SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of report (Date of earliest event reported) July 9, 1997
Brunswick Corporation
(Exact Name of Registrant as Specific in Its Charter)
Delaware 1-1043 36-0848180
(State or Other Jurisdiction (Commission IRS Employer
of Incorporation) File Number) Identification No.)
1 N. Field Ct., Lake Forest, Illinois 60045-4811
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code
(847) 735-4700
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 9, 1997, Brunswick Corporation ("Brunswick")
purchased from Life Fitness, a New York general partnership
("Life Fitness"), substantially all of its facilities, equip-
ment, inventory and other assets. The purchase price was
approximately $310,000,000 and is subject to adjustment for
the amount of net tangible assets actually acquired. The
purchase price consists of approximately $300,000,000 in cash
paid at closing and $10,000,000 in deferred cash payments
pursuant to an incentive compensation plan in connection with
the waiver of employee options granted by Life Fitness.
Life Fitness designs, markets and manufactures computer
ized cardiovascular and strength training fitness equipment
serving the commercial (health clubs, military, government,
corporate and university facilities) and high-end consumer
markets. Brunswick intends to operate the Life Fitness busi-
ness with its current management.
Brunswick obtained the funds to pay the purchase price
from the sale of commercial paper in the principal amount of
$296,000,000 with the remainder coming from cash from opera-
tions.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No. Exhibit
2.1 Asset Purchase Agreement dated as of
June 3, 1997 between Life Fitness and
Brunswick Corporation.
2.2 Amendment No. 1 to Asset Purchase
Agreement dated as of July 9, 1997
between Life Fitness and Brunswick
Corporation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly autho-
rized.
BRUNSWICK CORPORATION
DATE: July 22, 1997 By: /s/ V. J. Reich
Victoria J. Reich
Vice President
and Controller
EXHIBIT INDEX
Exhibit No. Exhibit
2.1 Asset Purchase Agreement dated as of June
3, 1997 between Life Fitness and Brunswick
Corporation.
2.2 Amendment No. 1 to Asset Purchase Agree
ment dated as of July 9, 1997 between Life
Fitness and Brunswick Corporation.
Exhibit 2.1
ASSET PURCHASE AGREEMENT
Between
LIFE FITNESS,
Seller,
- and -
BRUNSWICK CORPORATION,
Buyer.
Dated: June 3, 1997
TABLE OF CONTENTS
1. Sale and Purchase of Assets
1.1 Transfer of Assets
1.2 Excluded Assets
1.3 Assignment of Assets
(a) Nonassignability
(b) Seller to Use Reasonable Efforts
1.4 Obtaining Permits and Licenses
1.5 Assumption of Liabilities
1.6 Liabilities Specifically Not Assumed
2. Purchase Price
2.1 Amount of Purchase Price
2.2 Adjustment of Purchase Price
2.3 Payment of Purchase Price
2.4 Allocation of Purchase Price
3. Closing
3.1 Date of Closing
3.2 Delayed Closing
3.3 All Proceedings
4. Representations and Warranties of Seller
4.1 Authority of Seller
4.2 Organization, Standing and Qualification
4.3 Restrictions; Consents
4.4 Nonforeign Status
4.5 Employee Benefit Plans
4.6 Labor Relations
4.7 Litigation
4.8 Real Property
(a) Domestic Owned Real Property
(b) Domestic Leased Real Property
(c) Overseas Owned Real Property;
Overseas Real Property Leases
(d) As Is, Where Is
(e) No Other Real Property or Real
Property Interests
4.9 Tangible Personal Property
4.10 Proprietary Rights
4.11 Absence of Changes
4.12 Environmental Matters
4.13 Financial Statements
4.14 No Undisclosed Liabilities
4.15 Taxes
4.16 No Material Adverse Change
4.17 Material Contracts
4.18 Compliance with Laws; Permits
4.19 Insurance
4.20 Certain Employees
4.21 Assets Complete
4.22 Product Liability Experience
4.23 Liens and Encumbrances
4.24 Capital Stock
4.25 Inventory
4.26 Receivables
4.27 Product Warranty
5. Representations and Warranties of Buyer
5.1 Buyer's Organization
5.2 Authorization of Agreement
5.3 Restrictions; Consents
5.4 Litigation
6. Further Agreements of the Parties
6.1 Access to Information
6.2 Conduct of the Business Pending the Closing
6.3 Notice of Material Adverse Changes
6.4 Litigation
6.5 Continued Effectiveness of Representations
and Warranties
6.6 Expenses
6.7 Publicity
6.8 Preservation of Records
6.9 W-2 Matters
6.10 Employment Matters
(a) General
(b) Employee Benefit Plans
(c) Employees of the Life Fitness Group
(d) Multi-Employer Pension Plan
(e) Employee Benefit Indemnity
(f) Third Party Claims
(g) German Employees
6.11 Title and Survey
(a) Delivery of Title Commitment and Survey
(b) Title Review and Cure
(c) Delivery of Title Policy at Closing
(d) Title and Survey Costs
6.12 Casualty Event
6.13 Illinois Responsible Property Transfer Act
6.14 Certificates of Resale
6.15 Further Actions
6.16 Name Change
6.17 Cash Transfer
6.18 Transfer of Other Shares
7.0 Conditions to Closing
7.1 Conditions Precedent to Obligations of Buyer
7.2 Conditions Precedent to Obligations of Seller
8. Documents to be Delivered at the Closing
8.1 Documents to be Delivered by Seller
8.2 Documents to be Delivered by Buyer
9. Termination and Certain Continuing Obligations
9.1 Termination
9.2 Effect of Termination; Certain Continuing
Obligations
10. Miscellaneous
10.1 Finders
10.2 Entire Agreement
10.3 Governing Law
10.4 Expiration of Representations and Warranties
10.5 Table of Contents and Headings; Interpretation
10.6 Notices
10.7 Severability
10.8 Assignment
10.9 Payment of Real Property Transfer and
Sales Taxes
10.10 Seller's Knowledge
10.11 Further Assurances
10.12 Amendments; Waiver
10.13 Bulk Sales Laws
10.14 Limitation of Partner Liability
10.15 No Third Party Beneficiaries
10.16 Subsidiary Cash Option
10.17 Buyer's Option to Acquire Assets of LF Germany
10.18 Counterparts
The schedules listed below have been omitted from Exhibit 2.1,
and Brunswick Corporation agrees to furnish supplementally a
copy of any omitted schedules to the Securities and Exchange
Commission upon request.
SCHEDULES
1.1 Parent Assets
1.2 Excluded Assets
1.6 Excluded Liabilities
2.2 Calculation of Adjusted Net Tangible Assets
4.3 Restrictions; Consents
4.5 Employee Benefit Plans
4.6 Labor Relations
4.7 Litigation
4.8(a) Domestic Owned Real Property
4.8(b) Domestic Leased Real Property
4.8(c) Overseas Owned Real Property; Overseas Real Property
Leases
4.9 Tangible Personal Property
4.10 Proprietary Rights
4.11 Absence of Changes
4.12 Environmental Matters
4.14 No Undisclosed Liabilities
4.15 Taxes
4.16 No Material Adverse Change
4.17 Material Contracts
4.18 Permits
4.19 Insurance
4.20 Certain Employees
4.21 Assets Complete
4.22 Products Liability Experience
4.23 Liens
4.24 Capital Stock
4.27 Product Warranty
6.2 Certain Transactions
6.10(a) Employees Receiving Certain Benefits
6.10(g) German Employees
7.10(f) Required Consents
10.10 Seller's Knowledge
EXHIBITS
Exhibit 2.3 (b) Form of Escrow Agreement
Exhibit 4.8(a)(ix) Form of Estoppel Certificate For Domestic
Tenant Agreements
Exhibit 4.8(b)(i) Form of Estoppel Certificate For Domestic
Real Property Leases
Exhibit 7.1(d)(i) Opinion of Counsel to the Seller
Exhibit 7.1(d)(ii) Opinion of Special Counsel to the Seller
Exhibit 7.2(d) Opinion of Counsel to the Buyer
Exhibit 7.2(j) Certain Officer's Certificates
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 3, 1997,
between LIFE FITNESS, a New York general partnership (Seller),
and BRUNSWICK CORPORATION, a Delaware corporation (Buyer).
W I T N E S S E T H :
WHEREAS, Seller is in the business of designing,
manufacturing, marketing, selling, distributing and servicing
computerized fitness equipment and strength training equipment
throughout the world (the Business), directly and through the
Subsidiaries (as such term and each other capitalized term used
herein without textual definition is defined in Appendix I hereto)
(Seller and the Subsidiaries being referred to herein collectively
as the Life Fitness Group); and
WHEREAS, Seller wishes to sell and Buyer wishes to pur-
chase, substantially all of the assets and properties of Seller
including those shares of the issued and outstanding capital stock
of each of the Subsidiaries owned by Seller, and, as part of such
sale and purchase, Buyer is willing to assume substantially all of
the obligations and liabilities of Seller;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual
benefits to be derived hereby, the parties hereto agree as follows:
1. Sale and Purchase of Assets.
1.1 Transfer of Assets. Subject to the terms and
conditions of this Agreement, at the Closing referred to in Section
3.1 hereof, Seller shall sell, assign, transfer, convey and deliver
to Buyer, and Buyer shall purchase, acquire and take assignment and
delivery of from Seller, all of the assets, properties, rights and
business of Seller, other than the Excluded Assets referred to in
Section 1.2 hereof, as the same shall exist on the Closing Date
(collectively, the Assets), including without limitation:
(a) those assets, properties and rights reflected
on the audited consolidated balance sheet of The Life Fitness
Companies L.P. (such entity (the Parent) being a Delaware limited
partnership and the general partner of Seller holding the majority
partnership interest in Seller) as of December 31, 1996 (the 1996
Balance Sheet) (other than (i) the assets, properties and rights
owned or held by the Subsidiaries and (ii) the assets, properties
and rights directly owned or held by the Parent and listed on
Schedule 1.1 hereto), subject to such changes therein (including
any additions thereto) as shall have occurred between such date and
the Closing Date;
(b) The Domestic Owned Real Property, together
with: all buildings, plants, facilities, installations, fixtures
and other improvements located thereon or attached thereto; and,
all and singular, the rights, benefits, privileges, easements,
tenements, hereditaments, and appurtenances thereon or in anywise
appertaining to such land (collectively the Owned Real Property);
and all real property and real property interests leased or occu-
pied (other than occupied real property owned in fee, easement or
other ownership interest disclosed which would constitute Owned
Real Property) by the Seller (the Leased Real Property);
(c) all furnishings, furniture, fixtures, office
supplies, vehicles, tools, computers, machinery and equipment and
other fixed assets;
(d) all inventory, including raw materials, work-
in-process, finished goods and service parts;
(e) all accounts receivable and other receivables;
(f) all patents, trademarks, trade names, service
marks, know-how copyrights, (and any registrations with any Govern-
mental Authority of, and applications for registration pending with
respect to, any of the foregoing) trade secrets, inventions,
processes, designs, know-how, formulas, computer software and data,
including any and all uses of the name Life Fitness;
(g) all contracts, agreements, leases, licenses,
purchase orders, sales orders, arrangements and/or commitments of
any kind, including, without limitation, the collective bargaining
agreement listed on Schedule 4.6 hereto (collectively, the Contracts);
(h) all customer and vendor lists;
(i) all files and documents (including credit
information) relating to the Business, and other business and
financial records, files, books and documents;
(j) all municipal, state and federal franchises,
authorizations, permits and licenses;
(k) all prepaid charges, sums and fees;
(l) all claims and causes of action that Seller has
or may have on the Closing Date against any Person;
(m) Subject to Section 3.2 of this Agreement, the
issued and outstanding shares (collectively, the Shares) of share
capital stock owned of record or beneficially by Seller of each of
(i) Life Fitness Asia Pacific Limited, a Hong Kong corporation,
(LF Hong Kong), (ii) Life Fitness Atlantic B.V., a Dutch corpora-
tion ( LF Holland ), (iii) Life Fitness China Limited, a Hong Kong
corporation (LF China), (iv) Life Fitness Europe GmbH, a German
corporation (LF Germany), (v) Life Fitness Holdings B.V.B.A., a
Belgian corporation (LF Belgium), (vi) Life Fitness Italia
S.r.l., an Italian corporation (LF Italy) and (vii) Life Fitness
(UK) Limited, an English corporation (LF Britain; and together
with LF Hong Kong, LF Holland, LF China, LF Germany, LF Belgium and
LF Italy, collectively, the Share Subsidiaries); and
(n) all other tangible and intangible assets of
Seller (other than the Excluded Assets).
