Exhibit 99.5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 4, 1998, by and among LIFESTYLE
FITNESS OF WOODBRIDGE, INC., a New Jersey corporation, with an address at ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Seller"), ▇▇▇▇▇▇
▇▇▇▇▇▇▇, an individual and a shareholder of Seller with an address at ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Agarwal") and ▇▇▇▇▇▇▇ HOST, an
individual and a shareholder of Seller with an address at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Host") (Agarwal and Host sometimes collectively
referred to herein as "Seller's Principals") and TSI COLONIA, LLC, a Delaware
limited liability company, with an address c/o Town Sports International, Inc,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Buyer").
In consideration of the covenants and terms and conditions contained in
this Agreement, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the indicated meanings:
a. "Acquisition Agreements" shall mean collectively, the ▇▇▇▇ of
Sale, the Assignment and Assumption Agreement, the Assignment and Assumption of
Seller's Lease, the Undertaking Agreement, the Non-Competition Agreement and the
TSI Note.
b. "Assets" shall mean all assets of Seller relating to the Business
listed or described in Schedule 1(b) and any and all other personal property
located at the Demised Premises, owned by Seller, or used by Seller in
connection with the Business, of every kind and nature whatsoever, other than
Excluded Assets.
c. "Assumed Contracts" shall mean those agreements listed on
Schedule 1(c).
d. INTENTIONALLY OMITTED.
e. "Business" shall mean the business conducted by Seller of
operating a membership health club facility at the Demised Premises.
f. "Closing" shall mean the completion of the transactions
contemplated hereby on the Closing Date at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, 11th Floor.
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g. "Closing Date" shall mean the close of business on August 4,
1998.
h. "Demised Premises" shall mean that certain premises located at
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, leased to Seller by
Landlord pursuant to the Seller's Lease, as more particularly described therein.
i. "Equipment Contracts" shall mean all of the equipment leases or
financing agreements with respect to any and all equipment used by Seller, each
of which is indicated on Schedule 1(i), each of which Seller shall pay in full
on or prior to the Closing Date.
j. INTENTIONALLY OMITTED.
k. "Landlord" shall mean Colonia Limited Partnership, having an
address at c/o Rosen Associates Management Corp., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
l. "Lease Modification and Consent" shall mean the lease
modification and consent agreement modifying Seller's Lease, entered into by and
between Buyer and Landlord, dated as of the date hereof, with respect to the
Demised Premises.
m. "Lifestyle Acquisition Agreements" shall collectively mean this
Agreement and each of the five (5) other asset purchase agreements, dated the
date hereof, used in connection with the Related Lifestyle Acquisitions.
n. "Lifestyle Clubs" shall collectively mean each of the six (6)
health club businesses owned and operated by the Lifestyle Sellers which are
being sold to Buyer and TSI's Affiliates pursuant to the Lifestyle Acquisition
Agreements.
o. "Lifestyle Sellers" shall collectively mean the following
corporations: Lifestyle Fitness of Woodbridge, Inc. (Colonia), Lifestyle Fitness
of Franklin, Inc. (Franklin Park), Lifestyle Fitness of Parsippany, Inc.
(Parsippany), Lifestyle Fitness of Plainsboro, Inc. (Plainsboro), Lifestyle
Fitness of Somerset, Inc. (Somerset) and Lifestyle Fitness of Springfield, Inc.
(Springfield), which own and operate the six (6) Lifestyle Clubs.
p. "Present Membership Agreements" shall mean the present membership
agreements listed on Schedule 5(g), between the Present Members of the Business
and Seller, which are in full force and effect with respect to each such Present
Member and Seller.
q. "Present Members" shall mean those persons or entities which are
members of the health club facility located in the Demised Premises pursuant to
the Present Membership
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Agreements.
r. "Purchased Assets" shall mean, collectively, (i) the Assumed
Contracts, including, but not limited to, Seller's Lease and the Present
Membership Agreements, and (ii) the Assets.
s. "Related Lifestyle Acquisitions" shall mean the acquisition by
affiliates of TSI ("TSI's Affiliates") on the Closing Date of the other five (5)
Lifestyle Clubs.
t. "Seller's Lease" shall mean the existing lease between Landlord
and Seller, dated November 3, 1992, as amended, with respect to the Demised
Premises.
u. "Undertaking Agreement" shall mean the undertaking to be signed
on the Closing Date among the Lifestyle Sellers, Seller's Principals, Buyer and
TSI's Affiliates, with respect to certain post-closing obligations of the
Lifestyle Sellers and Seller's Principals.
v. "West ▇▇▇▇▇▇▇▇ Lease" shall mean the lease agreement executed
between Lifestyle Fitness of West ▇▇▇▇▇▇▇▇, Inc., a New Jersey corporation
wholly-owned by Seller's Principals (the "West ▇▇▇▇▇▇▇▇ Seller") and A
Co-Tenancy comprised of Harvirch Associates and the Stop and Shop Companies,
Inc., as the landlord (the "WC Landlord"), dated July 1, 1998.
2. SALE AND PURCHASE OF PURCHASED ASSETS; ACQUISITION AGREEMENTS.
a. On the Closing Date, subject to the terms and conditions of this
Agreement, and in reliance on the representations, warranties, undertakings and
agreements of Buyer made hereunder, and in consideration of the purchase by
Buyer described below and the assumption of certain liabilities of Seller by
Buyer, Seller and Seller's Principals hereby agree to sell, transfer, convey,
assign and deliver to Buyer, and Buyer hereby agrees to purchase and acquire
from Seller, the Purchased Assets, including all of the properties and assets
used by Seller in connection with the Business, as referred to in the ▇▇▇▇ of
sale, substantially in the form of Exhibit A attached hereto (the "▇▇▇▇ of
Sale"). It is understood and agreed that only those assets specifically listed
on Schedule 2(a) attached hereto shall not be included in the Purchased Assets,
and shall be expressly excluded therefrom (the "Excluded Assets").
b. Seller and Seller's Principals hereby agree to assign to Buyer
all of Seller's right, title and interest in and under, and Buyer hereby agrees
to assume all of Seller's obligations (except as otherwise set forth herein or
in the Assignment and Assumption Agreement) arising under, the Assumed
Contracts, and Seller and Buyer each hereby agree to execute and deliver on the
Closing Date an assignment and assumption agreement, substantially in the form
of Exhibit B attached hereto (the "Assignment and Assumption Agreement").
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c. In accordance with the terms of this Agreement and specifically
Section 9(d) hereof, Seller and Seller's Principals hereby agree to assign to
Buyer all of Seller's rights, title and interest in and under, and Buyer hereby
agrees to assume all of Seller's obligations (except as otherwise set forth
herein or in the Assignment and Assumption or Seller's Lease) arising under
Seller's Lease, and Seller and Buyer each hereby agree to execute and deliver on
the Closing Date an assignment and assumption agreement with respect to Seller's
Lease, substantially in the form of Exhibit C attached hereto (the "Assignment
and Assumption of Seller's Lease").
d. Seller and Seller's Principals agree to execute and deliver to
Buyer on the Closing Date, a non-competition agreement, substantially in the
form of Exhibit D attached hereto (the "Non-Competition Agreement").
e. Buyer agrees that, on the Closing Date, Buyer shall (i) pay to
Seller the Closing Date Consideration (as defined herein), (ii) direct its
parent company, Town Sports International, Inc. ("TSI") to deliver to the
Lifestyle Sellers, a single, non-transferable promissory note in accordance with
the terms of this Agreement, such promissory note to be in the form of Exhibit E
attached hereto (the "TSI Note"), and (iii) assume and comply with all executory
obligations of Seller arising on or after the Closing Date under each of the
Assumed Contracts.
f. At the Closing Date, and from time to time after the Closing
Date, (i) at the request of Buyer and without further consideration, Seller and
Seller's Principals shall promptly execute and deliver to Buyer such
certificates and other instruments of sale, conveyance, assignment and transfer,
and take such other action, as may reasonably be requested by Buyer more
effectively to confirm any obligation assumed by Buyer, and to sell, convey,
assign and transfer to and vest in Buyer, or to put Buyer in possession of, the
Purchased Assets, consistent with the provisions of this Agreement, and (ii) at
the request of Seller and Seller's Principals and without further consideration,
Buyer shall promptly execute and deliver to Seller such certificates and other
instruments of assumption, and take such other action, as may reasonably be
requested by Seller more effectively to confirm and carry out the assumption by
Buyer of the obligations of Seller assumed by Buyer hereunder, consistent with
the provisions of this Agreement.
g. As of the Closing Date, to the extent permissible, Seller shall
assign and transfer to Buyer all of its right, title and interest in and to the
following telephone number: ▇▇▇-▇▇▇-▇▇▇▇. Buyer shall perform all actions
necessary to effectuate the transfer of such number.
3. MEMBERSHIPS; BUYER'S TRANSFER SYSTEM; ADJUSTMENTS. Notwithstanding
anything to the contrary in this Agreement or in
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the Acquisition Agreements, Buyer, Seller and Seller's Principals agree as
follows:
a. (i) With respect to revenues received by Seller from Present
Members for initiation fees and other fees from monthly dues Present Members, in
each case for Present Members who joined or renewed their Present Memberships
within 45 days prior to the Closing Date, or in the case of "Preferred
memberships" on or after June 1, 1998 (provided that such June 1, 1998 date
shall be amended in the event the Closing fails to occur as a result of Buyer's
failure to use reasonable efforts to close on or about the Closing Date,
provided, further, that Buyer shall in no event be entitled to an allocation of
more than 60 days with respect to past "Preferred memberships), and, in each
case, up to and including the Closing Date, and in full satisfaction thereof,
Seller shall pay to Buyer on the Closing Date Buyer's share of all such amounts
received ("Buyer's Initiation/Fee Amount"), which amount shall be calculated in
accordance with the allocations set forth on Schedule 3(a) hereof. Seller,
Seller's Principals and Buyer agree that in the event that any memberships have
been sold during the relevant periods indicated above by Seller other than
memberships with the specific terms indicated in Schedule 3(a), Seller, Seller's
Principals and Buyer shall each act in good faith to divide the fees received
for such memberships among Buyer and Seller in accordance with the terms and the
spirit of Schedule 3(a);
(ii) Buyer and Seller agree that there are certain post-dated
checks and post-dated credit card receipts held by Seller which will be
deposited after the date hereof ("PostDated Amounts"). Seller and Buyer shall
allocate these amounts in accordance with Schedule 3(a) on the Closing Date;
(iii) Buyer and Seller agree that there are certain Present
Members who have pre-paid their monthly membership dues for some period of time
("Pre-Paid Amounts"). On the Closing Date, Seller and Buyer shall allocate these
amounts proportionately in accordance with the percentage that such pre-payments
correspond to services to be provided by Seller (i.e. on or prior to the Closing
Date) or Buyer (i.e. after the Closing Date).
b. (i) Except as specifically provided for in Section 3(c) hereof or
Section 5(g)(xi)(B) hereof, Buyer shall be entitled to receive and retain, for
Buyer's own account, any and all monies received after the Closing Date in
connection with the operation of the Business.
(ii) Buyer shall be entitled to receive and retain any and all
electronic fund transfers and credit card payments (together, "EFT Payments")
and any other monthly payments made by Present Members, received by Seller or
Buyer after the Closing Date. All EFT Payments and other monthly payments, minus
returns, received by Seller prior to the Closing Date ("Pre-
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Closing Date EFT Payments") shall be pro-rated between Seller and Buyer in
accordance with the percentage that the corresponding services are to be
provided by Seller (i.e. on or prior to the Closing Date) or Buyer (i.e. after
the Closing Date). (For example, if the Closing Date occurred on June 15, 1998
and Seller had collected $100,000.00 of EFT Payments (excluding returns) on June
1, 1998 relating to services to be provided in June, then Buyer would be paid
$50,000.00 of such EFT Payments by Seller and Seller would have retained
$50,000.00 of such amount.) On the Closing Date, Seller shall pay to Buyer,
Buyer's pro-rated share of the Pre-Closing Date EFT Payments.
