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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 200549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) of
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 6, 1998
TOWN SPORTS INTERNATIONAL, INC.
New York 333-40907 13-2749906
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
888 Seventh Avenue
New York, NY 10106
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (212) 246-6700
(Former name or former address, if changed since last report.) Not applicable
Page 1 of 3
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ITEM 2. ACQUISITION OF ASSETS
On April 6, 1998, the Company acquired the assets of three Ovox
Fitness Clubs located in Freehold, Marlboro and Matawan, New Jersey. The
aggregate purchase price for the clubs was $5.75 million. The assets were
purchased by the Company for $5.575 million cash, and the issuance of Notes
totaling $175,000 bearing interest at prime +2% due on September 6, 1998.
In addition, the Company entered into a series of agreements,
whereby the Company will purchase a fourth Ovox fitness club in Old Bridge,
New Jersey within 55 days. The aggregate purchase price for the club will
be either $2.25 million, if the acquisition is consummated as an asset
purchase, or $2.0 million if the acquisition is consummated as a stock
purchase and an extension of the underlying lease is not obtained. A down
payment of $1.0 million was made on April 6, 1998.
The related costs of the acquisitions are estimated at $180,000.
The Company has funded these transactions from available cash-in-bank.
The acquisitions will be accounted for as a purchase, accordingly
the Company will include the operations of the acquired clubs in the
consolidated financial statements from the dates of acquisition. The
Company will operate these four clubs as New York Sports Clubs.
The Clubs were or will be acquired from the following parties:
CLUB SELLERS
---- - - - -
Freehold Ultrafit, Inc., a New Jersey corporation
Marlboro Exercise, Inc., a New Jersey corporation
Matawan VIP Fitness, Inc., a New Jersey corporation
Old Bridge Maxifit, Ltd., a New Jersey corporation
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a.& (b) Financial Statements and Pro forma financial information.
Any financial statements and pro forma financial information
required will be filed within 60 days hereof in accordance with Rule 3-05
of Regulation S-X.
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(c) Exhibits
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1. Asset Purchase Agreement between Ultrafit Inc. and TSI Freehold,Inc.,
a wholly owned subsidiary of Town Sports International, Inc., dated
February 27, 1998.
2. Asset Purchase Agreement between Exercise, Inc. and TSI Marlboro,Inc.,
a wholly owned subsidiary of Town Sports International, Inc., dated
February 27, 1998.
3. Asset Purchase Agreement between VIP Fitness, Inc. and TSI Matawan,
Inc., a wholly owned subsidiary of Town Sports International, Inc.,
dated February 27, 1998.
4. Purchase Option Agreement between Maxifit, Inc. and TSI Old Bridge,
Inc., a wholly owned subsidiary of Town Sports International, Inc.,
dated April 6, 1998.
5. Asset Purchase Agreement between Maxifit, Inc. and TSI Old Bridge,
Inc., a wholly owned subsidiary of Town Sports International, Inc.,
dated February 27, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed by the
undersigned hereunto duly authorized.
TOWN SPORTS INTERNATIONAL, INC.
By: /s/ Richard Pyle
-----------------------------
Richard Pyle
Chief Financial Officer
April 10, 1998
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EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 27, 1998, by
and among ULTRAFIT, INC. d/b/a OVOX FITNESS & SPORTS CENTER OF FREEHOLD, a New
Jersey corporation, with an address at 200 Daniels Way, Freehold, New Jersey
("SELLER") and TSI FREEHOLD, INC., a Delaware corporation, with an address c/o
Town Sports International, Inc., 888 Seventh Avenue, New York, New York 10106
("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 Bill
of Sale, the Assignment and Assumption Agreement, the Assignment and Assumption
of Seller's Lease, 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, whether owned or leased 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. "BANK FACILITY" shall mean the loan documents, dated as of
April 24, 1997, by and between Ultrafit, Inc. and First Union National Bank
("BANK"), to which each of the other Ovox Sellers and each of Seller's
Principals are guarantors.
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 Donovan & Giannuzzi,
405 Park Avenue, New York, New York, 11th Floor.
g. "CLOSING DATE" shall mean the close of
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business on Wednesday, March 25, 1998.
h. "DEMISED PREMISES" shall mean that certain premises located
at 200 Daniels Way, Freehold, New Jersey, leased to Seller pursuant to the
Seller's Lease, as more particularly described therein.
i. "DUE DILIGENCE PERIOD" shall mean the period of time from
the date of this Agreement to the close of business on Friday, March 13, 1998.
j. "DUE DILIGENCE TERMINATION DATE" shall mean 5:00 pm, New
York time, on Friday, March 13, 1998.
k. "INTERIM PERIOD" shall mean the period of time from the date
of this Agreement to the close of business on the Closing Date.
l. "LANDLORD" shall mean MRP Realty, a New Jersey partnership,
having an office at 200 Daniels Way, Freehold, New Jersey 07728.
m. "NEW LEASE" shall mean the lease agreement to be signed
between Landlord and Buyer on the Closing Date with respect to the Demised
Premises, substantially and materially in the form of Landlord's proposed form
of lease with each of Buyer's proposed modifications thereto, all as attached
hereto as EXHIBIT F, pursuant to which Landlord and Buyer shall agree to amend
Seller's Lease.
n. "OVOX ACQUISITION AGREEMENTS" shall collectively mean this
Agreement and each of the three other asset purchase agreements used in
connection with the Related Ovox Acquisitions.
o. "OVOX CLUBS" shall collectively mean each of the four (4)
health club businesses owned and operated by the Ovox Sellers.
p. "OVOX SELLERS" shall collectively mean VIP Fitness, Inc.
(Matawan), Exercise Inc. (Marlboro), Ultrafit, Inc. (Freehold) and Maxifit, Ltd.
(Old Bridge).
q. "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
of such Present Members and Seller.
r. "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 Agreements.
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s. "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.
t. "RELATED OVOX ACQUISITIONS" shall mean the acquisition by
affiliates of TSI (as defined herein) on the Closing Date of Seller's
Principals' health club facilities located in (i) Freehold, New Jersey, (ii)
Matawan, New Jersey, (iii) Morganville, New Jersey (the so-called "Marlboro"
club) and (iv) Old Bridge, New Jersey (collectively, the "RELATED OVOX CLUBS").
u. "SELLER'S LEASE" shall mean the Agreement of Lease, dated
October 15, 1993, between Landlord and Seller, with respect to the Demised
Premises.
v. "SELLER'S PRINCIPALS" shall mean Harry Rosenstein, Phyllis
Rosenstein and Stuart Rosenstein, the sole shareholders of Seller.
2. SALE AND PURCHASE OF PURCHASED ASSETS; ACQUISITION AGREEMENTS. On
the Closing Date, subject to the terms and conditions of this Agreement, and in
reliance on the representations, warranties, undertakings and agreements made
hereunder, and in consideration of the purchase by Buyer described below and the
assumption of certain liabilities of Seller by Buyer:
a. Seller hereby agrees 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 bill of sale, in the form
of EXHIBIT A attached hereto (the "BILL 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 hereby agrees to assign to Buyer all of its 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, in the form of EXHIBIT B attached hereto (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT");
c. Seller hereby agrees to assign to Buyer all of its rights,
title and interest in and under, and Buyer hereby
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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, in the form of EXHIBIT C attached hereto (the "ASSIGNMENT AND ASSUMPTION
OF SELLER'S LEASE");
d. Seller agrees to execute and deliver to Buyer, and Seller
agrees to have each of Seller's Principals execute and deliver to Buyer, on the
Closing Date, a non-competition agreement, in the form of EXHIBIT D attached
hereto (the "NON-COMPETITION AGREEMENT");
e. 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 Seller and the owners of the Related Ovox Clubs, a
single, non-transferable promissory note in accordance with the terms of this
Agreement and the terms of the asset purchase agreements in the Related Ovox
Acquisitions, 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
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 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. To the extent that any consents, waivers or approvals necessary to
convey any item of the Purchased Assets to Buyer are not obtained prior to the
Closing Date, and Buyer agrees to nonetheless consummate the transactions
contemplated hereby, Seller shall use its best efforts to: (i) provide to
Buyer, at the request of Buyer, the benefits of any such Purchased Asset, and
hold the same in trust for Buyer, if so requested by Buyer; (ii) cooperate in
any reasonable and lawful arrangement approved by Buyer, designed to provide
such benefits to Buyer; and (iii) enforce and perform, at the request of Buyer
and for the account of Buyer, any rights or obligations of Seller arising from
any such Purchased Asset against or in respect of any third person
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(including a government or governmental unit), including the right to elect to
terminate any contract, arrangement or agreement in accordance with the terms
thereof upon the advice of Buyer; and
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: (732) 431-1355.
3. MEMBERSHIPS; BUYER'S TRANSFER SYSTEM; ADJUSTMENTS.
Notwithstanding anything to the contrary in this Agreement or in the Acquisition
Agreements, the Buyer and Seller agree as follows:
a. With respect to revenues received by Seller from so-called
"paid-in-full" Present Members who joined or renewed their Present Memberships
on or after September 1, 1997 and up to the Closing Date, and in full
satisfaction thereof, Seller shall pay to Buyer on the Closing Date the amount
of Twenty Thousand Dollars ($20,000.00) ("BUYER'S 1997-1998 PAID-IN-FULL
AMOUNT").
b. (i) 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")
made by Present Members, received by Seller or Buyer after the Closing Date.
All EFT Payments received by Seller PRIOR to the Closing Date ("PRE-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).
On the Closing Date, Seller shall pay to Buyer, Buyer's pro-rated share of the
Pre-Closing Date EFT Payments. (For example, if the Closing Date occurs on
March 15, 1998 and Seller has collected $100,000.00 of EFT Payments on March 1,
1998, then Buyer shall be paid $50,000.00 of such EFT Payments by Seller and
Seller shall be entitled to retain $50,000.00 of such amount.)
(iii) Seller shall instruct its EFT billing service (the "EFT
SERVICE"), in writing if necessary, that, as of the Closing Date, Buyer has the
sole right to all information concerning, and proceeds from, Seller's EfT
system, and that the EFT Service must provide full assistance and access to
Buyer in the collection of EFT Payments. All such proceeds from the EFT system
shall at all times be the sole and exclusive property of Buyer, and shall be
immediately delivered to Buyer.
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(iv) Immediately subsequent to the Closing Date, Seller shall
assist Buyer, if requested by 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.
(v) Seller 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 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. In
the event Seller fails to pay any such improperly debited amounts to Buyer
within three (3) days of notice from Buyer of the improperly debited amounts,
Buyer shall have an immediate right of offset against any payments required to
be made to Seller pursuant to the TSI Note.
(vi) Buyer's rights under this subsection 3(b) shall be subject
to Seller's rights to the Rosenstein Receivables (as defined herein).
c. As of the Closing Date, the parties shall make adjustments
between them for (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, such that Seller will be responsible for items of expense
allocable to 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. All
adjustments made in connection with this Agreement shall be made in accordance
with generally accepted accounting principles, consistently applied ("GAAP").
d. (i) (A) Seller shall allow Buyer to maintain all of
Seller's financial books, records and files at the Demised Premises until Buyer
has satisfactorily completed an audit of all such financial information. Seller
and Seller's accountants shall cooperate with such audit. Such audit shall be
completed no later than sixty (60) days after the Closing Date (the "POST-
CLOSING AUDIT PERIOD").
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(B) During the Post-Closing Audit Period, Seller and
its bookkeeper and accountant shall have non-exclusive access to the former
office of Harry Rosenstein for the purpose of reviewing Seller's financial
books, records and files, and shall have the right to review and copy all such
books, records and files; PROVIDED, HOWEVER, that such actions do not disrupt
the Business.
(C) During the Post-Closing Audit Period, Buyer, at
Buyer's expense, may utilize Seller's accountant to assist in the audit.
(ii) Seller and Seller's accountant will, for a period of
eighteen (18) months after the Closing Date, provide Buyer with access, upon
reasonable notice, to all financial books, records and files of the Business
reasonably necessary for Buyer's orderly operation and continuation of the
Business.
e. Seller shall, for a period of eighteen (18) months after the
Closing Date, maintain its corporate existence and remain a corporation in good
standing in the State of New Jersey.
f. (i) Seller shall have the right to all accounts receivable
collected from members who are delinquent in their payment accounts (each a
"DELINQUENT MEMBER") for any and all amounts relating to periods prior to the
calendar month in which the Closing occurs (the "ROSENSTEIN RECEIVABLES"). On
the Closing Date, Seller and Buyer shall prepare a list of all of the affected
Delinquent Members and the amounts outstanding (the "ROSENSTEIN RECEIVABLE
LIST"). In addition, (i) all delinquent amounts relating to the month in which
the Closing occurs ("CLOSING MONTH DELINQUENT AMOUNTS") shall be collected by
Buyer and, upon receipt of such amounts by Buyer, shall be divided, pro-rata,
amongst Seller and Buyer in accordance with the method set out in subsection
3(b)(ii) of this Agreement, and (ii) on the Closing Date, Seller and Buyer shall
prepare a list of the Closing Month Delinquent Amounts.
(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 Rosenstein
Receivable List, and only upon payment in full of the amount indicated on the
Rosenstein Receivable List shall such Delinquent Member's payments be for
Buyer's account.
(iii) Within the first ten (10) business days of each month
following the Closing Date, Buyer shall pay to Seller all amounts received in
the previous month constituting Rosenstein Receivables. Upon each monthly
payment, Buyer shall also provide Seller with a list indicating the amount
collected
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from each affected Delinquent Member as of such date.
(iv) For the first ninety (90) days following the Closing
Date, upon reasonable notice and during regular business hours, Seller shall
have the right to review the data used to revise the Rosenstein Receivable List
and any other information maintained by Buyer which may indicate amounts owed
and amounts paid by Delinquent Members.
(v) Following the Closing Date, each Delinquent Member
listed on the Rosenstein Receivable List shall be "locked-out" of all of the
Ovox Clubs until such Delinquent Member has paid the entire amount indicated on
the Rosenstein Receivable List.
(vi) Notwithstanding anything to the contrary in this
Agreement, Seller shall have the right to collect all accounts receivable
indicated on the Rosenstein Receivable List; PROVIDED, HOWEVER, that Seller may
not use illegal methods or methods inconsistent with the Fair Debt Collection
Practice Act, to the extent that it applies, in collecting such amounts.
g. The terms of this Agreement, including, but not limited to
the Purchase Price, shall be held strictly confidential by the parties and their
affiliates, except as required by law.
4. PURCHASE PRICE.
a. PAYMENT OF PURCHASE PRICE. The purchase price to be paid to
Seller by Buyer shall be TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($2,250,000.00) (the "PURCHASE PRICE"). The Purchase Price shall be paid by
Buyer to Seller, as follows:
(i) On the Closing Date, TWO MILLION ONE HUNDRED THIRTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($2,137,500.00) (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 wire transfer to an account designated by Seller or by
certified check (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 Ovox Acquisitions, in the total principal amount of
FOUR HUNDRED THOUSAND DOLLARS ($400,000.00), payable on the first anniversary of
the Closing Date, of which, the principal amount of ONE HUNDRED TWELVE THOUSAND
FIVE HUNDRED DOLLARS ($112,500.00) shall be payable to Seller.
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(iii) (A) In the event that as of the Closing Date, each of the Ovox
Sellers shall have received permanent, unconditional certificates of occupancy,
certificates of continued occupancy, or the legal equivalent of the same,
acceptable in form and substance to Buyer's architects and attorneys, covering
the entire demised premises for each of the four Ovox Clubs (each a "PERMANENT
CERTIFICATE OF OCCUPANCY"), all other necessary licenses and permits relating to
the Business and/or the Demised Premises (and have provided proof of the
Permanent Certificates of Occupancy to Buyer), and Seller has received all
required municipal sign-offs for the improvements made to the Demised Premises
since the issuing of the Permanent Certificate of Occupancy, and each of the
provisions of Article 8 (conditions to closing) of each of the Ovox Acquisition
Agreements are fully and completely satisfied, then the principal amount of the
TSI Note shall be decreased from the principal amount of Four Hundred Thousand
Dollars ($400,000.00) to the principal amount of TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000.00) and the closing date consideration to be paid to each of
the Ovox Sellers for each of the four Ovox Clubs shall be increased by THIRTY-
SEVEN THOUSAND FIVE HUNDRED DOLLARS (37,500.00) per club.
(B) In the event that the Ovox Seller's have been unable to
comply with subsection 4(a)(iii)(A) above on or prior to the Closing Date, and,
at any time after the Closing Date, but prior to the due date of the TSI Note,
each of the Ovox Sellers shall receive Permanent Certificates of Occupancy,
covering the entire demised premises for each of the four Ovox Clubs (and have
provided proof of the Permanent Certificates of Occupancy to Buyer), and each of
the post-closing undertakings agreed to by each of the Ovox Sellers shall have
been complied with, then the principal amount of the TSI Note shall, at such
time, be decreased to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and each of the Ovox Sellers shall be paid THIRTY-SEVEN THOUSAND
FIVE HUNDRED DOLLARS (37,500.00) plus the interest accrued on such amount to
such date.
b. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated as follows:
Machinery, Equipment & Furniture $ 186,676.00
Leasehold improvements $ 0.00
Membership lists $ 233,813.00
Goodwill $ 1,829,511.00
TOTAL: $ 2,250,000.00
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Buyer and Seller 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, and in accordance with,
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IRS Form 8594.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as of the date
of this Agreement or such other date as clearly indicated herein, represents and
warrants to Buyer that:
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
necessary 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 action of Seller. This Agreement and each of the Acquisition
Agreements to which Seller is a party will, as of the Closing Date, be duly and
validly executed and delivered by Seller, and Seller has the power to do the
same, and to perform this Agreement and 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 Seller is a party
constitutes a legal, valid, binding and enforceable obligation of such party.
c. This Agreement, the Acquisition Agreements and other
instruments of conveyance and transfer to be executed by Seller 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 nor the consummation of the transactions
contemplated hereby or thereby by Seller 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 is a
party, including without limitation, the Assumed Contracts, or by which Seller
or any of the Purchased Assets is bound, or any judgement or order or any law,
rule, regulation or ordinance, to which the Seller or any of the Purchased
Assets is subject. The provisions of this Section 5(d) are subject to the
Assignment and Assumption of Seller's Lease.
e. Except as set forth on SCHEDULE 5(E), to the best of
Seller's knowledge, Seller has good title to, owns and
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lawfully possesses all of the Purchased Assets free and clear of all mortgages,
liens, pledges, security interests and encumbrances. As of the Closing Date,
all mortgages, liens, pledges, security interests and encumbrances listed in
SCHEDULE 5(E) shall be terminated, and all of the Purchased Assets shall be free
and clear of all mortgages, liens, pledges, security interests and encumbrances.
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, any of the Purchased Assets or the Business, (ii) to the best of
Seller's knowledge, no action, suit, dispute or governmental, administrative,
arbitration or regulatory proceeding pending or involving Seller or any of the
Purchased Assets or the Business, or threatened against Seller or any of the
Purchased Assets or the Business, and (iii) to the best of Seller's knowledge,
no investigation pending or, threatened against or relating to Seller, any of
the Purchased Assets or the Business (collectively, "PROCEEDINGS"). None of the
Proceedings listed in SCHEDULE 5(F), if adversely determined against Seller, any
of the Purchased Assets or the Business, would have a material adverse effect on
the Purchased Assets or 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
February 13, 1998, and, unless otherwise indicated in SCHEDULE 5(G), to the best
of Seller's knowledge, each Present Membership Agreement is in full force and
effect in accordance with its terms. The net monthly EFT Payment of dues, net
of returns, in January 1998 totalled $100,045.00 and as of February 13, 1998
totalled $94,428.00, not including returns as of February 13, 1998. SCHEDULE
5(G) accurately lists the expiration date of each Present Membership Agreement,
and, to the best of Seller's knowledge, all other information therein is true,
complete and correct;
(i) Except as listed in SCHEDULE 5(G)(I), as of February 13,
1998, there are no renewal rights with respect to the Present Membership
Agreements, except as indicated in the standard membership agreements listed in
SCHEDULE 5(G)(VI), which allow a Present Member to renew or otherwise continue
his or her membership at an advantageous or preferred rate, including, but not
limited to, so-called "guaranteed minimum rate contracts" (a "PREFERRED RENEWAL
PROVISION");
(ii) Except as listed in SCHEDULE 5(G)(II), as of February 13,
1998, there are no provisions in the Present Membership Agreements which entitle
any Present Member to free or discounted personal services or rights ("PERSONAL
SERVICES"),
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including, without limitation, massage therapy, private training, nutrition
counseling, special dance classes, karate classes, etc. (each a "PERSONAL
SERVICES DISCOUNT");
(iii) Except as listed in SCHEDULE 5(G)(III), as of February
13, 1998, there are no Present Membership Agreements subject to special
corporate rates, family rates, senior rates and/or group rates;
(iv) There are no outstanding coupons or certificates for
Personal Services issued by Seller, which have been sold or otherwise provided
to any individual (exclusive of any such Personal Services provided for in the
Present Membership Agreements) which would obligate Buyer to provide Personal
Services to any individual after the Closing Date;
(v) Except as listed in SCHEDULE 5(G)(V), as of February 13,
1998, 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 the only membership
agreements Seller has used, which are the only form of membership agreement used
by Seller at any time in connection with past or present members of the
Business;
(vii) As of February 13, 1998, Seller has a total of
approximately THREE THOUSAND EIGHT HUNDRED SIX (3,806) active Present Members of
which (A) approximately NINE HUNDRED TWENTY-0NE (921) are paid-in-full
memberships, and (ii) approximately TWO THOUSAND EIGHT HUNDRED EIGHTY-FIVE
(2,885) are active, non-delinquent EFT Payment memberships.
(viii) As of the Closing Date, Seller has allowed Buyer to
review true, correct and complete originals, and any and all amendments and
related documents, of all Present Membership Agreements. As of the Closing Date
there shall be no oral modifications with respect to any of the Present
Membership Agreements or oral agreements between Seller and any Present Members
or any third parties which would entitle any such Present Member or third party
to any right customarily held by a Present Member of the Business;
(ix) As of March 15, 1998, to the best of Seller's knowledge,
except as listed in Schedule 5(g)(ix), Seller will have fully paid and satisfied
all refund obligations with respect to any and all past members and Present
Members as required by contract or by applicable law; and
(x) 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.
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h. (i) 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 will not be terminated on or prior to the Closing Date. As of
the Closing Date, Seller has delivered to Buyer true and complete copies of all
contracts, and all amendments thereto, to which it is a party, including, but
not limited to, each of the Assumed Contracts. 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. Except as set forth on
SCHEDULE 5(H)(I), to the best of Seller's knowledge, each of the Assumed
Contracts is valid, binding and enforceable in accordance with its terms.
Except as set forth on SCHEDULE 5(H)(I), to the best of Seller's knowledge, 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 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.
(ii) Except as set forth on SCHEDULE 5(H)(II), as of the Closing
Date, Seller shall not be a party to any contract or lease with respect to
equipment used by, or in the past used by, the Seller or the Business, to which
Buyer shall have any present or future financial or other obligations.
i. (i) Except as set forth on SCHEDULE 5(I), to the best of
Seller's knowledge, 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 under Seller's Lease attributable to Seller, 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. Seller has not received a written
notice of default or notice of cancellation under Seller's Lease which remains
uncured.
