month during each period described below, at
not more than the ratio set forth below opposite such period.
Maximum Senior Cash Flow
Period Leverage Ratio
------ ------------------------
Closing Date through December 30, 2003 N/A
December 31, 2003 through February 29, 2004 2.0 to 1
March 1, 2004 and thereafter 1.65 to 1
Health Fitness Corporation - Credit Agreement - 27 -
SECTION 5.10 SENIOR LEVERAGE RATIO.
The Borrower will maintain its Senior Leverage Ratio, determined as of the end
of each month during each period described below, at not more than the ratio set
forth below opposite such period.
Maximum Senior
Period Leverage Ratio
------ --------------
Closing Date through September 29, 2003 3.75 to 1
September 30, 2003 through December 30, 2003 4.0 to 1
December 31, 2003 through March 31, 2004 3.75 to 1
April 1, 2004 through December 30, 2004 3.50 to 1
December 31, 2004 and thereafter 2.50 to 1
SECTION 5.11 CURRENT RATIO.
The Borrower will maintain its Current Ratio, determined as of the end of each
month at not less than 1.5 to 1.0.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Note shall remain unpaid or any Facility shall
be outstanding, the Borrower agrees that, without the prior written consent of
the Bank:
SECTION 6.1 LIENS.
The Borrower will not, and will not permit any Subsidiary to, create, incur,
assume or suffer to exist any Lien or other charge or encumbrance of any nature
on any of its assets, now owned or hereafter acquired, or assign or otherwise
convey any right to receive income or give its consent to the subordination of
any right or claim of the Borrower or any Subsidiary to any right or claim of
any other Person; excluding, however, the following (collectively, "Permitted
Liens"):
(a) Liens for taxes or assessments or other governmental
charges to the extent not required to be paid by Section 5.4.
(b) Materialmen's, merchants', carriers' worker's, repairer's,
or other like liens arising in the ordinary course of business to the
extent not required to be paid by Section 5.4.
(c) Pledges or deposits to secure obligations under worker's
compensation laws, unemployment insurance and social security laws, or
to secure the performance
Health Fitness Corporation - Credit Agreement - 28 -
of bids, tenders, contracts (other than for the repayment of borrowed
money) or leases or to secure statutory obligations or surety or appeal
bonds, or to secure indemnity, performance or other similar bonds in
the ordinary course of business.
(d) Zoning restrictions, easements, licenses, restrictions on
the use of real property or minor irregularities in title thereto,
which do not materially impair the use of such property in the
operation of the business of the Borrower or any Subsidiary or the
value of such property for the purpose of such business.
(e) Purchase money Liens (which term for purposes of this
subsection shall include conditional sale agreements or other title
retention agreements and leases in the nature of title retention
agreements, but shall exclude operating leases) upon or in property
acquired after the date hereof, or Liens existing in such property at
the time of acquisition thereof, or, in the case of any Person which
thereafter becomes a Subsidiary, Liens upon or in its property,
existing at the time such Person becomes a Subsidiary, provided that:
(i) no such Lien extends or shall extend to or cover any
property of the Borrower or such Subsidiary, as the
case may be, other than the property then being
acquired and fixed improvements then or thereafter
erected thereon;
(ii) the aggregate principal amount of all Debt of the
Borrower and all Subsidiaries secured by all Liens
described in this subsection (e) shall not exceed
$100,000 at any one time outstanding; and
(iii) the aggregate principal amount of Debt secured by
Liens described in this subsection (e) at the time of
acquisition of the property subject thereto shall not
exceed 80% of the cost of such property or of the
then fair market value of such property as determined
by the Board of Directors of the Borrower, whichever
shall be less, and the aggregate amount of payments
made thereunder in any period of 12 consecutive
months will not result in a violation of the
restriction contained in Section 6.11.
(f) Liens created by any Subsidiary as security for Debt owing
to the Borrower or to another Subsidiary.
(g) Liens on any property of the Borrower or any Subsidiary
(other than those described in subsection (e) and (f)) securing any
indebtedness for borrowed money in existence on the date hereof and
listed in Schedule 6.1 Part A hereto.
(h) Liens in favor of the Bank.
(i) Liens arising out of a judgment against the Borrower or
any Subsidiary for the payment of money not exceeding $50,000 with
respect to which an appeal is
Health Fitness Corporation - Credit Agreement - 29 -
being prosecuted and a stay of execution pending such appeal has been
secured, but only so long as all such Liens are subordinate in all
respect to all Liens in favor of the Bank.
(j) Liens in favor of Bayview to secure payment of
Subordinated Debt owed to Bayview.
SECTION 6.2 INDEBTEDNESS.
The Borrower will not, and will not permit any Subsidiary to, incur, create,
assume or permit to exist any Debt or liability on account of deposits or
advances except:
(a) Amounts owed to trade creditors in the ordinary course for
the sale or lease of goods or rendition of services by such Persons to
the Borrower on an open account or deferred payment basis.
(b) Indebtedness to the Bank.
(c) Indebtedness of a Subsidiary to the Borrower or another
Subsidiary on account of borrowings, or indebtedness of the Borrower to
a Subsidiary on account of borrowings from that Subsidiary.
(d) Purchase money indebtedness of the Borrower or any
Subsidiary secured by Liens permitted by subsection 6.1(e).
(e) Subordinated Debt owed to Bayview.
SECTION 6.3 GUARANTIES.
The Borrower will not, and will not permit any Subsidiary to, assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) The endorsement of negotiable instruments by the Borrower
or any Subsidiary for deposit or collection or similar transactions in
the ordinary course of business.
(b) Guaranties by the Borrower's Subsidiaries in favor of
Bayview to secure payment of Subordinated Debt owed to Bayview.
SECTION 6.4 INVESTMENTS.
The Borrower will not, and will not permit any Subsidiary to, purchase or hold
beneficially any stock or other securities or evidence of indebtedness of, make
or permit to exist any loans or advances to, or make any investment or acquire
any interest whatsoever in, any other Person, except:
Health Fitness Corporation - Credit Agreement - 30 -
(a) Investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000.
(b) Any existing investment by the Borrower or any other
Subsidiary in the stock of any Subsidiary.
(c) Loans and advances by a Subsidiary to the Borrower or
another Subsidiary.
(d) Loans and advances by the Borrower to any Subsidiary not
exceeding at any one time an aggregate of $10,000 as to all
Subsidiaries combined.