(iii) Seller shall make its electronic fund transfer system
available to Buyer for a period of three (3) months after the Closing Date. All
EFT Payments collected through Seller's electronic fund transfer system shall
immediately be paid to Buyer, and all such amounts shall at all times be the
sole and exclusive property of Buyer.
(iv) Buyer, Seller and Seller's Principals acknowledge that
Buyer will be unable to effectively perform the customary membership billing of
the Business for some period of time after the Closing without the direct
assistance of Seller's Principals. Therefore, Buyer agrees to pay to Seller's
Principals the total amount of $15,000.00 per month (the first period commencing
on September 1, 1998 and ending on September 30, 1998) for the below listed
services, and Seller's Principals agree to perform for Buyer, each of the
following services, for a period not to exceed three (3) months after the
Closing Date: all billing of Lifestyle members as of the Closing Date,
including, but not limited to billing for EFT Payments, manual billing
(provided, however, that Seller and Seller's Principals agree that the first
manual billing to occur after the Closing Date (which the parties believe will
be on or about August 15, 1998) will be provided free of charge to Buyer), and
any and all other membership billing and collection reasonable and customary to
the Business, all as more fully set forth on Schedule 3(b)(iv) hereto.
(v) In the case of (iii) and (iv) of this Subsection 3(b),
Buyer shall use its best efforts to convert and transfer such billing procedure
and information to Buyer's billing system and to become self-sufficient with
respect to membership billing for three (3) months after the Closing Date.
(vi) Immediately subsequent to the Closing Date, Seller and
Seller's Principals shall begin to assist Buyer with the transfer of all EFT
Payment data from Seller's EFT system to Buyer's EFT system and shall continue
to assist Buyer until such transfer is completed, provided, that the parties
agree that such transfer shall be completed within three (3) months after the
Closing Date. Seller and Seller's Principals shall direct its EFT service
provider, Check Free, to assist Buyer to the fullest extent possible.
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(vii) Seller and Seller's Principals acknowledge that their
agreement to assist Buyer as set forth in (iii), (iv) and (vi) of this
Subsection 3(b) is of material importance to Buyer and being relied upon by
Buyer herein.
(viii) Except as provided in this Agreement, Seller and
Seller's Principals shall have no right to collect any EFT Payments from Present
Members after the Closing Date. In the event that Buyer, after due
investigation, reasonably believes that Seller or Seller's Principals has
debited any Present Member's account through an EFT Payment, Seller shall,
within three (3) days of written notice from Buyer, provide Buyer with access to
the complete and accurate records of its system which services and manages EFT
Payments, in order for Buyer to determine if such amounts have, in fact, been
debited by Seller or Seller's Principals. In the event Seller fails to pay any
such improperly debited amounts to Buyer within five (5) days of notice from
Buyer of the improperly debited amounts, Buyer and TSI shall each have a right
of offset, in accordance with Section 10(e) hereof, against any payments
required to be made to Seller pursuant to the TSI Note.
(ix) INTENTIONALLY OMITTED.
c. (i) Seller shall have a right to (A) all accounts receivable
collected by Buyer within sixty (60) days after the Closing Date from delinquent
members relating to periods prior to June 4, 1998 (for preferred memberships)
otherwise June 21, 1998, and (B) Seller's pro-rated share, determined in
accordance with Section 3(a), Section 3(b)(ii) and Schedule 3(a) hereof, for
accounts receivable collected by Buyer during such sixty (60) day period from
delinquent members relating to the period from June 4, 1998 (for preferred
memberships) otherwise June 21, 1998 to the Closing Date (collectively the
"Seller Receivables"). On the Closing Date, Seller shall prepare and Buyer and
Seller shall agree upon a list of all of the affected delinquent members and the
amounts outstanding with respect to each such delinquent member (the "Seller
Receivable List"; and each individual indicated on the Seller Receivable List
hereinafter a "Delinquent Member").
(ii) After the Closing Date, Buyer shall accept payment of all
accounts receivable in the normal course of conducting the Business. Upon
payment of any amounts from Delinquent Members, Buyer shall credit such payment
first to the amounts owed by such Delinquent Member indicated on the Seller
Receivable List, and then for Buyer's account.
(iii) Buyer shall pay to Seller all amounts received
constituting Seller Receivables within thirty (30) days of receipt.
(iv) For the first ninety (90) days following the Closing
Date, upon reasonable notice and during
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regular business hours, Seller shall have the right to review (i) the data used
to revise the Seller Receivable List and any other information maintained by
Buyer which may indicate amounts owed and amounts paid by Delinquent Members or
members with post-dated payments, and (ii) the folders containing the Present
Membership Agreements.
d. (i) Buyer's auditors, Coopers & ▇▇▇▇▇▇▇, with the cooperation of
Seller's accountant, have performed a pre- closing audit of the Lifestyle Clubs
for the years 1996 and 1997 (the "Audit"), and Buyer and Seller agree that the
cost of such audit is to be divided equally between (i) the Lifestyle Sellers
and (ii) Buyer and TSI's Affiliates, provided the Lifestyle Sellers' total cost
for such audit shall not exceed $10,000.00. Due to the fact that the audit will
exceed $20,000 in total, the parties agree that on the Closing Date, Seller
shall pay to Buyer $10,000.00 for the cost of such audit. Seller and Seller's
Principals acknowledge that although Seller is paying a portion of such audit,
the audit report shall remain the property of Buyer and Buyer, Seller and
Seller's Principals shall keep such audit report and its contents confidential
except as required by law, or, specifically, as required in order to comply with
any and all regulations or requirements of federal and state securities laws.
Notwithstanding the above, Buyer shall provide Seller with a copy of such audit
report, as required under, and in compliance with, Section 11(k) hereof.
(ii) Seller, Seller's Principals and Seller's accountant (with
respect to Seller's accountant, at Buyer's expense) will, for a period of two
(2) years after the Closing Date, provide Buyer with access to all records and
files of Seller and the Business reasonably necessary for Buyer's orderly
operation and continuation of the Business and shall cooperate with any
independent audit of financial statements or information relating to any period
prior to the Closing Date; provided, however, that nothing in this provision or
this Agreement shall be construed to obligate either of Seller's Principals to
provide personal financial information concerning Seller's Principals or to
provide any information concerning any other businesses or enterprises in which
they participate.
e. The parties shall make all adjustments reasonably possible on the
Closing Date, including, but not limited to, the following: (i) electricity,
gas, telephone and other utilities, water charges and sewer rents, and (ii) all
other obligations with respect to the expenses of the Business which are assumed
by Buyer pursuant to this Agreement, including, but not limited to, cable
television, credit card fees, collection fees, yellow pages fees, advertising
fees, and the like. To the extent all of these adjustments cannot be completed
on the Closing Date, the parties agree to make adjustment between them for such
items as soon as reasonably possible after the Closing Date, but not later than
forty-five (45) days after the Closing Date, such that Seller will be
responsible for items of expense allocable to
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periods up to and including the Closing Date and Buyer will be responsible for
items of expense allocable to periods commencing the day after the Closing Date,
except as otherwise provided in this Agreement.
f. (i) In the event that any Present Members who joined or renewed
their Present Membership Agreements on or prior to the Closing Date shall cancel
their Present Membership Agreements (A) pursuant to any so-called "three day (or
longer) cancellation clauses" within three (3) business days (or such other
period as required by law) after the Closing Date, or (B) within sixty (60) days
after the Closing Date, due to such Present Member moving farther than
twenty-five (25) miles from the Demised Premises or due to medical reasons (each
a "Permitted Cancellation", Seller shall make all required reimbursements of
such membership fees directly to the Present Members (each a "Cancellation
Cost"), as required by applicable law; provided, however, that for Present
Members who joined or renewed their Present Membership Agreements within
forty-five (45) days prior to the Closing Date or in the case of "Preferred
memberships" on or prior to June 4, 1998, Buyer and Seller shall reimburse such
Present Member in accordance with their allocative share as set forth in Section
3(a), Schedule 3(a) and Section 3(b) hereof.
(ii) Upon receipt of any such notice to cancel from a Present
Member, Buyer shall demand proof of such relocation or medical reason, as
required under such Present Member's membership agreement, and Buyer shall
provide the same to Seller and Seller shall have the right to review Buyer's
membership files and to challenge such relocation or medical termination in
accordance with such Present Member's membership agreement.
(iii) In the event that Seller fails to make such
reimbursements and fails to diligently challenge such relocation or termination
in good faith, Buyer and TSI shall, in accordance with Section 10(e) hereof
(including the notice provisions of Section 10(e)), have the right to make such
legally required payments and offset such amount from the TSI Note in accordance
with this Agreement and the TSI Note.
g. Seller shall, for at least two (2) years after the Closing Date,
maintain its corporate existence and remain a corporation in good standing in
the State of New Jersey.
h. The terms of this Agreement, including, but not limited to the
Purchase Price and the results and contents of the audit report performed by
Coopers & ▇▇▇▇▇▇▇, shall be held strictly confidential by the parties and the
parties shall instruct their attorneys, accountants, agents and affiliates to
also keep this Agreement confidential, in each case except as required by law or
as otherwise required in the reasonable judgment of any of the parties' counsel.
The parties shall not include any reference to Purchase Price in any press
releases
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concerning the transactions contemplated in this Agreement and the Acquisition
Agreements.
i. The provisions of this Article 3 shall survive the Closing Date
for a period of two (2) years, except for the provisions of subsection 3(h),
which shall survive the Closing Date for a period of five (5) years.
4. PURCHASE PRICE.
a. Payment of Purchase Price. The purchase price to be paid to
Seller by Buyer shall be ONE MILLION FIVE HUNDRED TWENTY-FOUR THOUSAND DOLLARS
($1,524,000.00) (the "Purchase Price"). The Purchase Price shall be paid by
Buyer to Seller, as follows:
(i) On the Closing Date, ONE MILLION FOUR HUNDRED SEVENTY-NINE
THOUSAND SIX HUNDRED TWELVE DOLLARS ($1,479,612.00) (which amount shall be
reduced, dollar-for-dollar, by any amount of Seller's debt which Buyer agrees to
assume and Seller agrees to assign, if any, as of the Closing Date), in
immediately available funds, by certified check to Seller (the "Closing Date
Consideration"); and
(ii) On the Closing Date, Buyer shall direct TSI to execute
and deliver to Seller the TSI Note, issued by TSI in connection with this
transaction and the Related Lifestyle Acquisitions, in the total amount of THREE
HUNDRED THOUSAND DOLLARS ($300,000.00), payable on the first anniversary of the
Closing Date, of which, the total amount of FORTY-FOUR THOUSAND THREE HUNDRED
EIGHTY-EIGHT DOLLARS ($44,388.00) shall be payable to Seller, and the remaining
amount of the TSI Note shall be paid among the other five (5) Lifestyle Sellers
as indicated in the TSI Note; provided, however, that the entire amount of the
TSI Note ($300,000.00) may be offset in accordance with the terms of this
Agreement, and in accordance with the terms of the other Lifestyle Acquisition
Agreements, due to the breach of any one or more of the Lifestyle Sellers.
b. Allocation of Purchase Price. Buyer, Seller and Seller's
Principals agree that the Purchase Price shall be allocated as follows:
Machinery & Equipment $50,000.00
Furniture $10,000.00
Membership lists $143,000.00
Leasehold improvements $200,000.00
Goodwill $1,121,000.00
Total: $1,524,000.00
-------------
Buyer, Seller and Seller's Principals further agree that they shall conform to
and respect such allocations for all tax and accounting purposes, and that they
shall file such allocations on,
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and in accordance with, IRS Form 8594.
5. REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PRINCIPALS.
Seller and Seller's Principals, jointly and severally represent and warrant to
Buyer that as of the date hereof and as of the Closing Date:
a. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. Seller has all
corporate power and authority to conduct the Business as now being conducted and
to own its properties.
b. The execution, delivery and performance by Seller of this
Agreement and the Acquisition Agreements to which it is a party, and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action of Seller. This Agreement and each of the Acquisition
Agreements to which Seller and Seller's Principals is a party will, as of the
Closing Date, be duly and validly executed and delivered by Seller and Seller's
Principals, as applicable, and Seller and each of Seller's Principals has the
power to do the same, and to perform this Agreement and the Acquisition
Agreements to which Seller or Seller's Principals is a party, and to consummate
the transactions contemplated hereby and thereby. This Agreement and each of the
Acquisition Agreements to which Seller and Seller's Principals is a party
constitutes a legal, valid, binding and enforceable obligation of Seller or each
of Seller's Principals, as applicable.
c. This Agreement, the Acquisition Agreements and other instruments
of conveyance and transfer to be executed by Seller and/or Seller's Principals
and delivered to Buyer on the Closing Date will be valid in accordance with
their terms and effective to assign, transfer and convey to Buyer at the Closing
Date all of the Purchased Assets.
d. Neither the execution or delivery of this Agreement or the
Acquisition Agreements by Seller or Seller's Principals nor the consummation of
the transactions contemplated hereby or thereby by Seller or Seller's Principals
will (with or without notice or the passage of time, or both) result in (i) a
conflict with the certificate of incorporation or by-laws of Seller, (ii) the
creation of any lien, charge, pledge, security interest or encumbrance of any
nature whatsoever on any of the Purchased Assets, or (iii) a breach of, or
liability under, any of the terms, or constitute a default pursuant to, any
covenant or agreement to which Seller or any of Seller's Principals is a party,
including without limitation, the Assumed Contracts, or by which Seller, any of
Seller's Principals, the Demised Premises or any of the Purchased Assets is
bound, or any judgement or order or any law, rule, regulation or ordinance, to
which the Seller, any of Seller's Principals, the Demised Premises or any of the
Purchased Assets is subject.
11
e. On the Closing Date, Seller shall have good title to, own and
lawfully possess all of the Purchased Assets, including, but not limited to the
equipment used by Seller, free and clear of all mortgages, liens, pledges,
security interests and encumbrances of any nature whatsoever other than those
which may exist pursuant to the Assumed Contracts. Neither Seller nor any of
Seller's Principals has entered into any contract or lease with respect to any
equipment used by, or in the past used by, the Business, to which Seller or
Seller's Principals has any present or future financial or other obligations.
f. Except as set forth on Schedule 5(f), there is (i) no outstanding
consent, order, judgment, injunction, award or decree of any court, government
or regulatory body or arbitration tribunal against or involving Seller, Seller's
Principals, the Business, the Purchased Assets or the Demised Premises, (ii) no
action, suit, dispute or governmental, administrative, arbitration or regulatory
proceeding pending or involving Seller, Seller's Principals, the Business, the
Purchased Assets or the Demised Premises, or, to the best of Seller's and
Seller's Principals' knowledge, threatened against Seller, Seller's Principals,
the Business, the Purchased Assets or the Demised Premises and (iii) no
investigation pending or, to the best of Seller's or Seller's Principals'
knowledge, threatened against or relating to Seller, Seller's Principals, the
Business, the Purchased Assets or the Demised Premises (collectively,
"Proceedings"). None of the Proceedings listed in Schedule 5(f), if adversely
determined against Seller, Seller's Principals, the Demised Premises, any of the
Purchased Assets or the Business, would have a material adverse effect on the
Purchased Assets, the Demised Premises, the Business or on the ability of Seller
or Seller's Principals to consummate the transactions contemplated hereby.
g. The list of the Present Membership Agreements set forth on
Schedule 5(g) is a complete and accurate list of all present memberships as of
July 15, 1998, and, unless otherwise indicated in Schedule 5(g), each Present
Membership Agreement is, and on the Closing Date shall be, in full force and
effect in accordance with its terms. The net monthly total payment of dues, net
of returns, in January 1998 totalled $51,094.87, in February 1998 totalled
$50,692.82, in March 1998 totalled $50,954.62, in April 1998 totalled
$51,237.87, in May 1998 totalled $52,204.50, and in June 1998 totalled
$51,508.65. Schedule 5(g) accurately lists the expiration date of each Present
Membership Agreement, and all other information therein is true, complete and
correct;
(i) Except as listed in Schedule 5(g)(i) and except as set
forth in Section 5(g)(xii) hereof, as of the date hereof and the Closing Date,
there are no renewal rights with respect to the Present Membership Agreements
which allow a Present Member to renew or otherwise continue his or her
membership at an advantageous or preferred rate or that limit the amount that
such membership may be increased upon renewal (a "Renewal Provision");
12
(ii) Except as listed in Schedule 5(g)(ii), and except for (A)
the right of all new members to receive a fifteen (15) minute nutrition
counselling session and a private training session upon joining, and (B) the
right of all members to one free private training session per month, which
Seller and Seller's Principals represent and warrant will not cost Buyer any
additional amounts because Seller has not in the past paid personal trainers any
additional amounts (other than normal salary or hourly pay) for the provision of
such free private training sessions; as of the date hereof and the Closing Date,
there are no provisions in the Present Membership Agreements which entitle any
Present Member to free or discounted personal services ("Personal Services"),
including, without limitation, private training, APEX sessions, baby-sitting,
massage therapy, nutrition counseling, or karate classes (each a "Personal
Services Discount");
(iii) Except as listed in Schedule 5(g)(iii), as of the date
hereof and the Closing Date, there are no Present Membership Agreements subject
to special corporate rates, family rates, senior rates and/or group rates;
(iv) As of the date hereof and the Closing Date, the total
aggregate amount received by the Lifestyle Sellers for outstanding coupons or
certificates for Personal Services issued by any of the Lifestyle Sellers at any
of the Lifestyle Clubs, including, but not limited to, personal training,
spinning classes and tanning sessions, which have been sold or otherwise
provided to any individual (exclusive of any such Personal Services provided for
in the Present Membership Agreements) does not exceed Ten Thousand Dollars
($10,000.00) in the aggregate for all of the Lifestyle Clubs;
(v) Except as listed in Schedule 5(g)(v), as of the date
hereof and the Closing Date, there are no Present Membership Agreements which
entitle Present Members to a free or complimentary membership;
(vi) Schedule 5(g)(vi) sets forth copies of Seller's standard
membership agreement(s), which is/are, to the best of Seller's and Seller's
Principals' knowledge, the only forms of membership agreement used by Seller at
any time in connection with past or present members of the Business;
(vii) As of July 15, 1998, Seller has a total of 3,511 active
Present Members;
(viii) As of the date hereof and the Closing Date, Seller has
made available to Buyer all true, correct and complete originals in Seller's
possession, and any and all related documents, of all Present Membership
Agreements. To the best of Seller's and Seller's Principals' knowledge, except
as provided for in this Agreement, there are no oral modifications with respect
to any of the Present Membership Agreements or oral
13
agreements between Seller or any of Seller's Principals and any third parties
which would entitle any such third party to any right customarily held by a
Present Member of the Business;
(ix) To the best of Seller's knowledge, Seller has fully paid
and satisfied all refund obligations with respect to any and all present or past
members as required by contract or by applicable law;
(x) Except as set forth in Section 3(f) hereof, Buyer shall
have no liability for any obligations of Seller due to any Present Member or
past member of Seller as a result of the cancellation of any membership prior to
the Closing Date;
(xi) (A) Buyer's Initiation/Fee Amount, as calculated in
accordance with Section 3(a) and Schedule 3(a) hereof, is true and correct, and
as of the Closing Date, Seller shall provide to Buyer Schedule 5(g)(xi)(A) which
shall properly reflect all of the initiation and other fee amounts received by
Seller on or after June 21, 1998 (except for so-called "preferred" memberships
which shall be calculated from June 4, 1998) up to and including July 15, 1998,
and Seller agrees that on the Closing Date it shall agree in writing (in the
Undertaking Agreement) to allocate, within fifteen (15) days after the Closing
Date, all of the initiation and other fee amounts received by Seller on or after
July 16, 1998 up to and including the Closing Date in accordance with Section
3(a) hereof;
(B) The Post-Dated Amount, as calculated in accordance
with Schedule 3(a) hereof, is true and correct, and as of the Closing Date,
Seller shall provide to Buyer Schedule 5(g)(xi)(B) which shall properly reflect
all such post-dated amounts held by Seller, and Seller, Seller's Principals and
Buyer each agree that on the Closing Date they shall agree in writing (in the
Undertaking Agreement) to allocate, within fifteen (15) days after the Closing
Date, all of the post-dated amounts received by Seller on or after July 16, 1998
up to and including the Closing Date, if any, or received by Buyer after the
Closing Date, if any, in accordance with Section 3(a) hereof; and
(C) The Pre-Paid Amount is true and correct, and as of
the Closing Date, Seller shall provide to Buyer Schedule 5(g)(xi)(C) which shall
properly reflect all such pre-paid amounts payable to Buyer, and Seller agrees
that on the Closing Date it shall agree in writing (in the Undertaking
Agreement) to allocate, within fifteen (15) days after the Closing Date, any
pre-paid amounts not allocated on the Closing Date, if any;
(xii) No more than thirty-seven percent (37%) of all Present
Membership Agreements contain provisions that guarantee any Present Member a
certain rate per month for his or her lifetime. All other Present Memberships
allow for increases, in the sole discretion of the owner of the Business, of
monthly and annual fees charged to the Present Members; provided, however,
14
that there are approximately 100 Present Memberships that allow for an increase
of no more than ten percent (10%) per year;
(xiii) Since June 15, 1998, Seller has used its best efforts
not to sell any new memberships, or renew any existing memberships, which
contain a limitation on the amount that dues may be increased from time to time,
including any limitations connected to increases in the consumer price index;
except that Seller has continued to sell "Preferred memberships" which do
contain certain increase limitations;
(xiv) Except as set forth in Section 5(g)(v), since June 1,
1998, Seller has not given any free months of use of the Business to any Present
Member or third party, except for (A) free months as a bonus for introducing new
Present Members to the Lifestyle Clubs, (B) in connection with "lead box"
promotions, as set forth on Schedule 5(g)(v) hereof, and (C) in connection with
existing Val-Pak promotions, which do not extend for more than two weeks; and
(xv) INTENTIONALLY OMITTED.
h. The Assumed Contracts, as set forth on Schedule 1(c), form a
complete and accurate list of all material contracts to which Seller is a party
and which have not been terminated on or prior to the Closing Date. Seller and
Seller's Principals represent that there are no other material contracts which
are binding on Buyer after the Closing Date. Seller has previously delivered to
Buyer true and complete copies of all contracts to which it is a party,
including, but not limited to, each of the Assumed Contracts, which remain
complete, and have not been amended or modified, as of the Closing Date. As of
the Closing Date, all payments under each of the Assumed Contracts are current
and each of the Assumed Contracts is otherwise in full force and effect. Each of
the Assumed Contracts is valid, binding and enforceable in accordance with its
terms. As of the Closing Date, there exists no default under any of the Assumed
Contracts on the part of Seller. Buyer is not, by entering into this Agreement
or otherwise, assuming any obligations of Seller or Seller's Principals under
the Excluded Assets or any contracts, agreements, arrangements or
understandings, other than as expressly stated in this Agreement, the
Acquisition Agreements or the Assumed Contracts.
i. (i) Seller has a valid and continuing leasehold interest in the
Demised Premises, free and clear of all mortgages, liens, attachments, pledges,
encumbrances or security interests. Seller's Lease is in good standing, and is
valid and in full force and effect in accordance with its terms. There are no
defaults, and there have never been any defaults, under Seller's Lease
attributable to Seller or Seller's Principals, and no event has occurred, that
(with or without the giving of notice or the lapse of time or both) would
constitute an event of default thereunder. Neither Seller nor Seller's
Principals has received a
15
written notice of default or notice of cancellation under Seller's Lease which
remains uncured.
