LOAN MODIFICATION NO. 2
AMONG: Pacific Rehabilitation & Sports
Medicine, Inc. ("Borrower")
AND: Bank of America Oregon (the "Bank")
EFFECTIVE DATE: June 30, 1995
This Loan Modification No. 2 (the "Modification") is
entered into on the above date by the Borrower and the Bank.
1. BACKGROUND. The Borrower entered into a Business
Loan Agreement (Receivables) with the Bank dated as of
December 23, 1994. The parties modified the Business Loan
Agreement pursuant to Loan Modification No. 1, effective as of
April 19, 1995 ("Loan Modification No. 1"). The Business Loan
Agreement and Loan Modification No. 1 shall hereinafter be
referred to collectively as the "Agreement." The Borrower is
entering into this Modification to state the terms and conditions
of certain modifications to the Agreement. Capitalized terms
used in this Modification shall, unless otherwise defined in this
Modification, have the meaning given to such terms in the
Agreement.
2. MODIFICATIONS TO THE AGREEMENT.
2.1 Section 1.1 of the Agreement is deleted and in its
place is inserted the following:
1.1 "BORROWING BASE" means:
(a) The lesser of:
(i) Twelve Million Dollars ($12,000,000); or
(ii) 98% of the balance due on Acceptable
Receivables (reducing to 95% for the
month of August, 1995, 90% for the month
of September, 1995, 85% for the month of
October, 1995, and to 70% thereafter)
minus the sum of (A) the bad debt
allowance for accounts receivable
contained in the Borrower's most recent
Form 10-K Annual Report ("10-K") or
Form 10-Q Quarterly Report ("10-Q")
provided to the Bank and (B) contractual
allowances provided by the Borrower or
any Subsidiary as set forth in the
PAGE 1 - LOAN MODIFICATION NO. 2
Borrower's most recent 10-K or 10-Q
provided to the Bank; or
(iii) 98% of the amount resulting from the
following computation (reducing to 95%
for the month of August, 1995, 90% for
the month of September, 1995, 85% for
the month of October, 1995, and to 70%
thereafter):
(A) 100% of the sum of the Borrower's
net revenue for the previous three
months as established by generally
accepted accounting principles
consistently applied ("Net
Revenue");
(B) Multiplied by 130 if the Borrowing
Base is calculated on or before
June 30, 1995; multiplied by 125 if
the Borrowing Base is calculated
between July 1, 1995 and September
30, 1995; multiplied by 120 if the
Borrowing Base is calculated after
September 30, 1995;
(C) Divided by 91.
For the purposes of this Agreement, the Borrower's
Net Revenue and Acceptable Receivables (as defined below) include
the Net Revenues and accounts receivable of the Borrower's
subsidiaries, and any subsidiary of a subsidiary, including, but
not limited to, Leeward Back and Neck, Inc., and PR Acquisition
Corporation, Dade Physical Therapy Rehab, Inc., and Pacific Rehab
of Maryland, Inc. (hereinafter referred to individually and
collectively as the "Subsidiary")."
2.2 Section 9.3 of the Agreement is deleted and
in its place is inserted the following:
"9.3 FUNDED DEBT TO EBITDA RATIO. To maintain on
a consolidated basis a ratio of funded debt to EBITDA not
exceeding the amounts indicated for each period specified below:
Period Ratio
------ -----
For the quarter ending
June 30, 1995 1.75:1.0
For the quarters ending
September 30, 1995 and
December 31, 1995 2.50:1.0
PAGE 2 - LOAN MODIFICATION NO. 2
For the quarter ending
March 31, 1996 2.25:1.0
For the quarter ending
June 30, 1996 and each
quarter thereafter 2.00:1.0
"Funded Debt to EBITDA ratio" means the ratio of funded debt to
earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA"). "Funded Debt" is defined as the sum of
short term debt and long term debt. This ratio will be
calculated at the end of each fiscal quarter, using the results
of that quarter and each of the three immediately preceding
quarters. Funded Debt will be measured as the average of Funded
Debt outstanding during the period being measured."
2.3 Section 9.4 of the Agreement is amended to
provide that the Fixed Charge Coverage Ratio shall be reduced to
.80:1.0 for the quarter ending September 30, 1995. In all other
respects the Fixed Charge Coverage Ratio shall remain the same.
3. FEES.
3.1 In consideration of Bank's consent to modify
the Agreement, Borrower agrees to pay Bank a fee of Six Thousand
Dollars ($6,000) fee on or before the date of this Modification.
4. NO OTHER MODIFICATIONS.
4.1 Except as expressly modified by this
Modification, the terms of the Agreement shall remain unchanged
and in full force and effect. The Bank's agreement to modify the
Agreement pursuant to this Modification shall not obligate Bank
to make any further modifications to the Agreement, or
Modification, or any other loan document. Nothing in this
Modification shall constitute a satisfaction of any indebtedness
of Borrower to Bank. It is the intention of Bank and the
Borrower to retain as liable parties all makers and endorsers of
the Agreement and Modification or any other loan document. No
maker, endorser, or guarantor shall be released by virtue of this
Modification. The terms of this paragraph shall apply not only
to this Modification, but also to all subsequent loan
modification agreements.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Borrower represents and warrants to Bank that
the execution, delivery and performance of this Modification are
within Borrower's corporate powers, and have been duly authorized
and are not in contravention of law or the terms of Borrower's
charter, bylaws, or other incorporation papers, or of any
PAGE 3 - LOAN MODIFICATION NO. 2
undertaking of Borrower of which either Borrower is a party or by
which it is bound.
5.2 Borrower understands and agrees that in
entering into this Modification, Bank is relying upon Borrower's
representations, warranties, and agreements as set forth in the
Agreement, and other loan documents. Borrower hereby reaffirms
all representations and warranties in the Agreement, all of which
are true with respect to each such corporation as the date of
this Modification.
BORROWERS: PACIFIC REHABILITATION &
SPORTS MEDICINE, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxx
Its: President and
Chief Executive Officer
LENDER: BANK OF AMERICA OREGON
By: /s/ Xxxxxx X. XxXxxx
-------------------------------
Xxxxxx X. XxXxxx
Its: Vice President
The undersigned guarantors consent to the modifications
to the Agreement Modification, and ratify the provisions of the
Continuing Guaranty executed by each guarantor for the benefit of
Bank and confirm that all provisions of its Continuing Guaranty
are in full force and effect.
LEEWARD BACK AND NECK, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Xxxxx X. Xxxxxxxxx
Its: President
P.R. ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Xxxxx Xxxxxxxxx
Its: President
PAGE 4 - LOAN MODIFICATION NO. 2