1.2 Excluded Assets. The parties to this Agreement
expressly understand and agree that Seller is not selling, assign
ing, transferring or conveying to Buyer the following assets,
rights and properties, which shall be specifically excluded from
the transactions contemplated by this Agreement (collectively, the
Excluded Assets):
(a) subject to Buyer's exercise of the option
accorded Buyer pursuant to Section 10.16 of this Agreement, all
Cash as of the Closing Date;
(b) all prepaid finance charges incurred in connec
tion with either the Senior Notes or the Credit Agreement;
(c) all minute books (copies of which have been
made available to Buyer), and similar partnership records of Seller
relating to the governance of Life Fitness and its relationship
with its partners and any other documents or records which Seller
is required by law to retain in its possession or which are reason
ably necessary to effect its dissolution;
(d) all claims and causes of action that Seller has
or may have on the Closing Date against its partners or its or
their respective Affiliates, other than the Subsidiaries, provided,
however, that the foregoing shall not extinguish any right Buyer
would otherwise have to assert any such claim or cause of action in
offset or defense to any claim asserted by any such partner or
Affiliate pursuant to Article VI of Seller s Partnership Agreement,
or otherwise to impair Buyer's rights to receive the benefits under
policies of insurance maintained by Seller for the benefit of such
partners or Affiliates to the same extent Seller would have been
entitled to receive the same;
(e) subject to Section 3.2 of this Agreement, all
Interests which pursuant to Section 1.3(a) of this Agreement and
Assets which pursuant to Section 1.4 of this Agreement are not
assigned to Buyer; and
(f) the Excluded Assets designated on Schedule 1.2
hereto.
Further, Buyer understands and acknowledges that, subject to
Buyer's exercise of the option accorded Buyer pursuant to Section
10.16 of this Agreement, on or before the Closing, Seller will
cause each Subsidiary to distribute or transfer to Seller or to
such other Persons as Seller may direct all Cash (including Cash
resulting from the conversion or liquidation of cash equivalents)
to the extent of legally available funds of such Subsidiary as of
or prior to the Closing Date and that Seller will distribute or
transfer to its partners or to such other Persons as Seller may
direct all Cash (including Cash resulting from the conversion or
liquidation of cash equivalents) of Seller as of or prior to the
Closing Date (collectively, the Cash Transfer ).
1.3. Assignment of Assets.
(a) Nonassignability. To the extent that any lease, con
tract, license, agreement, property interest, or other Asset
described in Section 1.1 (except for such other Assets referred to
in Section 1.1(j)) to be sold, assigned, transferred or conveyed to
Buyer (individually, an Interest and collectively, the
Interests), is not capable of being sold, assigned, transferred
or conveyed without the approval, consent or waiver of the issuer
thereof or the other party thereto, or any other Person, or if such
sale, assignment, transfer or conveyance or attempted assignment,
transfer or conveyance would constitute a breach thereof, this
Agreement shall not constitute a sale, assignment, transfer or
conveyance thereof, or an attempted assignment, transfer or convey
ance thereof and Buyer shall not have any liability or
responsibility in respect thereof (except as provided in Section
3.2 of this Agreement) and Seller shall not have released any of
its rights, title and interests in and to such Interests, unless
the appropriate approval, consent or waiver in respect thereof is
obtained.
(b) Seller to Use Reasonable Efforts. Anything in this
Agreement to the contrary notwithstanding, Seller is not obligated
to sell, assign, transfer or convey to Buyer any of its respective
rights and obligations in and to any Interest without first obtain
ing all necessary approvals, consents or waivers. Seller shall use
all its reasonable efforts, and Buyer shall cooperate fully with
Seller, to obtain all necessary approvals, consents or waivers
provided, however, that neither Buyer nor Seller shall be obligated
to pay any consideration therefor (except for filing fees and other
ordinary administrative charges which shall be borne by Seller) to
the third party from whom such approval, consent or waiver is
requested. If such required approval, consent, or waiver is not
obtained, or if an attempted assignment is ineffective, Seller
shall cooperate with Buyer in any reasonable arrangement requested
by Buyer to provide for Buyer the benefits under any such Interest;
provided, however, that Seller shall not be required to incur any
additional out-of-pocket cost or expense in connection with such
cooperation.
1.4. Obtaining Permits and Licenses. Seller shall use all its
reasonable efforts to assign, transfer or convey to Buyer at the
Closing all franchises, authorizations, permits and licenses
referred to in Section 1.1(j) hereof. To the extent any franchises,
authorizations, permits or licenses are not capable of
being assigned without the consent of the issuer thereof, or if
such assignment or attempted assignment would constitute a breach
thereof or a violation of any Applicable Law, this Agreement shall
not constitute an assignment or attempted assignment thereof and
Buyer shall not have any liability or responsibility in respect
thereof and Seller shall not have released any of its rights, title
and interests in and to such franchises, authorizations, permits
and licenses, unless the appropriate approval, consent or waiver in
respect thereof is obtained. Seller shall use all its reasonable
efforts, and Buyer shall cooperate fully with Seller, to obtain any
third party consents necessary for the assignment or transfer of
any such franchises, authorizations, permits or licenses used or
held by Seller. Neither Buyer nor Seller shall be obligated to pay
any consideration in connection with its efforts under this Section
1.4 (except for filing fees and other ordinary administrative
charges which shall be borne by Seller) to the third party from
whom such consent is requested.
1.5. Assumption of Liabilities. Effective as of the Closing,
Buyer shall, without any further responsibility or liability of or
recourse to Seller or its respective partners, managers, officers,
employees, agents, consultants, representatives, successors,
transferees or assignees, absolutely and irrevocably assume and be
solely liable and responsible for all liabilities, obligations and
commitments of Seller of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to
become due other than the Excluded Liabilities, and provided that
such liabilities, obligations and commitments arise from the
Business (including as conducted by Seller s predecessors in
interest) and are based on, or arise from facts or circumstances
(whether known or unknown) in existence or having occurred at any
time up to and including the Closing Date, and, to the extent
applicable, the date of any Delayed Closing, (the Assumed Liabili-
ties). Without limitation of the foregoing, the Assumed Liabili-
ties shall include the following (except for such as would consti-
tute Excluded Liabilities):
(a) (i) all liabilities of Seller reflected on the 1996
Balance Sheet, except to the extent previously satisfied after
December 31, 1996, and (ii) all unpaid liabilities of Seller
incurred since December 31, 1996 and through and including the
Closing Date;
(b) all liabilities and unperformed and unfulfilled obliga-
tions of Seller relating to all Contracts that are assigned to
Buyer pursuant to the terms hereof;
(c) all liabilities of Seller incurred in connection with any
claim (a Products Liability Claim ) arising out of or otherwise
relating to any express or implied representation, warranty,
agreement or guaranty made or claimed to have been made by or on
behalf of Seller or for which Seller is alleged to be responsible
(or Buyer or any Affiliate thereof as successor to the Business),
or imposed or asserted to be imposed whether by contract or opera
tion of law, or pursuant to any statute or common law theory of
tort or strict liability or otherwise in connection with any
products or services (including components or parts thereof)
produced, prepared, created, sold or rendered by or on behalf of
Seller (or any predecessor of Seller) or with respect to which
Seller (or any predecessor of Seller) is alleged to have responsi-
bility prior to the Closing (or by Buyer or any Affiliate thereof
as successor to the Business from and after the Closing), whether
or not such claims relate to damage or injury alleged to have
occurred prior to the Closing;
(d) all workers' compensation liabilities to employees of
Seller relating to illnesses or injuries occurring at any time,
including any liabilities relating to reoccurrences of illnesses or
injuries occurring at any time;
(e) all liabilities relating to claims of employees of Seller
who are or have been employed by Seller in connection with the
Business whensoever and howsoever arising;
(f) all liabilities and obligations, if any, to which Seller
has or may become subject in connection with the costs incurred by
J. Emil Anderson and Son, Inc. (Anderson) or otherwise relating
to that certain Declaration of Grant of Easements, dated July 30,
1965 by Anderson, and recorded on August 6, 1965 as Document No.
19550511 in Cook County, Illinois;
(g) all obligations and liabilities in connection with any
litigation, proceeding or governmental investigation pending or
threatened against or relating to Seller or the Business as of the
Closing Date including, without limitation, the matters listed on
Schedule 4.7 hereto;
(h) all liabilities and obligations to which the Assets or
the Business is subject or may in the future be subject in connec-
tion with conditions existing as of or prior to the Closing Date
pursuant to Environmental Laws;
(i) all liabilities under and with respect to any Business
Benefit Plans (as defined in Section 4.5) and with respect to any
Group Benefit Plan (as defined in Section 4.5) to the extent such
liabilities relate to employees or former employees of the Business,
including, without limitation, any liability for continued
coverage benefits under 4980B of the Internal Revenue Code of
1986, as amended (the Code) or Part 6 of Title I of ERISA with
respect to qualifying events occurring prior to the Closing Date;
(j) all liabilities and obligations of Seller arising under
Article VI of Seller s Amended and Restated Partnership Agreement,
dated as of June 18, 1992 (the Seller's Partnership Agreement)
and provided that such liabilities and obligations arise from the
Business and are based on, or arise from facts or circumstances
(whether known or unknown) in existence or having occurred at any
time up to and including the Closing Date, and, to the extent
applicable, the date of any Delayed Closing; and
(k) all liabilities and obligations, if any, to which Seller
has or may become subject in respect of the liabilities and obliga-
tions of the Subsidiaries (or any of them), whether by way of
agreement or operation of law.