(ii) The Demised Premises, and all building systems,
utilities, fixtures, equipment, including the health club exercise equipment,
and improvements therein are in good operating condition and repair, except for
ordinary, routine maintenance and Seller has made all required maintenance and
repairs thereof, and there are no deferred maintenance obligations. Seller has
performed all routine maintenance on the equipment used in connection with the
Business.
j. The Business is being operated in compliance with, and neither
Seller nor the Business is in default or violation of, any applicable federal,
state or local laws. Seller is in compliance with all other laws, statutes,
rules, regulations, orders and licensing requirements of, and has secured all
other necessary permits, authorizations, certificates and licenses issued by,
federal, state and local agencies and authorities, applicable to the Business.
Seller has received no notice of any violation of any law, rule, regulation or
ordinance, including laws concerning licensing or permitting with respect to the
Business, which violations have not been rectified, and no amounts are due with
respect to any such violation. There is a valid certificate of occupancy in
effect for the Demised Premises permitting the lawful operation of the Business
presently being conducted therein.
k. Neither Seller nor Seller's Principals have received any notice
of, and have no knowledge of, any violation of any environmental law or
regulation with respect to Seller, the Purchased Assets, the Demised Premises or
the Business. There are no past or present actions or conditions, including
without limitation, the release of any hazardous substance or waste regulated
under any environmental law that could form the basis of any claim under any
environmental law or regulation against Seller, the Purchased Assets, the
Demised Premises or the Business. There are no asbestos or asbestos-containing
materials located within the Demised Premises in violation of applicable law.
l. (i) Seller (A) is not a party to any collective bargaining
agreement, employment agreement or consulting agreement covering any employee of
Seller; and (B) except for an announcement that it planned to create a 401(k)
plan for some of its employees, has not announced or otherwise made a commitment
to create any bonus, option, deferred compensation, pension, profit-sharing or
retirement plan or arrangement, severance arrangement or other fringe benefit
plan covering any employee of Seller.
(ii) Seller does not maintain and has not at any time
maintained a pension plan (as defined in section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended
16
("ERISA"). Seller maintains plans that provide medical, dental, life insurance
and/or accidental death and dismemberment benefits (the "Plans") to each of the
employees and under each of the terms indicated in Schedule 5(l)(ii) hereof.
Except as described in the preceding sentence, Seller does not maintain and has
not at any time maintained any plan for the purpose of providing to its
employees or former employees or their beneficiaries, through the purchase of
insurance or otherwise, medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability, death, or unemployment,
or vacation benefits, apprenticeship, or other training programs, or day care
centers, scholarship funds, or prepaid legal services, or holiday, severance or
similar benefits (an "employee welfare benefit plan"). Seller and its employees
have complied in all respects with the requirements of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"), including, but not limited to,
the notice and continuation coverage provisions of the Consolidated Omnibus
Budget Reconciliation Act if 1985, as amended, and the reporting and disclosure
requirements of ERISA. The Plans comply in all material respects with the
applicable provisions of ERISA and the Code, and Seller does not maintain any
employee welfare benefit plan that, as of the Closing Date, has any unfunded
liabilities.
(iii) As of the Closing Date, Seller shall have terminated or
shall immediately thereafter terminate (A) the employment of all of its
employees and (B) all consulting arrangements or agreements with consultants to
the Business, immediately prior to the transactions contemplated hereby.
(iv) The execution and delivery of this Agreement by Seller
and Seller's Principals and the consummation of the transactions contemplated
hereunder will not result in any obligation or liability (with respect to
accrued benefits or otherwise) of Buyer to any employee or former employee of
Seller.
(v) Prior to the Closing Date or as soon thereafter as
practicable, Seller shall have paid all salaries, benefits, penalties,
employment taxes, severance pay, bonuses, unemployment insurance, and any and
all other sums owed to, or owed with respect to, its employees and consultants,
and Buyer shall have no obligation to pay any of the above items.
(vi) Schedule 5(l)(vi) sets forth the list of all of Seller's
employees (including their titles) and consultants (each of whom shall be
terminated as of the Closing Date), and the salaries, bonuses and all applicable
withholding taxes with respect to each such person.
m. Neither Seller nor Seller's Principals have received any notice
of, and have no knowledge of, any violation of any applicable law (including but
not limited to ERISA), rule or regulation relating to the employment of labor in
connection with the Business and its operations, including without limitation
any applicable law, rule or regulation relating to wages, hours,
17
unfair labor practices, discrimination, payment of social security and similar
taxes, and neither Seller nor Seller's Principals is liable for any penalties
for failure to comply with any of the foregoing; and no claims have been made
against Seller or Seller's Principals with regard to any of the foregoing.
n. All Federal, state and local taxes (including, without
limitation, all sales tax due on Present Membership Agreements) or assessments
due and payable with respect of Seller for all periods, including interest and
penalties, have been paid, and there is no tax levy against Seller, the
Business, or any of the Purchased Assets. No unsettled claim for any tax or
assessment or levy for which Seller may become liable has been asserted. Seller
has not failed to file any tax returns, tax reports or other related tax
information required by law to be filed. No federal, state or local government
entity is performing, or, to the best of Seller's and Seller's Principals'
knowledge has threatened to perform, an audit of Seller for any year in which
Seller has occupied the Demised Premises. Seller has paid all withholding taxes
required to be paid in connection with the payment of any and all consultants,
including, but not limited to aerobics instructors and personal trainers.
o. (i) As of the date hereof and the Closing Date, Seller is not,
and shall not be, Insolvent.
(ii) The transactions contemplated hereby have not been
planned, and are not intended by Seller or Seller's Principals, to hinder, delay
or defraud any creditor, and will not otherwise constitute a fraudulent transfer
or conveyance under any applicable law, including section 548 of Title 11 of the
United States Code.
(iii) For purposes of this Agreement, the term "Insolvent"
shall mean, with respect to Seller, that the Purchase Price paid pursuant to
Section 4 of this Agreement is, on the date of determination, less than the
total amount of liabilities (including contingent and unliquidated liabilities)
of Seller as of such date (not including the liabilities of Seller to be assumed
by Buyer hereunder) or that, as of such date Seller is unable to pay all
liabilities of Seller as such liabilities mature or has unreasonably small
capital for conducting the business proposed to be conducted by Seller; in
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
p. Seller has heretofore furnished Buyer with complete and correct
copies of the following financial information: (i) Seller's 1996 balance sheet
and operating statements for the period from January 1, 1996 to December 31,
1996, which indicate that in 1996 Seller had gross revenues of
18
$1,311,926.00, (ii) Seller's 1997 balance sheet and operating statements for the
period from January 1, 1997 to December 31, 1997, which indicate that in 1997
Seller had gross revenues of $1,267,545.00, and (iii) Seller's balance sheet and
operating statement for the period from January 1, 1998 to June 30, 1998, which
indicate that in such six (6) month period Seller had gross revenues of
$668,268.00.
q. To the best of Seller's knowledge, Seller has paid-in-full all
contractors, sub-contractors, materialmen, suppliers, expediters, attorneys,
architects and other service providers (collectively, "Contractors"), for any
and all work conducted, or contracted for, prior to the Closing Date with
respect to Seller, the Business, the Demised Premises or the Purchased Assets,
and no mechanic's or materialmen's liens have been filed against Seller, the
Business, the Demised Premises or the Purchased Assets relating to Seller, the
Business, the Demised Premises or the Purchased Assets. As of the Closing Date,
no Contractor has the legal right to file, a mechanic's or materialmen's lien
against Seller, the Business, the Demised Premises or the Purchased Assets.
Seller shall deliver to Buyer copies of all existing "as-built" plans, if any,
for the Demised Premises on the Closing Date or as soon as reasonably
practicable thereafter.
r. (i) Seller has no subsidiaries and does not own any interest in
any other trade or business, or other health club facility, whether incorporated
or unincorporated.
(ii) Except for the use of the name "Lifestyle Fitness
Center," Seller has not conducted business under any other name and has not
permitted the filing of any liens against Seller, the Business, or any of the
Purchased Assets in any other name.
s. Except as set forth on the Schedules hereto, since June 30, 1998,
Seller (i) has conducted the Business in the ordinary course, and (ii) has not
incurred any debt (except in the ordinary course of business).
t. Seller possesses all of the right, title and interest to the name
"Lifestyle Fitness" in the State of New Jersey, has a valid servicemark in the
State of New Jersey, and has all of the power and authority necessary to validly
transfer the rights to such name in New Jersey to Buyer in accordance with the
terms of this Agreement. As of the Closing Date, neither Seller, Seller's
Principals nor any related company has licensed or otherwise granted the right
to use the "Lifestyle Fitness" name to any third party.
u. Except as listed on Schedule 5(u) hereof, to the best of Seller's
and Seller's Principals' knowledge, there are no new health club facilities
under construction or scheduled to be opened within ten (10) miles of the
Demised Premises.
19
v. Except as listed on Schedule 5(v) hereof, Seller has entered into
no licenses, subleases, or other agreements which grant any third party the
right to use all or any portion of the Demised Premises (the "Space Licenses").
None of the Space Licenses listed in Schedule 5(v) have been amended, modified,
extended or otherwise altered, except as indicated in Schedule 5(v). Schedule
5(v) lists the amount of rent paid to Seller by each licensee for the month of
July 1998 and the total amount of security deposit deposited by each licensee
and presently held by Seller.
▇. ▇▇▇▇▇▇▇ and Host collectively own one hundred percent (100%) of
the issued and outstanding shares of Seller, and no other person or entity has
any voting interest in Seller.
x. (i) As of the Closing Date, all amounts owed to The Boo of
Woodbridge, Inc., a New Jersey corporation owned and controlled by ▇▇▇▇ ▇▇▇▇▇, a
consultant of the Business (collectively, the "Consultant") have been paid in
full, and, except for an additional amount that Seller shall owe to Consultant
upon receipt of the payment of the TSI Note, and no present, past or future
obligations remain outstanding to Consultant by Seller in connection with the
Consulting Agreement, dated February 1, 1997, between Seller and Consultant (the
"Consulting Agreement") or otherwise.
(ii) As of the Closing Date, all amounts owed to The Boo
Leasing Company, Inc., a New Jersey corporation owned and controlled by ▇▇▇▇
▇▇▇▇▇ (collectively, the "Primary Equipment Provider") for the financing of any
and all equipment financed by the Primary Equipment Provider for the benefit of
the Seller, at any time, have been paid in full, and no present, past or future
obligations remain outstanding to the Primary Equipment Provider with respect to
any and all such equipment used by Seller, and neither the Primary Equipment
Provider nor any third party has any right, claim or interest to any of the
equipment at any time used by Seller.
y. No representation, warranty or other statement of Seller or
Seller's Principals made under this Agreement, the Acquisition Agreements or
contained in any certificate, list or other document furnished to Buyer or its
agents or made available for inspection by Buyer or its agents, contains any
untrue statement of a material fact, or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
z. The representations and warranties contained in this Article 5
shall survive until the second (2nd) anniversary of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller and Seller's Principals that, as of the date hereof and as of the
Closing Date:
20
a. Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer has
the full power and authority to own its properties and to carry on its business
as presently conducted.
b. The execution, delivery and performance of this Agreement, the
Acquisition Agreements and the transactions contemplated by Buyer hereby have
been duly and validly authorized by all corporate action. This Agreement has
been, and the Acquisition Agreements to which it is a party will as of the
Closing Date be, duly and validly executed and delivered by Buyer, which has the
power to do the same, to perform this Agreement and each of the Acquisition
Agreements to which it is a party, and to consummate the transactions
contemplated hereby and thereby. This Agreement, and each of the Acquisition
Agreements to which it is a party, constitutes a legal, valid, binding and
enforceable obligation of Buyer.
c. Neither the execution or delivery of this Agreement or the
Acquisition Agreements by Buyer nor the consummation of the transactions
contemplated hereby by Buyer will (with or without notice or the passage of
time, or both) result in (i) a conflict with the certificate of formation or
operating agreement of Buyer, or (ii) a breach of, or liability under, any of
the terms, or constitute a default pursuant to, any covenant or agreement to
which Buyer is a party or by which Buyer is bound, or any judgement or any law,
rule, regulation or ordinance to which Buyer is subject.
d. Buyer represents and warrants that the cost of the Audit will
exceed $20,000 in total and that Buyer shall provide Seller with a copy of the
audit report in accordance with Section 11(k) hereof.
e. The representations and warranties contained in this Article 6
shall survive until the second (2nd) anniversary of the Closing Date.