(ii) To the best of Seller's knowledge, the Demised Premises, and
all building systems, utilities, fixtures and improvements therein are in good
operating condition and repair, and Seller has made all required maintenance and
repairs thereof, and there are no deferred maintenance obligations.
j. To the best of Seller's knowledge, whether or not there is a
Permanent Certificate of Occupancy, the Demised Premises and the Business are
being operated in compliance with, and neither Seller nor the Business is in
default or violation of, any applicable federal, state or local laws, rules,
regulations, or ordinances including, but not limited to, all
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parking requirements applicable to the Demised Premises and the Business being
conducted at the Demised Premises. The current signage used by the Seller at
the Demised Premises is in compliance with all applicable laws. To the best of
Seller's knowledge, 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 Demised
Premises and/or the Business, and such permits, authorizations, certificates and
licenses have been validly issued and are in compliance with applicable law.
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
Demised Premises or the Business, which violations have not been rectified.
k. Seller has received no notice of, and has no knowledge of,
any violation of any environmental law or regulation with respect to Seller, the
Purchased Assets 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 or the Business. To the best of Seller's knowledge, there are no
asbestos or asbestos-containing materials located within the Demised Premises in
violation of applicable law.
l. (i) Except as set forth in SCHEDULE 5(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) has not announced
or otherwise made a commitment to create any bonus (except for an oral
understanding that Seller will review certain employees' performance each year
and consider providing a bonus to each such employee), 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 ("ERISA")); PROVIDED, HOWEVER, that Seller does
maintain a 401(k) plan with respect to certain of its employees. Except as set
forth on SCHEDULE 5(L)(II), 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
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centers, scholarship funds, or prepaid legal services, or holiday, severance or
similar benefits (an "employee welfare benefit plan"). To the best of Seller's
knowledge, 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. To the best of
Seller's knowledge, 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 (A)
the employment of all of its employees and (B) all consulting arrangements or
agreements with consultants to the Business.
(iv) The execution and delivery of this Agreement by Seller 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
reasonably practicable, Seller shall pay all salaries, benefits, penalties,
employment taxes, 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 such third parties for such amounts.
(vi) SCHEDULE 5(L)(VI) sets forth the list of all employees
(including their titles) and consultants to be terminated as of the Closing
Date, and the salaries, bonuses and all applicable withholding taxes with
respect to each such person.
m. Except as set forth on SCHEDULE 5(M), neither Seller nor any
of Seller's Principals has received 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, 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. To the best of Seller's knowledge, all Federal, state and
local taxes (including, without limitation,
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all sales tax due on Present Membership Agreements, if any) or assessments due
and payable with respect of Seller for all periods, including interest and
penalties, have been paid, or shall be timely paid by Seller when required, 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. To the best of Seller's knowledge, Seller
has not failed to file timely any tax returns, tax reports or other related tax
information required by law to be filed. To the best of Seller's knowledge, no
federal, state or local government entity is performing, or has threatened to
perform, an audit of Seller for any year in which Seller has occupied the
Demised Premises. To the best of Seller's knowledge, Seller has paid, or will
timely pay when due, 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 Closing Date, Seller is not Insolvent.
(ii) The transactions contemplated hereby have not been
planned and will not be effected with intent 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 copies of the
following financial information: (i) Seller's 1996 federal and state tax
returns, and (ii) Seller's 1997 balance sheet and operating statements, covering
the period from January 1, 1997 to December 31, 1997 ("SELLER'S FINANCIALS"),
which were, to the best of Seller's knowledge, complete and correct as of the
date they were supplied. Seller's Financials for 1997 are being audited by
Buyer and Seller represents and warrants that Buyer will discover no material
adverse change.
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q. Except as set forth on SCHEDULE 5(Q), as of the Closing Date
Seller shall have paid-in-full all contractors, sub-contractors, materialmen,
suppliers, expediters, attorneys, architects and other service providers
(collectively, "CONTRACTORS"), for any and all work conducted prior to the
Closing Date with respect to Seller, the Business or the Demised Premises, 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,
to the best of Seller's knowledge, all contractors shall be paid in full, and no
Contractor shall have the legal right to file a mechanic's or materialmen's lien
against Seller, the Business, the Demised Premises or the Purchased Assets.
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 name "Ovox Fitness & Sports Center" and
"Powerhouse Gym", 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. Seller has conducted the Business in the ordinary course
since December 31, 1997, and has not incurred any debt or sold any discounted
present memberships, except in the ordinary course of the Business or sold any
services or goods for less than fair market value since such date.
t. Except as listed on SCHEDULE 5(T) hereof, to the best of
Seller's knowledge, there are no new health club facilities under construction
or scheduled to be opened within the next twelve (12) months within ten
(10) miles of the Demised Premises.
u. Except as listed on SCHEDULE 5(U) 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(u) have been amended, modified,
extended or otherwise altered, except as indicated in SCHEDULE 5(U).
v. Seller has no continuing obligations under the agreement
executed by and between Seller or Seller's Principals and Powerhouse Gym
("POWERHOUSE"), as amended from time to time (the "POWERHOUSE AGREEMENT").
w. To the best of Seller's knowledge, no representation,
warranty or other statement of Seller made under
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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.
x. The representations and warranties contained in this ARTICLE
5 shall survive the Closing Date for a period of eighteen (18) month; provided,
however, that Seller's representation in Section 5(n) (Taxes) hereof shall
survive the Closing Date indefinitely.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller and Seller's Principals as follows:
a. Buyer is a corporation 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 hereby have been
duly and validly authorized by all corporate action of Buyer. 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 nor 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 incorporation or
by-laws 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. The representations and warranties contained in this ARTICLE
6 shall survive the Closing Date for a period of eighteen (18) months.
7. DUE DILIGENCE PERIOD
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a. BUYER'S RIGHTS DURING DUE DILIGENCE PERIOD. During the Due
Diligence Period (as defined herein), Seller agrees to allow Buyer to perform
all required investigations and/or due diligence with respect to the Business,
the Demised Premises, Seller and the Purchased Assets, including, but not
limited to each of the following activities:
(i) Buyer and its auditors shall have the unimpeded right
to commence and perform an audit of the financial books and records of Seller;
(ii) Buyer shall have the unimpeded right to continue its
due diligence investigation commenced prior to signing this Agreement,
including, but not limited to, reviewing all documents, agreements,
correspondence, invoices, tax documents, etc. deemed relevant by Buyer;
provided, however, that Buyer shall conduct its due diligence investigation at
all times in a manner that will minimize disruption to the Business;
(iii) Buyer shall have the right to negotiate with the
Landlord, with respect to the terms and conditions of the New Lease/Lease
Modification, as applicable.
b. SELLER'S OBLIGATIONS DURING DUE DILIGENCE PERIOD. During
the Due Diligence Period, during the normal hours of the Business (including
weekends), Seller shall allow Buyer and its representatives access to the
Demised Premises and to the books and records of the Business, and shall provide
reasonable assistance to Buyer and its representatives in their due diligence
investigation.
c. TERMINATION OF AGREEMENT DURING DUE DILIGENCE PERIOD. If,
for any reason whatsoever, Buyer, in its sole and exclusive discretion, shall be
dissatisfied, in whole or in part, with the results of its due diligence
investigation, it may, at any time prior to the Due Diligence Termination Date,
terminate this Agreement by written notice of termination ("TERMINATION NOTICE")
to Seller's attorney. For purposes of this Section 7(c), fax notice, to the fax
number indicated in Article 14 of this Agreement, shall be acceptable. If Buyer
elects to terminate this Agreement as aforesaid, this Agreement shall be null
and void and be of no further force and effect, and neither party shall have any
further obligations to the other party. If a Termination Notice is not sent to
Seller's attorney on or before the Due Diligence Termination Date, this
Agreement shall continue in full force and effect in accordance with its terms.
Termination of this Agreement in accordance with this provision shall also
constitute termination of the other three Ovox Acquisition Agreements.
8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated under this Agreement are subject to the
satisfaction of the
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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 Seller is a party,
certified by the Secretary of Seller;
(ii) On the Closing Date, Seller AND SELLER'S PRINCIPALS
shall have represented in writing that, as of the Closing Date, each of the
representations in Article 5 of this Agreement listed in this Subsection
8(a)(ii) are true and accurate as of such date, including: Sections 5(a), 5(b),
5(c), 5(d), 5(e), 5(f), the third sentence of 5(g), 5(g)(iv), 5(g)(vi),
5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j), 5(k), 5(l), 5(m), 5(n), 5(o),
the second sentence of 5(q), 5(r), 5(s), 5(t), 5(u) and 5(v), each such
representation shall be true and correct as of the Closing Date, and each such
representation shall survive the Closing Date for a period of eighteen (18)
months, except for the representation in Section 5(n), which shall survive the
Closing Date indefinitely;
b. Seller, and/or Seller's Principals, as the case may be,
shall have executed and delivered to Buyer the Bill 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;
c. Landlord and Buyer shall have executed the New Lease,
substantially and materially in the form of EXHIBIT F hereto, subject only to
those changes acceptable to Buyer, in Buyer's sole discretion, and the New Lease
shall be valid and enforceable;
d. Seller (i) shall have completed all renovations to the men's
bathroom and the women's bathroom, including contemplated tile work, stalls,
vanities and partitions, and shall have obtained all necessary inspections,
permits and sign-offs with respect to such renovations, and (ii) shall have
either (A) obtained all necessary inspections, permits and sign-offs
(collectively, "REQUIRED INSPECTIONS") with respect to such construction, or (B)
at Closing entered into a written undertaking agreement with Buyer, in which
Seller and Seller's Principals agree to obtain such Required Inspections
post-Closing, and agree that such obligation will be subject to Buyer's and
TSI's right to offset in Section 10(e) hereof. The Landlord shall have obtained
a variance permitting the addition of a basketball court or a physical fitness
room. Notwithstanding the foregoing, the Closing shall not be delayed solely
because the Zoning Board of the Township of Freehold has denied a variance for
the basketball court or the physical fitness room or
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has not finally acted on the application for such variance. Instead, the
Closing shall proceed and Seller and Seller's Principals shall use all
reasonable efforts to assist Buyer and/or Landlord, should Buyer and/or Landlord
choose to continue efforts to obtain the variance at Landlord's cost;
e. Seller, 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 (notwithstanding the fact that a Permanent Certificate of
Occupancy may have not been issued), and that no variance or special permit is
required to obtain a valid, Permanent Certificate of Occupancy or to correct the
present non-compliance of the Demised Premised or the Business in accordance
with applicable legal requirements. In addition, if Seller has not received a
Permanent Certificate of Occupancy on or prior to the Closing Date, Seller shall
have undertaken, in writing, in a form acceptable to Buyer, to take all
reasonable actions necessary, at Seller's expense, to obtain a Permanent
Certificate of Occupancy for the Demised Premises. However, Buyer shall have
the right to obtain the Permanent Certificate of Occupancy without the
assistance of Seller but at Seller's expense. Such expenses shall include, but
not be limited to, the costs, fees and expenses for architects, engineers,
attorneys, expediters, and construction; PROVIDED, HOWEVER, that such costs,
fees and expenses must be reasonable and that such fees shall not exceed fees
typical of such professionals and contractors in Middlesex and Monmouth
counties; and PROVIDED FURTHER, that Buyer and TSI shall have the right to
off-set such expenses against the amount due to the Ovox Sellers under the TSI
Note, all in accordance with Section 10(e) hereof;
f. (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 Ovox Acquisition Agreements, ARE
FULLY AND COMPLETELY SATISFIED, and (B) affiliates of Buyer ("BUYER'S
AFFILIATES") and the Ovox Sellers shall have concluded each of the Related Ovox
Acquisitions on the Closing Date;
g. The Bank Facility and all related guaranties shall have been
terminated and Seller shall have provided Buyer with proof that no related
security agreement, UCC financing statement, or other document evidencing
indebtedness, is in effect with respect to the Purchased Assets;
h. Any and all installment contracts of Seller shall have been
paid in full with no additional amounts due thereunder, and Seller shall have
provided Buyer proof, satisfactory to Buyer, that all such amounts have been
paid and that no obligations remain outstanding with respect to the relevant
equipment provider. In addition, no security agreement,
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UCC financing statement, or other document evidencing indebtedness, shall exist
with respect to such installment contracts;
i. Seller shall have provided Buyer with (i) 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, the Bank, or any other third parties (including, but not limited to
equipment lessors and equipment vendors) in the Purchased Assets, and/or (ii)
pay-off letters from such third parties indicating the amount owed to such third
party on the Closing Date for payment in full of all amounts owed with respect
to the affected Purchased Assets;
j. All material consents of third parties necessary on the part
of Buyer, Seller 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;
k. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
l. Seller's affiliate, Ovox Fitness & Sports Corp., shall have
provided Buyer and each of Buyer's Affiliates a six (6) month royalty-free
license for the use of the "Ovox" name and trademark, substantially and
materially in the form of EXHIBIT G hereto;
m. Seller shall have paid to Buyer, Buyer's 1997-1998
Paid-in-Full Amount, as defined in Section 3(a) hereof, in the amount of
$20,000.00;
n. Seller shall have paid to Buyer, Buyer's pro-rated share of
the Pre-Closing Date EFT Payments, as defined in Section 3(b)(ii) hereof;
o. Seller shall have assigned to Buyer all of its right and
interest to each of the non-compete agreements listed in SCHEDULE 5(L)(I),
between Seller and certain of its employees and consultants;
p. Seller shall have assigned to Buyer, to the extent
assignable, 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;
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q. Seller shall have delivered to Buyer all other agreements,
consents and instruments required to be delivered to Buyer under this Agreement;
r. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
s. Seller and Seller's Principals shall agree in writing not to
conduct any negotiations, or enter into any agreement with the Sam's Landlord
(as defined herein) with respect to the Tyces Lane Premises (as defined herein);
t. Seller and Seller's Principals shall agree in writing to
provide Buyer with Seller's interim financials for the period from January 1,
1998 and the Closing Date, no later than thirty (30) days after the Closing
Date; and
u. Seller shall have paid to Buyer, Buyer's pro-rated share of
the license fee with respect to each of the Space Licenses listed in SCHEDULE
5(U) hereof.
9. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
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;
(ii) TSI shall have delivered to Seller resolutions
authorizing the execution and delivery of the TSI Note, certified by the
Secretary of Buyer;
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
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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. 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;
d. Landlord and Buyer shall have executed the New Lease,
substantially and materially in the form of EXHIBIT F hereto, subject only to
those changes acceptable to Buyer, in Buyer's sole discretion, and the New Lease
shall be valid and enforceable;
e. Buyer's Affiliates shall have completed each of the Related
Ovox Acquisitions as of the Closing Date;
f. All material consents of third parties necessary on the part
of Buyer, Seller 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;
g. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
h. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
i. Buyer shall have performed, satisfied and complied with all
of the covenants, conditions and provisions of this Agreement to be performed,
satisfied or complied with by Buyer; and
j. In connection with this Agreement and the
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other Ovox Acquisition Agreements, Buyer's Affiliates' parent, TSI, shall have
delivered to Seller's Principals a total of ten (10) complimentary,
non-transferable, passport memberships, which memberships shall be valid for as
long as TSI remains directly, or indirectly, the owner of any or all of Buyer's
Affiliates.
10. INDEMNIFICATION.
a. After the Closing Date, Seller and 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:
(i) any breach of the representations and warranties
made by Seller in or pursuant to this Agreement or any of the Acquisition
Agreements; or
(ii) the failure by Seller 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
(iii) any and all obligations of Seller, including, but
not limited to, Seller's obligations to its 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
(iv) any and all obligations to Powerhouse or its
affiliates, including, but not limited to any obligations arising from or
related to the Powerhouse Agreement or the termination of the Powerhouse
Agreement; or
(v) any and all liability with respect to the litigation
indicated on Schedule 5(f) hereof.
b. After the Closing Date, Buyer shall indemnify, defend and hold
Seller and its directors, officers, trustees, employees, agents and affiliates
and Seller's Principals (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'
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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:
(i) a breach of the representations and warranties made
by (A) Buyer in or pursuant to this Agreement or any of the Acquisition
Agreements and (B) TSI in or pursuant to the TSI Note; or
(ii) the failure by (A) 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, and (B) TSI to perform or
observe any of the covenants and agreements to be performed or observed by TSI
under the TSI Note; or
(iii) any and all obligations of Buyer including any and
all obligations under the assumed contracts, 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
under this Agreement or the Acquisition Agreements.
c. The provisions of this SECTION 10 shall survive the Closing Date
for a period of three (3) years.
d. 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
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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.
e. RIGHT OF OFFSET. In addition to any other rights Buyer may
have under this Agreement or in accordance with applicable law, in the event
that Seller and/or Seller's Principals fail 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 of any of the representations and
warranties set forth herein), Buyer, TSI and Buyer's Indemnities shall have an
immediate right of offset against any payments required to be made pursuant to
the TSI Note (i) to Seller or (ii) to the other entities controlled by Seller's
Principals, in accordance with the Related Ovox Acquisitions.
11. INTERIM PERIOD. (a) Seller agrees that, during the Interim
Period, it shall:
(i) conduct the Business in the ordinary course consistent
with prior practice, including, but not limited to prior membership sales
practice, and shall not incur any additional debt outside of the ordinary
course, issue any new complimentary or discounted memberships or make any
modifications to the Business as conducted as of the date of this Agreement,
unless previously agreed to by the parties in writing; and
(ii) preserve its business organization intact and shall use
its best efforts to preserve for Buyer the good will of (A) the Present Members,
(B) the suppliers of the Business, and (C) any third parties related to the
Business; and
(iii) (A) not enter into negotiations with, or provide any
information to, any third parties interested in the possible acquisitions of any
or all of the Ovox Clubs, and, (B) unless Buyer is in breach of this Agreement
or has terminated this Agreement, Seller may not terminate this Agreement
without Buyer's prior written approval; and
(iv) use its best efforts to (i) complete all renovations
listed in Section 8(d) hereof prior to the Closing Date, and (ii) apply for and
obtain prior to the Closing Date the variance with respect to the basketball
court or physical fitness room and shall provide copies of the related
application to Buyer.
(b) Buyer and Seller agree that during the Interim Period
they shall work together to provide appropriate notice and complete necessary
filing with respect to each of the
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following:
(i) 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) letter of non-applicability to the New Jersey
Department of Environmental Protection, in accordance with the Industrial Site
Recovery Act; and
(iii) notice of Seller's intention to sell a health club
facility to the Division of Consumer Affairs of the State of New Jersey; and
(iv) any and all other necessary or appropriate filings with
federal, state or local authorities.
(c) Buyer and Seller agree that during the Interim Period:
(i) Buyer, or Buyer's parent company, TSI, shall have the
exclusive right to negotiate with Sam's East, Inc. (the "SAM'S LANDLORD"), for a
lease for the premises located at The Shopping Center located on the corner of
Highway 18 and Tyces Lane in East Brunswick, New Jersey (the "TYCES LANE
PREMISES"), which will allow an affiliate of Buyer to establish a health club
facility at such location; and
(ii) Buyer shall continue to have the right to negotiate
with the Landlord, with respect to the terms and conditions of the New
Lease/Lease Modification, as applicable.
12. CLOSING DATE ACTIONS. (a) On the Closing Date, Seller and Buyer
agree, in good faith, to perform each of the following:
(i) work together to prepare the Rosenstein Receivable List and
the list of Closing Month Delinquent Amounts;
and
(ii) prepare and execute a side-letter agreement with respect to
post-closing undertakings of Seller, and other post-closing matters, as deemed
necessary by the parties; and
(iii) work together to complete all other actions reasonably
necessary to complete the transactions contemplated herein.
13. LIQUIDATED DAMAGES. (a) Notwithstanding anything to the contrary
in this Agreement, in the event that Buyer does not provide a Termination Notice
to Seller's Attorney on or prior
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to the Due Diligence Termination Date, AND, as of the Closing Date, all
conditions listed in Article 8 of this Agreement have been fully satisfied and
all conditions listed in Article 8 of each of the other Ovox Acquisition
Agreements have been fully satisfied, AND each of the Ovox Sellers is otherwise
ready, willing and able to conclude the transactions contemplated by the Ovox
Acquisition Agreements, THEN, if Buyer, on the Closing Date, defaults in its
obligation to complete the transactions contemplated hereby, Seller's sole
remedy shall be the right to receive a payment of One Hundred Thousand Dollars
($100,000.00) (the "LIQUIDATED DAMAGES AMOUNT") from Buyer as liquidated
damages, it being agreed that Seller's damages in case of Buyer's default might
be impossible to ascertain, and that the Liquidated Damages Amount constitutes a
fair and reasonable amount of damages under the circumstances and is not a
penalty.
(b) Upon the signing of this Agreement, TSI, the parent company
of Buyer, shall deliver to Seller a guaranty agreement (the "TSI GUARANTY"),
solely with respect to the Liquidated Damages Amount.
14. 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:
Harry Rosenstein
21 Manitoba Way
Marlboro, New Jersey 07746
Fax: 732-577-9832
with a copy to:
Robert Goldschlag, Esq.
65 South Street
Freehold, New Jersey 07728
Fax: 732-577-9832
To Buyer:
TSI Freehold, Inc.
c/o Town Sports International, Inc.
888 Seventh Avenue
New York, New York 10106
Fax: 212-246-8422
Attention: Alexander Alimanestianu
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with a copy to:
Donovan & Giannuzzi
405 Park Avenue
New York, New York 10022
Fax: 212-223-0966
Attention: Nicholas T. Donovan, 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 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 the subject matter of this Agreement.
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 be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller and Buyer.
g. GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
(ii) Any dispute, claim or controversy arising out of or
relating to this Agreement or the Acquisition Agreements, including, but not
limited to Buyer's and TSI's right of offset in Section 10(e) hereof, shall be
settled by arbitration in Monmouth County, New Jersey in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, or any
successor thereof. The decision and award of the arbitration shall be final and
conclusive on the parties, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
h. BROKERS. Each of the parties represents and
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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.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed
and delivered by the parties as of the date first above written.
ULTRAFIT, INC. d/b/a
Ovox Fitness & Sports Center of Freehold
By: /s/ Harry Rosenstein
-----------------------------
Name: Harry Rosenstein
Title:President
TSI FREEHOLD, INC.
By: /s/ Alexander Alimanestianu
-----------------------------
Alexander Alimanestianu
Executive Vice President
With Respect to Section 10(a):
/s/ Harry Rosenstein
- ---------------------------
HARRY ROSENSTEIN
/s/ Phyllis Rosenstein
- ---------------------------
PHYLLIS ROSENSTEIN
/s/ Stuart Rosenstein
- ---------------------------
STUART ROSENSTEIN
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EXHIBIT 99.2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 27, 1998, by and among EXERCISE
INC. d/b/a OVOX FITNESS & SPORTS CENTER OF MARLBORO, a New Jersey corporation,
with an address at 34 Route 9 North, Morganville, Marlboro Township, New Jersey
("SELLER") and TSI MARLBORO, INC., a Delaware corporation, with an address c/o
Town Sports International, Inc., 888 Seventh Avenue, New York, New York 10106
("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 Bill
of Sale, the Assignment and Assumption Agreement, the Assignment and Assumption
of Seller's Lease, 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, whether owned or leased 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. "BANK FACILITY" shall mean the loan documents, dated as of
April 24, 1997, by and between Ultrafit, Inc. and First Union National Bank
("BANK"), to which each of the other Ovox Sellers and each of Seller's
Principals are guarantors.