1.6. Liabilities Specifically Not Assumed. The parties
expressly understand and agree that Buyer is not assuming hereunder
any of the following obligations or liabilities of Seller (the
Excluded Liabilities): (a) all obligations or liabilities with
respect to Excluded Assets; (b) all obligations or liabilities with
respect to Interests which, pursuant to Section 1.3(a) hereof and
Assets which pursuant to Section 1.4 hereof, are not assigned to
Buyer; (c) all obligations and liabilities arising under Seller's
8.05% Senior Notes, due 2001 (the Senior Notes) or under the
Revolving Credit Agreement dated as of June 15, 1994 between Seller
and American National Bank (the Credit Agreement); and (d) the
Excluded Liabilities that are set forth on Schedule 1.6 hereto.
2. Purchase Price.
2.1. Amount of Purchase Price. The purchase price for the
Assets (the Purchase Price) shall be $310,000,000, subject to
adjustment pursuant to Section 2.2 hereof, which Purchase Price, as
so adjusted, when added to the Assumed Liabilities constitutes the
aggregate consideration to be paid by Buyer for the Assets. The
Purchase Price shall be payable as provided in Section 2.3 hereof.
The Purchase Price shall be allocated among the Assets as provided
in Section 2.4 hereof.
2.2. Adjustment of Purchase Price.
(a) The Purchase Price shall be adjusted upward on a dollar-
for-dollar basis for the excess, if any, of the amount of the
Adjusted Net Tangible Assets (as defined below) of the Life Fitness
Group as of the Closing Date over $43,877,000 (being the amount of
the Adjusted Net Tangible Assets as reflected on the 1996 Balance
Sheet).
(b) The Purchase Price shall be adjusted downward on a
dollar-for-dollar basis for the deficiency, if any, in the amount
of the Adjusted Net Tangible Assets (as defined below) of the Life
Fitness Group as of the Closing Date below $43,877,000 (being the
amount of the Adjusted Net Tangible Assets as reflected on the 1996
Balance Sheet).
(c) For purposes of this Section 2.2, the term Adjusted Net
Tangible Assets shall mean, as of December 31, 1996 or the Closing
Date, as the case may be (i) the consolidated assets (as would
appear on a balance sheet prepared in accordance with generally
accepted accounting principles) of the Life Fitness Group before
any allowances for depreciation on assets for the period subsequent
to December 31, 1996, but after eliminating all Excluded Assets
(including for this purpose Cash of the Subsidiaries), goodwill,
patents, trademarks, service marks, tradenames, copyrights, capi-
talized organization or development expenses and other intangible
items, less (ii) the consolidated liabilities (as would appear on a
balance sheet prepared in accordance with generally accepted
accounting principles) of the Life Fitness Group, but after elimi-
nating all Excluded Liabilities. The Adjusted Net Tangible Assets
as of the Closing Date shall be calculated in accordance with the
accounting policies, principles and assumptions used in connection
with the 1996 Balance Sheet, applied on a consistent basis (the
Accounting Policies). The Adjusted Net Tangible Assets as of the
Closing Date shall be calculated without the taking of a physical
count of inventories. For the purpose of illustration, Schedule
2.2 hereto sets forth calculations of Adjusted Net Tangible Assets
as of December 31, 1996 and March 31, 1997, respectively (and the
resulting adjustment to the Purchase Price called for in this
Section 2.2) as if the Closing Date were March 31, 1997. For the
sake of clarity, it is understood that Cash acquired pursuant to
Section 10.16 of this Agreement shall be deemed an Excluded Asset
for the purposes of determining Adjusted Net Tangible Assets.
(d) The initial calculation of the Adjusted Net Tangible
Assets as of the Closing Date shall be made by Buyer. Buyer shall
render a certificate (the Adjusted Net Tangible Assets Certifi-
cate) showing such calculation; provided, however, that such
calculation shall be made by Buyer in accordance with the Account
ing Policies. Seller and Seller's representatives shall have a
right to review such calculation. Buyer shall deliver the Adjusted
Net Tangible Assets Certificate to Seller as promptly as practica-
ble after the Closing but in no event later than 45 days following
the Closing Date.
(e) Seller shall have a period of 30 days after delivery of
the Adjusted Net Tangible Assets Certificate to present in writing
to Buyer any objections Seller may have to any of the matters set
forth therein, which objections shall be set forth in reasonable
detail. If no objections are raised within such 30-day period,
Buyer's determination of the Adjusted Net Tangible Assets shall be
deemed accepted and approved by Buyer and Seller and shall be final
and binding on them.
If Seller shall raise any objection within the aforesaid 30-
day period, Seller and Buyer shall attempt to resolve the matter or
matters in dispute. If all such objections shall be resolved
within 20 days after delivery of the Adjusted Net Tangible Assets
Certificate, Buyer shall send to Seller a confirmation of the
original Adjusted Net Tangible Assets Certificate, or, if neces-
sary, a revised Adjusted Net Tangible Assets Certificate prepared
in accordance with such resolution, and Seller shall send a letter
to Buyer confirming that such confirmed or revised Adjusted Net
Tangible Assets Certificate is in accordance with such resolution,
whereupon the confirmed or revised Adjusted Net Tangible Assets
Certificate shall be final and binding on Buyer and Seller.
If all such disputes cannot be so resolved in writing by Buyer
and Seller within 20 days after the delivery of the Adjusted Net
Tangible Assets Certificate, then the specific matters in dispute
shall be submitted to a firm of independent accountants of nation-
ally recognized standing selected by Buyer and Seller which firm
shall make a final and binding determination as to such matter or
matters, after gathering such data and interviewing such employees
and representatives of the parties as such firm of independent
accountants deems necessary. The parties shall cooperate fully
with such firm of independent accountants.
During the pendency of any such dispute, Seller or Buyer, as
the case may be, shall promptly remit to the other party any amount
due in respect of that part of the cash portion of the Purchase
Price adjustment which is not in dispute, and the dispute resolu-
tion mechanism set forth herein shall continue to operate with
respect to the remaining disputed item or items.
Each of Buyer and Seller understands and acknowledges that the
other may utilize the services of Arthur Anderson LLP in connection
with Sections 2.2(c) and 2.2(d) of this Agreement.
(f) If, after the Closing, Seller or Seller's representatives
require access to the employees or records of the Business in
connection with its or their review of the Adjusted Net Tangible
Assets Certificate or any calculation or other matters therein,
Buyer shall give Seller and Seller's representatives reasonable
access thereto, at no cost to Seller. Except as provided in the
preceding sentence, each party shall bear the fees and expenses of
its own accountants, and the fees and expenses of any firm selected
pursuant to the third paragraph of Section 2.2(e) hereof, if any,
shall be borne one-half by Buyer and one-half by Seller.
(g) If a Purchase Price adjustment is required under this
Section 2.2, the Purchase Price allocation set forth in Section 2.4
shall be appropriately adjusted.
2.3. Payment of Purchase Price.
(a) All payments required to be made under this Agreement
shall be made by wire transfer or transfers of immediately avail-
able funds to an account or accounts to be designated by such
recipient at least two (2) Business Days prior to the payment date.
(b) At the Closing, in respect of the Purchase Price, Buyer
shall:
(i) pay to Seller in cash an amount equal to:
(A) the product of (I) $310,000,000 plus or minus an
amount determined by Arthur Andersen LLP to be the estimated
amount of the adjustment to the Purchase Price to be made
pursuant to Section 2.2 hereof (the Estimated Adjustment),
which determination shall be made as of a date no earlier than
ten days prior to the Closing Date, multiplied by (II) the
Parent Partnership Option Rollover Fraction, plus
(B) an amount equal to the aggregate exercise price that
would have been payable upon the exercise of Parent Partner
ship Options Subject to Option Rollovers, less
(C) $1,000,000, (the Escrowed Adjustment Amount) and
(ii) deposit in cash with the Escrow Agent pursuant to
the terms of the Escrow Agreement an amount equal to the Escrowed
Adjustment Amount, such amount to be held and disbursed by such
agent in accordance with the terms of such agreement.
(c) Within five days after the Final Certificate Date (as
defined below), Buyer shall pay to Seller, or Seller shall reim-
burse Buyer for, as appropriate, an amount equal to (i) the product
of (A) the difference between the amount of the adjustment required
pursuant to the Final Net Tangible Assets Certificate (as defined
below) and the Estimated Adjustment multiplied by (B) the Parent
Partnership Option Rollover Fraction, less (ii) any portion thereof
previously paid or reimbursed pursuant to the fourth paragraph of
Section 2.2(e) of this Agreement. For purposes of this Section
2.3(c), the Final Net Tangible Assets Certificate means the
Adjusted Net Tangible Assets Certificate which becomes final and
binding upon the parties pursuant to Section 2.2(e) hereof, and the
Final Certificate Date means the date upon which the Adjusted Net
Tangible Assets Certificate becomes the Final Net Tangible Assets
Certificate. Any payment or reimbursement pursuant to this Section
2.3(c) (or pursuant to the fourth paragraph of Section 2.2(e) of
this Agreement) shall be accompanied by an amount of simple inter-
est on the amount of such payment or reimbursement, as the case may
be, at a rate of interest equal to the effective annual rate of
interest on the Escrowed Adjustment Amount pursuant to the terms of
the Escrow Agreement, from the Closing Date to the date of payment
or reimbursement. The payment obligation of Buyer or the reim-
bursement obligation of Seller, as appropriate, pursuant to this
Section 2.3(c) (or pursuant to the fourth paragraph of Section
2.2(e) of this Agreement) shall be reduced pro tanto to the extent
of the amounts then held by the Escrow Agent pursuant to the Escrow
Agreement, provided that the obligated party shall cooperate with
the other party in effecting the disbursement of such amounts by
the Escrow Agent to such other party.
2.4. Allocation of Purchase Price. The Purchase Price for the
Assets shall be allocated among the Assets in accordance with an
appraisal conducted by an appraiser retained by Buyer at Buyer's
expense (the Allocation). Buyer shall furnish Seller with the
Allocation and a copy of the appraisal as soon as reasonably
practicable. Seller and Buyer agree to prepare and file all their
respective federal, state, local and foreign income tax returns and
other filings reflecting the transactions contemplated hereunder
(the Tax Returns) on a basis consistent with the Allocation, and
to cooperate with each other in good faith in preparing any and all
statements required to be included in the Tax Returns, including
IRS Form 8594 and any required exhibits thereto (or other forms
required pursuant to Section 1060 of the Code, or other applicable
tax laws), reflecting the Allocation. Buyer shall have no respon-
sibility in respect of the preparation of Tax Returns of Seller or
any of its Affiliates (other than the Subsidiaries) or the payment
of Taxes related thereto (other than to the extent provided for in
Section 1.5(a) of this Agreement).
3. Closing.
3.1. Date of Closing. The closing of the sale and purchase of
the Assets provided for in Section 1 hereof (the Closing) shall
take place at the offices of Freeborn & Peters, 311 South Wacker
Drive - Suite 3000, Chicago, Illinois 60606-6677 at 9:00 a.m. on
July 9, 1997, (or on such other date or at such other place as the
parties may mutually designate in writing) provided each of the
conditions specified in Section 7 of this Agreement has been
fulfilled (or waived by the party entitled to waive any such
condition), and in the event that the Closing does not then occur
because any of such conditions shall not have been fulfilled or
waived, then either party hereto shall have the right by written
notice to the other party to adjourn the Closing, and upon notice
of adjournment having been given the Closing shall be rescheduled
to the third business day following the date on which the last of
such conditions has been fulfilled or waived, but in no event later
than August 15, 1997 (the Termination Date). The actual date on
which the Closing is held is referred to in this Agreement as the
Closing Date . At the Closing, the parties shall execute and
deliver the documents referred to in Section 8 hereof.