7. INTENTIONALLY OMITTED.
8. Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated under this Agreement are subject to the
satisfaction of each of the following conditions:
a. (i) On the Closing Date, Seller shall have delivered to Buyer
resolutions of Seller authorizing (A) the sale of the Assets, (B) the assignment
of the Assumed Contracts, and (C) the execution and delivery of this Agreement
and each of the Acquisition Agreements to which it is a party, certified by the
Secretary of Seller; and
21
(ii) Seller shall have delivered to Buyer a good standing
certificate, with respect to Seller, from the State of New Jersey;
b. Seller, or Seller's Principals, as the case may be, shall have
executed and delivered to Buyer the ▇▇▇▇ of Sale, the Assignment and Assumption
Agreement, the Assignment and Assumption of Seller's Lease and the
Non-Competition Agreement, each in the form of the appropriate exhibit attached
hereto, and the Undertaking Agreement and any and all other documents necessary
or appropriate to complete the transactions contemplated by this Agreement;
c. Landlord and Buyer shall have executed the Lease Modification and
Consent, in form and substance acceptable to Buyer, and the Lease Modification
and Consent shall be valid and enforceable;
d. (i) (A) Each of the provisions of this Article 8 (conditions to
closing) of this Agreement and (B) each of the provisions of Article 8
(conditions to closing) of each of the other Lifestyle Acquisition Agreements,
shall be fully and completely satisfied, (ii) TSI's Affiliates and the other
Lifestyle Sellers shall have completed the transactions contemplated by the
other Lifestyle Acquisition Agreements with respect to the Lifestyle Clubs on
the Closing Date, and (iii) the West ▇▇▇▇▇▇▇▇ Lease shall have been validly
assigned to an affiliate of Buyer;
e. INTENTIONALLY OMITTED.
f. All Equipment Contracts shall have been paid- in-full and Seller
shall have provided to Buyer conclusive proof of the same; Seller shall have
provided Buyer with all executed UCC-3 termination statements, and written
releases of lien or any other security interest, necessary to extinguish any and
all security interests held by Landlord, equipment lessors or lenders, or any
other third parties (including, but not limited to equipment lessors and
equipment vendors) in the Purchased Assets;
g. All material consents of third parties, including without
limitation, (i) consents of third parties with respect to the assignment of each
of the Assumed Contracts to Buyer, and (ii) all other relevant authorities and
all filings with and notifications of relevant authorities, or other entities
which regulate the business of Buyer, Seller, Seller's Principals or the
Business necessary on the part of Buyer, Seller, Seller's Principals or the
Business, to the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and to permit the operation of the
Business by Buyer in substantially the same manner after the Closing Date as
conducted by Seller prior to the Closing Date, shall have been obtained or
effected;
22
h. Seller shall have paid to Buyer, the proper amount of Buyer's
Paid-in-Full/Initiation Amount, the Post-Dated Amount and the Pre-Paid Amount,
each as defined in Section 3(a) hereof, and the parties shall have agreed that
such amount is correct;
i. Seller shall have paid to Buyer, the proper amount of Buyer's
pro-rated share of the Pre-Closing Date EFT Payments, as defined in Section
3(b)(ii) hereof, and the parties shall have agreed that such amount is correct;
j. Seller shall have paid to Buyer, Seller's portion of the cost of
the audit referred to in Section 3(c)(i) hereof, which as of the Closing Date is
$10,000.00;
k. Seller shall have paid to Buyer, Buyer's prorated share of the
license fee with respect to each of the Space Licenses listed in Schedule 5(v)
hereof for the month of August 1998, if received by Seller on or prior to the
Closing Date, and/or any other post-closing period and Seller shall have paid to
Buyer all of the security deposits deposited with Seller by the licensees;
l. Seller and Seller's Principals shall have provided the Seller
Receivable List and Schedule 5(g)(xi) to Buyer;
m. Seller and Seller's Principals shall have assigned to TSI all of
their right and interest to the "Lifestyle Fitness" name and all related names;
n. Seller, Seller's Principals and Buyer shall have:
(i) filed a notification of anticipated sale to the New Jersey
division of taxation, in accordance with Section 54-11A- 15 of the New Jersey
Statutes and Seller's attorney shall hold in escrow any amounts required by the
New Jersey division of taxation in connection with the transactions contemplated
hereby; and
(ii) provided notice of Seller's intention to sell a health
club facility to the Division of Consumer Affairs of the State of New Jersey;
and
(iii) filed any and all other necessary or appropriate filings
with federal, state or local authorities;
o. Seller and Seller's Principals shall each agree in the
Undertaking Agreement (to be executed on the Closing Date) (i) to provide Buyer
with Seller's interim financials for the period from June 30, 1998 to and
including the Closing Date, no later than thirty (30) days after the Closing
Date, and (ii) to complete the allocation for the period from and including July
16,
23
1998 to the Closing Date and to pay the appropriate amounts to Buyer in
accordance with Section 3(a) and Section 5(g)(xi) hereof;
p. Seller, the Business, the Demised Premises, and the building(s)
and improvements presently located at the Demised Premises, shall be in
compliance with all legal requirements of a business conducting the activities
presently conducted by Seller at the Demised Premises and Seller shall have a
valid, permanent certificate of occupancy for the Demised Premises;
q. Seller shall have assigned to Buyer all of Seller's right, title
and interest in and to all of Seller's permits, including, without limitation,
all permits necessary for the operation of the Business at the Demised Premises,
and in connection therewith, Seller shall deliver to Buyer all files, drawings,
architects' renderings and all other documents related to such permits;
r. Seller shall have provided proof to Buyer, satisfactory to Buyer,
that Seller has paid both the Consultant and the Primary Equipment Provider in
full and that no additional amounts or obligations are due or owing to either
Consultant or the Primary Equipment Provider with respect to the Business or the
Purchased Assets;
s. Seller shall have delivered to Buyer all other agreements,
consents and instruments required to be delivered to Buyer under this Agreement;
and
t. Except as set forth on Schedule 5(f), no action, suit, or
proceeding before any court or governmental or regulatory authority shall be
pending, no investigation by any governmental or regulatory authority shall have
been commenced, and no action, suit or proceeding by any governmental or
regulatory authority shall have been threatened, against Buyer, Seller or any of
the principals, officers or directors of any of them, which could have a
material adverse effect on the Purchased Assets, the Business, or the Demised
Premises.
9. Conditions to Obligations of Seller. The obligations of Seller and
Seller's Principals to consummate the transactions contemplated under this
Agreement are subject to the satisfaction of the following conditions:
a. (i) Buyer shall have delivered to Seller resolutions authorizing
the acquisition of the Assets and the assumption of the Assumed Contracts, and
the execution and delivery of this Agreement and each of the Acquisition
Agreements, certified by the Secretary of Buyer; and
(ii) Buyer shall have delivered a good standing certificate of
TSI from the State of New York;
24
b. No action, suit, or proceeding before any court or governmental
or regulatory authority shall be pending, no investigation by any governmental
or regulatory authority shall have been commenced, and no action, suit or
proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer, Seller or any of the principals, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions;
c. Seller, Seller's Principals and Buyer shall have:
(i) filed a notification of anticipated sale to the New Jersey
division of taxation, in accordance with Section 54-11A- 15 of the New Jersey
Statutes; and
(ii) provided notice of Seller's intention to sell a health
club facility to the Division of Consumer Affairs of the State of New Jersey;
and
(iii) filed any and all other necessary or appropriate filings
with federal, state or local authorities;
d. Landlord and Buyer shall have executed the Lease Modification and
Consent, in form and substance acceptable to Seller and Seller's Principals, the
Lease Modification and Consent shall be valid and enforceable;
e. (i) (A) Each of the provisions of this Article 9 (conditions to
closing) of this Agreement and (B) each of the provisions of Article 9
(conditions to closing) of each of the other Lifestyle Acquisition Agreements,
shall be fully and completely satisfied, (ii) TSI's Affiliates and the other
Lifestyle Sellers shall have completed the transactions contemplated by the
other Lifestyle Acquisition Agreements with respect to the Lifestyle Clubs on
the Closing Date, and (iii) the West ▇▇▇▇▇▇▇▇ Lease shall have been validly
assigned to an affiliate of Buyer;
f. Buyer shall have (i) delivered to Seller the Closing Date
Consideration, (ii) directed TSI to execute and deliver to Seller the TSI Note,
and TSI shall have delivered such TSI Note, (iii) assumed Seller's obligations
under the Assumed Contracts, and (iv) executed and delivered the Acquisition
Agreements to which it is a party; and
g. (i) Landlord or Buyer shall have returned Seller's security
deposit, if any, minus any amounts owed by Seller to Landlord;
h. INTENTIONALLY OMITTED.
i. Buyer shall have performed, satisfied and
25
complied with all of the covenants, conditions and provisions of this Agreement
to be performed, satisfied or complied with by Buyer.
10. INDEMNIFICATION.
a. After the Closing Date, Seller and, subject to Section 10(f)
below, Seller's Principals, shall jointly and severally indemnify, defend and
hold Buyer and its parent, directors, officers, trustees, employees, agents and
affiliates (the "Buyer's Indemnities") harmless from and against any and all
loss, damage, claim, obligation, assessment, cost, liability, and expense
(including, without limitation, reasonable attorneys' fees and costs and
expenses incurred in investigating, preparing, defending against or prosecuting
any litigation or claim, action, suit, proceeding or demand), of any kind or
character (a "Loss"), incurred, suffered, sustained or required to be paid by
any one of them to the extent resulting from:
(1) any breach of the representations and warranties made by
Seller or Seller's Principals in or pursuant to this Agreement or any of the
Acquisition Agreements; or
(2) the failure by Seller or Seller's Principals to perform or
observe any of the covenants and agreements to be performed or observed by
Seller pursuant to this Agreement or any of the Acquisition Agreements; or
(3) any and all obligations of Seller or Seller's Principals,
including, but not limited to, any and all obligations to Seller's Contractors,
investors, shareholders, creditors and any other third parties, except for (A)
obligations under the Assumed Contracts arising after the Closing Date, and (b)
other obligations expressly assumed or required to be assumed by Buyer under
this Agreement or the Acquisition Agreements; or
(4) any Proceedings, either listed on Schedule 5(f) hereto or
otherwise, relating to the Purchased Assets, the Business or the Demised
Premises arising on, accruing, or related to, any period prior to the Closing
Date.