(e) Loans to officers and employees of the Borrower or any
Subsidiary not exceeding at any one time an aggregate of $10,000 as to
the Borrower and all Subsidiaries combined.
(f) Travel advances to officers and employees of the Borrower
or any Subsidiary in the ordinary course of business.
(g) Advances in the form of progress payments, prepaid rent or
security deposits.
SECTION 6.5 DIVIDENDS.
The Borrower will not declare or pay any dividend on any class of its stock or
make any payment on account of the purchase, redemption or other retirement of
any shares of such stock or make any distribution in respect thereof, either
directly or indirectly.
SECTION 6.6 SALE OF ASSETS.
The Borrower will not, and will not permit any Subsidiary to, sell, lease,
assign, transfer or otherwise dispose of all or a material part of its assets
(whether in one transaction or in a series of transactions) to any other Person
other than in the ordinary course of business, except that a wholly-owned
Subsidiary of the Borrower may sell, lease, or transfer all or a substantial
part of its assets to the Borrower or another wholly-owned Subsidiary of the
Borrower, and the Borrower or such other wholly-owned Subsidiary, as the case
may be, may acquire all or substantially all of the assets of the Subsidiary so
to be sold, leased or transferred to it.
Health Fitness Corporation - Credit Agreement - 31 -
SECTION 6.7 TRANSACTIONS WITH AFFILIATES.
The Borrower will not, and will not permit any Subsidiary to, make any loan or
capital contribution to, or any other investment in, any Affiliate, or pay any
dividend to any Affiliate, or make any other cash transfer to any Affiliate;
provided, however, that (i) nothing in this Section shall restrict payment of
compensation to officers and directors in the ordinary course of business and
(ii) so long as no Default or Event of Default has occurred and is continuing at
the time thereof or would result therefrom, the foregoing shall not prohibit
sales of goods and services with any Affiliate to the extent that such sales are
on terms no less favorable to the Borrower than would be obtainable if no such
relationship existed.
SECTION 6.8 CONSOLIDATION AND MERGER.
The Borrower will not, and will not permit any Subsidiary to, consolidate with
or merge into any Person, or permit any other Person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all of the assets of any other Person; provided,
however, that the restrictions contained in this Section shall not apply to or
prevent the Acquisition or the consolidation or merger of a Subsidiary with, or
a conveyance or transfer of its assets to, the Borrower (if the Borrower shall
be the continuing or surviving entity) or another then-existing wholly-owned
Subsidiary of the Borrower.
SECTION 6.9 SALE AND LEASEBACK.
The Borrower will not, and will not permit any Subsidiary to, enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
or such Subsidiary shall sell or transfer any real or personal property, whether
now owned or hereafter acquired, and then or thereafter rent or lease as lessee
such property or any part thereof or any other property which the Borrower or
such Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
SECTION 6.10 SUBORDINATED DEBT.
The Borrower will not, and will not permit any Subsidiary to, (i) make any
payment of, or acquire, any Subordinated Debt except as expressly permitted by
the subordination provision thereof; (ii) give security for all or any part of
such Subordinated Debt except as permitted under Section 6.1(j); (iii) amend or
cancel the subordination provisions of such Subordinated Debt; (iv) take or omit
to take any action whereby the subordination of such Subordinated Debt or any
part thereof to the Note might be terminated, impaired or adversely affected; or
(v) omit to give the Bank prompt written notice of any default under any
agreement or instrument relating to such Subordinated Debt by reason whereof
such Subordinated Debt might become or be declared to be immediately due and
payable.
Health Fitness Corporation - Credit Agreement - 32 -
SECTION 6.11 CAPITAL EXPENDITURES.
The Borrower will not, and will not permit any Subsidiary to, make any Capital
Expenditure (including payments under capitalized leases, but excluding the cost
of the Acquisition) if, after giving effect to such expenditure, the aggregate
amount of Capital Expenditures made by the Borrower and its Subsidiaries in any
fiscal year will exceed $300,000. The restriction contained in this Section is
subject to the further limitations imposed by Section 6.1(e) if any asset is
acquired under a purchase money Lien referred to in that Section.
SECTION 6.12 HAZARDOUS SUBSTANCES.
The Borrower will not, and will not permit any Subsidiary to, cause or permit
any Hazardous Substance to be disposed of, in any manner which might result in
any material liability to the Borrower or any Subsidiary, on, under or at any
real property which is operated by the Borrower or any Subsidiary or in which
the Borrower or any Subsidiary has any interest.
SECTION 6.13 RESTRICTIONS ON NATURE OF BUSINESS.
The Borrower will not, and will not permit any Subsidiary to, engage in any line
of business materially different from that presently engaged in by the Borrower
or such Subsidiary.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the following events:
(a) Default in the payment of any principal of or interest on
the Note when it becomes due and payable.
(b) Default in the payment of any fees required under Section
2.7(b) when the same become due and payable.
(c) The Bank shall fail to receive at least two Business Days
before any funds are disbursed to the Seller from the Escrow Account,
searches of appropriate filing offices showing that as of a date not
more than two weeks prior to such disbursement, no state or federal tax
liens or financing statements have been filed and remain in effect
against the Seller with respect to the Purchased Assets.
(d) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrower contained in any Financial
Covenant.
(e) Default in the performance, or breach, of any covenant or
agreement of the Borrower in this Agreement (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with), and the continuance of such
default or breach for a period of 30 days after the
Health Fitness Corporation - Credit Agreement - 33 -
Bank has given notice to the Borrower specifying such default or breach
and requiring it to be remedied.
(f) Any representation or warranty made by the Borrower in
this Agreement, by any Subsidiary in any guaranty delivered to the
Bank, or by the Borrower (or any of its Officers) or any Subsidiary (or
any of its officers) in any certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement, shall prove to have been incorrect or misleading in any
material respect when made.
(g) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower (other than to the Bank) or
under any indenture or other instrument under which any such evidence
of indebtedness has been issued or by which it is governed and the
expiration of the applicable period of grace, if any, specified in such
evidence of indebtedness, indenture or other instrument; provided,
however, that if such default shall be cured by the Borrower, or waived
by the holders of such indebtedness, in each case prior to the
commencement of any action under Section 7.2 and as may be permitted by
such evidence of indebtedness, indenture or other instrument, then the
Event of Default hereunder by reason of such default shall be deemed
likewise to have been thereupon cured or waived.