3.2 Delayed Closing. Subject to the terms and conditions of
this Agreement, Buyer and Seller agree to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under
Applicable Law to consummate and make effective as soon as reason
ably practicable, all of the transactions contemplated by this
Agreement to occur at Closing. Notwithstanding the foregoing, the
closing (a Delayed Closing) of any sale and transfer of the
shares of any Share Subsidiary (a Share Transfer) pursuant to a
share purchase agreement referred to in Section 8.1(a) of this
Agreement, other than the shares of LF Germany, LF Britain and LF
Belgium which shall not be subject of a Delayed Closing, shall be
delayed to a date subsequent to the Closing Date (but as soon as
practicable following the satisfaction or waiver of the condition
precedent referred to in Paragraph (a) of this Section 3.2) if
each of the following conditions is satisfied:
(a) the sole remaining condition precedent to such Share
Transfer at the time of Closing is a required approval or waiver of
a Governmental Authority.
(b) each of Seller and Buyer have been advised by their
respective foreign counsel that it is reasonably certain that all
necessary approvals of such Governmental Authorities will be made
and issued within 30 days after the Closing so that the applicable
Delayed Closing may occur within such 30-day period.
(c) Buyer and Seller have made arrangements reasonably
satisfactory to Buyer appointing Buyer (or at Buyer's election a
designated subsidiary of Buyer (Buyer or such designated subsid-
iary, the Foreign Acquiring Company)), as the agent of the Share
Subsidiary with respect to its business (the Agented Business),
with full power and authority to control, supervise and manage the
operations of the Agented Business from the Closing Date until the
date of the Delayed Closing. As agent, the Foreign Acquiring
Company shall have full power and authority subject to applicable
law, to operate the Agented Business in its sole discretion and at
its sole risk and expense, including without limitation, to con-
tract for services and supplies, to sell or dispose of assets and
to terminate or modify all or any portion of the Agented Business.
The Foreign Acquiring Company shall provide all funds necessary to
operate the Agented Business in the manner it deems appropriate
during such period. As consideration for its services as agent,
the Foreign Acquiring Company shall be entitled to retain all
revenues and profits of the Agented Business generated during such
period.
3.3. All Proceedings. All proceedings to be taken and all
documents to be executed and delivered by all parties at the
Closing or any Delayed Closing shall be deemed to have been taken
and executed simultaneously and no proceedings shall be deemed
taken nor documents executed or delivered until all have been
taken, executed and delivered.
4. Representations and Warranties of Seller. Seller represents
and warrants to Buyer, as of the date of this Agreement and as of
the Closing Date (such representations and warranties being remade
on the Closing Date), as follows:
4.1. Authority of Seller. The execution, delivery and perfor-
mance of this Agreement and the Escrow Agreement have been duly
authorized and approved by all necessary action on the part of
Seller and its partners, and this Agreement and the Escrow Agree
ment have been duly executed and delivered by Seller and constitute
the legal, valid and binding obligations of Seller, enforceable
against it in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorgani-
zation, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general
principles of equity.
4.2. Organization, Standing and Qualification. Seller is a
general partnership duly organized and validly existing under the
laws of the State of New York. Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization as set forth
in Section 1.1(m) and in the definition of the Subsidiaries in
Appendix I. Seller has full partnership power and authority to
enter into and to perform its obligations under this Agreement and
to own, lease and operate its properties and to carry on its
businesses as now being conducted. Each Subsidiary has full
corporate power and authority to own, lease and operate its proper
ties and to carry on its businesses as now being conducted. Each
member of the Life Fitness Group is qualified to do business and is
in good standing in each jurisdiction in which the nature of the
business conducted by it or the properties owned or leased by it
requires qualification, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect.
Other than interests or securities that would be classified as cash
equivalents pursuant to generally accepted accounting principles or
notes received in the ordinary course of business, Seller does not
own, directly or indirectly, any interest in or security issued by
any Person other than the Subsidiaries. Each of the Subsidiaries
is and has been engaged solely in the marketing, sale, distribution
and service of the products of Business and none of the Subsidi-
aries either now or in the past has carried on any other trade or
business.
4.3. Restrictions; Consents. Except as set forth in Schedule
4.3 hereto, the execution, delivery and performance of this Agree
ment and the Escrow Agreement by Seller will not (a) violate or
conflict with the certificate of incorporation or by-laws or other
organizational documents of any member of the Life Fitness Group;
(b) violate or conflict with, or result in the breach or termina-
tion of, or constitute a default under, or permit cancellation of
by any other party to, any material lease, agreement, commitment or
other instrument, or any material order, judgment or decree, to
which any member of the Life Fitness Group is a party or by which
any member of the Life Fitness Group or its respective properties
are bound; (c) constitute a material violation of any Applicable
Law; or (d) result in the creation of any lien, charge or encum-
brance upon any of the properties or assets of any member of the
Life Fitness Group. No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority
or any other Person not a party to this Agreement is required on
the part of Seller in connection with the execution, delivery and
performance of this Agreement or the Escrow Agreement, except for
those as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the HSR Act) or as required
by applicable Governmental Authorities having jurisdiction over the
Subsidiaries or as disclosed on Schedule 4.3 hereto.
4.4. Nonforeign Status. Seller is not a foreign person within
the meaning of Section 1445(a) of the Code.
4.5. Employee Benefit Plans.
(a) For purposes of this Agreement: (i) Benefit Plan means
each and every employee benefit plan, contract, program, policy or
arrangement, including, without limitation, any retirement or
deferred compensation plan, incentive compensation plan, stock
plan, unemployment compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization program
or any other fringe benefit arrangements for any current or former
employee, director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding, whether or
not such arrangements constitute employee benefit plans (as defined
in section 3(3) of ERISA) under which or with respect to which
Seller or any Subsidiary has any direct or indirect, actual or
contingent liability; (ii) Business Benefit Plan means any
Benefit Plan which provides benefits exclusively with respect to
employees or former employees of the Business in the United States;
(iii) Group Benefit Plan means any Benefit Plan, other than a
Business Benefit Plan, which provides benefits with respect to
employees or former employees of the Business in the United States;
(iv) Welfare Plan means any Benefit Plan which is a welfare plan
within the meaning of section 3(1) of ERISA and provides benefits
with respect to employees of the Business in the United States; (v)
Retiree Welfare Plan means any Welfare Plan which provides
benefits with respect to employees or former employees of the
Business in the United States beyond their retirement or other
termination of service (other than coverage mandated by section
4980B of the Code, the cost of which is fully paid by the former
employee or his dependents); and (vi) ERISA means the Employee
Retirement Income Security Act of 1974, as amended and the regula-
tions thereunder. All employees of the Business are located either
in the United States, Canada, Austria, Belgium, China, Germany,
Hong Kong, Italy, the Netherlands or the United Kingdom. No
employee of the Business in any of the foregoing foreign countries
participates in any Benefit Plan other than as listed pursuant to
Section 4.5(g) hereof.
(b) Schedule 4.5 hereto sets forth a list of all Business
Benefit Plans and all Group Benefit Plans. Seller has, with
respect to each such plan, delivered to Buyer true and complete
copies of: (i) all plan texts and contracts and agreements relating
thereto; (ii) all existing summary plan descriptions; (iii) the
most recent annual report (including all schedules thereto); (iv)
the most recent actuarial valuation; and (v) if the plan is in
tended to qualify under section 401(a) or 403(a) of the Code, the
most recent determination letter received from the Internal Revenue
Service.
(c) Except as set forth in Schedule 4.5 hereto, with respect
to each Benefit Plan, Seller has no direct or indirect, actual or
contingent material liability for such plans, other than to make
payments for contributions, premiums or benefits when due, all of
which payments have been timely made. No Assets of Seller are
subject to any lien or other security interest under sections
302(f), 306(a), 307(a) or 4068 of ERISA, or sections 401(a)(29) or
412(n) of the Code.
(d) With respect to each Business Benefit Plan or Group
Benefit Plan, except as set forth on Schedule 4.5 hereto: (i) each
such plan complies in all material respects in form and operation
with Applicable Law; (ii) each such plan which is intended to be
qualified under sections 401(a) or 403(a) of the Code is so quali
fied; (iii) no payment is required under any such plan that, by
operation of section 280G of the Code, would not be deductible;
(iv) each such plan which is a group health plan (as defined in
section 607(1) of ERISA) has been operated in substantial compli-
ance with the provisions of Part 6 of Title I of ERISA and section
4980B of the Code ( COBRA ); (v) there are no material disputes,
actions, suits or claims pending, nor to Seller s knowledge threat
ened, against any such plan; (vi) there have been no material
prohibited transactions (as described in section 406 of ERISA or
section 4975 of the Code) with respect to any Benefit Plan and
Seller has not engaged in any material prohibited transaction; and
(vii) there have been no acts or omissions by the Seller which have
given rise to or could reasonably be expected to give rise to
material fines, penalties, taxes or related charges under section
502 of ERISA or Chapters 43, 47 or 68 of the Code for which Seller
would be liable.
(e) Except as specified on Schedule 4.5 hereto, there are no
Retiree Welfare Plans. Except as set forth in Schedule 4.5 hereto,
no Business Benefit Plan or Group Benefit Plan provides for sever-
ance pay, unemployment compensation or any similar payment with
respect to any current or former employee, officer or director of
or consultant to Seller. Except as set forth on Schedule 4.5, the
consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee of the Business
in the United States to severance pay, unemployment compensation or
any similar payment, (ii) accelerate the time of payment or vesting
of or increase the amount of compensation due to any such current
or former employee of the Business in the United States, or (iii)
constitute or involve a prohibited transaction (as defined in
section 406 of ERISA or section 4975 of the Code).
(f) Schedule 4.5 sets forth each Business Benefit Plan and
Group Benefit Plan that is subject to Title IV of ERISA. With
respect to such plans, (i) there has been no material reportable
event (as described in section 4043 of ERISA) which has not been
waived; (ii) no steps have been taken to terminate any such plan,
(iii) there has been no withdrawal (within the meaning of section
4063 of ERISA) of a substantial employer (as defined in section
4001(a)(2) of ERISA); (iv) no event or condition has occurred which
could reasonably be expected to constitute grounds under section
4042 of ERISA for the termination of or the appointment of a
trustee to administer any such plan; and (v) if each such plan were
terminated immediately after the Closing, there would be no un-
funded liabilities with respect to any such plan, its participants
or beneficiaries or the Pension Benefit Guaranty Corporation.
(g) Except as set forth in Schedule 4.5 hereto, no Business
Benefit Plan or Group Benefit Plan is a multiple employer plan or
a multi-employer plan, within the meaning of ERISA or the Code.
Except as set forth in Schedule 4.5 hereto, the Seller has no
direct or indirect, actual or contingent liability with respect to
any partial or complete withdrawal (as such terms are defined in
sections 4203 and 4205 of ERISA) from any such multi-employer plan.