b. After the Closing Date, Buyer shall indemnify, defend and hold
Seller and Seller's Principals and their respective directors, officers,
trustees, employees, agents and affiliates (the "Seller's Indemnities") harmless
from and against any and all loss, damage, claim, obligation, assessment, cost,
liability, and expense (including, without limitation, reasonable attorneys'
fees and costs and expenses incurred in investigating, preparing, defending
against or prosecuting any litigation or claim, action, suit, proceeding or
demand), of any kind or character (a "Loss"), incurred, suffered, sustained or
required to be paid by any one of them to the extent resulting from:
(1) a breach of the representations and
26
warranties made by Buyer in or pursuant to this Agreement or any of the
Acquisition Agreements; or
(2) the failure by Buyer to perform or observe any of the
covenants and agreements to be performed or observed by Buyer pursuant to this
Agreement or any of the Acquisition Agreements; or
(3) any and all obligations of Buyer, except for (A)
obligations under the Assumed Contracts or with respect to the Assets arising or
accruing on or prior to the Closing Date, and (b) all other obligations retained
by Seller and Seller's Principals under this Agreement or the Acquisition
Agreements.
c. A party seeking indemnification hereunder is called the
"Indemnified Party." A party against whom indemnification is sought hereunder is
called the "Indemnifying Party." The Indemnified Party shall give the
Indemnifying Party prompt written notice of any claim, suit or demand which the
Indemnified Party believes will give rise to indemnification by the Indemnifying
Party. The Indemnifying Party shall have the right to defend and to direct the
defense against any such claim, suit or demand, in its name or in the name of
the Indemnified Party, as the case may be, at the Indemnifying Party's expense
and with counsel selected jointly by the Indemnifying Party and the Indemnified
Party; provided, however, that if the Indemnified Party reasonably demonstrates
that a conflict of interest exists between the Indemnified Party and the
Indemnifying Party with respect to any such claim, suit or demand, the
Indemnified Party may engage counsel of its own choosing at the expense of the
Indemnifying Party and shall be entitled to undertake the defense, compromise or
settlement of any such claim, suit or demand at the expense of the Indemnifying
Party, and the Indemnifying Party shall reimburse the legal fees and other fees
and expenses incurred by the Indemnified Party on a monthly basis. If the
Indemnifying Party, within reasonable time after the notice of a claim, fails to
defend the Indemnified Party, the Indemnified Party shall be entitled to
undertake the defense, compromise or settlement of such claim at the expense of
and for the account and risk of the Indemnifying Party subject to the right of
the Indemnifying Party to jointly assume the defense of such claim at any time
prior to the settlement, compromise or final determination thereof.
d. The provisions of this Section 10 shall survive until the second
(2nd) anniversary of the Closing Date.
e. Right of Offset. (i) In addition to any other rights Buyer may
have under this Agreement or in accordance with applicable law, in the event
that either Seller or Seller's Principals fails to pay any amounts due to Buyer
or Buyer's Indemnities as and when required herein pursuant to Section 10(a)
hereof (including, without limitation, any costs incurred or injury suffered by
Buyer or Buyer's Indemnities due to the breach
27
of any of the representations and warranties set forth herein), Seller and
Seller's Principals acknowledge and agree that Buyer, TSI and Buyer's
Indemnities shall, upon providing five (5) days prior written notice in the case
of an emergency or twenty (20) days prior written notice in all other cases
(during which period Seller may cure such breach or failure), have an immediate
right of offset against any payments required to be made (i) to Seller and/or
(ii) to the other five (5) Lifestyle Sellers, in accordance with the Related
Lifestyle Acquisitions.
(ii) Buyer, Seller and Seller's Principals agree and
acknowledge that Buyer, Buyer's Indemnities and TSI may offset against any and
all payments required to be made to any of the Lifestyle Sellers under the TSI
Note for a breach by any one or more of the Lifestyle Sellers. (For example, if
Seller breaches this Agreement in the amount of $250,000.00, Buyer, Buyer's
Indemnities and TSI may offset the entire $250,000 amount of the breach from the
TSI Note despite the fact that only a portion of the TSI Note has been
apportioned to be paid to Seller.)
f. Seller's Principals' Limitation on Liability. Notwithstanding
anything to the contrary in this Agreement, or, more specifically, anything to
the contrary in this Article 10, and in addition to Section 10(e) hereof (which
provides Buyer, TSI and Buyer's Indemnities with an offset right against the
Lifestyle Sellers for amounts otherwise owed to the Lifestyle Sellers under the
TSI Note), Seller's Principals (as opposed to Seller or the other Lifestyle
Sellers) shall be personally liable under this Agreement only for (i) a breach
of the following representations and warranties: Section 5(b) (Due Execution),
Section 5(e) (No Liens or Encumbrances), Section 5(f) (Litigation), Section 5(j)
(Compliance with Law), Section 5(n) (Taxes) and Section 5(p) (Financials), or
(ii) failure to perform any of the obligations under the Undertaking Agreement.
In the event of any conflict between this Section 10(f) and any other section of
this Agreement, this Section 10(f) shall govern.
11. MISCELLANEOUS
a. Notices. Any notice, consent or other communications required or
permitted under this Agreement shall be in writing and delivered by personal
delivery, certified mail, return receipt requested or by a recognized overnight
courier, addressed as follows:
To Seller or Seller's Principals:
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. Host
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
28
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
To Buyer:
TSI COLONIA, LLC
c/o Town Sports International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Notices shall be deemed given (i) when received, if delivered by personal
delivery, (ii) three business days after being deposited in the United States
mail, if delivered by certified mail, and (iii) the next business day, if
delivered by overnight courier.
b. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of Seller, Seller's Principals and Buyer and their respective
successors and assignees.
c. Entire Agreement. This Agreement, together with the exhibits,
schedules, Acquisition Agreements and other writings referred to in this
Agreement, embodies or reflects the entire agreement among the parties relating
to both the subject matter of this Agreement and the transactions contemplated
hereby, and supersedes and replaces any and all other agreements, written or
oral, by or among TSI, Buyer, Seller and/or any of Seller's Principals,
including, without limitation, the term sheet and confidentiality agreement
among the parties.
d. Headings. The section and other headings of this Agreement are
for reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
e. Section References. All references in this Agreement to Sections
refer to sections of this Agreement.
f. Amendment and Waiver. This Agreement may not
29
be amended, modified or waived in whole or in part at any time, except in a
writing signed by Seller, Seller's Principals and Buyer.
g. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
h. Brokers. Each of the parties represents and warrants to each
other that there are no claims, or any basis for any claims, for brokerage
commissions, finders' fees or similar commissions in connection with the
transactions contemplated by this Agreement, including the execution of this
Agreement, resulting from any action taken by such party, or by any of its
agents, officers, employees or representatives.
i. Survival of Provisions. In the event that any of the provision(s)
of this Agreement are found by any court having jurisdiction to be invalid or
unenforceable, such provision or provisions shall be amended in accordance with
law, and the remainder of this Agreement shall remain in full force and effect
to the extent allowed by law.
j. Copy of Audit Report to Seller. Buyer shall provide Seller with a
copy of the audit report as soon as possible after the Closing Date, but in no
event later than thirty (30) days after the Closing Date.
30
IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed
and delivered by the parties as of the date first above written.
LIFESTYLE FITNESS OF WOODBRIDGE, INC.
By: /▇▇▇▇▇▇ ▇▇▇▇▇▇▇/
----------------------------------
Name:
Title: President
/▇▇▇▇▇▇ ▇▇▇▇▇▇▇/
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/▇▇▇▇▇▇▇ Host/
----------------------------------
▇▇▇▇▇▇▇ HOST
TSI COLONIA, LLC
By: /▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇/
----------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President
31
SCHEDULE 1(b)
ASSETS
1. See attached list of all assets (including all inventory) of Seller
SCHEDULE 1(c)
ASSUMED CONTRACTS
1. Including the Present Membership Agreements, as set forth
on Schedule 5(g) and Schedules 5(g)(i) through 5(g)(v)
2. Seller's Lease
3. All Space Licenses referred to in Schedule 5(v), if any
4. See List of Attached Additional Assumed Contracts
SCHEDULE 1(i)
EQUIPMENT CONTRACTS
NONE
34
SCHEDULE 2(a)
EXCLUDED ASSETS
1. ALL CASH AND CASH EQUIVALENTS (INCLUDING ALL BANK ACCOUNTS OF
SELLER)
2. ALL SECURITY DEPOSITS WITH LANDLORD
SCHEDULE 3(a)
INITIATION / FEE ALLOCATION
1. For memberships sold for an initiation fee of $199 and $42 per month,
Buyer is entitled to receive $0 of such initiation fees.
2. For memberships sold for an initiation fee of $399 and $32 per month,
Buyer is entitled to receive $150 of such initiation fee per membership on the
Closing Date.
3. For 3 month student memberships sold for $169, Buyer is entitled to
receive $0 of such initiation fees.
4. For so-called "civic memberships" sold for $395, Buyer is entitled to
receive $100 per membership on the Closing Date.
5. For 1 year "Preferred" memberships (typically sold for an initiation
fee of $849 with guaranteed future dues rates of not less than $23 per month, or
$17.50 per add-ons), Buyer is entitled to receive $475 of the initiation fee per
membership on the Closing Date.
6. For 1 year corporate memberships Seller is entitled to take $199.00 and
the remainder is pro-rated amongst Seller and Buyer.
36
SCHEDULE 3(b)(ii)
BILLING SERVICES TO BE PROVIDED BY SELLER'S PRINCIPALS
SELLER'S PRINCIPALS WILL:
A) MAINTAIN COMPUTER SOFTWARE FOR LIFESTYLE FITNESS MEMBERS, i.e. UPDATE
GATEWAY SOFTWARE, DOWNLOAD MEMBER INFORMATION THROUGHOUT CLUBS IF COMPUTER
ACCESS IS PROVIDED AT SUCH CLUB
B) UPLOAD AND DOWNLOAD GATEWAY CHECKFREE
C) PRINT BILLS
THE FOLLOWING SERVICES WILL NOT BE PROVIDED:
A) INPUT MEMBERSHIP INFORMATION
B) POST CUSTOMER CHANGES
C) PREPARE MEMBERSHIP CARDS
D) PERFORM TASKS FOR MAILING (i.e STUFF ENVELOPES)
37
SCHEDULE 5(e)
ENCUMBRANCES
NONE
38
SCHEDULE 5(f)
PROCEEDINGS
SCHEDULE 5(g)
PRESENT MEMBERSHIP AGREEMENTS
SCHEDULE 5(g)(i)
RENEWAL PROVISIONS
SELLER AND SELLER'S PRINCIPALS REPRESENT AND WARRANT THAT THERE ARE NO
MORE THAN 100 PRESENT MEMBERS WHO HAVE RENEWAL RIGHTS, THE TERMS OF WHICH ARE
HANDWRITTEN ON SUCH PRESENT MEMBERS' PRESENT MEMBERSHIP AGREEMENTS;
OTHERWISE NONE
SCHEDULE 5(g)(ii)
PERSONAL SERVICES DISCOUNTS
SELLER AND SELLER'S PRINCIPALS REPRESENT AND WARRANT THAT THERE ARE NO
MORE THAN 50 PRESENT MEMBERS WHO HAVE THE RIGHT TO FREE BABYSITTING, AND THAT
THE TERMS OF SUCH RIGHT ARE HANDWRITTEN ON SUCH PRESENT MEMBERS' PRESENT
MEMBERSHIP AGREEMENTS;
OTHERWISE NONE
SCHEDULE 5(g)(iii)
CORPORATE OR GROUP RATES
SCHEDULE 5(g)(v)
FREE OR COMPLIMENTARY MEMBERSHIPS
CERTAIN LOCAL STORES ALLOW SELLER TO KEEP "LEAD BOXES" IN
THEIR STORES FOR THE BENEFIT OF SELLER. THESE STOREOWNERS ARE
SOMETIMES GIVEN FREE OR DISCOUNTED MONTH TO MONTH MEMBERSHIPS.
THESE FREE OR DISCOUNTED MEMBERSHIPS MAY BE TERMINATED AT ANY TIME.