(h) An event of default shall occur under the Security
Agreement or any other security agreement, mortgage, deed of trust,
assignment or other instrument or agreement directly or indirectly
securing any obligations of the Borrower hereunder or under the Note or
any guaranty of such obligations.
(i) Default in the payment of any amount owed by the Borrower
to the Bank other than hereunder or under the Note.
(j) The Borrower or any Subsidiary shall be adjudicated a
bankrupt or insolvent, or admit in writing its inability to pay its
debts as they mature, or make an assignment for the benefit of
creditors; or the Borrower or any Subsidiary shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or for all or any substantial part of its property; or such receiver,
trustee or similar officer shall be appointed without the application
or consent of the Borrower or such Subsidiary, as the case may be, and
such appointment shall continue undischarged for a period of 30 days;
or the Borrower or any Subsidiary shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Borrower or any Subsidiary; or
any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the
property of the Borrower or any Subsidiary and such judgment, writ, or
similar process shall not be released, vacated or fully bonded within
30 days after its issue or levy.
Health Fitness Corporation - Credit Agreement - 34 -
(k) A petition shall be filed by or against the Borrower or
any Subsidiary under the United States Bankruptcy Code naming the
Borrower or that Subsidiary as debtor.
(l) Any Subsidiary shall repudiate, purport to revoke or fail
to perform its obligations under its guaranty or security agreement in
favor of the Bank.
(m) The legal or beneficial ownership of any shares of any
class of stock of any Subsidiary shall be sold, conveyed, transferred
or encumbered, whether voluntarily or involuntarily, without the prior
written consent of the Bank.
(n) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of $25,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution.
(o) A writ of attachment, garnishment, levy or similar process
shall be issued against or served upon the Bank with respect to (i) any
property of the Borrower or any Subsidiary in the possession of the
Bank, or (ii) any indebtedness of the Bank to the Borrower or any
Subsidiary.
(p) Any Plan shall have been terminated, or a trustee shall
have been appointed by an appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation shall
have instituted proceedings to terminate any Plan or to appoint a
trustee to administer any Plan, or withdrawal liability shall have been
asserted against the Borrower, any Subsidiary or any ERISA Affiliate by
a Multiemployer Plan; or the Borrower, any Subsidiary or any ERISA
Affiliate shall have incurred liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
Plan participants in excess of $1,000,000 with respect to any Plan; or
any Reportable Event that the Bank may determine in good faith might
constitute grounds for the termination of any Plan, for the appointment
by the appropriate United States District Court of a trustee to
administer any Plan or for the imposition of withdrawal liability with
respect to a Multiemployer Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
the Borrower by the Bank.
SECTION 7.2 RIGHTS AND REMEDIES.
Upon the occurrence of an Event of Default or at any time thereafter until such
Event of Default is cured to the written satisfaction of the Bank, the Bank may
exercise any or all of the following rights and remedies:
(a) The Bank may, by notice to the Borrower, declare the
Facility to be terminated, whereupon the same shall forthwith
terminate.
Health Fitness Corporation - Credit Agreement - 35 -
(b) The Bank may, by notice to the Borrower, declare all
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower.
(c) The Bank may, without notice to the Borrower and without
further action, apply any and all money owing by the Bank to the
Borrower to the payment of the Note then outstanding, including
interest accrued thereon, and of all other sums then owing by the
Borrower hereunder.
(d) The Bank may exercise and enforce its rights and remedies
under the Security Agreement, and/or .
(e) The Bank may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 7.1(k) or 7.1(o) hereof, the entire unpaid principal amount
of the Note then outstanding, all interest accrued and unpaid thereon, and all
other amounts payable under this Agreement shall be immediately due and payable
without presentment, demand, protest or notice of any kind.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NO WAIVER; CUMULATIVE REMEDIES.
No failure or delay on the part of the Bank in exercising any right, power or
remedy under the Loan Documents shall operate as a waiver thereof; nor shall the
Bank's acceptance of payments while any Default or Event of Default is
outstanding operate as a waiver of such Default or Event of Default, or any
right, power or remedy under the Loan Documents; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
SECTION 8.2 AMENDMENTS, ETC.
No amendment or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Bank, and any such waiver shall be effective only
in the specific instance and for the specific purpose for which given. No notice
to or demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances.
Health Fitness Corporation - Credit Agreement - 36 -
SECTION 8.3 NOTICE.
Except as otherwise expressly provided herein, all notices and other
communications hereunder shall be in writing and shall be (i) personally
delivered, (ii) transmitted by registered mail, postage prepaid, (iii) sent by
Federal Express or similar expedited delivery service, or (iv) transmitted by
telecopy, in each case addressed to the party to whom notice is being given at
its address or telecopier number (as the case may be) as set forth by its
signature below; or, as to each party, at such other address or telecopier
number as may hereafter be designated in a notice by that party to the other
party complying with the terms of this Section. All such notices or other
communications shall be deemed to have been given on (i) the date received if
delivered personally or by mail, (ii) the date of receipt, if delivered by
Federal Express or similar expedited delivery service, or (iii) the date of
transmission if delivered by telecopy, except that notices or requests to the
Bank pursuant to any of the provisions of Article II shall not be effective
until received.
SECTION 8.4 PARTICIPATIONS.
The Bank may grant participations in the Note and this Agreement to any
institutional investor without the consent of the Borrower. The Borrower shall
assist the Bank in granting any such participations.
SECTION 8.5 DISCLOSURE OF INFORMATION.
The Borrower authorizes the Bank to disclose to any participant or assignee
(each, a "Transferee") and any prospective Transferee any and all financial and
other information in the Bank's possession concerning the Borrower which has
been or is hereafter delivered to the Bank by the Borrower pursuant to this
Agreement or which has been or is hereafter delivered to the Bank by the
Borrower in connection with the Bank's credit evaluation of the Borrower before
entering into this Agreement. In addition, the Bank, Xxxxx Fargo & Company, and
all direct and indirect subsidiaries of Xxxxx Fargo & Company, may exchange any
and all information they may have in their possession regarding the Borrower and
its Affiliates, and the Borrower waives any right of confidentiality it may have
with respect to such exchange of such information.
SECTION 8.6 COSTS AND EXPENSES.
The Borrower agrees to pay on demand all costs and expenses incurred by the Bank
in connection with the negotiation, preparation, execution, administration,
amendment or enforcement of the Loan Documents and the other instruments and
documents to be delivered hereunder and thereunder, including the reasonable
fees and out-of-pocket expenses of counsel for the Bank with respect thereto,
whether paid to outside counsel or allocated to the Bank by in-house counsel.