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 Donovan & Giannuzzi,
405 Park Avenue, New York, New York, 11th Floor.
g. "CLOSING DATE" shall mean the close of
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business on Wednesday, March 25, 1998.
h. "DEMISED PREMISES" shall mean that certain premises located
at 34 Route 9 North, Morganville, Marlboro Township, New Jersey, leased to
Seller pursuant to the Seller's Lease, as more particularly described therein.
i. "DUE DILIGENCE PERIOD" shall mean the period of time from
the date of this Agreement to the close of business on Friday, March 13, 1998.
j. "DUE DILIGENCE TERMINATION DATE" shall mean 5:00 pm, New
York time, on Friday, March 13, 1998.
k. "INTERIM PERIOD" shall mean the period of time from the date
of this Agreement to the close of business on the Closing Date.
l. "LANDLORD" shall mean W & L Associates, L.L.C., having an
office at 556 Main Street, Orange, New Jersey 07050.
m. "LEASE MODIFICATION" shall mean the owner's consent and
lease modification agreement, dated the Closing Date, between Landlord and
Buyer, amending and modifying Seller's Lease, substantially and materially in
the form attached hereto as EXHIBIT F.
n. "OVOX ACQUISITION AGREEMENTS" shall collectively mean this
Agreement and each of the three other asset purchase agreements used in
connection with the Related Ovox Acquisitions.
o. "OVOX CLUBS" shall collectively mean each of the four (4)
health club businesses owned and operated by the Ovox Sellers.
p. "OVOX SELLERS" shall collectively mean VIP Fitness, Inc.
(Matawan), Exercise Inc. (Marlboro), Ultrafit, Inc. (Freehold) and Maxifit, Ltd.
(Old Bridge).
q. "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
of such Present Members and Seller.
r. "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 Agreements.
s. "PURCHASED ASSETS" shall mean, collectively,
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(i) the Assumed Contracts, including, but not limited to, Seller's Lease and the
Present Membership Agreements, and (ii) the Assets.
t. "RELATED OVOX ACQUISITIONS" shall mean the acquisition by
affiliates of TSI (as defined herein) on the Closing Date of Seller's
Principals' health club facilities located in (i) Freehold, New Jersey, (ii)
Matawan, New Jersey, (iii) Morganville, New Jersey (the so-called "Marlboro"
club) and (iv) Old Bridge, New Jersey (collectively, the "RELATED OVOX CLUBS").
u. "SELLER'S LEASE" shall mean the lease, dated November 15,
1996, between Landlord and Seller, with respect
to the Demised Premises.
v. "SELLER'S PRINCIPALS" shall mean Harry Rosenstein, Phyllis
Rosenstein and Stuart Rosenstein, the sole shareholders of Seller.
2. SALE AND PURCHASE OF PURCHASED ASSETS; ACQUISITION AGREEMENTS. On
the Closing Date, subject to the terms and conditions of this Agreement, and in
reliance on the representations, warranties, undertakings and agreements made
hereunder, and in consideration of the purchase by Buyer described below and the
assumption of certain liabilities of Seller by Buyer:
a. Seller hereby agrees 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 bill of sale, in the form
of EXHIBIT A attached hereto (the "BILL 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 hereby agrees to assign to Buyer all of its 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, in the form of EXHIBIT B attached hereto (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT");
c. Seller hereby agrees to assign to Buyer all of its 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
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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, in the form of EXHIBIT C attached hereto (the
"ASSIGNMENT AND ASSUMPTION OF SELLER'S LEASE");
d. Seller agrees to execute and deliver to Buyer, and Seller
agrees to have each of Seller's Principals execute and deliver to Buyer, on the
Closing Date, a non-competition agreement, in the form of EXHIBIT D attached
hereto (the "NON-COMPETITION AGREEMENT");
e. 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 Seller and the owners of the Related Ovox Clubs, a
single, non-transferable promissory note in accordance with the terms of this
Agreement and the terms of the asset purchase agreements in the Related Ovox
Acquisitions, 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
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 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. To the extent that any consents, waivers or approvals necessary to
convey any item of the Purchased Assets to Buyer are not obtained prior to the
Closing Date, and Buyer agrees to nonetheless consummate the transactions
contemplated hereby, Seller shall use its best efforts to: (i) provide to
Buyer, at the request of Buyer, the benefits of any such Purchased Asset, and
hold the same in trust for Buyer, if so requested by Buyer; (ii) cooperate in
any reasonable and lawful arrangement approved by Buyer, designed to provide
such benefits to Buyer; and (iii) enforce and perform, at the request of Buyer
and for the account of Buyer, any rights or obligations of Seller arising from
any such Purchased Asset against or in respect of any third person (including a
government or governmental unit), including the right to elect to terminate any
contract, arrangement or
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agreement in accordance with the terms thereof upon the advice of Buyer; and
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: (732) 536-4141.
3. MEMBERSHIPS; BUYER'S TRANSFER SYSTEM; ADJUSTMENTS.
Notwithstanding anything to the contrary in this Agreement or in the Acquisition
Agreements, the Buyer and Seller agree as follows:
a. With respect to revenues received by Seller from so-called
"paid-in-full" Present Members who joined or renewed their Present Memberships
on or after September 1, 1997 and up to the Closing Date, and in full
satisfaction thereof, Seller shall pay to Buyer on the Closing Date the amount
of Forty Thousand Dollars ($40,000.00). ("BUYER'S 1997-1998 PAID-IN-FULL
AMOUNT").
b. (i) 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")
made by Present Members, received by Seller or Buyer after the Closing Date.
All EFT Payments received by Seller PRIOR to the Closing Date ("PRE-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).
On the Closing Date, Seller shall pay to Buyer, Buyer's pro-rated share of the
Pre-Closing Date EFT Payments. (For example, if the Closing Date occurs on
March 15, 1998 and Seller has collected $100,000.00 of EFT Payments on March 1,
1998, then Buyer shall be paid $50,000.00 of such EFT Payments by Seller and
Seller shall be entitled to retain $50,000.00 of such amount.)
(iii) Seller shall instruct its EFT billing service (the "EFT
SERVICE"), in writing if necessary, that, as of the Closing Date, Buyer has the
sole right to all information concerning, and proceeds from, Seller's EfT
system, and that the EFT Service must provide full assistance and access to
Buyer in the collection of EFT Payments. All such proceeds from the EFT system
shall at all times be the sole and exclusive property of Buyer, and shall be
immediately delivered to Buyer.
(iv) Immediately subsequent to the Closing Date,
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Seller shall assist Buyer, if requested by 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.
(v) Seller 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 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. In
the event Seller fails to pay any such improperly debited amounts to Buyer
within three (3) days of notice from Buyer of the improperly debited amounts,
Buyer shall have an immediate right of offset against any payments required to
be made to Seller pursuant to the TSI Note.
(vi) Buyer's rights under this subsection 3(b) shall be subject
to Seller's rights to the Rosenstein Receivables (as defined herein).
c. As of the Closing Date, the parties shall make adjustments
between them for (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, such that Seller will be responsible for items of expense
allocable to 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. All
adjustments made in connection with this Agreement shall be made in accordance
with generally accepted accounting principles, consistently applied ("GAAP").
d. (i) (A) Seller shall allow Buyer to maintain all of
Seller's financial books, records and files at the Demised Premises until Buyer
has satisfactorily completed an audit of all such financial information. Seller
and Seller's accountants shall cooperate with such audit. Such audit shall be
completed no later than sixty (60) days after the Closing Date (the "POST-
CLOSING AUDIT PERIOD").
(B) During the Post-Closing Audit Period, Seller and
its bookkeeper and accountant shall have non-exclusive access to the former
office of Harry Rosenstein for the
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purpose of reviewing Seller's financial books, records and files, and shall have
the right to review and copy all such books, records and files; PROVIDED,
HOWEVER, that such actions do not disrupt the Business.
(C) During the Post-Closing Audit Period, Buyer, at
Buyer's expense, may utilize Seller's accountant to assist in the audit.
(ii) Seller and Seller's accountant will, for a period of
eighteen (18) months after the Closing Date, provide Buyer with access, upon
reasonable notice, to all financial books, records and files of the Business
reasonably necessary for Buyer's orderly operation and continuation of the
Business.
e. Seller shall, for a period of eighteen (18) months after the
Closing Date, maintain its corporate existence and remain a corporation in good
standing in the State of New Jersey.
f. (i) Seller shall have the right to all accounts receivable
collected from members who are delinquent in their payment accounts (each a
"DELINQUENT MEMBER") for any and all amounts relating to periods prior to the
calendar month in which the Closing occurs (the "ROSENSTEIN RECEIVABLES"). On
the Closing Date, Seller and Buyer shall prepare a list of all of the affected
Delinquent Members and the amounts outstanding (the "ROSENSTEIN RECEIVABLE
LIST"). In addition, (i) all delinquent amounts relating to the month in which
the Closing occurs ("CLOSING MONTH DELINQUENT AMOUNTS") shall be collected by
Buyer and, upon receipt of such amounts by Buyer, shall be divided, pro-rata,
amongst Seller and Buyer in accordance with the method set out in subsection
3(b)(ii) of this Agreement, and (ii) on the Closing Date, Seller and Buyer shall
prepare a list of the Closing Month Delinquent Amounts.
(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 Rosenstein
Receivable List, and only upon payment in full of the amount indicated on the
Rosenstein Receivable List shall such Delinquent Member's payments be for
Buyer's account.
(iii) Within the first ten (10) business days of each month
following the Closing Date, Buyer shall pay to Seller all amounts received in
the previous month constituting Rosenstein Receivables. Upon each monthly
payment, Buyer shall also provide Seller with a list indicating the amount
collected from each affected Delinquent Member as of such date.
(iv) For the first ninety (90) days
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following the Closing Date, upon reasonable notice and during regular business
hours, Seller shall have the right to review the data used to revise the
Rosenstein Receivable List and any other information maintained by Buyer which
may indicate amounts owed and amounts paid by Delinquent Members.
(v) Following the Closing Date, each Delinquent Member
listed on the Rosenstein Receivable List shall be "locked-out" of all of the
Ovox Clubs until such Delinquent Member has paid the entire amount indicated on
the Rosenstein Receivable List.
(vi) Notwithstanding anything to the contrary in this
Agreement, Seller shall have the right to collect all accounts receivable
indicated on the Rosenstein Receivable List; PROVIDED, HOWEVER, that Seller may
not use illegal methods or methods inconsistent with the Fair Debt Collection
Practice Act, to the extent that it applies, in collecting such amounts.
g. The terms of this Agreement, including, but not limited to
the Purchase Price, shall be held strictly confidential by the parties and their
affiliates, except as required by law.
4. PURCHASE PRICE.
a. PAYMENT OF PURCHASE PRICE. The purchase price to be paid to
Seller by Buyer shall be ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($1,250,000.00) (the "PURCHASE PRICE"). The Purchase Price shall be paid by
Buyer to Seller, as follows:
(i) On the Closing Date, ONE MILLION ONE HUNDRED EIGHTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($1,187,500.00) (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 wire transfer to an account designated by Seller or by
certified check (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 Ovox Acquisitions, in the principal amount of FOUR
HUNDRED THOUSAND DOLLARS ($400,000.00), payable on the first anniversary of the
Closing Date, of which, the principal amount of SIXTY TWO THOUSAND FIVE HUNDRED
DOLLARS ($62,500.00) shall be payable to Seller.
(iii) (A) In the event that as of the Closing Date, each of the Ovox
Sellers shall have received permanent,
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unconditional certificates of occupancy, certificates of continued occupancy, or
the legal equivalent of the same, or if Seller is unable to obtain the same, a
temporary certificate of occupancy that is contingent only upon grass growing
where required by Marlboro Township (which Seller shall remain bonded for), in
each case, acceptable in form and substance to Buyer's architects and attorneys,
covering the entire demised premises for each of the four Ovox Clubs (each a
"PERMANENT CERTIFICATE OF OCCUPANCY"), all other necessary licenses and permits
relating to the Business and/or the Demised Premises (and have provided proof of
the Permanent Certificates of Occupancy to Buyer), and Seller has received all
required municipal sign-offs for the improvements made to the Demised Premises
since the issuing of the Permanent Certificate of Occupancy, and each of the
provisions of Article 8 (conditions to closing) of each of the Ovox Acquisition
Agreements are fully and completely satisfied, then the principal amount of the
TSI Note shall be decreased from the principal amount of Four Hundred Thousand
Dollars ($400,000.00) to the principal amount of TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000.00) and the closing date consideration to be paid to each of
the Ovox Sellers for each of the four Ovox Clubs shall be increased by THIRTY-
SEVEN THOUSAND FIVE HUNDRED DOLLARS (37,500.00) per club.
(B) In the event that the Ovox Seller's have been unable to
comply with subsection 4(a)(iii)(A) above on or prior to the Closing Date, and,
at any time after the Closing Date, but prior to the due date of the TSI Note,
each of the Ovox Sellers shall receive Permanent Certificates of Occupancy,
covering the entire demised premises for each of the four Ovox Clubs (and have
provided proof of the Permanent Certificates of Occupancy to Buyer), and each of
the post-closing undertakings agreed to by each of the Ovox Sellers shall have
been complied with, then the principal amount of the TSI Note shall, at such
time, be decreased to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and each of the Ovox Sellers shall be paid THIRTY-SEVEN THOUSAND
FIVE HUNDRED DOLLARS (37,500.00) plus the interest accrued on such amount to
such date.
b. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated as follows:
Machinery, Equipment & Furniture $ 473,515.00
Leasehold improvements $ 510,786.00
Membership lists $ 190,345.00
Goodwill $ 75,354.00
TOTAL: $ 1,250,000.00
------ --------------
Buyer and Seller 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, and in accordance with, IRS Form 8594.
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5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as of the date
of this Agreement or such other date as clearly indicated herein, represents and
warrants to Buyer that:
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
necessary 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 action of Seller. This Agreement and each of the Acquisition
Agreements to which Seller is a party will, as of the Closing Date, be duly and
validly executed and delivered by Seller, and Seller has the power to do the
same, and to perform this Agreement and 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 Seller is a party
constitutes a legal, valid, binding and enforceable obligation of such party.
c. This Agreement, the Acquisition Agreements and other
instruments of conveyance and transfer to be executed by Seller 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 nor the consummation of the transactions
contemplated hereby or thereby by Seller 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 is a
party, including without limitation, the Assumed Contracts, or by which Seller
or any of the Purchased Assets is bound, or any judgement or order or any law,
rule, regulation or ordinance, to which the Seller or any of the Purchased
Assets is subject. The provisions of this Section 5(d) are subject to the
Assignment and Assumption of Seller's Lease.
e. Except as set forth on SCHEDULE 5(E), to the best of
Seller's knowledge, Seller has good title to, owns and lawfully possesses all of
the Purchased Assets free and clear of
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all mortgages, liens, pledges, security interests and encumbrances. As of the
Closing Date, all mortgages, liens, pledges, security interests and encumbrances
listed in SCHEDULE 5(E) shall be terminated, and all of the Purchased Assets
shall be free and clear of all mortgages, liens, pledges, security interests and
encumbrances.
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, any of the Purchased Assets or the Business, (ii) to the best of
Seller's knowledge, no action, suit, dispute or governmental, administrative,
arbitration or regulatory proceeding pending or involving Seller or any of the
Purchased Assets or the Business, or threatened against Seller or any of the
Purchased Assets or the Business, and (iii) to the best of Seller's knowledge,
no investigation pending or, threatened against or relating to Seller, any of
the Purchased Assets or the Business (collectively, "PROCEEDINGS"). None of the
Proceedings listed in SCHEDULE 5(F), if adversely determined against Seller, any
of the Purchased Assets or the Business, would have a material adverse effect on
the Purchased Assets or 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
February 13, 1998, and, unless otherwise indicated in SCHEDULE 5(G), to the best
of Seller's knowledge, each Present Membership Agreement is in full force and
effect in accordance with its terms. The net monthly EFT Payment of dues, net
of returns, in January 1998 totalled $76,803.00, and as of February 13, 1998
totalled $71,528.00, not including returns as of February 13, 1998. SCHEDULE
5(G) accurately lists the expiration date of each Present Membership Agreement,
and, to the best of Seller's knowledge, all other information therein is true,
complete and correct;
(i) Except as listed in SCHEDULE 5(G)(I), as of February 13,
1998, there are no renewal rights with respect to the Present Membership
Agreements, except as indicated in the standard membership agreements listed in
SCHEDULE 5(G)(VI), which allow a Present Member to renew or otherwise continue
his or her membership at an advantageous or preferred rate, including, but not
limited to, so-called "guaranteed minimum rate contracts" (a "PREFERRED RENEWAL
PROVISION");
(ii) Except as listed in SCHEDULE 5(G)(II), as of February 13,
1998, there are no provisions in the Present Membership Agreements which entitle
any Present Member to free or discounted personal services or rights ("PERSONAL
SERVICES"), including, without limitation, massage therapy, private training,
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nutrition counseling, special dance classes, karate classes, etc. (each a
"PERSONAL SERVICES DISCOUNT");
(iii) Except as listed in SCHEDULE 5(G)(III), as of February
13, 1998, there are no Present Membership Agreements subject to special
corporate rates, family rates, senior rates and/or group rates;
(iv) There are no outstanding coupons or certificates for
Personal Services issued by Seller, which have been sold or otherwise provided
to any individual (exclusive of any such Personal Services provided for in the
Present Membership Agreements) which would obligate Buyer to provide Personal
Services to any individual after the Closing Date;
(v) Except as listed in SCHEDULE 5(G)(V), as of February 13,
1998, 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 the only membership
agreements Seller has used, which are the only form of membership agreement used
by Seller at any time in connection with past or present members of the
Business;
(vii) As of February 13, 1998, Seller has a total of
approximately TWO THOUSAND FIVE HUNDRED FIFTY-SIX (2,556) active Present Members
of which (A) approximately ONE THOUSAND EIGHTY SIX (1,086) are paid-in-full
memberships, and (ii) approximately ONE THOUSAND FOUR HUNDRED SEVENTY (1,470)
are active, non-delinquent EFT Payment memberships.
(viii) As of the Closing Date, Seller has allowed Buyer to
review true, correct and complete originals, and any and all amendments and
related documents, of all Present Membership Agreements. As of the Closing Date
there shall be no oral modifications with respect to any of the Present
Membership Agreements or oral agreements between Seller and any Present Members
or any third parties which would entitle any such Present Member or third party
to any right customarily held by a Present Member of the Business;
(ix) As of March 15, 1998, to the best of Seller's knowledge,
except as listed in Schedule 5(g)(ix), Seller will have fully paid and satisfied
all refund obligations with respect to any and all past members and Present
Members as required by contract or by applicable law; and
(x) 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.
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h. (i) 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 will not be terminated on or prior to the Closing Date. As of
the Closing Date, Seller has delivered to Buyer true and complete copies of all
contracts, and all amendments thereto, to which it is a party, including, but
not limited to, each of the Assumed Contracts. 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. Except as set forth on
SCHEDULE 5(H)(I), to the best of Seller's knowledge, each of the Assumed
Contracts is valid, binding and enforceable in accordance with its terms.
Except as set forth on SCHEDULE 5(H)(I), to the best of Seller's knowledge, 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 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.
(ii) Except as set forth on SCHEDULE 5(H)(II), as of the Closing
Date, Seller shall not be a party to any contract or lease with respect to
equipment used by, or in the past used by, the Seller or the Business, to which
Buyer shall have any present or future financial or other obligations.
i. (i) Except as set forth on SCHEDULE 5(I), to the best of
Seller's knowledge, 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 under Seller's Lease attributable to Seller, 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. Seller has not received a written
notice of default or notice of cancellation under Seller's Lease which remains
uncured.
(ii) To the best of Seller's knowledge, the Demised Premises, and
all building systems, utilities, fixtures and improvements therein are in good
operating condition and repair, and Seller has made all required maintenance and
repairs thereof, and there are no deferred maintenance obligations.
j. To the best of Seller's knowledge, whether or not there is a
Permanent Certificate of Occupancy, the Demised Premises and the Business are
being operated in compliance with, and neither Seller nor the Business is in
default or violation of, any applicable federal, state or local laws, rules,
regulations, or ordinances including, but not limited to, all parking
requirements applicable to the Demised Premises and the
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Business being conducted at the Demised Premises. The current signage used by
the Seller at the Demised Premises is in compliance with all applicable laws.
To the best of Seller's knowledge, 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
Demised Premises and/or the Business, and such permits, authorizations,
certificates and licenses have been validly issued and are in compliance with
applicable law. 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 Demised Premises or the Business, which violations have not
been rectified.
k. Seller has received no notice of, and has no knowledge of,
any violation of any environmental law or regulation with respect to Seller, the
Purchased Assets 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 or the Business. To the best of Seller's knowledge, there are no
asbestos or asbestos-containing materials located within the Demised Premises in
violation of applicable law.
l. (i) Except as set forth in SCHEDULE 5(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) has not announced
or otherwise made a commitment to create any bonus (except for an oral
understanding that Seller will review certain employees' performance each year
and consider providing a bonus to each such employee), 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 ("ERISA")); PROVIDED, HOWEVER, that Seller does
maintain a 401(k) plan with respect to certain of its employees. Except as set
forth on SCHEDULE 5(L)(II), 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
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benefit plan"). To the best of Seller's knowledge, 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. To the best of Seller's knowledge, 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 (A)
the employment of all of its employees and (B) all consulting arrangements or
agreements with consultants to the Business.
(iv) The execution and delivery of this Agreement by Seller 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
reasonably practicable, Seller shall pay all salaries, benefits, penalties,
employment taxes, 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 such third parties for such amounts.
(vi) SCHEDULE 5(L)(VI) sets forth the list of all employees
(including their titles) and consultants to be terminated as of the Closing
Date, and the salaries, bonuses and all applicable withholding taxes with
respect to each such person.
m. Except as set forth on SCHEDULE 5(M), neither Seller nor any
of Seller's Principals has received 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, 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. To the best of Seller's knowledge, all Federal, state and
local taxes (including, without limitation, all sales tax due on Present
Membership Agreements, if any) or assessments due and payable with respect of
Seller for all
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periods, including interest and penalties, have been paid, or shall be timely
paid by Seller when required, 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. To the
best of Seller's knowledge, Seller has not failed to file timely any tax
returns, tax reports or other related tax information required by law to be
filed. To the best of Seller's knowledge, no federal, state or local government
entity is performing, or has threatened to perform, an audit of Seller for any
year in which Seller has occupied the Demised Premises. To the best of Seller's
knowledge, Seller has paid, or will timely pay when due, 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 Closing Date, Seller is not Insolvent.
(ii) The transactions contemplated hereby have not been
planned and will not be effected with intent 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 copies of the
following financial information: (i) Seller's 1996 federal and state tax
returns, and (ii) Seller's 1997 balance sheet and operating statements, covering
the period from January 1, 1997 to December 31, 1997 ("SELLER'S FINANCIALS"),
which were, to the best of Seller's knowledge, complete and correct as of the
date they were supplied. Seller's Financials for 1997 are being audited by
Buyer and Seller represents and warrants that Buyer will discover no material
adverse change.
q. Except as set forth on SCHEDULE 5(Q), as of
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the Closing Date Seller shall have paid-in-full all contractors,
sub-contractors, materialmen, suppliers, expediters, attorneys, architects and
other service providers (collectively, "CONTRACTORS"), for any and all work
conducted prior to the Closing Date with respect to Seller, the Business or the
Demised Premises, 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, to the best of Seller's knowledge, all contractors shall
be paid in full, and no Contractor shall have the legal right to file a
mechanic's or materialmen's lien against Seller, the Business, the Demised
Premises or the Purchased Assets.
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 name "Ovox Fitness & Sports Center" and
"Powerhouse Gym", 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. Seller has conducted the Business in the ordinary course
since December 31, 1997, and has not incurred any debt or sold any discounted
present memberships, except in the ordinary course of the Business or sold any
services or goods for less than fair market value since such date.
t. Except as listed on SCHEDULE 5(T) hereof, to the best of
Seller's knowledge, there are no new health club facilities under construction
or scheduled to be opened within the next twelve (12) months within ten
(10) miles of the Demised Premises.
u. Except as listed on SCHEDULE 5(U) 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(u) have been amended, modified,
extended or otherwise altered, except as indicated in SCHEDULE 5(U).
v. To the best of Seller's knowledge, no representation,
warranty or other statement of Seller 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.