With respect to any Business Benefit Plan or Group Benefit Plan
that is a multi-employer plan, (i) no such plan is, or to the
Seller s knowledge is expected to be, in the process of reorganiza-
tion or termination, (ii) Seller has not received any notice that
(A) increased contributions may be required to avoid a reduction in
plan benefits or the imposition of any excise tax, (B) any such
plan is or has been funded at a rate less than required under
section 412 of the Code, or (C) any such plan is or may become
insolvent, and (iii) all contributions have been made as required
by the terms of the plans, the terms of any collective bargaining
agreements, and Applicable Law; and Schedule 4.5 hereto sets forth
as of April 30, 1997 the number of employees of the Business
participating in such plan, and the rate of Seller s contribution
under any such plan for such employees.
(h) Except as set forth on Schedule 4.5 hereto, none of the
Subsidiaries is a party to, has any liability with respect to, or
is bound by any material pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, bonus,
group insurance or other incentive or welfare contract, plan or
arrangement relating to or with respect to its business.
4.6. Labor Relations. Except as set forth on Schedule 4.6
hereto, (a) there is no pending or, to Seller s knowledge, threat
ened strike, picketing, work stoppage or work slowdown involving
employees of the Business, (b) no union is certified by the Na
tional Labor Relations Board as collective bargaining agent for
employees of the Business in the United States, (c) in the United
States, no written demand is pending for recognition, no election
or campaign for certification is pending, and, to Seller's knowl-
edge, no such demand is scheduled, (d) neither Seller nor any
Subsidiary is a member of an employers association or a party to a
collective bargaining agreement, and (e) Seller and each Subsidiary
are in material compliance with their respective obligations, if
any, arising under Applicable Laws relating to the termination of
employees (including, without limitation, as to Seller, the Worker
Adjustment and Retraining Notification Act of 1988).
4.7. Litigation. There are no judicial or administrative
actions, claims, suits, proceedings or investigations pending or,
to Seller s knowledge, threatened against Seller that question the
validity of this Agreement or the Escrow Agreement or that question
any action to be taken by Seller in connection with this Agreement
or the Escrow Agreement. Except as set forth on Schedule 4.7
hereto, there is no litigation, action, suit, arbitration, proceed
ing or governmental investigation pending or, to Seller's knowl-
edge, threatened, or any order, injunction or decree outstanding,
against or relating to any member of the Life Fitness Group or to
the Business that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
4.8. Real Property.
(a) Domestic Owned Real Property.
(i) Schedule 4.8(a)(i) hereto sets forth a list of all
of the real property located in the United States and owned by
Seller, including the legal descriptions and street addresses
thereof (the Domestic Owned Real Property) and all current
leases or occupancy agreements pursuant to which any Person
other than Seller occupies any portion of the Domestic Owned
Real Property (the Domestic Tenant Agreements).
(ii) Except as set forth on Schedule 4.8(a)(ii), Seller
has not received any notice of and Seller has no knowledge of
any material violation, or claimed material violation of any
covenant, condition or other restriction, mineral right,
reservation or agreement, royalty agreement, mortgage, secu-
rity interest, right of way, license, easement, or other
agreement to which any of the Domestic Owned Real Property is
subject.
(iii) Except as set forth on Schedule 4.8(a)(iii),
Seller has not entered into any agreement with any Person
relating to the Domestic Owned Real Property, which imposes
upon the Seller an obligation to make any contribution or
dedication of money or land or to construct, install or
maintain any improvements of a public or private nature, other
than maintenance and like agreements entered into in the
ordinary course of business.
(iv) Except as set forth on Schedule 4.8(a)(iv) or as may
be disclosed by the Title Commitments, Seller has no knowledge
of any special assessments or other assessments for public
improvements against any of the Domestic Owned Real Property
the current (or any prior) periodic payment of which is unpaid
and for which the Seller is liable, including without limita-
tion, those for construction of sewer, water, gas and electri-
cal lines and mains, streets, roads, sidewalks and curbs, and
Seller has received no notice that any such assessments are
currently pending or proposed. Seller has no knowledge of any
costs incurred by Anderson or otherwise relating to that
certain Declaration of Grant of Easements, dated July 30, 1965
by Anderson, and recorded on August 6, 1965 as Document No.
19550511 in Cook County, Illinois for which Seller would be
liable.
(v) Except as set forth on Schedule 4.8(a)(v), to
Seller s knowledge Seller has, with respect to the Domestic
Owned Real Property, obtained all those certificates of
occupancy, underwriters and building inspection certificates
relating to electrical, plumbing, HVAC or other licensed or
regulated work, zoning, building, housing, safety, health,
fire, environmental protection, and other permits, licenses
and approvals which Seller is required to obtain by Applicable
Law, other than those, the absence of which would not materi-
ally adversely affect Seller's ability to use and occupy the
Domestic Owned Real Property as currently used and occupied by
Seller.
(vi) Except as set forth on Schedule 4.8(a)(vi) or as may
be disclosed by the Surveys, (A) to Seller s knowledge none of
the Domestic Owned Real Property is located, in whole or in
part, within an area identified by any governmental authority
as a flood hazard area or subject to the jurisdiction of the
Army Corps of Engineers, and (B) Seller has no knowledge of
any encroachment, fence dispute, boundary dispute, boundary
line question, water dispute, or drainage dispute concerning
or affecting any of the Domestic Owned Real Property.
(vii) Except as set forth on Schedule 4.8(a)(vii),
Seller has received no notice of the existence of any viola-
tion or default (or claimed violation or default) of any
applicable wetlands or coastal, inland or navigable waterways
laws, rules, regulations, permits or orders relating to the
Domestic Owned Real Property and which, if uncured or
unremedied, could reasonably be expected to would materially
adversely affect Seller s ability to use and occupy the
Domestic Owned Real Property as currently used and occupied by
Seller.
(viii) Except as set forth on Schedule 4.8(a)(viii), to
Seller s knowledge Seller is in material compliance with all
applicable building, zoning, land use or other similar stat-
utes, laws, ordinances, regulations, permits or other require
ments in respect of the Domestic Owned Real Property and
Seller has not received any notice of any violation (or
claimed violation) of any of the foregoing, which, if uncured
or unremedied, would result in the imposition of a material
fine or would materially adversely affect Seller's ability to
use and occupy the Domestic Owned Real Property as currently
used and occupied by Seller.
(ix) None of the Domestic Owned Real Property is leased
to any party nor does any party other than Seller occupy any
of the Owned Real Property except pursuant to the Domestic
Tenant Agreements. Except as set forth on Schedule 4.8(a)(ix)
Seller has received no notice of any, and to Seller's knowl-
edge there exists no dispute, claim, event of default or other
event which constitutes or would constitute (with notice or
lapse of time or both) a default by Seller under any Domestic
Tenant Agreement, which would give the other party thereto the
right to terminate such Domestic Tenant Agreement.
(x) Seller has no knowledge of any structural defect in
the buildings and improvements located on the Domestic Owned
Real Property or the electrical, plumbing, HVAC systems
thereof which could reasonably be expected to materially
adversely affect Seller s ability to use and occupy the
Domestic Owned Real Property as currently used and occupied by
Seller.
(b) Domestic Leased Real Property.
(i) Schedule 4.8(b)(i) hereto sets forth a list of all
of the real property located in the United States and leased
(as tenant) by Seller (the Domestic Leased Real Property)
and identifies each lease or other occupancy agreement pursu-
ant to which tenant occupies any portion of the Domestic
Leased Real Property (the Domestic Real Property Leases)
True, correct and complete copies of the Domestic Real Prop-
erty Leases have been made available to Buyer. Each of
Domestic Real Property Leases is valid, binding and in full
force and effect. Except as set forth in Schedule 4.8(b)(i):
(A) all rent and other amounts due and payable by the Seller
with respect to the Domestic Real Property Leases on or prior
to the Closing Date will have been paid prior to the Closing
Date; (B) no consent of any lessor to the consummation of the
transactions contemplated by this Agreement is required under
any Domestic Real Property Lease; and (C) Seller has neither
given nor received notice of any, and to Seller's knowledge
there exists no, dispute, claim, event of default or other
event which constitutes or would constitute (with notice or
lapse of time or both) a default by Seller or any other party
under any Domestic Real Property Lease which would give the
other party thereto the right to terminate such Domestic Real
Property Lease and by reason of which the other party to such
Domestic Real Property Lease could reasonably be expected to
exercise such right to terminate. Seller shall endeavor to
secure and shall deliver to Buyer, as and when received, but
in any event by at least 5 days before the Closing Date,
estoppel certificates from the lessor under each Domestic Real
Property Lease substantially in the form attached hereto as
Exhibit 4.8(b)(i).
(ii) Except as set forth on Schedule 4.8(b)(ii), to
Seller's knowledge Seller has, with respect to the Domestic
Leased Real Property, obtained all those certificates of
occupancy, underwriters and building inspection certificates
relating to electrical, plumbing, HVAC or other licensed or
regulated work, zoning, building, housing, safety, health,
fire, environmental protection, and other permits, licenses
and approvals which Seller is required to obtain pursuant to
the applicable Domestic Real Property Lease or by Applicable
Law, other than those, the absence of which would not materi-
ally adversely affect Seller s ability to use and occupy the
Domestic Leased Real Property as currently used and occupied
by Seller.
(iii) Except as set forth on Schedule 4.8(b)(iii), to
Seller's knowledge Seller is in material compliance with all
applicable building, zoning, land use or other similar stat-
utes, laws, ordinances, regulations, permits or other require
ments in respect of the Domestic Leased Real Property and
Seller has not received any notice of any violation (or
claimed violation) of any of the foregoing, which, if uncured
or unremedied, would result in the imposition of a material
fine or would materially adversely affect Seller s ability to
use and occupy the Domestic Leased Real Property as currently
used and occupied by Seller.
(c) Overseas Owned Real Property; Overseas Real Property
Leases. Schedule 4.8(c) hereto sets forth a list of all of the
real property located outside the United States and owned by any
Subsidiary (the Overseas Owned Real Property ). Other than month
to month tenancies, leases, subleases or other leasehold interests
which shall expire on or before the Closing Date, Schedule 4.8(c)
hereto sets forth a true, correct and complete list of all leases,
subleases or other leasehold interests held by any Subsidiary
(collectively, the Overseas Real Property Leases ). A true,
correct and complete copy of each Overseas Real Property Lease has
been delivered to Buyer. Each Overseas Real Property Lease is
valid, binding and in full force and effect. All rent and other
sums payable by tenants are current, in all material respects, and
to Seller s knowledge, there is no condition which, with the giving
of notice or passage of time or both, would constitute a material
default under any Overseas Real Property Lease.
(d) As Is, Where Is. It is expressly understood and agreed
that, except as otherwise specifically set forth in this Agreement,
Buyer accepts the condition of the Domestic Owned Real Property and
the Overseas Owned Real Property and all interests in the Domestic
Real Property Leases and the Overseas Real Property Leases AS IS,
WHERE IS as of the Closing Date and Seller makes no representa
tions, warranties or guarantees as to the condition, size, extent,
quantity, type or value of the Domestic Owned Real Property or the
Overseas Owned Real Property or any real property subject to any
Domestic Real Property Lease or Overseas Real Property Lease.