The Borrower also agrees to pay and reimburse the Bank for all of its
out-of-pocket and allocated costs incurred in connection with each audit or
examination conducted by the Bank, its employees or agents, which audits and
examinations shall be for the sole benefit of the Bank.
Health Fitness Corporation - Credit Agreement - 37 -
SECTION 8.7 INDEMNIFICATION BY BORROWER.
The Borrower hereby agrees to indemnify the Bank and each officer, director,
employee and agent thereof (herein individually each called an "Indemnitee" and
collectively called the "Indemnitees") from and against any and all losses,
claims, damages, reasonable expenses (including, without limitation, reasonable
attorneys' fees) and liabilities (all of the foregoing being herein called the
"Indemnified Liabilities") incurred by an Indemnitee in connection with or
arising out of the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the use of the proceeds of any Advance
(including but not limited to any such loss, claim, damage, expense or liability
arising out of any claim in which it is alleged that any Environmental Law has
been breached with respect to any activity or property of the Borrower), except
for any portion of such losses, claims, damages, expenses or liabilities
incurred solely as a result of the gross negligence or willful misconduct of the
applicable Indemnitee. If and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. All obligations provided
for in this Section shall survive any termination of this Agreement.
SECTION 8.8 BINDING EFFECT, ASSIGNMENT.
The Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights thereunder or any
interest therein without the prior written consent of the Bank.
SECTION 8.9 GOVERNING LAW.
The Loan Documents shall be governed by, and construed in accordance with, the
internal laws of the State of
Minnesota.
SECTION 8.10 CONSENT TO JURISDICTION.
The Borrower irrevocably (i) agrees that any suit, action or other legal
proceeding arising out of or relating to this Agreement or any other Loan
Document may be brought in a court of record in Hennepin County in the State of
Minnesota or in the courts of the United States located in such State, (ii)
consents to the jurisdiction of each such court in any suit, action or
proceeding, (iii) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any such courts and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum, and
(iv) agrees that a final judgment in any such suit, action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
Health Fitness Corporation - Credit Agreement - 38 -
SECTION 8.11 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
SECTION 8.12 HEADINGS.
Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
SECTION 8.13 ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by any
party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees,
officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement
and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for
additional credit.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in
Minnesota selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA's
commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "Rules"). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party
shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. Nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of
any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or
proceeds of collateral such as setoff or repossession; or (iii) obtain
provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the
Health Fitness Corporation - Credit Agreement - 39 -
appointment of a receiver, before during or after the pendency of any
arbitration proceeding. This exclusion does not constitute a waiver of
the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the
exercise of the actions detailed in sections (i), (ii) and (iii) of
this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000.00 or less
will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided
however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of Minnesota or a neutral retired judge of the
state or federal judiciary of {State Name}, in either case with a
minimum of ten years experience in the substantive law applicable to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect
to the statutes of limitation in determining any claim. In any
arbitration proceeding the arbitrator will decide (by documents only or
with a hearing at the arbitrator's discretion) any pre-hearing motions
which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Minnesota and may
grant any remedy or relief that a court of such state could order or
grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power
to award recovery of all costs and fees, to impose sanctions and to
take such other action as the arbitrator deems necessary to the same
extent a judge could pursuant to the Federal Rules of Civil Procedure,
the Minnesota Rules of Civil Procedure or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary
remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial
relief.
(e) Discovery. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being
arbitrated and must be completed no later than 20 days before the
hearing date and within 180 days of the filing of the dispute with the
AAA. Any requests for an extension of the discovery periods, or any
discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential
for the party's presentation and that no alternative means for
obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of
any dispute arising pursuant to the terms of this Agreement shall be
determined by a separate
Health Fitness Corporation - Credit Agreement - 40 -
arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to
conclude any arbitration proceeding within 180 days of the filing of
the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results
thereof, except for disclosures of information by a party required in
the ordinary course of its business or by applicable law or regulation.
If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the
dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or
any relationship between the parties.
SECTION 8.14 WAIVER OF JURY TRIAL.
THE BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT AND THE NOTE OR THE RELATIONSHIPS ESTABLISHED HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
Address: HEALTH FITNESS CORPORATION
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxx
Telecopier: (000) 000-0000 By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxxx
---------------------------
Its Chief Financial Officer
and Treasurer
---------------------------
Health Fitness Corporation - Credit Agreement - 41 -
Address: XXXXX FARGO BANK, NATIONAL
0000 Xxxxxx Xxxxxx Xxxxx ASSOCIATION
MAC X0000-000
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Telecopier: 000-000-0000 By /s/ Xxxx X. Xxxxxxx
----------------------------
Xxxx X. Xxxxxxx
Its Assistant Vice President
Health Fitness Corporation - Credit Agreement - 42 -
EXHIBITS AND SCHEDULES
Exhibit A Note
Exhibit B Escrow Agreement
Exhibit C Form of Compliance Certificate
Exhibit D Borrowing Base Certificate
----------------------
Schedule 4.4 Subsidiaries
Schedule 4.7 Litigation
Schedule 6.1 Permitted Liens
EXHIBIT A
PROMISSORY NOTE
$7,500,000 Minneapolis, Minnesota
August 22, 2003
For value received, Health Fitness Corporation, a Minnesota
corporation (the "Borrower"), promises to pay to the order of Xxxxx Fargo Bank,
National Association, a national banking association (the "Bank"), at its office
in Minneapolis, Minnesota, or at such other place as the holder hereof may
hereafter from time to time designate in writing, in lawful money of the United
States of America and in immediately available funds, the principal sum of Seven
Million Five Hundred Thousand Dollars and No Cents ($7,500,000), or so much
thereof as is advanced by the Bank to the Borrower from time to time pursuant to
the Credit Agreement of even date herewith between the Borrower and the Bank
(together with all amendments, modifications and restatements thereof, the
"Credit Agreement"), and to pay interest on the principal balance of this Note
outstanding from time to time at the rate or rates determined pursuant to the
Credit Agreement.
This Note is issued pursuant to, and is subject to, the Credit
Agreement, which provides (among other things) for the amount and date of
payments of principal and interest required hereunder, for the acceleration of
the maturity hereof upon the occurrence of an Event of Default (as defined
therein) and for the voluntary and mandatory prepayment hereof. This Note is the
Note, as defined in the Credit Agreement.