OTHERS:
A) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (1 MONTH REMAINING)
B) DR. ▇▇▇▇ ▇▇▇▇▇▇ (1 MONTH)
C) ▇▇▇▇▇ ▇'▇▇▇▇▇
D) ▇▇▇▇▇▇▇ HOST
E) ▇▇▇▇▇▇ HOST
F) ▇▇▇▇▇▇▇▇ HOST
G) ▇▇▇▇ ▇▇▇▇▇
H) ▇▇▇▇▇▇ ▇▇▇▇▇
I) ▇▇▇▇▇▇ ▇▇▇▇▇
J) ▇▇▇▇ ▇▇▇▇▇
K) ▇▇▇▇▇▇▇ ▇▇▇▇▇
L) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
M) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
N) ▇▇▇▇▇ ▇▇▇▇▇▇▇
O) ▇▇▇▇ ▇▇▇▇▇▇▇
P) ▇▇▇▇▇ ▇▇▇▇▇▇▇
Q) ▇▇▇▇▇ ▇▇▇▇▇▇▇
R) ▇▇▇▇▇▇▇ HOST
S) ▇▇▇▇▇▇ HOST
T) ▇▇▇▇▇▇▇ HOST
U) ▇▇▇▇▇ HOST
V) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SCHEDULE 5(g)(vi)
SELLER'S STANDARD MEMBERSHIP AGREEMENTS
SCHEDULE 5(g)(xi)(A)
NEW PAID-IN-FULL / INITIATION MEMBERSHIPS
46
SCHEDULE 5(g)(xi)(B)
POST-DATED AMOUNT
47
SCHEDULE 5(g)(xi)(C)
PRE-PAID ▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇ ▇(▇)(▇▇)
EMPLOYEES ON MEDICAL PLANS
49
SCHEDULE 5(l)(vi)
TERMINATED EMPLOYEES - SALARIES, ETC...
50
SCHEDULE 5(u)
COMPETING HEALTH CLUBS
1. WORKOUT WORLD ON ROUTE 1 IN NORTH BRUNSWICK
51
SCHEDULE 5(v)
SPACE LICENSES
COLONIA (Woodbridge)
Lease and License Agreement, dated September 30, 1997, between Seller, as
Landlord, and ▇▇▇▇▇▇▇ Institute for Rehabilitation, Inc, as Tenant - August 1998
Rent = $1,060.00 plus a production monthly fee - Security Deposit = $1,060.00
Oral Agreement between Seller and ▇▇. ▇▇▇▇▇▇▇▇, Chiropractor - Temporary
Occupancy - One Office - $500 per month - No Security Deposit
52
EXHIBIT A
▇▇▇▇ OF SALE
LIFESTYLE FITNESS OF WOODBRIDGE, INC., a New Jersey corporation, with an
address at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
("Seller"), pursuant to the Asset Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), among it, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Host and
TSI COLONIA, LLC, a Delaware limited liability company, with an address c/o Town
Sports International, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("Buyer"), and for good and valuable consideration to it in hand paid, receipt
of which is hereby acknowledged, does sell, assign, transfer and convey unto
Buyer, its successors and assigns, as at the close of business on the date
hereof, the Purchased Assets (as defined in the Purchase Agreement) and all of
Seller's rights, whether at common law or otherwise, claims, including the
proceeds of any claims which may not be assignable, and causes of action arising
out of any transaction occurring on or prior to the date hereof, with respect to
the Purchased Assets, irrespective of the time of date on which any such right,
claim or cause of action may arise or accrue.
Without limiting the generality of the foregoing, the rights, claims,
causes of action and property and assets being sold, assigned, transferred and
conveyed hereunder by Seller include all of the right, title and interest in, to
and under the Purchased Assets and all other assets of the Business not
expressly listed as an Excluded Asset on Schedule 2(a) of the Purchase
Agreement.
Seller hereby authorizes Buyer to take any appropriate action in
connection with any of said rights, claims, causes of action and property being
transferred hereunder, in the name of Seller or in its own or any other name but
at its own expense.
TO HAVE AND TO HOLD said rights, claims, causes of action, property and
assets of Seller, unto Buyer and its successors and assigns, to and for its or
their use forever.
And Seller does hereby warrant, covenant and agree that:
(a) the said property and assets are free from all liens, charges and
encumbrances made and suffered by Seller, and further covenants that it is the
lawful owner of said property and assets and has good title and right to
transfer the same;
(b) it will warrant and defend the sale of said property and assets
against each and every person or persons whomsoever claiming or who may claim
against any or all of the same; and
53
(c) it will take all steps necessary to put Buyer, its successors or
assigns in actual possession and operating control of said assets.
This ▇▇▇▇ of Sale shall be governed by the laws of the State of New
Jersey.
IN WITNESS WHEREOF, Seller has caused the same to be signed by its
President as at the close of business on this 4th day of August 1998.
LIFESTYLE FITNESS OF WOODBRIDGE, INC.
By:
---------------------------------
Name:
Title:
AGREED AND ACCEPTED:
TSI COLONIA, LLC
By:
---------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President
54
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into the 4th
day of August 1998, by and between LIFESTYLE FITNESS OF WOODBRIDGE, INC., a New
Jersey corporation, with an address at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Assignor") and TSI COLONIA, LLC, a Delaware limited liability
company, with an address c/o Town Sports International, Inc., ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Assignee").
W I T N E S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement dated as of the
date hereof, among Assignee, Assignor, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Host (the
"Purchase Agreement"), (i) Assignor has agreed to transfer and assign, to
Assignee all of its rights, title interest in and to the Assumed Contracts,
including, but not limited to, the Present Membership Agreements, and (ii)
Assignee, except as specifically limited by the terms of the Purchase Agreement,
has agreed to assume all of the obligations of Assignor under the Assumed
Contracts arising thereunder to the extent such obligations accrue and are to be
performed during any periods after the date hereof;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and in the Purchase Agreement, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, it is agreed as
follows:
1. Capitalized terms used herein which are not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement.
2. Assignor hereby assigns to Assignee all of its rights, title and
interest in and under the Assumed Contracts arising out of the periods after,
but not on or before, the date hereof.
3. Assignee hereby assumes all of the obligations of Assignor
arising under such Assumed Contracts to the extent such obligations arise after,
and are to be performed after, the date hereof, and except as expressly provided
to the contrary in the Purchase Agreement.
4. The parties acknowledge that this Assignment and Assumption
Agreement is made and entered into pursuant to, and subject in all respects to
the terms of, the Purchase Agreement.
5. This Assignment and Assumption Agreement shall inure to the
benefit of and be binding upon the parties, their successors and assigns.
This Assignment and Assumption Agreement shall be governed by the
laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have signed this Assignment and
Assumption Agreement on the date first set forth above.
LIFESTYLE FITNESS OF WOODBRIDGE, INC.
By:
---------------------------------
Name:
Title:
TSI COLONIA, LLC
By:
---------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF SELLER'S LEASE
57
EXHIBIT D
NON-COMPETITION AGREEMENT
THIS AGREEMENT is made as of August 4, 1998, by and among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
an individual with an address at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
("Agarwal"), ▇▇▇▇▇▇▇ HOST, an individual with an address at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Host") (Agarwal and Host, collectively "Seller's
Principals"), ▇▇▇▇ ▇▇▇▇▇, a consultant to Seller and an individual with an
address at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") (▇▇▇▇▇ and
Seller's Principals sometimes collectively referred to herein as "Seller's
Restricted Individuals") and Town Sports International, Inc, with an address at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Buyer").
WHEREAS, Seller's Principals, certain corporate subsidiaries of Seller's
Principals (collectively, the "Seller Corporations") and certain subsidiaries of
Buyer (collectively, the "Buyer LLCs") have entered into six asset purchase
agreements dated as of the date hereof (the "Purchase Agreements"; terms used
herein and not otherwise defined shall have the meaning indicated in the
Purchase Agreements), pursuant to which the Seller Corporation have each agreed
to sell and each of the Buyer LLCs have agreed to purchase the Purchased Assets
of each of the Seller Corporations;
WHEREAS, Agarwal and Host are the sole shareholders of each of the Seller
Corporations and will benefit directly from any amounts received by the Seller
Corporations pursuant to the Purchase Agreements and ▇▇▇▇▇ is a consultant of
each of the Seller Corporations and will also directly and financially benefit
from such amounts received by the Seller Corporations, including the payment of
certain consulting payments as a direct result of the sale of each of the
Businesses to the Buyer LLCs; and
WHEREAS, in order to induce the Buyer LLCs to execute and perform their
obligations under the Purchase Agreements, and in consideration of the covenants
contained in the Purchase Agreements and the amounts paid and to be paid by the
Buyer LLCs pursuant thereto to the Seller Corporations and Seller's Restricted
Individuals, Seller and Seller's Restricted individuals have agreed not to
compete with Buyer and Buyer's subsidiaries and affiliated companies in
accordance with the terms and conditions contained herein.
NOW THEREFORE, in consideration of the covenants contained in the Purchase
Agreement and the amounts paid and to be paid by the Buyer LLCs pursuant
thereto, each of Seller's Restricted Individuals have agreed as follows:
1. (a) Seller's Restricted Individuals and each of their affiliates will
not, directly or indirectly, "compete with" Buyer's or Buyer's subsidiaries' or
other affiliated companies' businesses (collectively, the "TSI Clubs") as
follows (i) within a
ten (10) mile radius of each of the six (6) Lifestyle Clubs and the West
▇▇▇▇▇▇▇▇, New Jersey location for a period of four (4) years from the date
hereof, (ii) within a three (3) mile radius of any health club facility
presently owned, leased, operated, or under development by any of Buyer's
subsidiaries or other affiliated companies, each as listed on Schedule A to this
Agreement, for a period of three (3) years from the date hereof, and (iii) as
Buyer intends to open clubs in the Philadelphia area, within a twenty (20) mile
radius of 30th Street Station in Philadelphia, Pennsylvania for a period of
three (3) years from the date hereof ((i) and (ii) and (iii) collectively, the
"Territory").
2. The phrase "compete with" the TSI Clubs shall mean, directly or
indirectly, as proprietor, partner, stockholder (specifically excluding the
owning of shares of stock of any publicly traded company), consultant, manager,
joint venturer, investor, lender or in any other capacity (including therein any
activities engaged in by members of the immediate family of Seller's Restricted
Individuals, specifically excluding ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇):
a. engage or participate in the operation or management of, or
furnish aid or assistance in connection with the distribution, sale, provision
or marketing of memberships in a commercial health or sports club within the
Territory;
b. intentionally solicit persons who are members of the TSI Clubs
for the sale or provision of the same or similar services provided by the TSI
Clubs or intentionally disparage the TSI name, "New York Sports Club" name,
"Washington Sports Club" name, "Boston Sports Club" name, "Philadelphia Sports
Club" name or other trade names used by Buyer and its subsidiaries and
affiliates; or
c. intentionally solicit any employee of the TSI Clubs to leave the
employ of the TSI Clubs, or intentionally interfere with, disrupt or attempt to
disrupt any relationship, contractual or otherwise, between the TSI Clubs and
any supplier, employee or person who is a customer or member of the TSI Clubs.
3. Seller's Restricted Individuals acknowledge that under the terms of the
Purchase Agreement they have sold and transferred all right, title and interest
to the tradename "Lifestyle Fitness," and each of Seller's Restricted
Individuals and each of their affiliates agree not to use the name "Lifestyle"
or any similar name in connection with any new health club owned, managed,
operated or developed by any of Seller's Restricted Individuals or any of their
affiliates.