(e) No Other Real Property or Real Property Interests. Except
for the Domestic Owned Real Property, the Overseas Owned Real
Property and the real property leased pursuant to the Domestic Real
Property Leases and the Overseas Real Property Leases, neither
Seller nor any Subsidiary owns, leases, operates or otherwise has
any interest in any real property.
4.9. Tangible Personal Property. All of the fixtures, machin-
ery and equipment material to the operation of the Business are
owned, leased or licensed by the Life Fitness Group. Subject to
routine maintenance and scheduled replacement, such fixtures,
machinery and equipment of the Life Fitness Group are in reasonably
good operating condition and repair, normal wear and tear excepted.
All leases and licenses for such material fixtures, machinery and
equipment are identified on Schedule 4.9 hereto. Except as set
forth on Schedule 4.8 or Schedule 4.9 hereto and in the Title
Policies, the interests of the Life Fitness Group in such property
are free and clear of all mortgages, pledges, liens, encumbrances
or security interests, except (a) imperfections of title, if any,
that do not materially detract from the value of the property
subject thereto, or materially interfere with the manner in which
it is currently being used in the Business, or materially impair
the operations of the Business and (b) taxes and general assess
ments which are not delinquent as of the date hereof or which can
be paid without material penalty or which are being contested in
good faith by appropriate proceedings, which if resolved adversely
could not reasonably be expected to result in a material liability.
All of the material leases and licenses set forth on Schedule 4.9
hereto are in full force and effect and none of the members of the
Life Fitness Group is in material default thereunder.
4.10. Proprietary Rights. Schedule 4.10 hereto contains a
complete and accurate list of (a) all patents, patent applications,
trademark registrations and applications therefore, service mark
registrations and applications therefor, and copyright registra
tions and applications therefor (the Intellectual Property),
owned or used by the Life Fitness Group in connection with the
Business, and (b) all licenses or other agreements giving to third
parties rights in the Intellectual Property listed in Schedule
4.10. Except as set forth in Schedule 4.10 hereto, the members of
the Life Fitness Group have good title, free and clear of any liens
or other encumbrances to, or possess adequate and, to Seller's
knowledge, enforceable licenses or other rights to use all Intel-
lectual Property and all common law trademarks, trade names,
service marks, and copyrights, and all computer software, software
programs, inventions, drawings, designs, customer lists, propri-
etary know-how or information or other rights material to the
Business (collectively, the Proprietary Rights). Each item of
Intellectual Property owned by members of the Life Fitness Group
and listed in Schedule 4.10 hereto has been, to the extent indi-
cated in such Schedule, duly registered with, filed in or issued by
the United States Patent and Trademark Office, the United States
Copyright Office or such other domestic or foreign government
entity as indicated in such Schedule, and, to Seller's knowledge,
such registrations, filings and issuances remain in full force and
effect. To Seller s knowledge, except as set forth on Schedule
4.10 hereto, there are no conflicts with or infringements upon any
proprietary rights of third parties caused by the operations of the
Business, including but not limited to the use of trademarks, trade
names, service marks and copyrighted material and to products,
processes, services, methods, substances, parts or other materials
made, sold or used by the Business, that could, if adversely
determined, be reasonably expected to result in a material liabil-
ity or a material impairment of the Business. Except as set forth
in Schedule 4.10, there are no licenses or other agreements giving
any member of the Life Fitness Group rights to intellectual prop-
erty of third parties in connection with the Business other than
licenses or agreements entered into in the ordinary course of
business (such as licenses to use commercial software). Except as
set forth in Schedule 4.10, to Seller's knowledge, there is no
infringement by or claim of infringement against any third party of
any Proprietary Rights of the Life Fitness Group that could, if
adversely determined, be reasonably expected to result in a mate-
rial liability or a material impairment of the Business.
4.11. Absence of Changes. Since December 31, 1996, the
Business has been operated in the ordinary course, except as set
forth on Schedule 4.11 hereto or as permitted by Section 6.2
hereof, and none of the members of the Life Fitness Group have,
except as otherwise set forth on Schedule 4.11 or as otherwise
disclosed in this Agreement or on any Schedule hereto:
(a) entered into or authorized any transaction or terminated
or modified any transaction previously entered into or authorized,
or incurred or authorized the incurrence of any liability or
obligation, other than in the ordinary course of business or that
is or would be material to the Business;
(b) merged or consolidated, or entered into any agreement to
merge or consolidate, with any Person, or, other than in the
ordinary course of business, purchased, sold or transferred, or
entered into any agreement for the purchase, sale or transfer of,
any assets, that are material to the Business;
(c) other than in the ordinary course of business, made or
entered into any bonus payment or arrangement or wage or salary
increase or made any payment or commitment to pay any severance or
termination pay with any of its employees or agents employed or
retained by the Life Fitness Group other than as required by
agreements in effect as of the date hereof that have been disclosed
in writing to Buyer on or prior to the date hereof;
(d) made any change in its accounting methods, policies or
practices or made any change in depreciation or amortization
policies or rates adopted by it in connection with the Business;
(e) materially changed any of its business policies as such
relate to the Business, including, without limitation, advertising,
marketing, pricing, purchasing, sales, returns, budget, warranty or
product acquisition policies;
(f) suffered or incurred any material damage, destruction or
loss (whether or not covered by insurance);
(g) other than in the ordinary course of business, autho-
rized, entered into or amended any employment agreement with
respect to any employee employed by any member of the Life Fitness
Group, or entered into or amended, in any material respect, any
Business Benefit Plan or Group Benefit Plan;
(h) other than in the ordinary course of business, incurred
or authorized the incurrence of any indebtedness for borrowed money
in connection with the Business;
(i) entered into any lease (as lessor or lessee) or granted
or suffered to exist any lien or other encumbrance on any of its
assets or properties, other than in the ordinary course of business
or that is material to the Business;
(j) knowingly waived, released or cancelled any material
claim, debt or right; or
(k) made, other than in the ordinary course of business any
loan or advance to any Person not a member of the Life Fitness
Group, or made any capital contribution to or investment in any
Person not a member of the Life Fitness Group (other than in
interests or securities which would be classified as cash equiva-
lents pursuant to generally accepted accounting principles or notes
received in the ordinary course of business).
4.12. Environmental Matters.
(a) Except as set forth on Schedule 4.12 hereto, Seller has
at all times operated and is operating the Business and the Assets
in the United States in compliance in all material respects with
all applicable Environmental Laws and Approvals (as in effect at
such time) and there has not been any release of Hazardous Sub-
stances on, in, under or at any United States facilities or proper-
ties at any time when such facilities or properties were owned,
leased or occupied by Seller the remediation of which would have a
Material Adverse Effect. Except as set forth in Schedule 4.12
hereto, there are no pending or, to Seller s knowledge threatened,
claims, enforcement proceedings, cleanup orders, citizen suits or
other judicial or administrative actions instituted by private
parties, employees or Governmental Authorities arising out of or in
connection with the condition of any property or facility or the
conduct or the operations of the Business or the Assets in the
United States in connection with any Environmental Law or the
release of Hazardous Substances on, in, under or at the United
States properties or facilities, which could, if adversely deter-
mined, be reasonably expected to have a Material Adverse Effect or
give rise to a material environmental liability or cost. Except as
set forth on Schedule 4.12 hereto, Seller has not been subjected to
any investigation by any Governmental Authority to determine
compliance with Environmental Laws or Approvals. As used in this
Section 4.12(a), Approval means any approval, consent, waiver,
exemption, order, permit, authorization, franchise, right or
license required by any Governmental Authority relating to health
and safety or protection of the environment pursuant to require
ments as are in effect on the date hereof, and, at Closing, as are
in effect on the Closing Date; Environmental Laws means applica-
ble federal, state, local and international laws, principles of
common law or regulations pertaining to pollution, protection of
the environment or health and safety and orders, decrees, judg-
ments, or injunctions issued, promulgated, approved or entered
thereunder as such laws, principles of common law and regulations
are in effect on the date hereof and, at Closing, as are in effect
on the Closing Date; Hazardous Substance means any Hazardous
Substance, Oil, Pollutant or Contaminant, as those terms are
defined in 40 C.F.R. 300.5, as such section is in effect on the
date hereof, natural gas (including liquefied natural gas, syn-
thetic gas of pipeline quality and mixtures of natural and syn-
thetic gas), or any pollutant or contaminant found to present an
imminent and substantial danger to public health or welfare by a
Governmental Authority and any other substance that is defined or
regulated under any Environmental Law as a hazardous or toxic sub-
stance, a hazardous waste or toxic waste, or a hazardous constitu
ent of such substance or waste.
(b) To Seller s knowledge, (i) each Subsidiary has operated
and is operating its business (an Overseas Business) in compli-
ance in all material respects with all applicable environmental,
health and safety statutes or regulations as such statutes or
regulations are in effect on the date hereof; and (ii) there are no
claims, enforcement proceedings, clean-up orders, citizen suits or
other actions instituted by private parties, employees or Govern-
mental Authorities arising out of the conduct or the operations of
any Overseas Business in connection with any applicable environmen
tal, health or safety statutes or regulations as such statutes or
regulations are in effect on the date hereof.
4.13. Financial Statements. The audited consolidated
balance sheets and the audited consolidated statements of opera-
tions and cash flows for the Parent as of and for the years ended
December 31, 1996 and 1995 (collectively, the Financial State-
ments), and the unaudited consolidated balance sheet of the Parent
as of March 31, 1997 and unaudited consolidated statement of
operations and cash flows of Parent for the three month period then
ended (collectively, the First Quarter Financials), copies of
which have been delivered to Buyer, have been prepared in accor-
dance with generally accepted accounting principles consistently
applied and present fairly the consolidated financial positions of
Parent as of the dates indicated, and the consolidated related
results of operations and cash flows of Parent, for the periods
indicated, subject, in the case of the First Quarter Financials,
to normal year end adjustments. The Financial Statements and the
First Quarter Financials are in accordance with the books and
records of Parent, Seller and the Subsidiaries and such books and
records in reasonable detail accurately and fairly reflect the
financial transactions of Parent, Seller and the Subsidiaries.
4.14. No Undisclosed Liabilities. Except as set forth on
Schedule 4.14 hereto, as of the date of this Agreement there are no
material liabilities of the Life Fitness Group which relate to the
Assets (or the assets of the Subsidiaries) or the Business which
are not shown on the Financial Statements or the notes thereto or
disclosed in a Schedule hereto, in the First Quarter Financials or
elsewhere herein or in any document referred to in a Schedule
hereto, or which have not been incurred in the ordinary course of
business since December 31, 1996.