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w. The representations and warranties contained in this ARTICLE
5 shall survive the Closing Date for a period of eighteen (18) month; provided,
however, that Seller's representation in Section 5(n) (Taxes) hereof shall
survive the Closing Date indefinitely.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller and Seller's Principals as follows:
a. Buyer is a corporation 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 hereby have been
duly and validly authorized by all corporate action of Buyer. 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 nor 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 incorporation or
by-laws 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. The representations and warranties contained in this ARTICLE
6 shall survive the Closing Date for a period of eighteen (18) months.
7. DUE DILIGENCE PERIOD
a. BUYER'S RIGHTS DURING DUE DILIGENCE PERIOD. During the Due
Diligence Period (as defined herein), Seller agrees to allow Buyer to perform
all required investigations and/or due diligence with respect to the Business,
the Demised Premises, Seller and the Purchased Assets, including, but not
limited to each of the following activities:
(i) Buyer and its auditors shall have the
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unimpeded right to commence and perform an audit of the financial books and
records of Seller; and
(ii) Buyer shall have the unimpeded right to continue its
due diligence investigation commenced prior to signing this Agreement,
including, but not limited to, reviewing all documents, agreements,
correspondence, invoices, tax documents, etc. deemed relevant by Buyer;
provided, however, that Buyer shall conduct its due diligence investigation at
all times in a manner that will minimize disruption to the Business; and
(iii) Buyer shall have the right to negotiate with the
Landlord, with respect to the terms and conditions of the New Lease/Lease
Modification, as applicable.
b. SELLER'S OBLIGATIONS DURING DUE DILIGENCE PERIOD. During
the Due Diligence Period, during the normal hours of the Business (including
weekends), Seller shall allow Buyer and its representatives access to the
Demised Premises and to the books and records of the Business, and shall provide
reasonable assistance to Buyer and its representatives in their due diligence
investigation.
c. TERMINATION OF AGREEMENT DURING DUE DILIGENCE PERIOD. If,
for any reason whatsoever, Buyer, in its sole and exclusive discretion, shall be
dissatisfied, in whole or in part, with the results of its due diligence
investigation, it may, at any time prior to the Due Diligence Termination Date,
terminate this Agreement by written notice of termination ("TERMINATION NOTICE")
to Seller's attorney. For purposes of this Section 7(c), fax notice, to the fax
number indicated in Article 14 of this Agreement, shall be acceptable. If Buyer
elects to terminate this Agreement as aforesaid, this Agreement shall be null
and void and be of no further force and effect, and neither party shall have any
further obligations to the other party. If a Termination Notice is not sent to
Seller's attorney on or before the Due Diligence Termination Date, this
Agreement shall continue in full force and effect in accordance with its terms.
Termination of this Agreement in accordance with this provision shall also
constitute termination of the other three Ovox Acquisition Agreements.
8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated under this Agreement are subject to the
satisfaction 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 Seller is a party,
certified by
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the Secretary of Seller;
(ii) On the Closing Date, Seller AND SELLER'S PRINCIPALS
shall have represented in writing that, as of the Closing Date, each of the
representations in Article 5 of this Agreement listed in this Subsection
8(a)(ii) are true and accurate as of such date, including: Sections 5(a), 5(b),
5(c), 5(d), 5(e), 5(f), the third sentence of 5(g), 5(g)(iv), 5(g)(vi),
5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j), 5(k), 5(l), 5(m), 5(n), 5(o),
the second sentence of 5(q), 5(r), 5(s), 5(t) and 5(u), each such representation
shall be true and correct as of the Closing Date, and each such representation
shall survive the Closing Date for a period of eighteen (18) months, except for
the representation in Section 5(n), which shall survive the Closing Date
indefinitely;
b. Seller, and/or Seller's Principals, as the case may be,
shall have executed and delivered to Buyer the Bill 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;
c. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
d. Seller, 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 conducing the activities presently
conducted by Seller at the Demised Premises and a Permanent Certificate of
Occupancy has been issued. In the event that Buyer, in its sole discretion
agrees to complete the transactions contemplated by this Agreement despite
Seller's inability to obtain a Permanent Certificate of Occupancy, Seller shall,
at Seller's sole expense, including, but not limited to the costs, fees and
expenses for architects, engineers, attorneys, expediters, and construction,
take all actions and spend all sums necessary to secure a Permanent Certificate
of Occupancy for the Demised Premises. In the event that Seller does not obtain
the Permanent Certificate of Occupancy on or prior to the payment date of the
TSI Note (the first anniversary of the Closing Date), Buyer, may direct TSI to
suspend payment of the TSI Note (with no interest accruing) until such Permanent
Certificate of Occupancy is received by Buyer. In addition, Seller must provide
"as-built" plans to Buyer on, or prior to, the Closing Date.
e. (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
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the other Ovox Acquisition Agreements, ARE FULLY AND COMPLETELY SATISFIED, and
(B) affiliates of Buyer ("BUYER'S AFFILIATES") and the Ovox Sellers shall have
concluded each of the Related Ovox Acquisitions on the Closing Date;
f. The Bank Facility and all related guaranties shall have been
terminated and Seller shall have provided Buyer with proof that no related
security agreement, UCC financing statement, or other document evidencing
indebtedness, is in effect with respect to the Purchased Assets;
g. Any and all installment contracts of Seller shall have been
paid in full with no additional amounts due thereunder, and Seller shall have
provided Buyer proof, satisfactory to Buyer, that all such amounts have been
paid and that no obligations remain outstanding with respect to the relevant
equipment provider. In addition, no security agreement, UCC financing
statement, or other document evidencing indebtedness, shall exist with respect
to such installment contracts;
h. Seller shall have provided Buyer with (i) 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, the Bank, or any other third parties (including, but not limited to
equipment lessors and equipment vendors) in the Purchased Assets, and/or (ii)
pay-off letters from such third parties indicating the amount owed to such third
party on the Closing Date for payment in full of all amounts owed with respect
to the affected Purchased Assets;
i. All material consents of third parties necessary on the part
of Buyer, Seller 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;
j. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
k. Seller's affiliate, Ovox Fitness & Sports Corp., shall have
provided Buyer and each of Buyer's Affiliates a six (6) month royalty-free
license for the use of the "Ovox" name and trademark, substantially and
materially in the form of EXHIBIT G hereto;
l. Seller shall have paid to Buyer, Buyer's 1997-1998
Paid-in-Full Amount, as defined in Section 3(a) hereof, in the amount of Forty
Thousand Dollars ($40,000.00);
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m. Seller shall have paid to Buyer, Buyer's pro-rated share of
the Pre-Closing Date EFT Payments, as defined in Section 3(b)(ii) hereof;
n. Seller shall have assigned to Buyer all of its right and
interest to each of the non-compete agreements listed in SCHEDULE 5(L)(I),
between Seller and certain of its employees and consultants;
o. Seller shall have assigned to Buyer, to the extent
assignable, 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;
p. Seller shall have delivered to Buyer all other agreements,
consents and instruments required to be delivered to Buyer under this Agreement;
q. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
r. Seller and Seller's Principals shall agree in writing not to
conduct any negotiations, or enter into any agreement with the Sam's Landlord
(as defined herein) with respect to the Tyces Lane Premises (as defined herein);
s. Seller and Seller's Principals shall agree in writing to
provide Buyer with Seller's interim financials for the period from January 1,
1998 and the Closing Date, no later than thirty (30) days after the Closing
Date; and
t. Seller shall have paid to Buyer, Buyer's pro-rated share of
the license fee with respect to each of the Space Licenses listed in SCHEDULE
5(U) hereof.
9. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
to consummate the transactions contemplated under this Agreement are subject to
the satisfaction of the
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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;
(ii) TSI shall have delivered to Seller resolutions
authorizing the execution and delivery of the TSI Note, certified by the
Secretary of Buyer;
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. 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;
d. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
e. Buyer's Affiliates shall have completed each of the Related
Ovox Acquisitions as of the Closing Date;
f. All material consents of third parties necessary on the part
of Buyer, Seller 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;
g. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
h. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially
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effect the value of the Purchased Assets or Buyer's ability to profitably own
and operate the Business, (ii) no investigation by any governmental or
regulatory authority shall have been commenced, and no action, suit or
proceeding by any third party or 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;
i. Buyer shall have performed, satisfied and complied with all
of the covenants, conditions and provisions of this Agreement to be performed,
satisfied or complied with by Buyer; and
j. In connection with this Agreement and the other Ovox
Acquisition Agreements, Buyer's Affiliates' parent, TSI, shall have delivered to
Seller's Principals a total of ten (10) complimentary, non-transferable,
passport memberships, which memberships shall be valid for as long as TSI
remains directly, or indirectly, the owner of any or all of Buyer's Affiliates.
10. INDEMNIFICATION.
a. After the Closing Date, Seller and 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:
(i) any breach of the representations and warranties
made by Seller in or pursuant to this Agreement or any of the Acquisition
Agreements; or
(ii) the failure by Seller 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
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(iii) any and all obligations of Seller, including, but
not limited to, Seller's obligations to its 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
(iv) any and all liability with respect to the litigation
indicated on Schedule 5(f) hereof.
b. After the Closing Date, Buyer shall indemnify, defend and hold
Seller and its directors, officers, trustees, employees, agents and affiliates
and Seller's Principals (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:
(i) a breach of the representations and warranties made
by (A) Buyer in or pursuant to this Agreement or any of the Acquisition
Agreements and (B) TSI in or pursuant to the TSI Note; or
(ii) the failure by (A) 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, and (B) TSI to perform or
observe any of the covenants and agreements to be performed or observed by TSI
under the TSI Note; or
(iii) any and all obligations of Buyer including any and
all obligations under the assumed contracts, 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
under this Agreement or the Acquisition Agreements.
c. The provisions of this SECTION 10 shall survive the Closing Date
for a period of three (3) years.
d. 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,
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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.
e. RIGHT OF OFFSET. In addition to any other rights Buyer may
have under this Agreement or in accordance with applicable law, in the event
that Seller and/or Seller's Principals fail 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 of any of the representations and
warranties set forth herein), Buyer, TSI and Buyer's Indemnities shall have an
immediate right of offset against any payments required to be made pursuant to
the TSI Note (i) to Seller or (ii) to the other entities controlled by Seller's
Principals, in accordance with the Related Ovox Acquisitions.
11. INTERIM PERIOD. (a) Seller agrees that, during the Interim
Period, it shall:
(i) conduct the Business in the ordinary course consistent
with prior practice, including, but not limited to prior membership sales
practice, and shall not incur any additional debt outside of the ordinary
course, issue any new complimentary or discounted memberships or make any
modifications to the Business as conducted as of the date of this Agreement,
unless previously agreed to by the parties in writing; and
(ii) preserve its business organization intact and shall use
its best efforts to preserve for Buyer the good will of (A) the Present Members,
(B) the suppliers of the Business, and (C) any third parties related to the
Business; and
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(iii) (A) not enter into negotiations with, or provide any
information to, any third parties interested in the possible acquisitions of any
or all of the Ovox Clubs, and, (B) unless Buyer is in breach of this Agreement
or has terminated this Agreement, Seller may not terminate this Agreement
without Buyer's prior written approval.
(b) Buyer and Seller agree that during the Interim Period
they shall work together to provide appropriate notice and complete necessary
filing with respect to each of the following:
(i) 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) letter of non-applicability to the New Jersey
Department of Environmental Protection, in accordance with the Industrial Site
Recovery Act; and
(iii) notice of Seller's intention to sell a health club
facility to the Division of Consumer Affairs of the State of New Jersey; and
(iv) any and all other necessary or appropriate filings with
federal, state or local authorities.
(c) Buyer and Seller agree that during the Interim Period:
(i) Buyer, or Buyer's parent company, TSI, shall have the
exclusive right to negotiate with Sam's East, Inc. (the "SAM'S LANDLORD"), for a
lease for the premises located at The Shopping Center located on the corner of
Highway 18 and Tyces Lane in East Brunswick, New Jersey (the "TYCES LANE
PREMISES"), which will allow an affiliate of Buyer to establish a health club
facility at such location; and
(ii) Buyer shall continue to have the right to negotiate
with the Landlord, with respect to the terms and conditions of the New
Lease/Lease Modification, as applicable.
12. CLOSING DATE ACTIONS. (a) On the Closing Date, Seller and Buyer
agree, in good faith, to perform each of the following:
(i) work together to prepare the Rosenstein Receivable List and
the list of Closing Month Delinquent Amounts;
(ii) prepare and execute a side-letter agreement with respect to
post-closing undertakings of Seller, and other post-closing matters, as deemed
necessary by the parties; and
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(iii) work together to complete all other actions reasonably
necessary to complete the transactions contemplated herein.
13. LIQUIDATED DAMAGES. (a) Notwithstanding anything to the contrary
in this Agreement, in the event that Buyer does not provide a Termination Notice
to Seller's Attorney on or prior to the Due Diligence Termination Date, AND, as
of the Closing Date, all conditions listed in Article 8 of this Agreement have
been fully satisfied and all conditions listed in Article 8 of each of the other
Ovox Acquisition Agreements have been fully satisfied, AND each of the Ovox
Sellers is otherwise ready, willing and able to conclude the transactions
contemplated by the Ovox Acquisition Agreements, THEN, if Buyer, on the Closing
Date, defaults in its obligation to complete the transactions contemplated
hereby, Seller's sole remedy shall be the right to receive a payment of One
Hundred Thousand Dollars ($100,000.00) (the "LIQUIDATED DAMAGES AMOUNT") from
Buyer as liquidated damages, it being agreed that Seller's damages in case of
Buyer's default might be impossible to ascertain, and that the Liquidated
Damages Amount constitutes a fair and reasonable amount of damages under the
circumstances and is not a penalty.
(b) Upon the signing of this Agreement, TSI, the parent company
of Buyer, shall deliver to Seller a guaranty agreement (the "TSI GUARANTY"),
solely with respect to the Liquidated Damages Amount.
14. 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:
Harry Rosenstein
21 Manitoba Way
Marlboro, New Jersey 07746
Fax: 732-577-9832
with a copy to:
Robert Goldschlag, Esq.
65 South Street
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Freehold, New Jersey 07728
Fax: 732-577-9832
To Buyer:
TSI Marlboro, Inc.
c/o Town Sports International, Inc.
888 Seventh Avenue
New York, New York 10106
Fax: 212-246-8422
Attention: Alexander Alimanestianu
with a copy to:
Donovan & Giannuzzi
405 Park Avenue
New York, New York 10022
Fax: 212-223-0966
Attention: Nicholas T. Donovan, 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 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 the subject matter of this Agreement.
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 be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller and Buyer.
g. GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
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(ii) Any dispute, claim or controversy arising out of or
relating to this Agreement or the Acquisition Agreements, including, but not
limited to Buyer's and TSI's right of offset in Section 10(e) hereof, shall be
settled by arbitration in Monmouth County, New Jersey in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, or any
successor thereof. The decision and award of the arbitration shall be final and
conclusive on the parties, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
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.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed
and delivered by the parties as of the date first above written.
EXERCISE INC. d/b/a
Ovox Fitness & Sports Center of Marlboro
By: /s/ Harry Rosenstein
--------------------
Name: Harry Rosenstein
Title:President
TSI MARLBORO, INC.
By: /s/ Alexander Alimanestianu
---------------------------
Alexander Alimanestianu
Executive Vice President
With Respect to Section 10(a):
/s/ Harry Rosenstein
- ---------------------------
HARRY ROSENSTEIN
/s/ Phyllis Rosenstein
- ---------------------------
PHYLLIS ROSENSTEIN
/s/ Stuart Rosenstein
- ---------------------------
STUART ROSENSTEIN
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EXHIBIT 99.3
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 27, 1998, by and among VIP
FITNESS, INC. d/b/a OVOX FITNESS & SPORTS CENTER OF MATAWAN, a New Jersey
corporation, located at the intersection of Disbrow Road & State Highway 34, Old
Bridge, New Jersey ("SELLER") and TSI MATAWAN, INC., a Delaware corporation,
with an address c/o Town Sports International, Inc., 888 Seventh Avenue, New
York, New York 10106 ("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 Bill
of Sale, the Assignment and Assumption Agreement, the Assignment and Assumption
of Seller's Lease, 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, whether owned or leased 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. "BANK FACILITY" shall mean the loan documents, dated as of
April 24, 1997, by and between Ultrafit, Inc. and First Union National Bank
("BANK"), to which each of the other Ovox Sellers and each of Seller's
Principals are guarantors.
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 Donovan & Giannuzzi,
405 Park Avenue, New York, New York, 11th Floor.
g. "CLOSING DATE" shall mean the close of
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business on Wednesday, March 25, 1998.
h. "DEMISED PREMISES" shall mean that certain premises located
at the intersection of Disbrow Road & State Highway 34, Old Bridge, New Jersey,
leased to Seller pursuant to the Seller's Lease, as more particularly described
therein.
i. "DUE DILIGENCE PERIOD" shall mean the period of time from
the date of this Agreement to the close of business on Friday, March 13, 1998.
j. "DUE DILIGENCE TERMINATION DATE" shall mean 5:00 pm, New
York time, on Friday, March 13, 1998.
k. "INTERIM PERIOD" shall mean the period of time from the date
of this Agreement to the close of business on the Closing Date.
l. "LANDLORD" shall mean The Racquet Place, having an office at
the intersection of Disbrow Road & State Highway 34, Old Bridge, New Jersey.
m. "LEASE MODIFICATION" shall mean the owner's consent and
lease modification agreement, dated the Closing Date, between Landlord and
Buyer, amending and modifying Seller's Lease, substantially and materially in
the form attached hereto as EXHIBIT F.
n. "OVOX ACQUISITION AGREEMENTS" shall collectively mean this
Agreement and each of the three other asset purchase agreements used in
connection with the Related Ovox Acquisitions.
o. "OVOX CLUBS" shall collectively mean each of the four (4)
health club businesses owned and operated by the Ovox Sellers.
p. "OVOX SELLERS" shall collectively mean VIP Fitness, Inc.
(Matawan), Exercise Inc. (Marlboro), Ultrafit, Inc. (Freehold) and Maxifit, Ltd.
(Old Bridge).
q. "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
of such Present Members and Seller.
r. "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 Agreements.
s. "PURCHASED ASSETS" shall mean, collectively,
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(i) the Assumed Contracts, including, but not limited to, Seller's Lease and the
Present Membership Agreements, and (ii) the Assets.
t. "RELATED OVOX ACQUISITIONS" shall mean the acquisition by
affiliates of TSI (as defined herein) on the Closing Date of Seller's
Principals' health club facilities located in (i) Freehold, New Jersey, (ii)
Matawan, New Jersey, (iii) Morganville, New Jersey (the so-called "Marlboro"
club) and (iv) Old Bridge, New Jersey (collectively, the "RELATED OVOX CLUBS").
u. "SELLER'S LEASE" shall mean the lease, dated April 8, 1995,
between Landlord and Seller, with respect
to the Demised Premises.
v. "SELLER'S PRINCIPALS" shall mean Harry Rosenstein, Phyllis
Rosenstein and Stuart Rosenstein, the sole shareholders of Seller.
2. SALE AND PURCHASE OF PURCHASED ASSETS; ACQUISITION AGREEMENTS. On
the Closing Date, subject to the terms and conditions of this Agreement, and in
reliance on the representations, warranties, undertakings and agreements made
hereunder, and in consideration of the purchase by Buyer described below and the
assumption of certain liabilities of Seller by Buyer:
a. Seller hereby agrees 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 bill of sale, in the form
of EXHIBIT A attached hereto (the "BILL 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 hereby agrees to assign to Buyer all of its 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, in the form of EXHIBIT B attached hereto (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT");
c. Seller hereby agrees to assign to Buyer all of its 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
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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, in the form of EXHIBIT C attached hereto (the
"ASSIGNMENT AND ASSUMPTION OF SELLER'S LEASE");
d. Seller agrees to execute and deliver to Buyer, and Seller
agrees to have each of Seller's Principals execute and deliver to Buyer, on the
Closing Date, a non-competition agreement, in the form of EXHIBIT D attached
hereto (the "NON-COMPETITION AGREEMENT");
e. 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 Seller and the owners of the Related Ovox Clubs, a
single, non-transferable promissory note in accordance with the terms of this
Agreement and the terms of the asset purchase agreements in the Related Ovox
Acquisitions, 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
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 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. To the extent that any consents, waivers or approvals necessary to
convey any item of the Purchased Assets to Buyer are not obtained prior to the
Closing Date, and Buyer agrees to nonetheless consummate the transactions
contemplated hereby, Seller shall use its best efforts to: (i) provide to
Buyer, at the request of Buyer, the benefits of any such Purchased Asset, and
hold the same in trust for Buyer, if so requested by Buyer; (ii) cooperate in
any reasonable and lawful arrangement approved by Buyer, designed to provide
such benefits to Buyer; and (iii) enforce and perform, at the request of Buyer
and for the account of Buyer, any rights or obligations of Seller arising from
any such Purchased Asset against or in respect of any third person (including a
government or governmental unit), including the
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right to elect to terminate any contract, arrangement or agreement in accordance
with the terms thereof upon the advice of Buyer; and
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: (732) 583-3990.
3. MEMBERSHIPS; BUYER'S TRANSFER SYSTEM; ADJUSTMENTS.
Notwithstanding anything to the contrary in this Agreement or in the Acquisition
Agreements, the Buyer and Seller agree as follows:
a. With respect to revenues received by Seller from so-called
"paid-in-full" Present Members who joined or renewed their Present Memberships
on or after September 1, 1997 and up to the Closing Date, and in full
satisfaction thereof, Seller shall pay to Buyer on the Closing Date the amount
of Twenty Thousand Dollars ($20,000.00) ("BUYER'S 1997-1998 PAID-IN-FULL
AMOUNT").
b. (i) 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")
made by Present Members, received by Seller or Buyer after the Closing Date.
All EFT Payments received by Seller PRIOR to the Closing Date ("PRE-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).
On the Closing Date, Seller shall pay to Buyer, Buyer's pro-rated share of the
Pre-Closing Date EFT Payments. (For example, if the Closing Date occurs on
March 15, 1998 and Seller has collected $100,000.00 of EFT Payments on March 1,
1998, then Buyer shall be paid $50,000.00 of such EFT Payments by Seller and
Seller shall be entitled to retain $50,000.00 of such amount.)
(iii) Seller shall instruct its EFT billing service (the "EFT
SERVICE"), in writing if necessary, that, as of the Closing Date, Buyer has the
sole right to all information concerning, and proceeds from, Seller's EfT
system, and that the EFT Service must provide full assistance and access to
Buyer in the collection of EFT Payments. All such proceeds from the EFT system
shall at all times be the sole and exclusive property of Buyer, and shall be
immediately delivered to Buyer.
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(iv) Immediately subsequent to the Closing Date, Seller shall
assist Buyer, if requested by 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.
(v) Seller 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 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. In
the event Seller fails to pay any such improperly debited amounts to Buyer
within three (3) days of notice from Buyer of the improperly debited amounts,
Buyer shall have an immediate right of offset against any payments required to
be made to Seller pursuant to the TSI Note.
(vi) Buyer's rights under this subsection 3(b) shall be subject
to Seller's rights to the Rosenstein Receivables (as defined herein).
c. As of the Closing Date, the parties shall make adjustments
between them for (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, such that Seller will be responsible for items of expense
allocable to 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. All
adjustments made in connection with this Agreement shall be made in accordance
with generally accepted accounting principles, consistently applied ("GAAP").
d. (i) (A) Seller shall allow Buyer to maintain all of
Seller's financial books, records and files at the Demised Premises until Buyer
has satisfactorily completed an audit of all such financial information. Seller
and Seller's accountants shall cooperate with such audit. Such audit shall be
completed no later than sixty (60) days after the Closing Date (the "POST-
CLOSING AUDIT PERIOD").
