BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT (this "Agreement") is dated as of August 26,
1997, by and between Health Fitness Corporation, a Minnesota corporation (the
"Company"), and Brightbridge Fund I, L.P. a Minnesota limited partnership
("Investor").
RECITALS:
Whereas, the Company needs cash to fund its operations until such time as
it can complete a proposed private offering of senior subordinated debentures
(the "Offering") as contemplated by that certain Confidential Private Placement
Memorandum dated July 7, 1997 (as amended or supplemented, the "Offering
Memorandum"); and
Whereas, Investor desires to lend funds to the Company on the terms and
conditions set forth in this Agreement.
AGREEMENT:
Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Loan/Promissory Note. Investor agrees to lend to the Company Five
Hundred Thousand Dollars ($500,000) and the Company agrees to deliver to the
Investor a subordinated unsecured promissory note, in the form attached hereto
as Exhibit A (the "Note"), in a like amount. The delivery of the Note shall be
made concurrently with delivery of funds to the Company in the amount set forth
above.
2. Warrants.
(a) In consideration of the loan, the Company shall issue to Investor,
concurrently with delivery of the Note, stock purchase warrants, in the
form attached hereto as Exhibit B (the "Original Warrant"), to purchase
Twenty Thousand (20,000) shares of Company Common Stock at an exercise
price of $3.00 per share. If the Note is not paid when due, the number of
shares purchasable under the Original Warrant shall increase by 2,500, and
further increase by an additional 2,500 shares for each 60-day period
thereafter that the Note remains unpaid.
(b) The parties intend that the terms of Original Warrant shall be at
least as favorable to the Investor (on a proportional basis) as the
warrants to be issued to purchasers of the Company's unsecured subordinated
debt in the Offering. Therefore, notwithstanding subsection (a) above, if
the Offering is completed (for purposes of which, the Offering shall be
deemed completed upon one or more closings resulting in cumulative
aggregate proceeds to the Company of at least $4,000,000), Investor shall
have the option, exercisable in its sole discretion at anytime within 30
days after completion of the Offering, of receiving, in lieu of the
Original Warrant, stock purchase warrants, in form identical to the
warrants received by the purchaser(s) of unsecured subordinated debt in the
Offering and at the same exercise price per share, entitling Investor to
purchase a pro rata number of shares of Company Common Stock (equal to a
fraction of the total number of warrants issued to such purchaser(s) of
unsecured subordinated debt, the numerator of which equals $500,000 and the
denominator of which equals the total amount of subordinated debt related
to such warrants) (the "Replacement Warrant"). For purposes of
clarification, if a purchaser in the Offering purchases both secured and
unsecured debt, the warrants associated with such unsecured portion,
without giving effect to any "blended" provisions, shall be the form of
warrants which Investor may elect to receive pursuant to this Section.
The Original Warrant and/or the Replacement Warrant are referred to
herein as the "Warrant", and the shares of Company Common Stock issuable
upon exercise of the Warrant are referred to hereinafter as the "Warrant
Shares."
3. Repayment. All outstanding principal and accrued interest on the Note
shall be due and payable 90 days after the date hereof; provided, however, that
notwithstanding the foregoing, the Note shall be payable in full within three
business days after the closing of any private or public offering(s) of
unsecured subordinated debt or equity securities of the Company resulting in
cumulative aggregate proceeds to the Company of at least $4,000,000. The Note
may be prepaid at any time without penalty.
4. Subordination. The Note shall be subordinate to all senior debt of the
Company as set forth in Section 5 of the Note.
5. Restrictions on Transfer. The Note, the Warrant, and the Warrant Shares
shall be subject to certain restrictions on transfer identified in the Note and
the Warrant.
6. Representations and Warranties of the Company. The Company represents
and warrants as follows:
(a) This Agreement has been duly authorized by all necessary corporate
action on behalf of the Company, has been duly executed and delivered by an
authorized officer of the Company, and is a valid and binding agreement on
the part of the Company.
(b) All corporate action necessary to the authorization, issuance, and
delivery of the Note, the Warrant, and the Warrant Shares has been taken on
or prior to the date hereof.
(c) As of the date hereof, this Agreement, the Note, the Warrant and
the Offering Memorandum (together with all exhibits thereto and documents
delivered therewith), taken as a whole, do not contain an untrue statement
of a material fact or omit to state a material fact required in light of
the circumstances under which such statements were made to be stated in
such documents to make the statements in such documents, taken as a whole,
not misleading.
7. Investor represents and warrants to the Company as follows:
(a) This Agreement has been duly authorized by all necessary corporate
or partnership action on behalf of Investor, has been duly executed and
delivered by an authorized officer of Investor, and is a valid and binding
agreement on the part of Investor.
(b) Investor is an "accredited investor" as defined in Rule 501(a) of
Regulation D of the Securities Act, and was not formed for the purpose of
making this investment. Investor is a bona fide resident of, and received
the offer and made the decision to invest in the Note in, the State of
Minnesota. The Note and the Warrant are being purchased by Investor in
Investor's name solely for Investor's own beneficial interest and not as
nominee for, or on behalf of, or for the beneficial interest of, or with
the intention to transfer to, any other person, trust or organization.