The Borrower shall pay all costs of collection, including
reasonable attorneys' fees and legal expenses, if this Note is not paid when
due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
HEALTH FITNESS CORPORATION
By /s/ Xxx Xxxxxxxxx
---------------------------
Xxx Xxxxxxxxx
Its Chief Financial Officer
EXHIBIT B
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement"), is dated as of August
___, 2003 by and among Xxxxxxx & Xxxxxxx Health Care Systems Inc., a New Jersey
corporation ("J&J Health"), Bayview Capital Partners LP, a Delaware limited
partnership ("Bayview"), Xxxxx Fargo Bank, National Association, as lender
("Lender"), and Xxxxx Fargo Bank Minnesota, National Association, as escrow
agent (the "Escrow Agent").
WITNESSETH:
WHEREAS, Health Fitness Corporation, a Minnesota corporation ("HFC"),
and J&J Health are parties to that certain Asset Purchase Agreement, dated as of
the date hereof (the "Asset Purchase Agreement"), pursuant to which HFC will
acquire certain assets (the "Acquired Assets") of the Health & Fitness Services
division of J&J Health;
WHEREAS, to induce J&J Health to enter into the Asset Purchase
Agreement, Section 7(a) of the Asset Purchase Agreement provides that, in
connection with the purchase of the Acquired Assets, the sum of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000.00) (the "Escrow Contribution") shall
be deposited with the Escrow Agent and held by the Escrow Agent in an escrow
account established pursuant to this Escrow Agreement, and subsequently
disbursed in accordance with the terms of this Escrow Agreement;
WHEREAS, the Lender will deposit Two Million Two Hundred and Fifty
Thousand Dollars ($2,250,000) of the Escrow Contribution with the Escrow Agent
and Bayview will deposit Three Million Dollars ($3,000,000) of the Escrow
Contribution with the Escrow Agent; and
WHEREAS, the Escrow Agent has agreed to hold the Escrow Fund (as
defined herein) pursuant to the terms of this Escrow Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1) Defined Terms. Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings assigned to them in the Asset Purchase
Agreement.
1.2) Additional Definitions. The following terms shall have the
following meanings:
"Closing Distribution Notice" means as defined in Section 4.1.
"Escrow Fund" means the Escrow Contribution deposited with the Escrow
Agent pursuant to Section 7(a) of the Asset Purchase Agreement, together with
interest and other earnings and profits upon or in respect of such amount, minus
amounts paid or distributed pursuant to this Agreement.
"Permitted Investments" means as defined in Section 3.1.
"Post-Closing Distribution Notice" means as defined in Section 4.1.
ARTICLE II
ESCROW
2.1) Funds Placed in Escrow. On the date hereof, Lender and Bayview
have deposited the Escrow Contribution with the Escrow Agent. The Escrow Agent
hereby acknowledges receipt of such deposits and accepts delivery of the Escrow
Contribution. The Escrow Agent agrees to hold the Escrow Fund in an escrow
account, subject to the terms and conditions of this Agreement. The escrow
account shall be a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party to
this Agreement.
2.2) Repayment; Reimbursement. The Escrow Fund shall be utilized to pay
to J&J Health the Purchase Price at the Closing for the Acquired Assets and to
pay J&J Health any adjusted Purchase Price after the Closing, all as provided in
Section 7(a) of the Asset Purchase Agreement.
2.3) Escrow Taxes. Unless otherwise required by law, J&J Health will
include in its income, for federal, state, local and foreign tax purposes, that
portion of income and gains realized by the Escrow Fund that is disbursed to J&J
Health, and shall pay all income taxes due with respect thereto. HFC will
include in its income, for federal, state, local and foreign tax purposes, that
portion of income and gains realized by the Escrow Fund that is disbursed other
than to J&J Health. As soon as practicable after December 31 of each calendar
year (but in no event later than required by applicable law), the Escrow Agent
shall report, as required by applicable law, income and gains realized by the
Escrow Fund in a manner consistent with this section.
ARTICLE III
INVESTMENT OF FUND
3.1) Permitted Investments; Interest. From the date hereof until the
final disbursement from the Escrow Fund pursuant to Article 4 of this Escrow
Agreement, the Escrow Agent is authorized and directed to invest and reinvest
the Escrow Fund in the Xxxxx Fargo Treasury Plus Money Market Fund (the
"Permitted Investments"). The Escrow Agent hereby represents that the Xxxxx
Fargo Treasury Plus Money Market Fund is a money market fund that is rated AAA
or Aaa by Standard & Poor's or Moody's, respectively, and that provides daily
liquidity without penalty. The Permitted Investments and interest accruing on,
and any profit resulting from, such investments shall be added to, and become a
part of, the Escrow Fund pursuant to this Escrow Agreement. For purposes of this
Escrow Agreement, "interest" on the Escrow Fund shall include all proceeds
thereof and investment earnings with respect thereto. The Permitted Investments
shall be registered in the name of the Escrow Agent. The Escrow Agent shall have
full power and authority to sell any and all of the Permitted Investments held
by it under this Escrow Agreement as necessary to make disbursements under this
Escrow Agreement, and may use its bond department to effect such sales. The
Escrow Agent shall not be responsible for any unrealized profit or realized loss
realized on such investments.
ARTICLE IV
RELEASE OF ESCROW ACCOUNT
4.1) Closing of the Asset Purchase Agreement. In connection with the
consummation of the Closing under the Asset Purchase Agreement, J&J Health and
HFC shall deliver to the Escrow Agent, with a copy to Bayview and the Lender, a
notice jointly executed by J&J Health and HFC stating that all conditions
precedent to the Closing of the Asset Purchase Agreement, with the exception of
delivery of the Purchase Price, have been satisfied and not waived (provided
that J&J Health may, in its sole and absolute discretion, waive any one or more
conditions precedent to J&J Health's obligation to consummate the Closing set
forth in Section 11(d)(ii) of the Asset Purchase Agreement), and setting forth
the amount of the Purchase Price to be distributed to J&J Health in accordance
with Section 7(a) of the Asset Purchase Agreement (the "Closing Distribution
Notice"), and the Escrow Agent thereupon shall promptly make a disbursement to
J&J Health from the Escrow Fund in the amount set forth in the Closing
Distribution Notice. Thereafter, at the end of each of the six calendar months
following the month in which the Closing occurs, the Escrow Agent shall disburse
to J&J Health an amount equal to the amount, if any, by which the Purchase Price
as recalculated in accordance with Section 7(a) of the Asset Purchase Agreement
at such month-end exceeds the total Purchase Price theretofore paid to J&J
Health upon the receipt of a notice, with a copy to Bayview and the Lender,
jointly executed by J&J Health and HFC setting forth and directing the
disbursement of any such amount (each a "Post-Closing Distribution Notice").