(B) During the Post-Closing Audit Period, Seller and
its bookkeeper and accountant shall have
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non-exclusive access to the former office of Harry Rosenstein for the purpose of
reviewing Seller's financial books, records and files, and shall have the right
to review and copy all such books, records and files; PROVIDED, HOWEVER, that
such actions do not disrupt the Business.
(C) During the Post-Closing Audit Period, Buyer, at
Buyer's expense, may utilize Seller's accountant to assist in the audit.
(ii) Seller and Seller's accountant will, for a period of
eighteen (18) months after the Closing Date, provide Buyer with access, upon
reasonable notice, to all financial books, records and files of the Business
reasonably necessary for Buyer's orderly operation and continuation of the
Business.
e. Seller shall, for a period of eighteen (18) months after the
Closing Date, maintain its corporate existence and remain a corporation in good
standing in the State of New Jersey.
f. (i) Seller shall have the right to all accounts receivable
collected from members who are delinquent in their payment accounts (each a
"DELINQUENT MEMBER") for any and all amounts relating to periods prior to the
calendar month in which the Closing occurs (the "ROSENSTEIN RECEIVABLES"). On
the Closing Date, Seller and Buyer shall prepare a list of all of the affected
Delinquent Members and the amounts outstanding (the "ROSENSTEIN RECEIVABLE
LIST"). In addition, (i) all delinquent amounts relating to the month in which
the Closing occurs ("CLOSING MONTH DELINQUENT AMOUNTS") shall be collected by
Buyer and, upon receipt of such amounts by Buyer, shall be divided, pro-rata,
amongst Seller and Buyer in accordance with the method set out in subsection
3(b)(ii) of this Agreement, and (ii) on the Closing Date, Seller and Buyer shall
prepare a list of the Closing Month Delinquent Amounts.
(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 Rosenstein
Receivable List, and only upon payment in full of the amount indicated on the
Rosenstein Receivable List shall such Delinquent Member's payments be for
Buyer's account.
(iii) Within the first ten (10) business days of each month
following the Closing Date, Buyer shall pay to Seller all amounts received in
the previous month constituting Rosenstein Receivables. Upon each monthly
payment, Buyer shall also provide Seller with a list indicating the amount
collected from each affected Delinquent Member as of such date.
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(iv) For the first ninety (90) days following the Closing
Date, upon reasonable notice and during regular business hours, Seller shall
have the right to review the data used to revise the Rosenstein Receivable List
and any other information maintained by Buyer which may indicate amounts owed
and amounts paid by Delinquent Members.
(v) Following the Closing Date, each Delinquent Member
listed on the Rosenstein Receivable List shall be "locked-out" of all of the
Ovox Clubs until such Delinquent Member has paid the entire amount indicated on
the Rosenstein Receivable List.
(vi) Notwithstanding anything to the contrary in this
Agreement, Seller shall have the right to collect all accounts receivable
indicated on the Rosenstein Receivable List; PROVIDED, HOWEVER, that Seller may
not use illegal methods or methods inconsistent with the Fair Debt Collection
Practice Act, to the extent that it applies, in collecting such amounts.
g. The terms of this Agreement, including, but not limited to
the Purchase Price, shall be held strictly confidential by the parties and their
affiliates, except as required by law.
4. PURCHASE PRICE.
a. PAYMENT OF PURCHASE PRICE. The purchase price to be paid to
Seller by Buyer shall be TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($2,250,000.00) (the "PURCHASE PRICE"). The Purchase Price shall be paid by
Buyer to Seller, as follows:
(i) On the Closing Date, TWO MILLION ONE HUNDRED THIRTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($2,137,500.00) (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 wire transfer to an account designated by Seller or by
certified check (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 Ovox Acquisitions, in the principal amount of FOUR
HUNDRED THOUSAND DOLLARS ($400,000.00), payable on the first anniversary of the
Closing Date, of which, the principal amount of ONE HUNDRED TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($112,500.00) shall be payable to Seller.
(iii) (A) In the event that as of the Closing Date,
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each of the Ovox Sellers shall have received permanent, unconditional
certificates of occupancy, certificates of continued occupancy, or the legal
equivalent of the same, acceptable in form and substance to Buyer's architects
and attorneys, covering the entire demised premises for each of the four Ovox
Clubs (each a "PERMANENT CERTIFICATE OF OCCUPANCY"), all other necessary
licenses and permits relating to the Business and/or the Demised Premises (and
have provided proof of the Permanent Certificates of Occupancy to Buyer), and
Seller has received all required municipal sign-offs for the improvements made
to the Demised Premises since the issuing of the Permanent Certificate of
Occupancy do prior to the Closing Date, and each of the provisions of Article 8
(conditions to closing) of each of the Ovox Acquisition Agreements are fully and
completely satisfied, then the principal amount of the TSI Note shall be
decreased from the principal amount of Four Hundred Thousand Dollars
($400,000.00) to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and the closing date consideration to be paid to each of the Ovox
Sellers for each of the four Ovox Clubs shall be increased by THIRTY-SEVEN
THOUSAND FIVE HUNDRED DOLLARS (37,500.00) per club.
(B) In the event that the Ovox Seller's have been unable to
comply with subsection 4(a)(iii)(A) above on or prior to the Closing Date, and,
at any time after the Closing Date, but prior to the due date of the TSI Note,
each of the Ovox Sellers shall receive Permanent Certificates of Occupancy,
covering the entire demised premises for each of the four Ovox Clubs (and have
provided proof of the Permanent Certificates of Occupancy to Buyer), and each of
the post-closing undertakings agreed to by each of the Ovox Sellers shall have
been complied with, then the principal amount of the TSI Note shall, at such
time, be decreased to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and each of the Ovox Sellers shall be paid THIRTY-SEVEN THOUSAND
FIVE HUNDRED DOLLARS (37,500.00) plus the interest accrued on such amount to
such date.
b. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated as follows:
Machinery, Equipment & Equipment $ 187,069.00
Leasehold improvements $ 83,382.00
Membership lists $ 254,142.00
Goodwill $ 1,725,407.00
TOTAL: $ 2,250,000.00
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Buyer and Seller 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, and in accordance with, IRS Form 8594.
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5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as of the date
of this Agreement or such other date as clearly indicated herein, represents and
warrants to Buyer that:
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
necessary 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 action of Seller. This Agreement and each of the Acquisition
Agreements to which Seller is a party will, as of the Closing Date, be duly and
validly executed and delivered by Seller, and Seller has the power to do the
same, and to perform this Agreement and 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 Seller is a party
constitutes a legal, valid, binding and enforceable obligation of such party.
c. This Agreement, the Acquisition Agreements and other
instruments of conveyance and transfer to be executed by Seller 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 nor the consummation of the transactions
contemplated hereby or thereby by Seller 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 is a
party, including without limitation, the Assumed Contracts, or by which Seller
or any of the Purchased Assets is bound, or any judgement or order or any law,
rule, regulation or ordinance, to which the Seller or any of the Purchased
Assets is subject. The provisions of this Section 5(d) are subject to the
Assignment and Assumption of Seller's Lease.
e. Except as set forth on SCHEDULE 5(E), to the best of
Seller's knowledge, Seller has good title to, owns and lawfully possesses all of
the Purchased Assets free and clear of all mortgages, liens, pledges, security
interests and
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encumbrances. As of the Closing Date, all mortgages, liens, pledges, security
interests and encumbrances listed in SCHEDULE 5(E) shall be terminated, and all
of the Purchased Assets shall be free and clear of all mortgages, liens,
pledges, security interests and encumbrances.
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, any of the Purchased Assets or the Business, (ii) to the best of
Seller's knowledge, no action, suit, dispute or governmental, administrative,
arbitration or regulatory proceeding pending or involving Seller or any of the
Purchased Assets or the Business, or threatened against Seller or any of the
Purchased Assets or the Business, and (iii) to the best of Seller's knowledge,
no investigation pending or, threatened against or relating to Seller, any of
the Purchased Assets or the Business (collectively, "PROCEEDINGS"). Except for
the Neu Litigation (as defined herein), none of the Proceedings listed in
SCHEDULE 5(F), if adversely determined against Seller, any of the Purchased
Assets or the Business, would have a material adverse effect on the Purchased
Assets or 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
February 13, 1998, and, unless otherwise indicated in SCHEDULE 5(G), to the best
of Seller's knowledge, each Present Membership Agreement is in full force and
effect in accordance with its terms. The net monthly EFT Payment of dues, net
of returns, in January 1998 totalled $108,620.00, and as of February 13, 1998
totalled $100,865.00, not including returns as of February 13, 1998. SCHEDULE
5(G) accurately lists the expiration date of each Present Membership Agreement,
and, to the best of Seller's knowledge, all other information therein is true,
complete and correct;
(i) Except as listed in SCHEDULE 5(G)(I), as of February 13,
1998, there are no renewal rights with respect to the Present Membership
Agreements, except as indicated in the standard membership agreements listed in
SCHEDULE 5(G)(VI), which allow a Present Member to renew or otherwise continue
his or her membership at an advantageous or preferred rate, including, but not
limited to, so-called "guaranteed minimum rate contracts" (a "PREFERRED RENEWAL
PROVISION");
(ii) Except as listed in SCHEDULE 5(G)(II), as of February 13,
1998, there are no provisions in the Present Membership Agreements which entitle
any Present Member to free or discounted personal services or rights ("PERSONAL
SERVICES"), including, without limitation, massage therapy, private training,
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nutrition counseling, special dance classes, karate classes, etc. (each a
"PERSONAL SERVICES DISCOUNT");
(iii) Except as listed in SCHEDULE 5(G)(III), as of February
13, 1998, there are no Present Membership Agreements subject to special
corporate rates, family rates, senior rates and/or group rates;
(iv) There are no outstanding coupons or certificates for
Personal Services issued by Seller, which have been sold or otherwise provided
to any individual (exclusive of any such Personal Services provided for in the
Present Membership Agreements) which would obligate Buyer to provide Personal
Services to any individual after the Closing Date;
(v) Except as listed in SCHEDULE 5(G)(V), as of February 13,
1998, 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 the only membership
agreements Seller has used, which are the only form of membership agreement used
by Seller at any time in connection with past or present members of the
Business;
(vii) As of February 13, 1998, Seller has a total of
approximately THREE THOUSAND EIGHT HUNDRED SIXTY-SIX (3,866) active Present
Members of which (A) approximately FOUR HUNDRED SIXTY THREE (463) are paid-in-
full memberships, and (ii) approximately THREE THOUSAND FOUR HUNDRED THREE
(3,403) are active, non-delinquent EFT Payment memberships;
(viii) As of the Closing Date, Seller has allowed Buyer to
review true, correct and complete originals, and any and all amendments and
related documents, of all Present Membership Agreements. As of the Closing Date
there shall be no oral modifications with respect to any of the Present
Membership Agreements or oral agreements between Seller and any Present Members
or any third parties which would entitle any such Present Member or third party
to any right customarily held by a Present Member of the Business;
(ix) As of March 15, 1998, to the best of Seller's knowledge,
except as listed in Schedule 5(g)(ix), Seller will have fully paid and satisfied
all refund obligations with respect to any and all past members and Present
Members as required by contract or by applicable law; and
(x) 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.
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h. (i) 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 will not be terminated on or prior to the Closing Date. As of
the Closing Date, Seller has delivered to Buyer true and complete copies of all
contracts, and all amendments thereto, to which it is a party, including, but
not limited to, each of the Assumed Contracts. 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. Except as set forth on
SCHEDULE 5(H)(I), to the best of Seller's knowledge, each of the Assumed
Contracts is valid, binding and enforceable in accordance with its terms.
Except as set forth on SCHEDULE 5(H)(I), to the best of Seller's knowledge, 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 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.
(ii) Except as set forth on SCHEDULE 5(H)(II), as of the Closing
Date, Seller shall not be a party to any contract or lease with respect to
equipment used by, or in the past used by, the Seller or the Business, to which
Buyer shall have any present or future financial or other obligations.
i. (i) Except as set forth on SCHEDULE 5(I), to the best of
Seller's knowledge, 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 under Seller's Lease attributable to Seller, 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. Seller has not received a written
notice of default or notice of cancellation under Seller's Lease which remains
uncured.
(ii) To the best of Seller's knowledge, the Demised Premises, and
all building systems, utilities, fixtures and improvements therein are in good
operating condition and repair, and Seller has made all required maintenance and
repairs thereof, and there are no deferred maintenance obligations.
j. To the best of Seller's knowledge, whether or not there is a
Permanent Certificate of Occupancy, the Demised Premises and the Business are
being operated in compliance with, and neither Seller nor the Business is in
default or violation of, any applicable federal, state or local laws, rules,
regulations, or ordinances including, but not limited to, all parking
requirements applicable to the Demised Premises and the
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Business being conducted at the Demised Premises. The current signage used by
the Seller at the Demised Premises is in compliance with all applicable laws.
To the best of Seller's knowledge, 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
Demised Premises and/or the Business, and such permits, authorizations,
certificates and licenses have been validly issued and are in compliance with
applicable law. 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 Demised Premises or the Business, which violations have not
been rectified.
k. Seller has received no notice of, and has no knowledge of,
any violation of any environmental law or regulation with respect to Seller, the
Purchased Assets 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 or the Business. To the best of Seller's knowledge, there are no
asbestos or asbestos-containing materials located within the Demised Premises in
violation of applicable law.
l. (i) Except as set forth in SCHEDULE 5(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) has not announced
or otherwise made a commitment to create any bonus (except for an oral
understanding that Seller will review certain employees' performance each year
and consider providing a bonus to each such employee), 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 ("ERISA")); PROVIDED, HOWEVER, that Seller does
maintain a 401(k) plan with respect to certain of its employees. Except as set
forth on SCHEDULE 5(L)(II), 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
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benefit plan"). To the best of Seller's knowledge, 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. To the best of Seller's knowledge, 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 (A)
the employment of all of its employees and (B) all consulting arrangements or
agreements with consultants to the Business.
(iv) The execution and delivery of this Agreement by Seller 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
reasonably practicable, Seller shall pay all salaries, benefits, penalties,
employment taxes, 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 such third parties for such amounts.
(vi) SCHEDULE 5(L)(VI) sets forth the list of all employees
(including their titles) and consultants to be terminated as of the Closing
Date, and the salaries, bonuses and all applicable withholding taxes with
respect to each such person.
m. Except as set forth on SCHEDULE 5(M), neither Seller nor any
of Seller's Principals has received 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, 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. To the best of Seller's knowledge, all Federal, state and
local taxes (including, without limitation, all sales tax due on Present
Membership Agreements, if any) or assessments due and payable with respect of
Seller for all
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periods, including interest and penalties, have been paid, or shall be timely
paid by Seller when required, 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. To the
best of Seller's knowledge, Seller has not failed to file timely any tax
returns, tax reports or other related tax information required by law to be
filed. To the best of Seller's knowledge, no federal, state or local government
entity is performing, or has threatened to perform, an audit of Seller for any
year in which Seller has occupied the Demised Premises. To the best of Seller's
knowledge, Seller has paid, or will timely pay when due, 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 Closing Date, Seller is not Insolvent.
(ii) The transactions contemplated hereby have not been
planned and will not be effected with intent 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 copies of the
following financial information: (i) Seller's 1996 federal and state tax
returns, and (ii) Seller's 1997 balance sheet and operating statements, covering
the period from January 1, 1997 to December 31, 1997 ("SELLER'S FINANCIALS"),
which were, to the best of Seller's knowledge, complete and correct as of the
date they were supplied. Seller's Financials for 1997 are being audited by
Buyer and Seller represents and warrants that Buyer will discover no material
adverse change.
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q. Except as set forth on SCHEDULE 5(Q), as of the Closing Date
Seller shall have paid-in-full all contractors, sub-contractors, materialmen,
suppliers, expediters, attorneys, architects and other service providers
(collectively, "CONTRACTORS"), for any and all work conducted prior to the
Closing Date with respect to Seller, the Business or the Demised Premises, 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,
to the best of Seller's knowledge, all contractors shall be paid in full, and no
Contractor shall have the legal right to file a mechanic's or materialmen's lien
against Seller, the Business, the Demised Premises or the Purchased Assets.
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 name "Ovox Fitness & Sports Center" and
"Powerhouse Gym", 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. Seller has conducted the Business in the ordinary course
since December 31, 1997, and has not incurred any debt or sold any discounted
present memberships, except in the ordinary course of the Business or sold any
services or goods for less than fair market value since such date.
t. Except as listed on SCHEDULE 5(T) hereof, to the best of
Seller's knowledge, there are no new health club facilities under construction
or scheduled to be opened within the next twelve (12) months within ten
(10) miles of the Demised Premises.
u. Except as listed on SCHEDULE 5(U) 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(u) have been amended, modified,
extended or otherwise altered, except as indicated in SCHEDULE 5(U).
v. Seller has no continuing obligations under the agreement
executed by and between Seller or Seller's Principals and Powerhouse Gym
("POWERHOUSE"), as amended from time to time (the "POWERHOUSE AGREEMENT").
w. To the best of Seller's knowledge, no representation,
warranty or other statement of Seller made under this Agreement, the Acquisition
Agreements or contained in any
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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.
x. The representations and warranties contained in this ARTICLE
5 shall survive the Closing Date for a period of eighteen (18) month; provided,
however, that Seller's representation in Section 5(n) (Taxes) hereof shall
survive the Closing Date indefinitely.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller and Seller's Principals as follows:
a. Buyer is a corporation 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 hereby have been
duly and validly authorized by all corporate action of Buyer. 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 nor 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 incorporation or
by-laws 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. The representations and warranties contained in this ARTICLE
6 shall survive the Closing Date for a period of eighteen (18) months.
7. DUE DILIGENCE PERIOD
a. BUYER'S RIGHTS DURING DUE DILIGENCE PERIOD. During the Due
Diligence Period (as defined herein), Seller
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agrees to allow Buyer to perform all required investigations and/or due
diligence with respect to the Business, the Demised Premises, Seller and the
Purchased Assets, including, but not limited to each of the following
activities:
(i) Buyer and its auditors shall have the unimpeded right
to commence and perform an audit of the financial books and records of Seller;
and
(ii) Buyer shall have the unimpeded right to continue its
due diligence investigation commenced prior to signing this Agreement,
including, but not limited to, reviewing all documents, agreements,
correspondence, invoices, tax documents, etc. deemed relevant by Buyer;
provided, however, that Buyer shall conduct its due diligence investigation at
all times in a manner that will minimize disruption to the Business; and
(iii) Buyer shall have the right to negotiate with the
Landlord, with respect to the terms and conditions of the New Lease/Lease
Modification, as applicable.
b. SELLER'S OBLIGATIONS DURING DUE DILIGENCE PERIOD. During
the Due Diligence Period, during the normal hours of the Business (including
weekends), Seller shall allow Buyer and its representatives access to the
Demised Premises and to the books and records of the Business, and shall provide
reasonable assistance to Buyer and its representatives in their due diligence
investigation.
c. TERMINATION OF AGREEMENT DURING DUE DILIGENCE PERIOD. If,
for any reason whatsoever, Buyer, in its sole and exclusive discretion, shall be
dissatisfied, in whole or in part, with the results of its due diligence
investigation, it may, at any time prior to the Due Diligence Termination Date,
terminate this Agreement by written notice of termination ("TERMINATION NOTICE")
to Seller's attorney. For purposes of this Section 7(c), fax notice, to the fax
number indicated in Article 14 of this Agreement, shall be acceptable. If Buyer
elects to terminate this Agreement as aforesaid, this Agreement shall be null
and void and be of no further force and effect, and neither party shall have any
further obligations to the other party. If a Termination Notice is not sent to
Seller's attorney on or before the Due Diligence Termination Date, this
Agreement shall continue in full force and effect in accordance with its terms.
Termination of this Agreement in accordance with this provision shall also
constitute termination of the other three Ovox Acquisition Agreements.
8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated under this Agreement are subject to the
satisfaction of the following conditions:
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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 Seller is a party,
certified by the Secretary of Seller;
(ii) On the Closing Date, Seller AND SELLER'S PRINCIPALS
shall have represented in writing that, as of the Closing Date, each of the
representations in Article 5 of this Agreement listed in this Subsection
8(a)(ii) are true and accurate as of such date, including: Sections 5(a), 5(b),
5(c), 5(d), 5(e), 5(f), the third sentence of 5(g), 5(g)(iv), 5(g)(vi),
5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j), 5(k), 5(l), 5(m), 5(n), 5(o),
the second sentence of 5(q), 5(r), 5(s), 5(t), 5(u) and 5(v), each such
representation shall be true and correct as of the Closing Date, and each such
representation shall survive the Closing Date for a period of eighteen (18)
months, except for the representation in Section 5(n), which shall survive the
Closing Date indefinitely;
b. Seller, and/or Seller's Principals, as the case may be,
shall have executed and delivered to Buyer the Bill 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;
c. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
d. Seller (i) shall have completed all renovations to the men's
bathroom and the women's bathroom, including contemplated tile work, stalls,
vanities and partitions, and shall have obtained all necessary inspections,
permits and sign-offs with respect to such renovations. The Township Council of
the Township of Old Bridge shall have adopted an ordinance authorizing parking
on the portion of Disbrow Road contiguous to the Demised Premises.