4.15. Taxes. Except as set forth on Schedule 4.15 hereto,
none of the members of the Life Fitness Group is currently being or
has ever been audited by any taxing authority with respect to Taxes
(as defined below). Taxes shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, income,
excise, property, sales, gross receipts, employment and franchise
taxes imposed on the members of the Life Fitness Group by the
United States, or by any state, county, local or foreign govern-
ment, or subdivision or agency thereof, and including any interest,
penalties or additions attributable thereto. Except for Taxes which
are not delinquent as of the Closing Date or which can be paid
without material penalty or which are set forth on Schedule 4.15
hereto and, are being contested in good faith by appropriate
proceedings and which in each case if resolved adversely would not
result in the imposition of a material liability, each member of
the Life Fitness Group has timely filed all applicable tax returns
and has paid, and where necessary collected or withheld and remit-
ted to, the proper Governmental Authority all Taxes related to
taxable periods or portions thereof ending prior to or on the
Closing Date that may result in a lien or other encumbrance on the
Assets or the assets of the Subsidiaries. Except as set forth on
Schedule 4.15, none of the Assets are tax-exempt bond financed
property within the meaning of Section 168 of the Code. Seller is
properly characterized as a partnership for federal and applicable
state and local tax purposes and not as an association taxable as a
corporation. Each of the Subsidiaries is properly characterized as
a corporation for federal income tax purposes. Except as set forth
on Schedule 4.15, neither Seller nor any of its Affiliates has made
an election or otherwise treated any of the Subsidiaries in a
manner which is inconsistent with such treatment. Except as set
forth on Schedule 4.15, no member of the Life Fitness Group has
agreed to any extensions of time for filing any return with respect
to any Taxes, or to an extension of time which any Tax can be
claimed, to a date later than the date hereof. The tax accruals
reflected on the 1996 Balance Sheet and on the balance sheet
included in the First Quarter Financials are in an amount which
would be sufficient to pay the unpaid taxes of Seller and the
Subsidiaries to which such accruals relate, except for such defi-
ciencies which in the aggregate would not be material. Except for
the liability of Seller for the Taxes of Seller's partners re-
flected in the Financial Statements, the First Quarter Financials,
or the notes to either of them, as adjusted for operations and
transactions through the Closing Date, no member of the Life
Fitness Group is liable for the Taxes of any Person other than the
members of the Life Fitness Group.
4.16. No Material Adverse Change. Since December 31, 1996,
there has been no adverse change in the assets, properties, busi-
ness or financial condition of the Life Fitness Group or the
Business that would constitute a Material Adverse Effect, except as
set forth in the First Quarter Financials or as disclosed on
Schedule 4.16 hereto.
4.17. Material Contracts. Schedule 4.17 hereto contains a
list of the following contracts, in effect as of the date hereof,
of the Life Fitness Group:
(a) all commitments and agreements for the purchase of any
equipment, materials or supplies that involve an expenditure by any
member of the Life Fitness Group of more than $250,000 for any one
contract;
(b) all leases and other rental agreements under which any
member of the Life Fitness Group is either lessor or lessee that
require annual payments or provide for annual receipts of $250,000
or more;
(c) all agreements with customers that involve a payment to
any member of the Life Fitness Group of more than $250,000 for any
one contract;
(d) contracts for the employment or compensation of any
employee of any member of the Life Fitness Group individually in
excess of $150,000 per year or which contain a provision relating
to a change of control of Seller or any Subsidiary;
(e) any partnership or joint venture contract or arrangement
or any other agreement involving a sharing of profits which in each
case, has a material effect on the Business; and
(f) any material contract with a sales representative,
manufacturer s representative, distributor, dealer, broker, sales
agent, advertising agency or other Person (excepting employees of
any member of the Life Fitness Group) engaged in sales, distribu-
tion or promotional activities;
(g) any contract pursuant to which the geographical area in
which Seller or any Subsidiary may conduct business or the type or
scope of business which may be conducted by Seller or any Subsid-
iary is restricted;
(h) any power of attorney or agency agreement (other than of
the type described in clause (f) of this Section 4.17, without
regard to the materiality thereof) with any Person (excepting
employees of any member of the Life Fitness Group) pursuant to
which such Person is granted the authority to act, in any material
respect, for or on behalf of Seller or any Subsidiary, or Seller or
any Subsidiary is granted the authority to act, in any material
respect, for or on behalf of any other Person;
(i) all contracts between any member of the Life Fitness
Group and any of their Affiliates;
(j) any tax sharing agreement or tax assumption agreement;
and
(k) all other leases, commitments, agreements and instruments
(including, but not limited to, mortgages, indentures and other
agreements and instruments relating to indebtedness for borrowed
money or guarantees or undertakings to answer for the debts or
defaults of another, but excluding purchase orders and sales orders
in the ordinary course of business not otherwise referred to
herein), that individually are material to the Business or involve
an anticipated receipt or expenditure of $50,000 or more, to which
any member of the Life Fitness Group is a party or by which any of
their respective properties are bound that are not otherwise
disclosed in this Agreement or on any Schedule hereto.
Seller has made available to Buyer copies of all written
contracts set forth on Schedule 4.17 hereto. All of the material
contracts set forth on Schedule 4.17 hereto are in full force and
effect and none of the members of the Life Fitness Group is in
material default under any of them and, to the knowledge of Seller,
no other party to any such contract is in material default there-
under.
4.18. Compliance with Laws; Permits. The Life Fitness Group
is in compliance in all material respects with Applicable Laws.
Schedule 4.18 hereto identifies all material licenses, permits,
orders or approvals of all Governmental Authorities held by or in
effect with respect to the Life Fitness Group (collectively, the
Permits) and the Permits constitute all licenses, permits, orders
or approvals of all Governmental Authorities required to be held by
or in effect with respect to the Life Fitness Group for the conduct
of the Business, except such the absence of which could not reason-
ably be expected to result in a material liability or a material
impairment of the Business. Except as set forth in Schedule 4.18
hereto, no consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Authority or any other
Person not a party to this Agreement is required on the part of the
Life Fitness Group to transfer to Buyer any material Permit listed
on Schedule 4.18 hereto.
4.19. Insurance. Schedule 4.19 sets forth a list of all
policies or binders of insurance held by or on behalf of the Life
Fitness Group (specifying the insurer, the policy number or cover
ing note number with respect to binders, and describing each
pending claim thereunder of more than $100,000). The Life Fitness
Group is not in default in any material respect under any policy or
binder listed on Schedule 4.19. The Life Fitness Group has not
received a notice of cancellation or non-renewal of any such policy
or binder. No member of the Life Fitness Group has been refused
any insurance with respect to the Assets or the Business.
4.20. Certain Employees. Schedule 4.20 sets forth the
names, title or job descriptions, and total compensation of each
individual consultant or employee of the Life Fitness Group whose
annual rate of compensation for 1996 (including bonuses and commis-
sions) exceeded $150,000. Except as set forth on Schedule 4.20,
during the six months prior to the date hereof each of the employ-
ees listed thereon has devoted his principal time and efforts to
the Business. The salaries and bonuses of all officers and employ
ees of the Life Fitness Group are paid by the Life Fitness Group.
4.21. Assets Complete. Except as set forth on Schedule 4.21
hereto, the Warranted Assets constitute the assets and properties
necessary to the operation of the Business as currently conducted.
4.22. Products Liability Experience. Schedule 4.22 hereto
sets forth, to Seller s knowledge, a true and complete list, in all
material respects, of all Products Liability Claims relating to
damage or injury to person or property to which the Life Fitness
Group has been a party, or to which the Business has been subject,
since January 1, 1995.
4.23. Liens and Encumbrances. Except as specifically
provided in Sections 4.8, 4.9, and 4.10 hereof or as set forth on
Schedule 4.23 hereto, the members of the Life Fitness Group have
good title to, or valid and subsisting rights in all of the War-
ranted Assets, free and clear of any lien or other encumbrance,
other than (a) imperfections of title, if any, that do not materi-
ally detract from the value of the property subject thereto, or
materially interfere with the manner in which it is currently being
used in the Business, or materially impair the operations of the
Business, and (b) liens relating to taxes and general or special
assessments which are not delinquent or which can be paid without
material penalty or which are being contested in good faith by
appropriate proceedings and which if resolved adversely could not
reasonably be expected to result in the imposition of a material
liability.
4.24. Capital Stock.
(a) The total number of shares comprising the issued share
capital of each Subsidiary, and the classes and par values (if
applicable) thereof, which each Subsidiary is authorized to issue
(if applicable), and the number of such shares which are issued and
outstanding are as set forth in Schedule 4.24. Except as set forth
on Schedule 4.24, Seller owns all of the issued and outstanding
shares in the share capital of each Share Subsidiary. The Shares
have been duly and validly issued and are fully paid and nonassess-
able.
(b) LF Belgium owns all of the issued and outstanding shares
in the share capital of each of Life Fitness Benelux N.V., a
Belgian corporation and Life Med B.V.B.A., a Belgian corporation;
such shares have been duly and validly issued and are fully paid
and nonassessable. LF Germany owns all of the issued and outstand
ing shares in the share capital of Life Fitness Vertriebs GmbH, an
Austrian corporation; such shares have been duly and validly issued
and are fully paid and nonassessable. LF Holland owns all of the
issued and outstanding shares in the share capital of LF Italy not
owned by Seller; such shares have been duly and validly issued and
are fully paid and nonassessable.
(c) There are not outstanding any (i) securities of any
Subsidiary convertible into or exchangeable for any shares in the
share capital of such Subsidiary or other securities of such
Subsidiary or (ii) subscriptions, options, warrants or other rights
entitling any third party to acquire from any Subsidiary any shares
in the share capital of such Subsidiary or other securities of such
Subsidiary.
4.25. Inventory. The inventory of the Life Fitness Group
consists of raw materials and supplies, manufactured and processed
parts, work in process, and finished goods. Such finished goods
are merchantable and are not slow-moving or obsolete, subject to
the reserve for inventory write down reflected in the balance sheet
included in the First Quarter Financials, as adjusted for opera
tions and transactions through the Closing Date in accordance with
the past custom and practice of the Life Fitness Group. Except for
items of inventory which are at any time (a) in transit, (b) held
for the benefit of one or more members of the Life Fitness Group in
bonded warehouses or (c) located at show rooms or otherwise located
off premises which, in the case of clause (c) are in the aggregate
immaterial in amount, all inventories of the Life Fitness Group are
located at the real properties owned or leased by the Life Fitness
Group.
4.26. Receivables. All notes and accounts receivable of the
Life Fitness Group are valid receivables subject to no setoffs or
counterclaims, subject to the reserve for bad debts reflected in
the balance sheet included in the First Quarter Financials as
adjusted for operations and transactions through the Closing Date
in accordance with the past custom and practice of the Life Fitness
Group.
4.27. Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by the Life Fitness Group
have conformed in all material respects with all applicable con-
tractual commitments and all express and implied warranties, and
the Life Fitness Group does not have any material liability for
replacement or repair thereof or other damages in connection
therewith, subject to the reserve for product warranty claims
reflected in the balance sheet included in the First Quarter
Financials as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the
Life Fitness Group. Substantially all of the products manufac-
tured, sold, leased, and delivered by the Life Fitness Group are
subject to standard terms and conditions of sale or lease. Sched-
ule 4.27 hereto includes copies of the standard terms and condi-
tions of sale or lease for each of the members of the Life Fitness
Group (containing applicable guaranty, warranty, and indemnity
provisions).
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as of the date of this Agreement and as of the
Closing Date (such representations and warranties being remade on
the Closing Date), as follows:
5.1. Buyer's Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and has the full corporate power and author
ity to enter into and perform its obligations under this Agreement
and the Escrow Agreement.
5.2. Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Escrow Agreement have been
duly authorized and approved by all necessary action on the part of
Buyer, and this Agreement and the Escrow Agreement have been duly
executed and delivered by Buyer and constitute the legal, valid and
binding obligations of Buyer, enforceable against it in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors rights and remedies generally and
subject, as to enforceability, to general principles of equity.