Promptly following full payment of all amounts set forth in the Closing
Distribution Notice and all amounts set forth in the Post-Closing Distribution
Notices, any amounts remaining in the Escrow Fund shall be disbursed to Lender.
4.2) Termination of the Asset Purchase Agreement. On receipt of a
notice jointly executed by J&J Health and HFC stating that the Asset Purchase
Agreement has been terminated (the "Termination Distribution Notice"), the
Escrow Agent shall promptly disburse all amounts in the Escrow Fund to Lender
and to Bayview pro rata based on the percentage of the Escrow Contribution
contributed by each.
4.3) No Closing or Termination. If the Escrow Agent has not received
the Closing Distribution Notice or Termination Distribution Notice on or before
November 30, 2003, the Escrow Agent shall promptly disburse all amounts in the
Escrow Fund to Lender and to Bayview pro rata based on the percentage of the
Escrow Contribution contributed by each.
ARTICLE V
LIABILITY AND COMPENSATION OF ESCROW AGENT
5.1) No Implied Duties. The duties and obligations of the Escrow Agent
hereunder shall be determined solely by the express provisions of this Escrow
Agreement, and no implied duties or obligations shall be read into this Escrow
Agreement against the Escrow Agent. The Escrow Agent shall, in determining its
duties hereunder, be under no obligation to refer to any other documents between
or among the parties related in any way to this Escrow Agreement (except to the
extent that this Escrow Agreement specifically refers to or incorporates by
reference provisions of any other document).
5.2) Indemnification of Escrow Agent. HFC and the Escrow Agent have
entered into a separate letter agreement dated the date hereof relating to
indemnification of the Escrow Agent for certain liability and expense which may
arise out of actions taken or omitted by the Escrow Agent in accordance with
this Escrow Agreement (except such liability and expense as may result from the
gross negligence or willful misconduct of the Escrow Agent).
5.3) Standard of Care; Reliance. The Escrow Agent shall not be liable
to any person by reason of any error of judgment or for any act done or step
taken or omitted by it, or for any mistake of fact or law or anything which it
may do or refrain from doing in connection herewith unless caused by or arising
out of its own gross negligence or willful misconduct. The Escrow Agent shall be
entitled to rely in good faith on, and shall be protected in acting in reliance
in good faith upon, any instructions or directions furnished to it in writing
jointly executed by J&J Health and HFC or by Lender and Bayview, as applicable,
pursuant to any provision of this Escrow Agreement and shall be entitled to
treat as genuine, and as the document it purports to be, any letter, paper or
other document furnished to it by J&J Health and HFC or by Lender and Bayview,
and reasonably believed by the Escrow Agent to be genuine and to have been
signed and presented by the proper party or parties. In performing its
obligations hereunder, the Escrow Agent may consult with counsel to the Escrow
Agent and shall be entitled to rely in good faith on, and shall be protected in
acting in reliance in good faith upon, the advice or opinion of such counsel.
5.4) Compensation of Escrow Agent. The Escrow Agent shall be entitled
to its customary fee for the performance of services by the Escrow Agent
hereunder for each year or portion thereof that any portion of the Escrow Fund
remains in escrow and shall be reimbursed for reasonable costs and expenses
incurred by it in connection with the performance of such services (such fees,
costs and expenses are hereinafter referred to as the "Escrow Agent's
Compensation"). The Escrow Agent's Compensation shall be paid by HFC pursuant to
the terms of a separate letter agreement between the Escrow Agent and HFC dated
the date hereof.
5.5) Resignation and Successor. The Escrow Agent may resign at any time
by giving sixty (60) days written notice to Lender, Bayview and J&J Health;
provided, that such resignation shall not be effective unless and until a
successor Escrow Agent has been appointed and accepts such position pursuant to
the terms of this Section 5.5. In such event, Lender, Bayview and J&J Health
shall jointly appoint a successor Escrow Agent. If a successor Escrow Agent is
not appointed within the 30-day period following such notice, the Escrow Agent
may petition any court of competent jurisdiction to name a successor Escrow
Agent. Such appointment shall be effective on the effective date of the
aforesaid resignation (the "Escrow Transfer Date"). On the Escrow Transfer Date,
all right title and interest to the Escrow Fund, including interest thereon,
shall be transferred to the successor Escrow Agent and this Escrow Agreement
shall be assigned by the Escrow Agent to such successor Escrow Agent, and
thereafter, the resigning Escrow Agent shall be released from any further
obligations hereunder. The Escrow Agent shall continue to serve until its
successor is appointed, assumes this Escrow Agreement and receives the
transferred Escrow Fund.
5.6) Disputes. It is understood and agreed that in the event any
adverse claims or demands are made in connection with the Escrow Fund, or in the
event the Escrow Agent in good faith is in doubt as to what action it should
take hereunder, the Escrow Agent shall retain the Escrow Fund until the Escrow
Agent shall have received (i) an enforceable final order of a court or
arbitrator of competent jurisdiction which is not subject to further appeal
directing delivery of the Escrow Fund or (ii) a written statement jointly
executed by J&J Health and HFC, on the one hand, and Lender and Bayview, on the
other hand, directing delivery of the Escrow Fund, in which event Escrow Agent
shall disburse the Escrow Fund in accordance with such order or agreement. Any
court or arbitrator order referred to in clause (i) immediately above shall be
accompanied by a legal opinion of counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court or arbitrator order or
judgment is final and enforceable and is not subject to further appeal. The
Escrow Agent shall act on such court or arbitrator order and legal opinion
without further question.
5.7) Limitation on Damages. In no event shall the Escrow Agent be
liable in connection with this Escrow Agreement for any special, indirect or
consequential loss or damage of any kind whatsoever, even if the Escrow Agent
has been previously advised of such loss or damage.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1) Representations by Escrow Agent. The Escrow Agent represents and
warrants to each of the other parties hereto that it is duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation;
that it has the power and authority to execute and deliver this Escrow Agreement
and to perform its obligations hereunder; that the execution, delivery and
performance of this Escrow Agreement by it has been duly authorized and approved
by all necessary action; that this Escrow Agreement constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms; and
that the execution, delivery and performance of this Escrow Agreement by it will
not result in a breach of or loss of rights under or constitute a default under
or a violation of any trust (constructive or other), agreement, judgment,
decree, order or other instrument to which it is a party or by which it or its
properties or assets may be bound.