Notwithstanding the foregoing, the Closing shall not be delayed solely because
the Township Council is in the process of considering whether to adopt such
ordinance or has denied such an ordinance. Instead, the Closing shall proceed
and Seller and Seller's Principals shall use all reasonable efforts to assist
Buyer, should Buyer choose to continue efforts to obtain the adoption of such
ordinance or the modification of the existing preliminary site plan approval for
such parking expansion, at Buyer's sole cost;
e. Seller, the Demised Premises, and the
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building(s) and improvements presently located at the Demised Premises, shall be
in compliance with all legal requirements of a business conducing the activities
presently conducted by Seller at the Demised Premises and that a Permanent
Certificate of Occupancy has been issued. In the event that Buyer, in its sole
discretion agrees to complete the transactions contemplated by this Agreement
despite Seller's inability to obtain a Permanent Certificate of Occupancy,
Seller shall, at Seller's sole expense, including, but not limited to the costs,
fees and expenses for architects, engineers, attorneys, expediters, and
construction, take all actions and spend all sums necessary to secure a
Permanent Certificate of Occupancy for the Demised Premises. In the event that
Seller does not obtain the Permanent Certificate of Occupancy on or prior to the
payment date of the TSI Note (the first anniversary of the Closing Date), Buyer,
may direct TSI to suspend payment of the TSI Note (with no interest accruing)
until such Permanent Certificate of Occupancy is received by Buyer;
f. (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 Ovox Acquisition Agreements, ARE
FULLY AND COMPLETELY SATISFIED, and (B) affiliates of Buyer ("BUYER'S
AFFILIATES") and the Ovox Sellers shall have concluded each of the Related Ovox
Acquisitions on the Closing Date;
g. The Bank Facility and all related guaranties shall have been
terminated and Seller shall have provided Buyer with proof that no related
security agreement, UCC financing statement, or other document evidencing
indebtedness, is in effect with respect to the Purchased Assets;
h. Any and all installment contracts of Seller shall have been
paid in full with no additional amounts due thereunder, and Seller shall have
provided Buyer proof, satisfactory to Buyer, that all such amounts have been
paid and that no obligations remain outstanding with respect to the relevant
equipment provider. In addition, no security agreement, UCC financing
statement, or other document evidencing indebtedness, shall exist with respect
to such installment contracts;
i. Seller shall have provided Buyer with (i) 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, the Bank, or any other third parties (including, but not limited to
equipment lessors and equipment vendors) in the Purchased Assets, and/or (ii)
pay-off letters from such third parties indicating the amount owed to such third
party on the Closing Date for payment
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in full of all amounts owed with respect to the affected Purchased Assets;
j. All material consents of third parties necessary on the part
of Buyer, Seller 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;
k. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
l. Seller's affiliate, Ovox Fitness & Sports Corp., shall have
provided Buyer and each of Buyer's Affiliates a six (6) month royalty-free
license for the use of the "Ovox" name and trademark, substantially and
materially in the form of EXHIBIT G hereto;
m. Seller shall have paid to Buyer, Buyer's 1997-1998
Paid-in-Full Amount, as defined in Section 3(a) hereof, which as of the Closing
Date is $20,000.00;
n. Seller shall have paid to Buyer, Buyer's pro-rated share of
the Pre-Closing Date EFT Payments, as defined in Section 3(b)(ii) hereof;
o. Seller shall have assigned to Buyer all of its right and
interest to each of the non-compete agreements listed in SCHEDULE 5(L)(I),
between Seller and certain of its employees and consultants;
p. Seller shall have assigned to Buyer, to the extent
assignable, 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;
q. Seller shall have delivered to Buyer all other agreements,
consents and instruments required to be delivered to Buyer under this Agreement;
r. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
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commenced, and no action, suit or proceeding by any third party or 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;
s. Seller shall have provided proof, reasonably satisfactory to
Buyer, that the litigation commenced by Alex Neu, as plaintiff, in the Superior
Court of New Jersey, Chancery Division, Essex County, Docket Number C-218-97
(the "NEU LITIGATION"), against Seller, Landlord, and certain third parties, has
been settled and that Seller's Lease shall be valid and enforceable;
t. Seller and Seller's Principals shall agree in writing not to
conduct any negotiations, or enter into any agreement with the Sam's Landlord
(as defined herein) with respect to the Tyces Lane Premises (as defined herein);
and
u. Seller and Seller's Principals shall agree in writing to
provide Buyer with Seller's interim financials for the period from January 1,
1998 and the Closing Date, no later than thirty (30) days after the Closing
Date; and
v. Seller shall have paid to Buyer, Buyer's pro-rated share of
the license fee with respect to each of the Space Licenses listed in SCHEDULE
5(U) hereof.
9. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
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;
(ii) TSI shall have delivered to Seller resolutions
authorizing the execution and delivery of the TSI Note, certified by the
Secretary of Buyer;
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
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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. 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;
d. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
e. Buyer's Affiliates shall have completed each of the Related
Ovox Acquisitions as of the Closing Date;
f. All material consents of third parties necessary on the part
of Buyer, Seller 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;
g. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
h. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
i. Buyer shall have performed, satisfied and complied with all
of the covenants, conditions and provisions of this Agreement to be performed,
satisfied or complied with by Buyer; and
j. In connection with this Agreement and the
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other Ovox Acquisition Agreements, Buyer's Affiliates' parent, TSI, shall have
delivered to Seller's Principals a total of ten (10) complimentary,
non-transferable, passport memberships, which memberships shall be valid for as
long as TSI remains directly, or indirectly, the owner of any or all of Buyer's
Affiliates.
10. INDEMNIFICATION.
a. After the Closing Date, Seller and 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:
(i) any breach of the representations and warranties
made by Seller in or pursuant to this Agreement or any of the Acquisition
Agreements; or
(ii) the failure by Seller 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
(iii) any and all obligations of Seller, including, but
not limited to, Seller's obligations to its 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
(iv) any and all obligations to Powerhouse or its
affiliates, including, but not limited to any obligations arising from or
related to the Powerhouse Agreement or the termination of the Powerhouse
Agreement; or
(v) any and all liability with respect to the litigation
indicated on Schedule 5(f) hereof.
b. After the Closing Date, Buyer shall indemnify, defend and hold
Seller and its directors, officers, trustees, employees, agents and affiliates
and Seller's Principals (the "SELLER'S INDEMNITIES") harmless from and against
any and all
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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:
(i) a breach of the representations and warranties made by
(A) Buyer in or pursuant to this Agreement or any of the Acquisition Agreements
and (B) TSI in or pursuant to the TSI Note; or
(ii) the failure by (A) 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, and (B) TSI to perform or
observe any of the covenants and agreements to be performed or observed by TSI
under the TSI Note; or
(iii) any and all obligations of Buyer including any and all
obligations under the assumed contracts, 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 under this
Agreement or the Acquisition Agreements.
c. The provisions of this SECTION 10 shall survive the Closing Date
for a period of three (3) years.
d. 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
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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.
e. RIGHT OF OFFSET. In addition to any other rights Buyer may
have under this Agreement or in accordance with applicable law, in the event
that Seller and/or Seller's Principals fail 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 of any of the representations and
warranties set forth herein), Buyer, TSI and Buyer's Indemnities shall have an
immediate right of offset against any payments required to be made pursuant to
the TSI Note (i) to Seller or (ii) to the other entities controlled by Seller's
Principals, in accordance with the Related Ovox Acquisitions.
11. INTERIM PERIOD. (a) Seller agrees that, during the Interim
Period, it shall:
(i) conduct the Business in the ordinary course consistent
with prior practice, including, but not limited to prior membership sales
practice, and shall not incur any additional debt outside of the ordinary
course, issue any new complimentary or discounted memberships or make any
modifications to the Business as conducted as of the date of this Agreement,
unless previously agreed to by the parties in writing; and
(ii) preserve its business organization intact and shall use
its best efforts to preserve for Buyer the good will of (A) the Present Members,
(B) the suppliers of the Business, and (C) any third parties related to the
Business; and
(iii) (A) not enter into negotiations with, or provide any
information to, any third parties interested in the possible acquisitions of any
or all of the Ovox Clubs, and, (B) unless Buyer is in breach of this Agreement
or has terminated this Agreement, Seller may not terminate this Agreement
without Buyer's prior written approval; and
(iv) use its best efforts to (i) complete all renovations
listed in Section 8(d) hereof prior to the Closing Date, and (ii) apply for and
obtain prior to the Closing Date all required approvals for Seller's "parking
package", consisting of twenty (20) on-street parking spaces and fifteen (15)
on-site parking spaces and shall provide copies of the related application to
Buyer.
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(b) Buyer and Seller agree that during the Interim Period
they shall work together to provide appropriate notice and complete necessary
filing with respect to each of the following:
(i) 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) letter of non-applicability to the New Jersey
Department of Environmental Protection, in accordance with the Industrial Site
Recovery Act; and
(iii) notice of Seller's intention to sell a health club
facility to the Division of Consumer Affairs of the State of New Jersey; and
(iv) any and all other necessary or appropriate filings with
federal, state or local authorities.
(c) Buyer and Seller agree that during the Interim Period:
(i) Buyer, or Buyer's parent company, TSI, shall have the
exclusive right to negotiate with Sam's East, Inc. (the "SAM'S LANDLORD"), for a
lease for the premises located at The Shopping Center located on the corner of
Highway 18 and Tyces Lane in East Brunswick, New Jersey (the "TYCES LANE
PREMISES"), which will allow an affiliate of Buyer to establish a health club
facility at such location; and
(ii) Buyer shall continue to have the right to negotiate
with the Landlord, with respect to the terms and conditions of the New
Lease/Lease Modification, as applicable.
12. CLOSING DATE ACTIONS. (a) On the Closing Date, Seller and Buyer
agree, in good faith, to perform each of the following:
(i) work together to prepare the Rosenstein Receivable List and
the list of Closing Month Delinquent Amounts; and
(ii) prepare and execute a side-letter agreement with respect to
post-closing undertakings of Seller, and other post-closing matters, as deemed
necessary by the parties; and
(iii) work together to complete all other actions reasonably
necessary to complete the transactions contemplated herein.
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13. LIQUIDATED DAMAGES. (a) Notwithstanding anything to the contrary
in this Agreement, in the event that Buyer does not provide a Termination Notice
to Seller's Attorney on or prior to the Due Diligence Termination Date, AND, as
of the Closing Date, all conditions listed in Article 8 of this Agreement have
been fully satisfied and all conditions listed in Article 8 of each of the other
Ovox Acquisition Agreements have been fully satisfied, AND each of the Ovox
Sellers is otherwise ready, willing and able to conclude the transactions
contemplated by the Ovox Acquisition Agreements, THEN, if Buyer, on the Closing
Date, defaults in its obligation to complete the transactions contemplated
hereby, Seller's sole remedy shall be the right to receive a payment of One
Hundred Thousand Dollars ($100,000.00) (the "LIQUIDATED DAMAGES AMOUNT") from
Buyer as liquidated damages, it being agreed that Seller's damages in case of
Buyer's default might be impossible to ascertain, and that the Liquidated
Damages Amount constitutes a fair and reasonable amount of damages under the
circumstances and is not a penalty.
(b) Upon the signing of this Agreement, TSI, the parent company
of Buyer, shall deliver to Seller a guaranty agreement (the "TSI GUARANTY"),
solely with respect to the Liquidated Damages Amount.
14. 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:
Harry Rosenstein
21 Manitoba Way
Marlboro, New Jersey 07746
Fax: 732-577-9832
with a copy to:
Robert Goldschlag, Esq.
65 South Street
Freehold, New Jersey 07728
Fax: 732-577-9832
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To Buyer:
TSI Matawan, Inc.
c/o Town Sports International, Inc.
888 Seventh Avenue
New York, New York 10106
Fax: 212-246-8422
Attention: Alexander Alimanestianu
with a copy to:
Donovan & Giannuzzi
405 Park Avenue
New York, New York 10022
Fax: 212-223-0966
Attention: Nicholas T. Donovan, 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 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 the subject matter of this Agreement.
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 be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller and Buyer.
g. GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
(ii) Any dispute, claim or controversy arising out of or
relating to this Agreement or the Acquisition Agreements, including, but not
limited to Buyer's and TSI's right
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of offset in Section 10(e) hereof, shall be settled by arbitration in Monmouth
County, New Jersey in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, or any successor thereof. The decision and
award of the arbitration shall be final and conclusive on the parties, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof.
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.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed
and delivered by the parties as of the date first above written.
VIP FITNESS, INC. d/b/a
Ovox Fitness & Sports Center of Matawan
By: /s/ Harry Rosenstein
----------------------------
Name: Harry Rosenstein
Title:President
TSI MATAWAN, INC.
By: /s/ Alexander Alimanestianu
-----------------------------
Alexander Alimanestianu
Executive Vice President
With Respect to Section 10(a):
/s/ Harry Rosenstein
- --------------------------
HARRY ROSENSTEIN
/s/ Phyllis Rosenstein
- --------------------------
PHYLLIS ROSENSTEIN
/s/ Stuart Rosenstein
- --------------------------
STUART ROSENSTEIN
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EXHIBIT 99.4
PURCHASE OPTION AGREEMENT
Purchase Option Agreement dated as of April 6, 1998, by and among
Maxifit, Ltd., a New Jersey corporation, Harry Rosenstein, Phyllis Rosenstein
and Stuart Rosenstein (collectively, "Sellers") and TSI Old Bridge, Inc., a
Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers desire to grant to Buyer an irrevocable option to
purchase all of the Purchased Assets (as hereinafter defined) or the Shares (as
hereinafter defined), which relate to the business, operations and activities of
the Sellers used in connection with, or arising out of, the use of Sellers'
health club facility located at Browntown Shopping Center, Route 516 & Gaub
Road, Old Bridge, New Jersey (the "Club"), such option to be on the terms and
conditions hereinafter set forth in this Agreement; and
WHEREAS, from the date hereof until the expiration of the Option
Period (as hereinafter defined), Buyer, in accordance with the Management
Agreement (as hereinafter defined) shall have the exclusive right to supervise,
manage, operate and control the operation of the Club on the terms and
conditions set forth in this Agreement and the Management Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
THE OPTION
1.1 GRANT OF THE OPTION. The Sellers hereby jointly and severally grant to
Buyer the sole, exclusive and irrevocable option to purchase and acquire from
the Sellers in accordance with the terms of this Article 1 (the "Option").
1.2 OPTION PRICE; EXPIRATION DATE. (a) Upon the execution of this
Agreement, Buyer shall pay to Sellers the sum of One Million Dollars
($1,000,000.00) by Certified Check (the "Option Price") for the Option. The
Option Price shall be non-refundable.
(b) Buyer shall exercise the Option at any time on or prior to May 31,
1998, or, if there shall be a Legal Prohibition (as hereafter defined), within
10 days after such Legal Prohibition shall be removed or discharged in a manner
reasonably acceptable to Buyer (the "Expiration Date").
1.3 FORM OF ACQUISITION. Buyer shall acquire the Club on or before the
Expiration Date in accordance with, either, in Buyer's sole and exclusive
discretion (a) the terms of the Asset Purchase
<PAGE>
Agreement, dated as of February 27, 1998, by and among Sellers and Buyer,
attached hereto as EXHIBIT A (the "Asset Purchase Agreement") ("Option (a)"), or
(b) the terms and provisions of the draft Stock Purchase Agreement, to be
executed by and among Buyer and Harry Rosenstein, Phyllis Rosenstein and Stuart
Rosenstein, attached hereto as EXHIBIT B (the "Stock Purchase Agreement")
("Option (b)") (the Asset Purchase Agreement and the Stock Purchase Agreement
shall be collectively referred to as the "Club Acquisition Agreements"). Buyer
shall designate whether Buyer wants to Close under Option (a) or Option (b) by
written notice to Sellers on or before the Expiration Date. In either case, the
Option Price shall be fully credited against the Purchase Price to be paid to
Sellers on the Closing Date under the Club Acquisition Agreements, as indicated
in Exhibit A or Exhibit B. In either case, notwithstanding anything to the
contrary contained in the Club Acquisition Agreements, the total additional
Purchase Price due to Sellers on the Closing Date shall be One Million One
Hundred Seventy-Five Thousand Dollars ($1,175,000.00) (the "Balance Purchase
Price") plus interest at the rate of Prime plus two percent (2%) per annum,
compounded daily (the "Interest Rate"), from the date hereof to and including
the Closing Date. Nothing in this Section 1.3 shall be construed to modify or
to be inconsistent with the terms of the TSI Note.
1.4 CLOSING DATE. Buyer shall exercise the Option and complete the
transactions contemplated herein on or before the Expiration Date (such date,
the "Closing Date"). On the Closing Date, Sellers shall deliver the Purchased
Assets, as defined in Exhibit A, or the Shares, as defined in Exhibit B, in
accordance with the terms of the Asset Purchase Agreement or the Stock Purchase
Agreement, as applicable, and Sellers and Buyer shall execute all documents
reasonably necessary to conclude such transaction, including, without
limitation, all documents required to be delivered pursuant to the appropriate
Club Acquisition Agreement.
1.5 MANAGEMENT AGREEMENT. The parties acknowledge that they are entering into
a Management Agreement, dated as of the date hereof and attached hereto as
EXHIBIT C (the "Management Agreement"), which provides for Buyer's full,
complete and exclusive right to supervise, manage, operate and control all
aspects of the Club including making all business, financial and other
decisions, from the date hereof through the Closing Date.
1.6 SELLERS OBLIGATIONS. The Sellers represent and warrant that as of the date
hereof Sellers have complied with all of the provisions of Article 8
("Conditions to Obligations of Buyer") of the Asset Purchase Agreement and
Article 6 ("Conditions Precedent to Buyer") of the Stock Purchase Agreement.
The parties also acknowledge that, in accordance with the terms of the
Management Agreement, Buyer shall have physical and constructive control of the
Club from the date hereof to the Closing Date. Recognizing that Buyer is in
control of the Club, Sellers hereby represent and warrant to Buyer that they
shall take no action or omit to take any action which (i) could have a material
adverse effect on the Purchased Assets, in the case of the Asset Purchase
Agreement, or the Shares, in the case of the Stock Purchase Agreement, or that
would otherwise cloud or adversely affect title to the any of the
<PAGE>
Purchased Assets or the Shares or (ii) are inconsistent with the terms and
conditions of this Agreement, the Management Agreement and/or the Club
Acquisition Agreements. Sellers also agree, upon request from Buyer, that they
shall take all actions reasonably necessary to assist with the completion of the
transactions contemplated by the Club Acquisition Agreements.
1.7 REPRESENTATIONS AND WARRANTIES OF SELLER AS OF THE DATE HEREOF.
a. Asset Purchase Agreement
(i) Sellers represent that all representations and warranties specified in
the Agreement in Sections 5(a), 5(b), 5(c), 5(d), 5(e), 5(f), the third sentence
of 5(g), 5(g)(iv), 5(g)(vi), 5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j),
5(k), 5(l), 5(m), 5(n), 5(o), the second sentence of 5(q), 5(r), 5(s), 5(t),
5(u) and 5(v), are true and correct in all material respects, in each case as if
each representation or warranty were made as of the date hereof.
(ii) Buyer represents and warrants that as of the date hereof, all of Buyer
representations and warranties are true and correct. In all material respects,
in each case as if each representation or warranty were made as of the date
hereof.
b. Stock Purchase Agreement
Sellers represent and warrant that as of the date hereof, all of
Sellers' representations and warranties in the Stock Purchase Agreement are true
and correct.
1.8 REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE.
As of the Closing Date, Sellers and Buyer shall, each represent and warrant
that each of their statements in Section 1.7(a) or (b), as the case may be,
shall be true and correct as of the Closing Date.
1.9 SUPERSEDING TERMS.
Except as expressly provided to the contrary herein, upon the closing of
the Asset Purchase Agreement or the Stock Purchase Agreement on the Closing
Date, the terms of the applicable Club Acquisition Agreement shall supersede the
terms and replace the terms and provisions of this Agreement and the Management
Agreement.
1.10 LEGAL PROHIBITIONS.
Notwithstanding anything to the contrary herein or in the Club Acquisition
Agreements, in the case that there exists an injunction, restraining order or
other legal prohibition or restraint ("Legal Prohibition") restricting,
prohibiting or limiting Buyer's ability to complete the transactions
contemplated by this Agreement on the Expiration Date, the Expiration Date
<PAGE>
shall be extended until such time as the Legal Prohibition is no longer in
effect. Buyer and Sellers agree that they shall each use best efforts, and
cooperate with each other, to prosecute, defend, settle, remove or otherwise
deal with respect to such Legal Prohibition, including any attempt by Landlord
or any third party to seek such Legal Prohibition. Buyer and Sellers agree that
they shall each pay one-half (1/2) of the total expenses incurred to prosecute,
defend, settle, remove or otherwise deal with respect to such Legal
Prohibitions, or any attempt to obtain the Legal Prohibitions, including
reasonable legal fees and expenses.
1.11 DEFENSE FUND.
(a) In the event that Buyer and/or Seller shall engage in any litigation
with Landlord (hereafter defined), whether prior or subsequent to the Closing
Date, arising out of or with respect to the Lease and/or the Demised Premises,
other than litigation resulting from Buyer's failure to make required payments
under the Lease, including any litigation contemplated by this Agreement Buyer
and Sellers agree that they shall each be responsible for one-half (1/2) of the
total reasonable legal fees and related expenses, including, but not limited to,
court costs, expert witnesses, studies, reports, investigators, stenographers,
etc.
1.12 DEEMED AMENDMENT TO ASSET PURCHASE AGREEMENT.
(a) This Agreement shall be deemed to amend and modify the Asset Purchase
Agreement. In the event of any conflict or inconsistency between the terms and
conditions of this Agreement and the Asset Purchase Agreement, the terms,
covenants and conditions of this Agreement shall govern and control. Except as
expressly modified by this Agreement, the Asset Purchase Agreement shall
continue in full force and effect and shall be unmodified.
(b) Upon Buyer's election to close pursuant to the Stock Purchase
Agreement, as set forth in this Agreement, the Asset Purchase Agreement shall be
terminated, and shall be of no further force and effect, and immediately
thereupon the relationship between the parties hereto shall be governed by the
Stock Purchase Agreement and this Agreement, which shall survive the termination
of the Asset Purchase Agreement. Further, if Buyer shall elect to close
pursuant to the Asset Purchase Agreement, in accordance with this Agreement, the
Stock Purchase Agreement shall be null and void AB INITIO, and the relationship
between the parties hereto shall thereafter be governed by the Asset Purchase
Agreement and this Purchase Option Agreement, without giving effect to the Stock
Purchase Agreement.
(c) The TSI Note annexed hereto as EXHIBIT D shall be the TSI Note
referred to in the Purchase Agreements (as such term is defined in the TSI
Note), and the TSI Note shall replace and supersede the draft of the TSI Note
annexed to each of the Purchase Agreements.
1.13 LEASE; RENEWAL TERM. (a) The parties hereto acknowledge and agree
that Maxifit, Ltd. and Saul Cantor (or any successor
<PAGE>
landlord, hereinafter, "Landlord") are parties to a certain Lease Agreement
dated August 9, 1993 with respect to the Demised Premises occupied by Maxifit,
Ltd. in the Browntown Shopping Center, Route 516 and Gaud Road, Old Bridge, New
Jersey (the "Premises") (the "Lease"). The original expiration date of the
Lease is November 30, 2003 (the "Lease Expiration Date"). In addition, the
Lease contains one (1) five-year renewal term commencing immediately following
the expiration of the original Lease Term (the "Renewal Term"). The existing
term of the Lease, as extended by the Renewal Term, shall be deemed to
constitute the "Extended Term". Maxifit, Ltd. has heretofore exercised its
option to extend the Lease for the Renewal Term, and that Landlord has objected
in writing to Maxifit, Ltd.'s extension of the Lease for the Renewal Term.
(b) Subject to the further terms and conditions of this Agreement, Buyer
shall exercise reasonable efforts, and diligently pursue such efforts, to cause
Landlord to unequivocally agree in writing, whether pursuant to a written Lease
amendment or otherwise, that Maxifit, Ltd. has validly extended the Lease for
the Renewal Term. In connection therewith, Buyer may, but shall not be
obligated to, commence litigation against Landlord, either before or after the
Closing Date, to seek a declaratory judgement or other similar injunctive order
that the renewal option has been duly exercised by Maxifit, Ltd., and that the
Lease has been extended for the Renewal Term. Such litigation shall be
prosecuted by Buyer, in Buyer's sole and absolute discretion, using attorneys
selected by Buyer. Sellers agree to cooperate with Buyer in connection
therewith, to the extent Seller's cooperation shall reasonably be necessary.
The cost of such litigation shall be allocated between Sellers and Buyer
pursuant to Section 1.11 of this Agreement.
(c) The date which is the EARLIEST of the following dates shall be deemed
to be the Lease Renewal Resolution Date:
(i) the date upon which Buyer shall enter into an unequivocal
written agreement with Landlord, in a form acceptable to Buyer and Buyer's
counsel, which acknowledges that the Lease has been extended for the Renewal
Term;
(ii) the date upon which Landlord and Buyer shall enter into a duly
effective written agreement pursuant to which the Lease shall be extended for a
term which shall be equal to, or greater than, the Extended Term;
(iii) the date upon which Buyer shall receive a final and
unappealable judgement from a Court of competent jurisdiction which clearly and
unequivocally states that the Lease has been extended for the Extended Term, and
which duly binds Landlord with respect thereto;
(iv) the date which is the first (1st) anniversary date of the
Lease Expiration Date, provided, and upon the express condition, that (A)
Landlord shall have accepted the payment and performance of Tenant's obligations
under the Lease by Buyer for the period between the Lease Expiration Date and
the first (1st)
<PAGE>
anniversary of the Lease Expiration Date and (B) Landlord and Buyer shall not
then be in litigation arising out of or with respect to, or which disputes the
due and valid extension of the Lease for the Extended Term, including any
holdover litigation; or
(v) if (A) the Lease Renewal Resolution Date shall not have occurred
prior to the first (1st) anniversary date of the Lease Expiration Date and (B)
the conditions of subparagraphs (iv)(A) and (iv)(B) above have not been
satisfied, then the Lease Renewal Resolution Date shall be the date upon which
(1) Buyer shall receive a final and unappealable judgement from a Court of
competent jurisdiction which clearly and unequivocally states that the Lease has
been extended for the Extended Term, and which duly binds Landlord with respect
thereto or (2) the expiration date of the Extended Term, provided that Buyer
shall continue to occupy the Premises, in accordance with the terms and
conditions of the Lease for the entire Extended Term (unless Buyer shall
voluntarily and wilfully terminate the Lease prior to the expiration date of the
Extended Term).