4. Seller's Restricted Individuals and Buyer agree that Seller's
Restricted Individuals may own, manage, operate and develop no more than three
(3) health clubs in the aggregate prior to the third (3rd) anniversary of the
date hereof (each new club
59
of Seller's Restricted Individuals or their affiliates, a "New Seller Club"),
with the understanding that each of Seller's Restricted Individuals shall have
the right, title and interest to either open one New Seller Club or transfer or
sell such right, title and interest to one of the other Seller's Restricted
Individuals from any time after the date through and including the third (3rd)
anniversary of this Agreement; provided, however, that nothing in this Section 4
shall be construed to allow any of the new health clubs owned, managed, operated
or developed by any of Seller's Restricted Individuals or their affiliates to
violate the provisions of Section 1 or Section 2 of this Agreement.
5. (i) Seller's Restricted Individuals hereby agree that, for a period of
seven (7) years from the date hereof, Buyer and any subsidiary of Buyer
(collectively "Town Sports") shall have an exclusive right of first refusal to
purchase any or all of the New Seller Clubs, if any. Seller's Restricted
Individuals agree that, during such seven (7) year period, prior to selling all
or any part of any New Seller Club to any third party (including (i) a sale of
assets, including, but not limited to, the sale of membership lists, or (ii) a
sale of any or all of the stock or interests in the company owning the New
Seller Club, or (iii) a merger or consolidation of the New Seller Club), it
shall provide Town Sports with a bona fide written offer to purchase the subject
club for a specified purchase price, including the specific payment terms and
other material terms of the agreement, which offer shall be in writing, shall be
made by a bona fide third party purchaser and shall include the complete
financial information of the owner of the New Seller Club for the last two
fiscal years or such lesser amount of time that such New Seller Club has been
conducting business (the "Written Offer").
(ii) Town Sports shall have twenty (20) days from its actual receipt
of the Written Offer, to conduct a complete and thorough due diligence
investigation of the subject club, and the applicable Seller's Principal(s) and
the New Seller Club agree to provide Town Sports with its full assistance and
cooperation in conducting such investigation, including providing Town Sports
with any and all requested documents and records. At the end of such twenty (20)
day period, Town Sports shall respond in writing to the applicable Seller's
Restricted Individuals and the New Seller Club indicating its decision whether
or not to exercise its rights hereunder ("Town Sports' Response"). In the event
that Town Sports determines to exercise its right of first refusal, the closing
of the sale of the subject club shall take place as soon as reasonably possible
after Town Sports' Response. The applicable Seller's Restricted Individuals and
Town Sports, or a subsidiary of TSI, shall execute such documents and
instruments as may be necessary or appropriate to effect the sale of the subject
club pursuant to the terms of the Written Offer and this Section 5.
6. (i) At any time from the date hereof through and including the third
(3rd) anniversary of the date hereof, Buyer,
60
TSI or an affiliate of Buyer or TSI (collectively, the "TSI Buyers") may elect
to purchase all or substantially all of the assets of any or all of the New
Seller Clubs (including the option to purchase the leasehold interest prior to
opening any such New Seller Club) at the Option Price (as defined below).
(ii) The parties agree that the "Option Price" shall be calculated
by following the following equation:
(1) adding all of the costs and expenses incurred by the
principal(s) of such New Seller Club (which shall be clearly demonstrated and
quantified), including, but not limited to, architect fees, construction costs,
advertising, payroll, permitting, professional fees, physical equipment,
improvements, furniture and fixtures, and all other costs and expenses that can
be clearly demonstrated and quantified by the principal(s) of the New Seller
Club, incurred by the principal(s) in establishing, managing and operating the
New Seller Club (the "Total Investment"), plus
(2) regardless of when the purchase occurs, the greater of (I) an
additional twenty percent (20%) per annum calculated on the amount of the Total
Investment, (II) the Total Investment plus an additional 25% percent of the
Total Investment, or (III) the Total Investment plus an additional $225,000.00
(the greater of (I), (II) or (III) hereinafter referred to as the "Premium"), in
each case minus
(3) the amount of all assets sold by the business, minus
(4) all distributions, dividends or loans to any of Seller's
Restricted Individuals or any of their affiliates or any other shareholders or
other owners of the New Seller Club, minus
(5) all amounts salaried, paid or otherwise taken out of the
business by any of the shareholders or other owners of the New Seller Club in
excess of customary and usual amounts for a health club of a similar size and
quality.
(iii) The TSI Buyers may exercise their option to purchase each of
the New Seller Clubs at different times, or may exercise the option to purchase
all of the New Seller Clubs at the same time. The purchase price shall be
comprised of at least ninety percent (90%) cash at closing with the remainder
paid in the form of promissory note by TSI, payable in one year from the closing
date. TSI shall provide, as the first draft of acquisition agreements for each
such acquisition by the TSI Buyers, the Purchase Agreement (as defined herein)
and the agreements referred to therein with the understanding that Seller's
Restricted Individuals do not consent to any terms therein, and that the parties
will negotiate all such terms in good faith; provided, however, that the
non-competition agreement
61
shall include a radius of only five (5) miles from the applicable New Seller
Club and there shall be no right of first refusal or option provisions.
7. Seller's Restricted Individuals and Buyer consider the restrictions
contained herein reasonable with respect to (i) the protection of the TSI Clubs'
businesses, (ii) time, and (iii) geographic area, and with respect to all other
matters herein. If, however, such restrictions are found by any court having
jurisdiction to be unreasonable because one or more of such restrictions are too
broad, then such restrictions will nevertheless remain effective, but shall be
amended to provide protection to business, time and geographic area in whatever
manner is considered reasonable by that court, and as so amended shall be
enforced.
8. Each of Seller's Restricted Individuals acknowledge that a breach by
any one or more of them of the provisions of this Agreement would cause
irreparable injury to Buyer and the TSI Clubs and would injure Buyer and the TSI
Clubs in a way that could not be adequately compensated by damages. With respect
to any such breach, Buyer may, in addition to any other remedies available to
it, apply for an injunction restraining the breach and/or decree for specific
performance of the terms of this Agreement, and no bond or other security shall
be required in connection with any such injunction or decree, to the extent
permitted by law. Notwithstanding anything to the contrary in this Agreement, a
breach by one of Seller's Restricted Individual shall not be construed as a
breach by the other non-breaching Seller's Restricted Individuals, and Buyer
shall take legal action only against the breaching party.
9. Each of Seller's Restricted Individuals represent and warrant that as
of the date hereof, none of Seller's Restricted Individuals has any interest,
directly or indirectly, as proprietor, partner, stockholder, consultant,
manager, joint venturer, investor, lender or in any other capacity of any entity
which "competes with" the TSI Clubs' businesses.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
11. This Agreement shall be binding upon and inure to the benefit of
Seller's Restricted Individuals and Buyer, and their respective successors and
assigns.
12. This Agreement embodies or reflects the entire agreement among the
parties hereto relating to the subject matter of this Agreement.
13. This Agreement may not be amended, modified or waived in whole or in
part at any time, except in a writing signed by each of Seller's Restricted
Individuals and Buyer.
62
IN WITNESS WHEREOF, the parties have signed this Non-Competition
Agreement on the date first set forth above.
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ HOST
-------------------------------
▇▇▇▇ ▇▇▇▇▇
TOWN SPORTS INTERNATIONAL, INC.
By:
-----------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President
63
EXHIBIT E
[NOTE: ONLY ONE NOTE SHALL BE USED WITH RESPECT TO ALL SIX
ACQUISITIONS]
TSI NOTE
Amount: $300,000.00 Issued: August 4, 1998
FOR VALUE RECEIVED, TOWN SPORTS INTERNATIONAL, INC., a New York
corporation (the "Company"), in accordance with and subject to the terms of the
six (6) asset purchase agreements, dated as of the date hereof, among certain
wholly-owned subsidiaries of the Company (collectively, the "Buyers"),
_______________, ____________, ______________, _____________, ___________ and
___________ (collectively, the "Lifestyle Sellers" or the "Payees"), and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Host (collectively, the "Sellers' Principals") and in
accordance with the terms of the Undertaking Agreement, dated as of the date
hereof; hereby promises to pay, in lawful money of the United States of America
and in immediately available funds, the principal amount of THREE HUNDRED
THOUSAND DOLLARS ($300,000.00) with interest at the rate of nine percent (9%)
per annum as follows: (i) to the order of ____________, the principal amount of
________ THOUSAND DOLLARS ($_____________) plus interest, (ii) to the order of
____________, the principal amount of _______ THOUSAND DOLLARS ($___________)
plus interest, (iii) to the order of ____________, the principal amount of
________ THOUSAND DOLLARS ($___________) plus interest, (iv) to the order of
____________, the principal amount of _________ THOUSAND DOLLARS ($____________)
plus interest, (v) to the order of ____________, the principal amount of
_________ THOUSAND DOLLARS ($___________) plus interest, and (vi) to the order
of ____________, the principal amount of ___________ THOUSAND DOLLARS
($___________) plus interest, in each case at such Payee's principal offices, or
such other place as such Payee shall designate from time to time, on August 4,
2000; provided, however, that the Company's payment obligations hereunder are
subject to and expressly limited by (i) each of the Buyers' and the Company's
right of offset under Section 10(e) of each of the above referenced asset
purchase agreements (hereinafter, collectively the "Lifestyle Acquisition
Agreements") and (ii) the terms and provisions of the Undertaking Agreement; and
provided further that, notwithstanding the fact that each of Payees is
designated to be paid a specific amount under this Note, the Company or any of
the Buyers may offset the entire amount of the required payments hereunder
against a breach by any Payee under any one of more of the Lifestyle Acquisition
Agreements. Payees acknowledge that the amount ultimately paid to each of them
may be modified due to the terms of the Undertaking Agreement and the Company's
right of offset.
In the event of a default in the payment of any amount
under this Note when due, whether upon demand or otherwise, such unpaid amounts
shall bear interest, payable upon demand, at a rate per annum of 12% computed on
the basis of the actual number of days elapsed over a year of 360 days;
provided, however, that if such failure to make a payment occurs as a result of
the Company exercising its or any of the Buyers' right of offset under Section
10(e) of any of the Lifestyle Acquisition Agreements, no additional interest
shall be computed during the period in which such payment amount is in dispute.
Notwithstanding any of the foregoing, no interest shall be payable hereunder in
excess of the maximum permitted by applicable law.
At the option of the Company, this Note may be prepaid in whole or in part
at any time, or in part from time to time, without premium or penalty.
If any amount payable hereunder shall fall due on the day that is not a
business day when banks are open at the principal office of the applicable
payee, then such due date shall be extended to the next succeeding business day
when banks are so open.
The Company and all persons who may at any time be liable, whether
primarily or secondarily, for the payment of the indebtedness evidenced by this
Note, for such persons and for the heirs, legal representatives, successors and
assigns of such persons, hereby expressly waive presentment for payment, demand,
notice of dishonor, protest and notice of protest.
This Note may not be changed, nor any provision hereof waived, orally, but
only by an agreement in writing, signed by the party against whom any waiver,
change, modification or discharge is sought to be enforced.
This Note has not been registered under the Securities Act of 1933, as
amended, and may not be offered, sold, assigned, pledged, hypothecated or
otherwise transferred in the absence of such registration or an exemption
therefrom under said Act.
This Note may not be sold, assigned, pledged, hypothecated or otherwise
transferred except with the prior written consent of the Company.
This Note shall be construed in accordance with and governed by the laws
of the State of New Jersey without giving effect to its conflict of laws rules.
The Company agrees that any legal action or proceeding under or with
respect to this Note may be brought in the courts of the State of New Jersey;
and for the purpose of any such legal action or proceeding, the Company hereby
agrees to waive any objection and agrees not to raise any defense it may have
with respect to the venue of such courts or based upon forum non conveniens. The
Company also agrees not to bring any legal action
65
or proceeding under of with respect to this Note outside the State of New Jersey
unless for some reason the otherwise appropriate court in the State of New
Jersey refuses or does not have jurisdiction in the matter.
The Lifestyle Acquisition Agreements and the Undertaking Agreement are
incorporated herein by reference.
TOWN SPORTS INTERNATIONAL, INC.
By:
-------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President
66