6.2) Representations by J&J Health, Bayview and Lender. J&J Health,
Bayview and Lender each represents to each of the other parties hereto that it
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation; that it has the power and authority to execute and
deliver this Escrow Agreement and to perform its obligations hereunder; that the
execution, delivery and performance of this Escrow Agreement by it has been duly
authorized and approved by all necessary action; that this Escrow Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms; and that the execution, delivery and performance of
this Escrow Agreement by it will not result in a breach of or loss of rights
under or constitute a default under or a violation of any trust (constructive or
other), agreement, judgment, decree, order or other instrument to which it is a
party or by which it or its properties or assets may be bound.
ARTICLE VII
7.1) Termination. This Agreement shall terminate TERMINATION on the
date all amounts in the Escrow Fund have been disbursed as provided herein.
ARTICLE VIII
GENERAL
8.1) Other Agreements. Nothing in this Agreement is intended to limit
any of the rights of HFC or J&J Health, or any obligation of HFC or J&J Health,
under the Asset Purchase Agreement (or any agreement entered into in connection
with the transactions contemplated by the Asset Purchase Agreement).
8.2) Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota (regardless of the laws that might otherwise govern under
applicable Minnesota principles of conflicts of law).
8.3) Arbitration.
(i) The parties hereby agree that any dispute shall be
resolved by arbitration before a single arbitrator in
accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") then
pertaining (available by xxx.xxx.xxx), except where
those rules conflict with this provision, in which
case this provision controls. Any court with
jurisdiction shall enforce this clause and enter
judgment on any award. The arbitrator shall be
selected within twenty business days from
commencement of the arbitration from the AAA's
National Roster of Arbitrators pursuant to agreement
or through selection procedures administered by the
AAA. Within 45 days of initiation of arbitration, the
parties shall reach agreement upon and thereafter
follow procedures, including limits on discovery,
assuring that the arbitration will be concluded and
the award rendered within no more than eight months
from the selection of the arbitrator, or, failing
agreement, procedures meeting such time limits will
be designed by the AAA and adhered to by the parties.
The arbitration shall be held in Minneapolis,
Minnesota and the arbitrator shall apply the
substantive law of Minnesota, except that the
interpretation and enforcement of this arbitration
provision shall be governed by the Federal
Arbitration Act. Prior to commencement of
arbitration, emergency relief is available from any
court to avoid irreparable harm. THE ARBITRATOR SHALL
NOT AWARD EITHER PARTY PUNITIVE, EXEMPLARY,
MULTIPLIED OR CONSEQUENTIAL DAMAGES, OR ATTORNEYS'
FEES OR COSTS.
(ii) Prior to the commencement of arbitration, the parties
must attempt to mediate their dispute using a
professional mediator from AAA, the CPR Institute for
Dispute Resolution, or like organization selected by
agreement or, absent agreement, through selection
procedures administered by the AAA. Within a period
of 45 days after the request for mediation, the
parties agree to convene with the mediator, with
business representatives present, for at least one
session to attempt to resolve the matter. In no event
will mediation delay commencement of the arbitration
for more than 45 days absent agreement of the parties
or interfere with the availability of emergency
relief.
8.4) Benefit; Successor and Assigns. This Escrow Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but shall not be assignable by any party hereto
without the written consent
of all of the other parties hereto. The parties acknowledge that HFC is an
intended third-party beneficiary of this Escrow Agreement and that this Escrow
Agreement will not be amended without the consent of HFC. This Escrow Agreement
is not intended to confer on any person not a party hereto, other than HFC
pursuant to the immediately preceding sentence, any rights or remedies
hereunder.
8.5) Severability. If any provision of this Agreement, or the
application of such a provision, is for any reason and to any extent invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other circumstances shall be interpreted so as reasonably to effect the
intent of the parties to this Agreement. The parties shall replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that shall achieve, to the greatest extent possible, the economic, business and
other purposes of the void or unenforceable provision.
8.6) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts of it, individually or taken together,
whether delivered via facsimile or otherwise, bear the signatures of all the
parties reflected hereon as signatories.
8.7) Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. Except
with respect to HFC pursuant to Section 8.4, notwithstanding any rights that may
be created in any third party under the terms of this Agreement, no such
amendment or waiver shall require the consent of such third party to be
effective. The waiver by a party of any breach of this Agreement or default in
the performance of any obligations under this Agreement shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
8.8) Notices. All notices and other communications hereunder shall be
in writing and shall be delivered personally by commercial courier service or
otherwise, or by telecopier, or by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to J&J Health:
-----------------
Xxxxxxx & Xxxxxxx Health Care Systems Inc.
000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to Escrow Agent:
-------------------
Xxxxx Fargo Bank Minnesota, N.A.
Corporate Trust Services
MAC N9303-110 Sixth and Marquette
Xxxxxxxxxxx, XX 00000
FAX: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
If to Lender:
-------------
Xxxxx Fargo Bank, N.A.
0000 Xxxxxx Xxxxxx Xxxxx
XXX X0000-000
Xxxxxxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
If to Bayview:
--------------
Bayview Capital Partners LP
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxxx Xxxxxx and Xxxx X. Xxx
Any party may change the above-specified recipient and/or mailing address by
notice to all other parties given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by telecopy) or on the day shown on the return receipt
(if delivered by mail).
8.9) Construction of Agreement. This Escrow Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
of this Agreement shall not be construed for or against any party. A reference
to a Section shall mean a Section in this Agreement unless otherwise explicitly
set forth. The titles and headings in this Agreement are for reference purposes
only and shall not in any manner limit the construction of this Agreement, which
shall be considered as a whole.
8.10) Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described in this
Escrow Agreement and contemplated by it and to carry into effect the intents and
purposes of this Escrow Agreement.
8.11) Absence of Third Party Beneficiary Rights. No provisions of this
Escrow Agreement are intended, nor shall be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder or partner of any party to this Escrow
Agreement or any other person or entity unless specifically provided otherwise
in it, and, except as so provided, all provisions of this Escrow Agreement shall
be personal solely among the parties to this Escrow Agreement.