(d) Except as expressly provided to the contrary in this Agreement and/or
by the express terms of the TSI Note, the TSI Note shall become due and payable,
in accordance with its terms, upon the LATER to occur of (i) the Maturity Date
of the TSI Note or (ii) the Lease Renewal Resolution Date.
1.14 CONTRIBUTION TO LANDLORD.
(a) If at any time prior to the Lease Renewal Resolution Date, Buyer
shall agree in writing with Landlord to modify the Lease in a manner pursuant to
which Landlord acknowledges the validity of the extension of the Lease for the
Extended Term, and in connection therewith, Buyer, in Buyer's sole and absolute
discretion, shall agree in writing to pay to Landlord, over the balance of the
Extended Term, a sum (including any increased rent payments) having a net
present value, discounted at the then current Interest Rate (the "Discount
Rate"), which shall be greater than the net present value, discounted at the
Discount Rate, of the sum of $25,000.00 per annum to be paid to Landlord from
the Transition Date through the last day of the Extended Term, then Sellers
shall pay to Buyer fifty percent (50%) of such difference. By way of example,
if Buyer agrees to pay Landlord the sum of fifty thousand dollars ($50,000.00)
per annum from the Transition Date through the expiration date of the Extended
Term, then, upon the consummation of such agreement, Sellers shall pay to Buyer
fifty percent (50%) of the difference between (i) the net present value of fifty
thousand dollars ($50,000.00) per annum, payable from the Transition Date
through the expiration date of the Extended Term, discounted at the Discount
Rate, and (ii) the net present value of twenty five thousand dollars
($25,000.00) per annum, payable from the Transition Date through the expiration
date of the Extended Term, discounted at the Discount Rate.
(b) Upon such an agreement being entered into between Buyer and
Landlord, the Lease Renewal Resolution Date shall be deemed to have occurred
under the TSI Note.
<PAGE>
1.15 SELLER'S CAP.
(a) Notwithstanding anything to the contrary contained herein, the
aggregate amount of the payments required to be made by Sellers pursuant to
Sections 1.10, 1.11, 1.13(b) and 1.14 of this Agreement shall not exceed the sum
of $125,000.00.
(b) The amounts required to be paid by Sellers pursuant to Sections 1.10,
1.11, 1.13(b) and 1.14, limited as set forth in Subparagraph 1.15(a) above,
shall be offset by Buyer, when due, against the amounts due and payable under
the TSI Note.
1.16 SURVIVAL. Notwithstanding anything to the contrary herein or in the Asset
Purchase Agreement or the Stock Purchase Agreement, Section 3(d), 3(c), 3(f),
3(g) of the Asset Purchase Agreement shall be deemed in effect from the date of
this Agreement forward, and shall remain in effect regardless of which of the
Club Acquisition Agreements is terminated.
1.17 REMEDIES. (a) If Seller shall willfully default under this Agreement,
Buyer shall have all of Buyer's remedies in equity or at law, including specific
performance of this Agreement, and the Management Agreement shall continue in
full force and effect.
(b) If Buyer shall willfully default under this Agreement, Sellers shall
have all of Sellers' remedies in equity or at law, including the right to
terminate this Agreement, the Asset Purchase Agreement and the Management
Agreement. In the case of Buyer's willful default, Sellers shall have the right
to retain the Option Price.
<PAGE>
2. MISCELLANEOUS
2.1 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 Sellers:
Harry Rosenstein
21 Manitoba Way
Marlboro, New Jersey 07746
Fax: 732-577-9832
with a copy to:
Robert Goldschlag, Esq.
65 South Street
Freehold, New Jersey 07728
To Buyer:
TSI Old Bridge, Inc.
c/o Town Sports International, Inc.
888 Seventh Avenue
New York, New York 10106
Attention: Alexander Alimanestianu, Esq.
with a copy to:
Donovan & Giannuzzi
405 Park Avenue
New York, New York 10022
Attention: Nicholas T. Donovan, 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.
2.2 BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of Sellers and Buyer and their respective successors and
assignees.
2.3 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 the subject matter of this Agreement.
2.4 AMENDMENT AND WAIVER. This Agreement may not be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller's and Buyer.
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2.5 GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
(ii) Any dispute, claim or controversy arising out of or relating
to this Agreement or the Acquisition Agreements, including, but not limited to
Buyer's and TSI's right of offset in Section 10(e) hereof, shall be settled by
arbitration in Monmouth County, New Jersey in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, or any successor
thereof. The decision and award of the arbitration shall be final and
conclusive on the parties, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
<PAGE>
IN WITNESS WHEREOF, this Purchase Option Agreement has been executed
and delivered by the parties as of the date first above written.
MAXIFIT, INC. d/b/a
Ovox Fitness & Sports Center of Old Bridge
By: Harry Rosenstein
------------------------
Harry Rosenstein
President
Harry Rosenstein
-----------------------
HARRY ROSENSTEIN
Phyllis Rosenstein
-----------------------
PHYLLIS ROSENSTEIN
Stuart Rosenstein
-----------------------
STUART ROSENSTEIN
TSI OLD BRIDGE, INC.
By: Alexander Alimanestianu
-----------------------------
Alexander Alimanestianu
Executive Vice President
<PAGE>
EXHIBIT 99.5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 27, 1998, by and among MAXIFIT,
LTD. d/b/a OVOX FITNESS & SPORTS CENTER OF OLD BRIDGE, a New Jersey corporation,
with an address at Browntown Shopping Center, Route 516 & Gaub Road, Old Bridge,
New Jersey ("SELLER") and TSI OLD BRIDGE, INC., a Delaware corporation, with an
address c/o Town Sports International, Inc., 888 Seventh Avenue, New York, New
York 10106 ("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 Bill
of Sale, the Assignment and Assumption Agreement, the Assignment and Assumption
of Seller's Lease, 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, whether owned or leased 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. "BANK FACILITY" shall mean the loan documents, dated as of
April 24, 1997, by and between Ultrafit, Inc. and First Union National Bank
("BANK"), to which each of the other Ovox Sellers and each of Seller's
Principals are guarantors.
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 Donovan & Giannuzzi,
405 Park Avenue, New York, New York, 11th Floor.
g. "CLOSING DATE" shall mean the close of
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business on Wednesday, March 25, 1998.
h. "DEMISED PREMISES" shall mean that certain premises located
at Browntown Shopping Center, Route 516 & Gaub Road, Old Bridge, New Jersey,
leased to Seller pursuant to the Seller's Lease, as more particularly described
therein.
i. "DUE DILIGENCE PERIOD" shall mean the period of time from
the date of this Agreement to the close of business on Friday, March 13, 1998.
j. "DUE DILIGENCE TERMINATION DATE" shall mean 5:00 pm, New
York time, on Friday, March 13, 1998.
k. "INTERIM PERIOD" shall mean the period of time from the date
of this Agreement to the close of business on the Closing Date.
l. "LANDLORD" shall mean Saul Cantor, 2933 Vauxhall Road,
Vauxhall, New Jersey 07728.
m. "LEASE MODIFICATION" shall mean the owner's consent and
lease modification agreement, dated the Closing Date, between Landlord and
Buyer, amending and modifying Seller's Lease, substantially and materially in
the form attached hereto as EXHIBIT F.
n. "OVOX ACQUISITION AGREEMENTS" shall collectively mean this
Agreement and each of the three other asset purchase agreements used in
connection with the Related Ovox Acquisitions.
o. "OVOX CLUBS" shall collectively mean each of the four (4)
health club businesses owned and operated by the Ovox Sellers.
p. "OVOX SELLERS" shall collectively mean VIP Fitness, Inc.
(Matawan), Exercise Inc. (Marlboro), Ultrafit, Inc. (Freehold) and Maxifit, Ltd.
(Old Bridge).
q. "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
of such Present Members and Seller.
r. "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 Agreements.
s. "PURCHASED ASSETS" shall mean, collectively, (i) the Assumed
Contracts, including, but not limited to,
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Seller's Lease and the Present Membership Agreements, and (ii) the Assets.
t. "RELATED OVOX ACQUISITIONS" shall mean the acquisition by
affiliates of TSI (as defined herein) on the Closing Date of Seller's
Principals' health club facilities located in (i) Freehold, New Jersey, (ii)
Matawan, New Jersey, (iii) Morganville, New Jersey (the so-called "Marlboro"
club) and (iv) Old Bridge, New Jersey (collectively, the "RELATED OVOX CLUBS").
u. "SELLER'S LEASE" shall mean the lease, dated August 9, 1993,
between Landlord and Seller, with respect
to the Demised Premises.
v. "SELLER'S PRINCIPALS" shall mean Harry Rosenstein, Phyllis
Rosenstein and Stuart Rosenstein, the sole shareholders of Seller.
2. SALE AND PURCHASE OF PURCHASED ASSETS; ACQUISITION AGREEMENTS. On
the Closing Date, subject to the terms and conditions of this Agreement, and in
reliance on the representations, warranties, undertakings and agreements made
hereunder, and in consideration of the purchase by Buyer described below and the
assumption of certain liabilities of Seller by Buyer:
a. Seller hereby agrees 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 bill of sale, in the form
of EXHIBIT A attached hereto (the "BILL 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 hereby agrees to assign to Buyer all of its 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, in the form of EXHIBIT B attached hereto (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT");
c. Seller hereby agrees to assign to Buyer all of its 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
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hereby agree to execute and deliver on the Closing Date an assignment and
assumption agreement with respect to Seller's Lease, in the form of EXHIBIT C
attached hereto (the "ASSIGNMENT AND ASSUMPTION OF SELLER'S LEASE");
d. Seller agrees to execute and deliver to Buyer, and Seller
agrees to have each of Seller's Principals execute and deliver to Buyer, on the
Closing Date, a non-competition agreement, in the form of EXHIBIT D attached
hereto (the "NON-COMPETITION AGREEMENT");
e. 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 Seller and the owners of the Related Ovox Clubs, a
single, non-transferable promissory note in accordance with the terms of this
Agreement and the terms of the asset purchase agreements in the Related Ovox
Acquisitions, 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
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 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. To the extent that any consents, waivers or approvals necessary to
convey any item of the Purchased Assets to Buyer are not obtained prior to the
Closing Date, and Buyer agrees to nonetheless consummate the transactions
contemplated hereby, Seller shall use its best efforts to: (i) provide to
Buyer, at the request of Buyer, the benefits of any such Purchased Asset, and
hold the same in trust for Buyer, if so requested by Buyer; (ii) cooperate in
any reasonable and lawful arrangement approved by Buyer, designed to provide
such benefits to Buyer; and (iii) enforce and perform, at the request of Buyer
and for the account of Buyer, any rights or obligations of Seller arising from
any such Purchased Asset against or in respect of any third person (including a
government or governmental unit), including the right to elect to terminate any
contract, arrangement or agreement in accordance with the terms thereof upon the
advice of
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Buyer; and
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: (732) 607-2966.
3. MEMBERSHIPS; BUYER'S TRANSFER SYSTEM; ADJUSTMENTS.
Notwithstanding anything to the contrary in this Agreement or in the Acquisition
Agreements, the Buyer and Seller agree as follows:
a. With respect to revenues received by Seller from so-called
"paid-in-full" Present Members who joined or renewed their Present Memberships
on or after September 1, 1997 and up to the Closing Date, and in full
satisfaction thereof, Seller shall pay to Buyer on the Closing Date the amount
of Twenty Thousand Dollars ($20,000.00) ("BUYER'S 1997-1998 PAID-IN-FULL
AMOUNT").
b. (i) 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")
made by Present Members, received by Seller or Buyer after the Closing Date.
All EFT Payments received by Seller PRIOR to the Closing Date ("PRE-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).
On the Closing Date, Seller shall pay to Buyer, Buyer's pro-rated share of the
Pre-Closing Date EFT Payments. (For example, if the Closing Date occurs on
March 15, 1998 and Seller has collected $100,000.00 of EFT Payments on March 1,
1998, then Buyer shall be paid $50,000.00 of such EFT Payments by Seller and
Seller shall be entitled to retain $50,000.00 of such amount.)
(iii) Seller shall instruct its EFT billing service (the "EFT
SERVICE"), in writing if necessary, that, as of the Closing Date, Buyer has the
sole right to all information concerning, and proceeds from, Seller's EfT
system, and that the EFT Service must provide full assistance and access to
Buyer in the collection of EFT Payments. All such proceeds from the EFT system
shall at all times be the sole and exclusive property of Buyer, and shall be
immediately delivered to Buyer.
(iv) Immediately subsequent to the Closing Date, Seller shall
assist Buyer, if requested by Buyer, with the
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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.
(v) Seller 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 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. In
the event Seller fails to pay any such improperly debited amounts to Buyer
within three (3) days of notice from Buyer of the improperly debited amounts,
Buyer shall have an immediate right of offset against any payments required to
be made to Seller pursuant to the TSI Note.
(vi) Buyer's rights under this subsection 3(b) shall be
subject to Seller's rights to the Rosenstein Receivables (as defined herein).
c. As of the Closing Date, the parties shall make adjustments
between them for (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, such that Seller will be responsible for items of expense
allocable to 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. All
adjustments made in connection with this Agreement shall be made in accordance
with generally accepted accounting principles, consistently applied ("GAAP").
d. (i) (A) Seller shall allow Buyer to maintain all of
Seller's financial books, records and files at the Demised Premises until Buyer
has satisfactorily completed an audit of all such financial information. Seller
and Seller's accountants shall cooperate with such audit. Such audit shall be
completed no later than sixty (60) days after the Closing Date (the "POST-
CLOSING AUDIT PERIOD").
(B) During the Post-Closing Audit Period, Seller and
its bookkeeper and accountant shall have non-exclusive access to the former
office of Harry Rosenstein for the purpose of reviewing Seller's financial
books, records and files,
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and shall have the right to review and copy all such books, records and files;
PROVIDED, HOWEVER, that such actions do not disrupt the Business.
(C) During the Post-Closing Audit Period, Buyer, at
Buyer's expense, may utilize Seller's accountant to assist in the audit.
(ii) Seller and Seller's accountant will, for a period of
eighteen (18) months after the Closing Date, provide Buyer with access, upon
reasonable notice, to all financial books, records and files of the Business
reasonably necessary for Buyer's orderly operation and continuation of the
Business.
e. Seller shall, for a period of eighteen (18) months after the
Closing Date, maintain its corporate existence and remain a corporation in good
standing in the State of New Jersey.
f. (i) Seller shall have the right to all accounts receivable
collected from members who are delinquent in their payment accounts (each a
"DELINQUENT MEMBER") for any and all amounts relating to periods prior to the
calendar month in which the Closing occurs (the "ROSENSTEIN RECEIVABLES"). On
the Closing Date, Seller and Buyer shall prepare a list of all of the affected
Delinquent Members and the amounts outstanding (the "ROSENSTEIN RECEIVABLE
LIST"). In addition, (i) all delinquent amounts relating to the month in which
the Closing occurs ("CLOSING MONTH DELINQUENT AMOUNTS") shall be collected by
Buyer and, upon receipt of such amounts by Buyer, shall be divided, pro-rata,
amongst Seller and Buyer in accordance with the method set out in subsection
3(b)(ii) of this Agreement, and (ii) on the Closing Date, Seller and Buyer shall
prepare a list of the Closing Month Delinquent Amounts.
(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 Rosenstein
Receivable List, and only upon payment in full of the amount indicated on the
Rosenstein Receivable List shall such Delinquent Member's payments be for
Buyer's account.
(iii) Within the first ten (10) business days of each month
following the Closing Date, Buyer shall pay to Seller all amounts received in
the previous month constituting Rosenstein Receivables. Upon each monthly
payment, Buyer shall also provide Seller with a list indicating the amount
collected from each affected Delinquent Member as of such date.
(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 the data used to
revise the Rosenstein Receivable List and any other information maintained by
Buyer which may indicate amounts owed and amounts paid by Delinquent Members.
(v) Following the Closing Date, each Delinquent Member
listed on the Rosenstein Receivable List shall be "locked-out" of all of the
Ovox Clubs until such Delinquent Member has paid the entire amount indicated on
the Rosenstein Receivable List.
(vi) Notwithstanding anything to the contrary in this
Agreement, Seller shall have the right to collect all accounts receivable
indicated on the Rosenstein Receivable List; PROVIDED, HOWEVER, that Seller may
not use illegal methods or methods inconsistent with the Fair Debt Collection
Practice Act, to the extent that it applies, in collecting such amounts.
g. The terms of this Agreement, including, but not limited to
the Purchase Price, shall be held strictly confidential by the parties and their
affiliates, except as required by law.
4. PURCHASE PRICE.
a. PAYMENT OF PURCHASE PRICE. The purchase price to be paid to
Seller by Buyer shall be TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($2,250,000.00) (the "PURCHASE PRICE"). The Purchase Price shall be paid by
Buyer to Seller, as follows:
(i) On the Closing Date, TWO MILLION ONE HUNDRED THIRTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($2,137,500.00) (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 wire transfer to an account designated by Seller or by
certified check (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 Ovox Acquisitions, in the principal amount of FOUR
HUNDRED THOUSAND DOLLARS ($400,000.00), payable on the first anniversary of the
Closing Date, of which, the principal amount of ONE HUNDRED TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($112,500.00) shall be payable to Seller.
(iii) (A) In the event that as of the Closing Date, each of the Ovox
Sellers shall have received permanent, unconditional certificates of occupancy,
certificates of
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continued occupancy, or the legal equivalent of the same, acceptable in form and
substance to Buyer's architects and attorneys, covering the entire demised
premises for each of the four Ovox Clubs (each a "PERMANENT CERTIFICATE OF
OCCUPANCY"), all other necessary licenses and permits relating to the Business
and/or the Demised Premises (and have provided proof of the Permanent
Certificates of Occupancy to Buyer), and Seller has received all required
municipal sign-offs for the improvements made to the Demised Premises since the
issuing of the Permanent Certificate of Occupancy, and each of the provisions of
Article 8 (conditions to closing) of each of the Ovox Acquisition Agreements are
fully and completely satisfied, then the principal amount of the TSI Note shall
be decreased from the principal amount of Four Hundred Thousand Dollars
($400,000.00) to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and the closing date consideration to be paid to each of the Ovox
Sellers for each of the four Ovox Clubs shall be increased by THIRTY-SEVEN
THOUSAND FIVE HUNDRED DOLLARS (37,500.00) per club.
(B) In the event that the Ovox Seller's have been unable to
comply with subsection 4(a)(iii)(A) above on or prior to the Closing Date, and,
at any time after the Closing Date, but prior to the due date of the TSI Note,
each of the Ovox Sellers shall receive Permanent Certificates of Occupancy,
covering the entire demised premises for each of the four Ovox Clubs (and have
provided proof of the Permanent Certificates of Occupancy to Buyer), and each of
the post-closing undertakings agreed to by each of the Ovox Sellers shall have
been complied with, then the principal amount of the TSI Note shall, at such
time, be decreased to the principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) and each of the Ovox Sellers shall be paid THIRTY-SEVEN THOUSAND
FIVE HUNDRED DOLLARS (37,500.00) plus the interest accrued on such amount to
such date.
b. ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated as follows:
Machinery, Equipment & Furniture $ 186,675.00
Leasehold improvements $ 0.00
Membership list $ 266,701.00
Goodwill $ 1,796,624.00
TOTAL: $ 2,250,000.00
------ --------------
Buyer and Seller 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, and in accordance with, IRS Form 8594.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as of the date
of this Agreement or such other date as clearly
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indicated herein, represents and warrants to Buyer that:
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
necessary 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 action of Seller. This Agreement and each of the Acquisition
Agreements to which Seller is a party will, as of the Closing Date, be duly and
validly executed and delivered by Seller, and Seller has the power to do the
same, and to perform this Agreement and 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 Seller is a party
constitutes a legal, valid, binding and enforceable obligation of such party.
c. This Agreement, the Acquisition Agreements and other
instruments of conveyance and transfer to be executed by Seller 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 nor the consummation of the transactions
contemplated hereby or thereby by Seller 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 is a
party, including without limitation, the Assumed Contracts, or by which Seller
or any of the Purchased Assets is bound, or any judgement or order or any law,
rule, regulation or ordinance, to which the Seller or any of the Purchased
Assets is subject. The provisions of this Section 5(d) are subject to the
Assignment and Assumption of Seller's Lease.
e. Except as set forth on SCHEDULE 5(E), to the best of
Seller's knowledge, Seller has good title to, owns and lawfully possesses all of
the Purchased Assets free and clear of all mortgages, liens, pledges, security
interests and encumbrances. As of the Closing Date, all mortgages, liens,
pledges, security interests and encumbrances listed in SCHEDULE 5(E) shall be
terminated, and all of the Purchased Assets shall
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be free and clear of all mortgages, liens, pledges, security interests and
encumbrances.
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, any of the Purchased Assets or the Business, (ii) to the best of
Seller's knowledge, no action, suit, dispute or governmental, administrative,
arbitration or regulatory proceeding pending or involving Seller or any of the
Purchased Assets or the Business, or threatened against Seller or any of the
Purchased Assets or the Business, and (iii) to the best of Seller's knowledge,
no investigation pending or, threatened against or relating to Seller, any of
the Purchased Assets or the Business (collectively, "PROCEEDINGS"). None of the
Proceedings listed in SCHEDULE 5(F), if adversely determined against Seller, any
of the Purchased Assets or the Business, would have a material adverse effect on
the Purchased Assets or 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
February 13, 1998, and, unless otherwise indicated in SCHEDULE 5(G), to the best
of Seller's knowledge, each Present Membership Agreement is in full force and
effect in accordance with its terms. The net monthly EFT Payment of dues, net
of returns, in January 1998 totalled $125,608.00, and as of February 13, 1998
totalled $106,636.00, not including returns as of February 13, 1998. SCHEDULE
5(G) accurately lists the expiration date of each Present Membership Agreement,
and, to the best of Seller's knowledge, all other information therein is true,
complete and correct;
(i) Except as listed in SCHEDULE 5(G)(I), as of February 13,
1998, there are no renewal rights with respect to the Present Membership
Agreements, except as indicated in the standard membership agreements listed in
SCHEDULE 5(G)(VI), which allow a Present Member to renew or otherwise continue
his or her membership at an advantageous or preferred rate, including, but not
limited to, so-called "guaranteed minimum rate contracts" (a "PREFERRED RENEWAL
PROVISION");
(ii) Except as listed in SCHEDULE 5(G)(II), as of February 13,
1998, there are no provisions in the Present Membership Agreements which entitle
any Present Member to free or discounted personal services or rights ("PERSONAL
SERVICES"), including, without limitation, massage therapy, private training,
nutrition counseling, special dance classes, karate classes, etc. (each a
"PERSONAL SERVICES DISCOUNT");
(iii) Except as listed in SCHEDULE 5(G)(III), as
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of February 13, 1998, there are no Present Membership Agreements subject to
special corporate rates, family rates, senior rates and/or group rates;
(iv) There are no outstanding coupons or certificates for
Personal Services issued by Seller, which have been sold or otherwise provided
to any individual (exclusive of any such Personal Services provided for in the
Present Membership Agreements) which would obligate Buyer to provide Personal
Services to any individual after the Closing Date;
(v) Except as listed in SCHEDULE 5(G)(V), as of February 13,
1998, 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 the only membership
agreements Seller has used, which are the only form of membership agreement used
by Seller at any time in connection with past or present members of the
Business;
(vii) As of February 13, 1998, Seller has a total of
approximately FOUR THOUSAND FORTY-TWO (4,042) active Present Members of which
(A) approximately EIGHT HUNDRED THIRTY-ONE (831) are paid-in-full memberships,
and (ii) approximately THREE THOUSAND TWO HUNDRED ELEVEN (3,211) are active,
non-delinquent EFT Payment memberships.