(c) Investor has such knowledge and experience in financial and
business matters that Investor is capable of evaluating the merits and
risks of the prospective investment in the Note and Warrants and has the
net worth to undertake such risks. Investor is in a financial position to
hold the Note, the Warrant and the Warrant Shares for an indefinite period
of time and is able to bear the economic risk and withstand a complete loss
of Investor's investment therein. Investor believes that the investment in
the Note and Warrants is suitable for the Investor based upon Investor's
investment objectives and financial needs.
(d) Investor realizes that (i) the purchase of the Note and the
Warrant is a long-term investment, (ii) Investor must bear the economic
risk of investment for an indefinite period of time because the Note, the
Warrant, and the Warrant Shares have not been registered under the
Securities Act or under the securities laws of any state and, therefore,
none of such securities can be sold unless they are subsequently registered
under said laws or exemptions from such registrations are available; (iii)
Investor may not be able to liquidate Investor's investment in the event of
an emergency or pledge any of such securities as collateral for loans; and
(iv) the transferability of such securities is restricted and legends will
be placed on the Note and the Warrant and on any certificates representing
the Warrant Shares referring to the applicable restrictions on
transferability.
(e) Investor has been given access to full and complete information
regarding the Company and has utilized such access to Investor's
satisfaction for the purpose of obtaining information concerning the
Company and to obtain any additional information, to the extent reasonably
available, necessary to verify the accuracy of information provided to
Investor.
(f) Investor is not subject to the backup withholding provisions of
Section 3406(a)(i)(C) of the Internal Revenue Code of 1986, as amended
(Note: You are subject to backup withholding if (i) you fail to furnish
your Social Security number or taxpayer identification number herein; (ii)
the Internal Revenue Service notifies the Company that You furnished an
incorrect Social Security number or taxpayer identification number; (iii)
you are notified that you are subject to backup withholding; or (iv) you
fail to certify that you are not subject to backup withholding or you fail
to certify your Social Security number or taxpayer identification number).
(g) Investor does not own voting securities of any brokerage firm. No
director, officer, partner or 5% owner of Investor is also a director,
officer, partner, branch manager, registered representative, employee,
shareholder of, or similarly related to or employed by, a brokerage firm.
8. Registration Rights.
(a) Each time the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities Act
in connection with the proposed offer and sale for money of any of its
securities by it, the Company will give written notice of its determination
to Investor. Upon the written request of Investor given within 30 days
after the date of mailing of any such notice from the Company, the Company
will, except as herein provided, cause all the Warrant Shares issued and to
be issued upon exercise of the Warrants requested by Investor to be
registered, to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by Investor of the
Warrant Shares to be so registered; provided, however, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
such registration initiated by it. If any such registration shall be
underwritten in whole or in part, the Company may require that the shares
requested for inclusion by Investor pursuant to this paragraph (a) be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If in the good
faith judgment of the managing underwriter of such public offering the
inclusion of all of the shares originally covered by a request for
registration made by Investor would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the
shares of stock offered by the Company, the number of shares owned by
Investor and otherwise to be included in the underwritten public offering
may be reduced; provided, however, that any such required reduction shall
be pro rata among all persons (other than the Company) who are
participating in such offering. Those shares which are thus excluded from
such underwritten public offering shall be withheld from the market by
Investor for a period, not to exceed 90 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
(b) With respect to each inclusion of securities in a registration
statement pursuant to this Section 8, the Company shall bear the following
fees, costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company is required to bear such
fees and disbursements), all internal expenses, the premiums and other
costs of policies of insurance against liability arising out of the public
offering, and legal fees and disbursements and other expenses of complying
with state securities laws of any jurisdictions in which the securities to
be offered are to be registered or qualified. Fees and disbursements of
special counsel and accountants for the selling holders, underwriting
discounts and commissions, and transfer taxes for selling holders and any
other expenses relating to the sale of securities by the selling holders
not expressly included above shall be borne by the selling holders.
(c) The Company shall indemnify Investor, its officers and directors
and each person, if any, who controls Investor within the meaning of
Section 15 of the Securities Act against all losses, claims, damages, and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or prospectus (and as
amended or supplemented) relating to such registration, or caused by any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they are made, unless such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company expressly for use therein by Investor.
(d) Investor shall indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act against all losses, claims, damages, and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or prospectus (and as
amended or supplemented) relating to such registration, or caused by any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they are made, provided that this
paragraph (e) shall apply only to statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
expressly for use therein by the Investor.
9. Other.
(a) This Agreement and the rights and obligations of the parties
hereunder shall not be assignable, in whole or in part, by any party
without the prior written consent of the other party, and neither this
Agreement nor any provision hereof may be amended, modified, waived or
discharged without the written consent of the party against whom
enforcement of such amendment, modification, waiver, or discharge is
sought.
(b) This Agreement, including the exhibits attached hereto,
constitutes the entire agreement of the parties relative to the subject
matter hereof and supersedes any and all other agreements and
understandings, whether written or oral, relative to the matters discussed
herein.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the State of Minnesota, except for its rules relating to
conflicts of law.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(e) The Company agrees to reimburse Investor for up to $2,000 of fees
or expenses incurred by Investor in connection with this Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
HEALTH FITNESS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
Its:
BRIGHTBRIDGE FUND I, L.P.
By: Brightstone Capital Limited LLC,
General Partner
By: /s/ Illegible
Its: Partner
Address: Brightbridge Fund I, L.P
c/o Brightstone Capital Limited
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxxxxx 00000
Tax I.D. No.: 00-0000000