8.12) Entire Agreement. This Escrow Agreement and the Asset Purchase
Agreement and the exhibits and schedules to this Escrow Agreement and to the
Asset Purchase Agreement constitute the entire understanding and agreement of
the parties to this Escrow Agreement with respect to the subject matter of this
Agreement and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto. The express terms of this Escrow
Agreement control and supersede any course of performance or usage of trade
inconsistent with any of the terms of this Escrow Agreement.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS XXXXX FARGO BANK MINNESOTA, NATIONAL
INC. ASSOCIATION, AS ESCROW AGENT
By: By:
----------------------------------- --------------------------------
Name: Name:
--------------------------------- ------------------------------
Title: Title:
-------------------------------- -----------------------------
XXXXX FARGO BANK, NATIONAL ASSOCIATION, BAYVIEW CAPITAL PARTNERS LP
AS LENDER
BY: BAYVIEW CAPITAL MANAGEMENT LLC
ITS: GENERAL PARTNER
By: By:
----------------------------------- --------------------------------
Name: Name:
--------------------------------- ------------------------------
Title: Title:
-------------------------------- -----------------------------
EXHIBIT C
COMPLIANCE CERTIFICATE
--------------------------, ------
Xxxxx Fargo Bank, National Association
MAC N9307-013
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
COMPLIANCE CERTIFICATE
Ladies and Gentlemen:
Reference is made to the Credit Agreement (the "Credit
Agreement") dated August 22, 2003 entered into between Xxxxx Fargo Bank,
National Association and Health Fitness Corporation (the "Borrower").
All terms defined in the Credit Agreement and not otherwise
defined herein shall have the meanings given them in the Credit Agreement.
This is a Compliance Certificate submitted in connection
with the Borrower's financial statements (the "Statements") as of
_____________________, _______ (the "Effective Date").
I hereby certify to you as follows:
1. I am the Chief Financial Officer of the Borrower, and I am
familiar with the financial statements and financial affairs
of the Borrower.
2. The Statements, and the computations below, have been prepared
in accordance with GAAP. Attached hereto are all relevant
facts in reasonable detail to evidence, and the computations
of, the Financial Covenants.
3. I have no knowledge of the occurrence of any Default or Event
of Default under the Credit Agreement not previously reported
to you, except as set forth in the attachments, if any,
hereto.
Very truly yours,
HEALTH FITNESS CORPORATION
By
---------------------------
Xxx Xxxxxxxxx
Its Chief Financial Officer
EXHIBIT D
BORROWING BASE CERTIFICATE
--------------------------, ------
Xxxxx Fargo Bank, National Association
MAC N9307-013
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Telecopier: (000) 000-0000
Ladies and Gentlemen:
Reference is made to the Credit Agreement (the "Credit
Agreement") dated as of August 22, 2003 entered into between Health Fitness
Corporation (the "Borrower") and Xxxxx Fargo Bank, National Association (the
"Bank"). All terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings given them in the Credit Agreement. This is a
Borrowing Base Certificate submitted as of ____________________, _______ (the
"Effective Date").
I hereby certify to you that the following is a true and
correct calculation of the Borrowing Base as of the Effective Date:
(a) Total Accounts $
--------------
(b) Ineligible Accounts $
--------------
(c) Total Eligible Accounts (line (a) minus line (b)) $
--------------
(d) Eligible Accounts Advance Rate [80%, 90% or 100%] $
--------------
(e) Eligible Accounts amount (product of lines (c) and (d)) $
--------------
(f) [if applicable] outstanding principal balance of funds in
Escrow Account deposited by Bank (all disbursements of
funds from the Escrow Account shall be deemed to come first
from funds other than those deposited by the Bank)
(g) Total Borrowing Base amount (sum of lines (e) and (f)) $
--------------
Attached hereto are supporting schedules showing a detailed calculation
of the items listed above.
Very truly yours,
SCHEDULE 4.4
SUBSIDIARIES
Fitness Centers of America, d/b/a Fitness Systems, a California corporation
Health Fitness Rehab, Inc., a Minnesota corporation
Health Fitness Corporation of Canada, Inc., an Alberta corporation
SCHEDULE 4.7
LITIGATION
In April 2000, HealthSouth Corporation filed a lawsuit against the
Company and two former employees in U.S. District Court in Minnesota arising out
of HealthSouth's purchase of several rehabilitation and physical therapy clinics
from the Company in May 1999. HealthSouth claimed that the two former employees
improperly diverted business away from the purchased clinics. HealthSouth
claimed damages in excess of $3,000,000, alleging misrepresentations and
breaches of warranties in the purchase agreement. In February 2002, the U.S.
District Court in Minneapolis dismissed all of HealthSouth's claims in
connection with a summary judgment motion filed by the Company, and issued an
order awarding the Company a judgment of $43,156 for its counter claim relating
to certain accounts receivable. The final outcome of this matter is pending on
the outcome of an appeal made by HealthSouth.
A former employee, Xxxx Xxxxxxxxx, sent e-mails on March 12 and 13,
2003, when still employed, indicating that he had a lawyer and was considering
filing a charge of discrimination as well as a defamation action against the
Company. The Company vigorously denies all such allegations and would vigorously
defend any charge if brought. No charge has been filed to date.
SCHEDULE 6.1
LIENS
PART A
DEBTOR JURISDICTION SECURED PARTY FILE NUMBER FILE DATE COLLATERAL DESCRIPTION
------ ------------ ------------- ----------- --------- ----------------------
Health Fitness MN, CGI Capital Inc. 2141330 6/22/99 Specific computer equipment
Corporation Secretary of pursuant to lease agreement
State
PART B
Neither of the filings by Coast Business Credit listed below perfect an
effective Lien. All obligations owed by Fitness Centers of America to such party
have been satisfied in full, and all Liens were released through a refinancing
with Xxxxxxx Xxxxx Business Financial Services. The Borrower undertakes to use
commercially reasonable efforts to have such filings terminated as provided in
Section 9-509(d)(1) or (2) of the Uniform Commercial Code.
DEBTOR JURISDICTION SECURED PARTY FILE NUMBER FILE DATE COLLATERAL DESCRIPTION
------ ------------ ------------- ----------- --------- ----------------------
Fitness Centers of MN, Secretary Coast Business 2240702 06/30/00 Blanket Lien
America of State Credit, a division
of Southern Pacific
Bank
------------------ ------------- ------------------- ----------- -------- --------------------
CA, Secretary Coast Business 00-18260610 06/29/00 Blanket Lien
of State Credit, a division
of Southern Pacific
Bank