(viii) As of the Closing Date, Seller has allowed Buyer to
review true, correct and complete originals, and any and all amendments and
related documents, of all Present Membership Agreements. As of the Closing Date
there shall be no oral modifications with respect to any of the Present
Membership Agreements or oral agreements between Seller and any Present Members
or any third parties which would entitle any such Present Member or third party
to any right customarily held by a Present Member of the Business;
(ix) As of March 15, 1998, to the best of Seller's knowledge,
except as listed in Schedule 5(g)(ix), Seller will have fully paid and satisfied
all refund obligations with respect to any and all past members and Present
Members as required by contract or by applicable law; and
(x) 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.
h. (i) 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 will not be terminated on or prior to the Closing Date. As of
the Closing
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Date, Seller has delivered to Buyer true and complete copies of all contracts,
and all amendments thereto, to which it is a party, including, but not limited
to, each of the Assumed Contracts. 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. Except as set forth on SCHEDULE 5(H)(I), to
the best of Seller's knowledge, each of the Assumed Contracts is valid, binding
and enforceable in accordance with its terms. Except as set forth on SCHEDULE
5(H)(I), to the best of Seller's knowledge, 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 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.
(ii) Except as set forth on SCHEDULE 5(H)(II), as of the Closing
Date, Seller shall not be a party to any contract or lease with respect to
equipment used by, or in the past used by, the Seller or the Business, to which
Buyer shall have any present or future financial or other obligations.
i. (i) Except as set forth on SCHEDULE 5(I), to the best of
Seller's knowledge, 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 under Seller's Lease attributable to Seller, 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. Seller has not received a written
notice of default or notice of cancellation under Seller's Lease which remains
uncured.
(ii) To the best of Seller's knowledge, the Demised Premises, and
all building systems, utilities, fixtures and improvements therein are in good
operating condition and repair, and Seller has made all required maintenance and
repairs thereof, and there are no deferred maintenance obligations.
j. To the best of Seller's knowledge, whether or not there is a
Permanent Certificate of Occupancy, the Demised Premises and the Business are
being operated in compliance with, and neither Seller nor the Business is in
default or violation of, any applicable federal, state or local laws, rules,
regulations, or ordinances including, but not limited to, all parking
requirements applicable to the Demised Premises and the Business being conducted
at the Demised Premises. The current signage used by the Seller at the Demised
Premises is in compliance with all applicable laws. To the best of Seller's
knowledge, Seller is in compliance with all other laws, statutes,
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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 Demised
Premises and/or the Business, and such permits, authorizations, certificates and
licenses have been validly issued and are in compliance with applicable law.
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
Demised Premises or the Business, which violations have not been rectified.
k. Seller has received no notice of, and has no knowledge of,
any violation of any environmental law or regulation with respect to Seller, the
Purchased Assets 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 or the Business. To the best of Seller's knowledge, there are no
asbestos or asbestos-containing materials located within the Demised Premises in
violation of applicable law.
l. (i) Except as set forth in SCHEDULE 5(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) has not announced
or otherwise made a commitment to create any bonus (except for an oral
understanding that Seller will review certain employees' performance each year
and consider providing a bonus to each such employee), 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 ("ERISA")); PROVIDED, HOWEVER, that Seller does
maintain a 401(k) plan with respect to certain of its employees. Except as set
forth on SCHEDULE 5(L)(II), 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
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benefit plan"). To the best of Seller's knowledge, 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. To the best of Seller's knowledge, 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 (A)
the employment of all of its employees and (B) all consulting arrangements or
agreements with consultants to the Business.
(iv) The execution and delivery of this Agreement by Seller 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
reasonably practicable, Seller shall pay all salaries, benefits, penalties,
employment taxes, 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 such third parties for such amounts.
(vi) SCHEDULE 5(L)(VI) sets forth the list of all employees
(including their titles) and consultants to be terminated as of the Closing
Date, and the salaries, bonuses and all applicable withholding taxes with
respect to each such person.
m. Except as set forth on SCHEDULE 5(M), neither Seller nor any
of Seller's Principals has received 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, 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. To the best of Seller's knowledge, all Federal, state and
local taxes (including, without limitation, all sales tax due on Present
Membership Agreements, if any) or
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assessments due and payable with respect of Seller for all periods, including
interest and penalties, have been paid, or shall be timely paid by Seller when
required, 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. To the best of Seller's
knowledge, Seller has not failed to file timely any tax returns, tax reports or
other related tax information required by law to be filed. To the best of
Seller's knowledge, no federal, state or local government entity is performing,
or has threatened to perform, an audit of Seller for any year in which Seller
has occupied the Demised Premises. To the best of Seller's knowledge, Seller
has paid, or will timely pay when due, 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 Closing Date, Seller is not Insolvent.
(ii) The transactions contemplated hereby have not been
planned and will not be effected with intent 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 copies of the
following financial information: (i) Seller's 1996 federal and state tax
returns, and (ii) Seller's 1997 balance sheet and operating statements, covering
the period from January 1, 1997 to December 31, 1997 ("SELLER'S FINANCIALS"),
which were, to the best of Seller's knowledge, complete and correct as of the
date they were supplied. Seller's Financials for 1997 are being audited by
Buyer and Seller represents and warrants that Buyer
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will discover no material adverse change.
q. Except as set forth on SCHEDULE 5(Q), as of the Closing Date
Seller shall have paid-in-full all contractors, sub-contractors, materialmen,
suppliers, expediters, attorneys, architects and other service providers
(collectively, "CONTRACTORS"), for any and all work conducted prior to the
Closing Date with respect to Seller, the Business or the Demised Premises, 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,
to the best of Seller's knowledge, all contractors shall be paid in full, and no
Contractor shall have the legal right to file a mechanic's or materialmen's lien
against Seller, the Business, the Demised Premises or the Purchased Assets.
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 name "Ovox Fitness & Sports Center" and
"Powerhouse Gym", 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. Seller has conducted the Business in the ordinary course
since December 31, 1997, and has not incurred any debt or sold any discounted
present memberships, except in the ordinary course of the Business or sold any
services or goods for less than fair market value since such date.
t. Except as listed on SCHEDULE 5(T) hereof, to the best of
Seller's knowledge, there are no new health club facilities under construction
or scheduled to be opened within the next twelve (12) months within ten (10)
miles of the Demised Premises.
u. Except as listed on SCHEDULE 5(U) 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(u) have been amended, modified,
extended or otherwise altered, except as indicated in SCHEDULE 5(U).
v. Seller has no continuing obligations under the agreement
executed by and between Seller or Seller's Principals and Powerhouse Gym
("POWERHOUSE"), as amended from time to time (the "POWERHOUSE AGREEMENT").
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w. To the best of Seller's knowledge, no representation,
warranty or other statement of Seller 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.
x. The representations and warranties contained in this ARTICLE
5 shall survive the Closing Date for a period of eighteen (18) month; provided,
however, that Seller's representation in Section 5(n) (Taxes) hereof shall
survive the Closing Date indefinitely.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller and Seller's Principals as follows:
a. Buyer is a corporation 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 hereby have been
duly and validly authorized by all corporate action of Buyer. 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 nor 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 incorporation or
by-laws 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. The representations and warranties contained in this ARTICLE
6 shall survive the Closing Date for a period of eighteen (18) months.
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7. DUE DILIGENCE PERIOD
a. BUYER'S RIGHTS DURING DUE DILIGENCE PERIOD. During the Due
Diligence Period (as defined herein), Seller agrees to allow Buyer to perform
all required investigations and/or due diligence with respect to the Business,
the Demised Premises, Seller and the Purchased Assets, including, but not
limited to each of the following activities:
(i) Buyer and its auditors shall have the unimpeded right
to commence and perform an audit of the financial books and records of Seller;
and
(ii) Buyer shall have the unimpeded right to continue its
due diligence investigation commenced prior to signing this Agreement,
including, but not limited to, reviewing all documents, agreements,
correspondence, invoices, tax documents, etc. deemed relevant by Buyer;
provided, however, that Buyer shall conduct its due diligence investigation at
all times in a manner that will minimize disruption to the Business; and
(iii) Buyer shall have the right to negotiate with the
Landlord, with respect to the terms and conditions of the New Lease/Lease
Modification, as applicable.
b. SELLER'S OBLIGATIONS DURING DUE DILIGENCE PERIOD. During
the Due Diligence Period, during the normal hours of the Business (including
weekends), Seller shall allow Buyer and its representatives access to the
Demised Premises and to the books and records of the Business, and shall provide
reasonable assistance to Buyer and its representatives in their due diligence
investigation.
c. TERMINATION OF AGREEMENT DURING DUE DILIGENCE PERIOD. If,
for any reason whatsoever, Buyer, in its sole and exclusive discretion, shall be
dissatisfied, in whole or in part, with the results of its due diligence
investigation, it may, at any time prior to the Due Diligence Termination Date,
terminate this Agreement by written notice of termination ("TERMINATION NOTICE")
to Seller's attorney. For purposes of this Section 7(c), fax notice, to the fax
number indicated in Article 14 of this Agreement, shall be acceptable. If Buyer
elects to terminate this Agreement as aforesaid, this Agreement shall be null
and void and be of no further force and effect, and neither party shall have any
further obligations to the other party. If a Termination Notice is not sent to
Seller's attorney on or before the Due Diligence Termination Date, this
Agreement shall continue in full force and effect in accordance with its terms.
Termination of this Agreement in accordance with this provision shall also
constitute termination of the other three Ovox Acquisition Agreements.
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8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the transactions contemplated under this Agreement are subject to the
satisfaction 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 Seller is a party,
certified by the Secretary of Seller;
(ii) On the Closing Date, Seller AND SELLER'S PRINCIPALS
shall have represented in writing that, as of the Closing Date, each of the
representations in Article 5 of this Agreement listed in this Subsection
8(a)(ii) are true and accurate as of such date, including: Sections 5(a), 5(b),
5(c), 5(d), 5(e), 5(f), the third sentence of 5(g), 5(g)(iv), 5(g)(vi),
5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j), 5(k), 5(l), 5(m), 5(n), 5(o),
the second sentence of 5(q), 5(r), 5(s), 5(t), 5(u) and 5(v), each such
representation shall be true and correct as of the Closing Date, and each such
representation shall survive the Closing Date for a period of eighteen (18)
months, except for the representation in Section 5(n), which shall survive the
Closing Date indefinitely;
b. Seller, and/or Seller's Principals, as the case may be,
shall have executed and delivered to Buyer the Bill 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;
c. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
d. Seller, 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 conducing the activities presently
conducted by Seller at the Demised Premises and that a Permanent Certificate of
Occupancy has been issued. In the event that Buyer, in its sole discretion
agrees to complete the transactions contemplated by this Agreement despite
Seller's inability to obtain a Permanent Certificate of Occupancy, Seller shall,
at Seller's sole expense, including, but not limited to the costs, fees and
expenses for architects, engineers, attorneys, expediters, and construction,
take all actions and spend all sums necessary to secure a Permanent Certificate
of Occupancy for the Demised Premises. In
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the event that Seller does not obtain the Permanent Certificate of Occupancy on
or prior to the payment date of the TSI Note (the first anniversary of the
Closing Date), Buyer, may direct TSI to suspend payment of the TSI Note (with no
interest accruing) until such Permanent Certificate of Occupancy is received by
Buyer;
e. (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 Ovox Acquisition Agreements, ARE
FULLY AND COMPLETELY SATISFIED, and (B) affiliates of Buyer ("BUYER'S
AFFILIATES") and the Ovox Sellers shall have concluded each of the Related Ovox
Acquisitions on the Closing Date;
f. The Bank Facility and all related guaranties shall have been
terminated and Seller shall have provided Buyer with proof that no related
security agreement, UCC financing statement, or other document evidencing
indebtedness, is in effect with respect to the Purchased Assets;
g. Any and all installment contracts of Seller shall have been
paid in full with no additional amounts due thereunder, and Seller shall have
provided Buyer proof, satisfactory to Buyer, that all such amounts have been
paid and that no obligations remain outstanding with respect to the relevant
equipment provider. In addition, no security agreement, UCC financing
statement, or other document evidencing indebtedness, shall exist with respect
to such installment contracts;
h. Seller shall have provided Buyer with (i) 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, the Bank, or any other third parties (including, but not limited to
equipment lessors and equipment vendors) in the Purchased Assets, and/or (ii)
pay-off letters from such third parties indicating the amount owed to such third
party on the Closing Date for payment in full of all amounts owed with respect
to the affected Purchased Assets;
i. All material consents of third parties necessary on the part
of Buyer, Seller 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;
j. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
k. Seller's affiliate, Ovox Fitness & Sports
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Corp., shall have provided Buyer and each of Buyer's Affiliates a six (6) month
royalty-free license for the use of the "Ovox" name and trademark, substantially
and materially in the form of EXHIBIT G hereto;
l. Seller shall have paid to Buyer, Buyer's 1997-1998
Paid-in-Full Amount, as defined in Section 3(a) hereof, in the amount of
$20,000.00;
m. Seller shall have paid to Buyer, Buyer's pro-rated share of
the Pre-Closing Date EFT Payments, as defined in Section 3(b)(ii) hereof;
n. Seller shall have assigned to Buyer all of its right and
interest to each of the non-compete agreements listed in SCHEDULE 5(L)(I),
between Seller and certain of its employees and consultants;
o. Seller shall have assigned to Buyer, to the extent
assignable, 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;
p. Seller shall have delivered to Buyer all other agreements,
consents and instruments required to be delivered to Buyer under this Agreement;
q. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
r. Seller and Seller's Principals shall agree in writing not to
conduct any negotiations, or enter into any agreement with the Sam's Landlord
(as defined herein) with respect to the Tyces Lane Premises (as defined herein);
s. Seller and Seller's Principals shall agree in writing to
provide Buyer with Seller's interim financials for the period from January 1,
1998 and the Closing Date, no later than thirty (30) days after the Closing
Date; and
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t. Seller shall have paid to Buyer, Buyer's pro-rated share of
the license fee with respect to each of the Space Licenses listed in SCHEDULE
5(U) hereof.
9. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
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;
(ii) TSI shall have delivered to Seller resolutions
authorizing the execution and delivery of the TSI Note, certified by the
Secretary of Buyer;
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. 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;
d. Landlord and Buyer shall have executed the Lease
Modification, substantially and materially in the form of EXHIBIT F hereto,
subject only to those changes acceptable to Buyer, in Buyer's sole discretion,
and the Lease Modification shall be valid and enforceable;
e. Buyer's Affiliates shall have completed each of the Related
Ovox Acquisitions as of the Closing Date;
f. All material consents of third parties necessary on the part
of Buyer, Seller 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
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the Closing Date as conducted by Seller prior to the Closing Date, shall have
been obtained or effected;
g. Seller and Buyer shall have written and agreed upon the
contents of the Rosenstein Receivable List;
h. Except as set forth on SCHEDULE 5(F), (i) no action, suit,
or proceeding before any court or governmental or regulatory authority shall be
pending which could materially effect the value of the Purchased Assets or
Buyer's ability to profitably own and operate the Business, (ii) no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any third party or 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;
i. Buyer shall have performed, satisfied and complied with all
of the covenants, conditions and provisions of this Agreement to be performed,
satisfied or complied with by Buyer; and
j. Buyer shall have delivered to Seller a total of ten (10)
complimentary, non-transferable, passport memberships, which memberships shall
be valid for as long as TSI remains directly, or indirectly, the owner of any or
all of Buyer's Affiliates.
10. INDEMNIFICATION.
a. After the Closing Date, Seller and 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:
(i) any breach of the representations and warranties
made by Seller in or pursuant to this Agreement or any of the Acquisition
Agreements; or
(ii) the failure by Seller to perform or observe any of
the covenants and agreements to be performed or
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observed by Seller pursuant to this Agreement or any of the Acquisition
Agreements; or
(iii) any and all obligations of Seller, including, but
not limited to, Seller's obligations to its 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
(iv) any and all obligations to Powerhouse or its
affiliates, including, but not limited to any obligations arising from or
related to the Powerhouse Agreement or the termination of the Powerhouse
Agreement; or
(v) any and all liability with respect to the litigation
indicated on Schedule 5(f) hereof.
b. After the Closing Date, Buyer shall indemnify, defend and hold
Seller and its directors, officers, trustees, employees, agents and affiliates
and Seller's Principals (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:
(i) a breach of the representations and warranties made
by (A) Buyer in or pursuant to this Agreement or any of the Acquisition
Agreements and (B) TSI in or pursuant to the TSI Note; or
(ii) the failure by (A) 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, and (B) TSI to perform or
observe any of the covenants and agreements to be performed or observed by TSI
under the TSI Note; or
(iii) any and all obligations of Buyer including any and
all obligations under the Assumed Contracts, 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
under this Agreement or the Acquisition Agreements.
c. The provisions of this SECTION 10 shall survive the Closing Date
for a period of three (3) years.
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d. 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.
e. RIGHT OF OFFSET. In addition to any other rights Buyer may
have under this Agreement or in accordance with applicable law, in the event
that Seller and/or Seller's Principals fail 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 of any of the representations and
warranties set forth herein), Buyer, TSI and Buyer's Indemnities shall have an
immediate right of offset against any payments required to be made pursuant to
the TSI Note (i) to Seller or (ii) to the other entities controlled by Seller's
Principals, in accordance with the Related Ovox Acquisitions.
11. INTERIM PERIOD. (a) Seller agrees that, during the Interim
Period, it shall:
(i) conduct the Business in the ordinary course consistent
with prior practice, including, but not limited to prior membership sales
practice, and shall not incur any additional debt outside of the ordinary
course, issue any new complimentary or discounted memberships or make any
modifications
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to the Business as conducted as of the date of this Agreement, unless previously
agreed to by the parties in writing; and
(ii) preserve its business organization intact and shall use
its best efforts to preserve for Buyer the good will of (A) the Present Members,
(B) the suppliers of the Business, and (C) any third parties related to the
Business; and
(iii) (A) not enter into negotiations with, or provide any
information to, any third parties interested in the possible acquisitions of any
or all of the Ovox Clubs, and, (B) unless Buyer is in breach of this Agreement
or has terminated this Agreement, Seller may not terminate this Agreement
without Buyer's prior written approval.
(b) Buyer and Seller agree that during the Interim Period
they shall work together to provide appropriate notice and complete necessary
filing with respect to each of the following:
(i) 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) letter of non-applicability to the New Jersey
Department of Environmental Protection, in accordance with the Industrial Site
Recovery Act; and
(iii) notice of Seller's intention to sell a health club
facility to the Division of Consumer Affairs of the State of New Jersey; and
(iv) any and all other necessary or appropriate filings with
federal, state or local authorities.
(c) Buyer and Seller agree that during the Interim Period:
(i) Buyer, or Buyer's parent company, TSI, shall have the
exclusive right to negotiate with Sam's East, Inc. (the "SAM'S LANDLORD"), for a
lease for the premises located at The Shopping Center located on the corner of
Highway 18 and Tyces Lane in East Brunswick, New Jersey (the "TYCES LANE
PREMISES"), which will allow an affiliate of Buyer to establish a health club
facility at such location; and
(ii) Buyer shall continue to have the right to negotiate
with the Landlord, with respect to the terms and conditions of the New
Lease/Lease Modification, as applicable.
12. CLOSING DATE ACTIONS. (a) On the Closing Date, Seller and Buyer
agree, in good faith, to perform each of the
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following:
(i) work together to prepare the Rosenstein Receivable List and
the list of Closing Month Delinquent Amounts;
(ii) prepare and execute a side-letter agreement with respect to
post-closing undertakings of Seller, and other post-closing matters, as deemed
necessary by the parties; and
(iii) work together to complete all other actions reasonably
necessary to complete the transactions contemplated herein.
13. LIQUIDATED DAMAGES. (a) Notwithstanding anything to the contrary
in this Agreement, in the event that Buyer does not provide a Termination Notice
to Seller's Attorney on or prior to the Due Diligence Termination Date, AND, as
of the Closing Date, all conditions listed in Article 8 of this Agreement have
been fully satisfied and all conditions listed in Article 8 of each of the other
Ovox Acquisition Agreements have been fully satisfied, AND each of the Ovox
Sellers is otherwise ready, willing and able to conclude the transactions
contemplated by the Ovox Acquisition Agreements, THEN, if Buyer, on the Closing
Date, defaults in its obligation to complete the transactions contemplated
hereby, Seller's sole remedy shall be the right to receive a payment of One
Hundred Thousand Dollars ($100,000.00) (the "LIQUIDATED DAMAGES AMOUNT") from
Buyer as liquidated damages, it being agreed that Seller's damages in case of
Buyer's default might be impossible to ascertain, and that the Liquidated
Damages Amount constitutes a fair and reasonable amount of damages under the
circumstances and is not a penalty.
(b) Upon the signing of this Agreement, TSI, the parent company
of Buyer, shall deliver to Seller a guaranty agreement (the "TSI GUARANTY"),
solely with respect to the Liquidated Damages Amount.
14. 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:
Harry Rosenstein
21 Manitoba Way
Marlboro, New Jersey 07746
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Fax: 732-577-9832
with a copy to:
Robert Goldschlag, Esq.
65 South Street
Freehold, New Jersey 07728
Fax: 732-577-9832
To Buyer:
TSI Freehold, Inc.
c/o Town Sports International, Inc.
888 Seventh Avenue
New York, New York 10106
Fax: 212-246-8422
Attention: Alexander Alimanestianu
with a copy to:
Donovan & Giannuzzi
405 Park Avenue
New York, New York 10022
Fax: 212-223-0966
Attention: Nicholas T. Donovan, 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 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 the subject matter of this Agreement.
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.
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f. AMENDMENT AND WAIVER. This Agreement may not be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller and Buyer.
g. GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
(ii) Any dispute, claim or controversy arising out of or
relating to this Agreement or the Acquisition Agreements, including, but not
limited to Buyer's and TSI's right of offset in Section 10(e) hereof, shall be
settled by arbitration in Monmouth County, New Jersey in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, or any
successor thereof. The decision and award of the arbitration shall be final and
conclusive on the parties, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
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.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been executed
and delivered by the parties as of the date first above written.
MAXIFIT, INC. d/b/a
Ovox Fitness & Sports Center
of Old Bridge
By: /s/ Harry Rosenstein
-------------------------------
Name: Harry Rosenstein
Title: President
TSI OLD BRIDGE, INC.
By: /s/ Alexander Alimanestianu
-------------------------------
Alexander Alimanestianu
Executive Vice President
With Respect to Section 10(a):
/s/ Harry Rosenstein
- ---------------------------------
HARRY ROSENSTEIN
/s/ Phyllis Rosenstein
- ---------------------------------
PHYLLIS ROSENSTEIN
/s/ Stuart Rosenstein
- ---------------------------------
STUART ROSENSTEIN
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