5.3. Restrictions; Consents. The execution, delivery and
performance of this Agreement and the Escrow Agreement by Buyer
will not (a) violate or conflict with the certificate of incorpora-
tion or by-laws of Buyer; (b) violate or conflict with, or result
in the breach or termination of, or constitute a default under, or
permit the cancellation of by any other party to any lease, agree
ment, commitment or other instrument, or any order, judgment or
decree, to which Buyer is a party or by which it or its properties
are bound, except for any conflicts, breaches, terminations,
defaults or cancellations that could not reasonably be expected to
have a material adverse effect on the ability of Buyer to perform
its obligations under this Agreement (a Buyer Material Adverse
Effect); or (c) constitute a violation by Buyer of any law or
regulation applicable to Buyer, except for any violation as could
not reasonably be expected to have a Buyer Material Adverse Effect.
No consent, approval or authorization of, or designation, declara-
tion or filing with, any Governmental Authority is required or will
be required on the part of Buyer in connection with the execution,
delivery and performance of this Agreement or the Escrow Agreement
except for those as may be required under applicable securities
laws or under the HSR Act or as required by applicable Governmental
Authorities having jurisdiction over the Subsidiaries.
5.4. Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to the best of
Buyer's knowledge, threatened against Buyer that question the
validity of this Agreement or the Escrow Agreement, or any action
taken or to be taken by Buyer in connection with this Agreement or
the Escrow Agreement have, or that, if adversely determined, could
reasonably be expected to have a Buyer Material Adverse Effect.
6. Further Agreements of the Parties.
6.1. Access to Information. Prior to the date hereof, Buyer
has made such investigation of the Business as Buyer has desired
and Seller has given, and prior to the Closing shall give, to Buyer
and its counsel, accountants and other representatives reasonable
access during normal business hours throughout the period prior to
the Closing to the properties, books, commitments, agreements,
records, files and personnel of the Life Fitness Group and Seller
has furnished, and prior to the Closing will furnish, to Buyer
during that period, copies of all documents and information con-
cerning the business and affairs of the Business as Buyer has
requested or may reasonably request. Buyer shall hold, and cause
its counsel, accountants and other agents and representatives to
hold, all such information and documents in accordance with and
subject to the terms of the Confidentiality Agreement.
6.2. Conduct of the Business Pending the Closing. Until the
Closing, except as otherwise permitted in Schedule 6.2 hereto, or
except with the consent of Buyer, Seller shall comply with the
provisions set forth below in connection with the Business:
(a) other than for actions as may be contemplated by the Cash
Transfer, the Business shall be operated in the ordinary course
consistent with past practice and none of the members of the Life
Fitness Group shall incur or pay any obligation or liability other
than in the ordinary course consistent with past practice;
(b) Seller shall use all its reasonable efforts to maintain
and preserve the organization of the Business intact, to retain the
present employees of the Life Fitness Group so that they will be
available to Buyer after the Closing (provided, however, that
nothing herein shall modify the rights of Seller with respect to
the discipline or termination of employees employed by the Life
Fitness Group) and to maintain the relationships of the Life
Fitness Group with customers, suppliers and others with the view
that those relationships be preserved after the Closing;
(c) Seller shall use all its reasonable efforts to maintain
in full force and effect all insurance policies of the Life Fitness
Group currently in force, consistent with past practices;
(d) Seller shall maintain the Assets, and shall cause the
Subsidiaries to maintain their assets, in accordance with their
past practice, reasonable wear and use excepted;
(e) other than for actions as may be contemplated by the Cash
Transfer, Seller shall not, and shall not permit any Subsidiary to,
undertake any of the actions specified in Section 4.11 hereof; and
(f) Seller shall not modify or terminate, or permit any
Subsidiary to modify or terminate, any agreement with respect to
any Domestic Real Property Lease or Overseas Real Property Lease.
6.3. Notice of Material Adverse Changes. Seller shall promptly
advise Buyer of any material adverse change in the business,
operations, results of operations, condition (financial or other
wise), properties (including intangible properties) assets (includ-
ing intangible assets) or liabilities of Seller or any Subsidiary.
Each party to this Agreement shall promptly notify the other party
hereto of any event that could reasonably be expected to impair
such party's ability to perform its obligations under this Agree-
ment or the Escrow Agreement.
6.4. Litigation. Seller shall promptly notify Buyer of any
lawsuits, claims, proceedings or investigations which after the
date hereof are threatened or commenced against any member of the
Life Fitness Group or against any officer, director, partner,
employee, consultant, agent or shareholder of any such member with
respect to this Agreement or the Escrow Agreement or the Business.
6.5. Continued Effectiveness of Representations and Warran-
ties. From the date hereof through the Closing Date, Seller shall
use all its reasonable efforts to conduct the Business in such a
manner so that the representations and warranties contained in
Article 4 shall continue to be true and correct on and as of the
Closing Date as if made on and as of the Closing Date, and Buyer
shall use all its reasonable efforts to conduct its business in a
manner so that the representations and warranties contained in
Article 5 shall continue to be true and correct on and as of the
Closing Date as if made on and as of the Closing Date.
6.6. Expenses. Except as otherwise specifically provided in
this Agreement or in the Escrow Agreement, Buyer and Seller shall
bear their own respective expenses incurred in connection with this
Agreement or the Escrow Agreement and in connection with all
obligations required to be performed by each of them under this
Agreement and the Escrow Agreement.
6.7. Publicity. Neither Buyer nor Seller nor any of their
respective subsidiaries or Affiliates, shall make any public
announcement or issue any press release of any kind concerning the
transactions contemplated by this Agreement without the prior
written consent of the other party (which consent shall not be
unreasonably withheld), except as may be required by Applicable
Law, in which case the party making such announcement or release
shall use all its reasonable efforts to permit the other party to
review and comment upon such announcement or release in advance.
6.8. Preservation of Records.
(a) Buyer agrees that it shall preserve and keep the records
with respect to the Business acquired pursuant to this Agreement
for a period of five (5) years from the Closing, or for any longer
period as may be required by any Governmental Authority or ongoing
audit, administrative proceeding or litigation. Buyer further
agrees that it shall make such records and personnel available to
Seller as may be reasonably required by Seller in connection with,
among other things, the filing of any tax return or report by, or
any insurance claims by, legal proceedings against or governmental
investigations (including tax audits) of, Seller or its Affiliates,
provided, however, that Seller shall promptly reimburse Buyer for
any reasonable out-of-pocket expenses incurred by Buyer in making
such records and personnel available. In the event that Buyer
wishes to destroy such records after that time, it shall first give
90 days prior written notice to Seller and Seller shall have the
right, at its option and expense, upon prior written notice given
within that 90-day period, to take possession of the records within
90 days after the date of such notice.
(b) Seller agrees that it shall preserve and keep the records
with respect to the Business retained by Seller pursuant to Section
1.2(c) for a period of five (5) years from the Closing, or for any
longer period as may be required by any Governmental Authority or
ongoing audit, administrative proceeding or litigation. Seller
further agrees that it shall make such records available to Buyer
as may be reasonably required by Buyer in connection with, among
other things, the filing of any tax return or report by, or any
insurance claims by, legal proceedings against or governmental
investigations (including tax audits) of, Buyer or its Affiliates,
provided, however, that Buyer shall promptly reimburse Seller for
any reasonable out-of-pocket expenses incurred by Seller in making
such records available. In the event that Seller wishes to destroy
such records after that time, it shall first give 90 days prior
written notice to Buyer and Buyer shall have the right, at its
option and expense, upon prior written notice given within that 90-
day period, to take possession of the records within 90 days after
the date of such notice.
6.9. W-2 Matters. Buyer hereby undertakes and agrees on behalf
of Seller, at Buyer's expense, to furnish a Form W-2 to each
employee of the Business who has been employed by Seller disclosing
all wages and other compensation paid by Seller for the period
ending on the Closing Date and the taxes withheld thereon.
6.10. Employment Matters.
(a) General.
(i) Buyer shall grant to Transferred Employees (as
hereafter defined), to the extent theretofore granted by the
Life Fitness Group, credit for service prior to the Closing
Date with the Business for all purposes (including, without
limitation, for purposes of eligibility, vesting and benefit
accrual) under any and all employee benefit plans maintained
by Buyer or any member of its controlled group as defined
under Section 4001 of ERISA ( Controlled Group ). The term
Transferred Employees shall mean Employees, as hereafter
defined, of the Business in the United States immediately
prior to the Closing and who become employees of Buyer as of
the Closing. Effective as of the Closing, Buyer will use its
reasonable best efforts to adopt, assume sponsorship of and
continue each Business Benefit Plan (other than any defined
benefit plan, retiree benefit plan, retiree health plan or
option or other plan providing for an ownership interest) as
in effect immediately prior to the Closing. To the extent
that, after using its reasonable best efforts, Buyer is unable
to adopt, assume sponsorship of or continue any such Business
Benefit Plan, Buyer shall establish plans which, as of the
Closing Date, provide Transferred Employees with benefits
that, as of the Closing Date and in the aggregate (taking into
account benefits provided under the Business Benefit Plans
assumed by Buyer pursuant to the foregoing provisions of this
paragraph), are substantially comparable in all material
respects to the benefits that were provided to such Trans-
ferred Employees under the Business Benefit Plans (other than
any defined benefit plan, retiree health plan or option or
other plan providing for an ownership interest) immediately
prior to the Closing.
(ii) The term Employees shall mean all active em-
ployees of the Business including employees (A) on vacation or
(B) on a leave of absence, sick leave or short term disability
who are expected to return to active employment with the
Business within six (6) months and the term Employee shall
mean any of the Employees. Set forth on Schedule 6.10(a)
hereto is a complete list of all Employees on sick leave or
receiving disability benefits.
(b) Employee Benefit Plans. If the employment of an Employee
employed by Buyer is terminated by the Buyer on or after the
Closing Date, Buyer shall provide such Employee with the health and
medical and plan coverage (if any) required to be provided to such
Employee by COBRA.
(c) Employees of the Life Fitness Group. Effective on the
Closing Date, Buyer shall offer to each person who is an Employee
on such date, employment in substantially the same capacity and on
terms and conditions of employment that are reasonably comparable
in the aggregate to those on which the Employee had been employed
immediately prior to the Closing Date, and at substantially the
same annual salary or compensation arrangement (including employee
benefits that are reasonably comparable in the aggregate) as
received by the Employee prior to the Closing Date; provided,
however, that (i) with respect to Employees covered by the collec-
tive bargaining agreement referred to on Schedule 4.6 hereto
(Bargaining Unit Employees), Buyer shall assume the collective
bargaining agreement and shall offer employment to each Bargaining
Unit Employee upon the same terms and conditions of employment as
those on which such employee had been employed prior to the Closing
Date, (ii) nothing herein shall change at-will relationships to any
other type of relationship, and (iii) Buyer shall have no obliga-
tion to maintain any defined benefit except as provided in (i) of
this Section 6.10(c) and Section 6.10(d) or retiree health plan or
option or other plan providing for an ownership interest.
(d) Multi-employer Pension Plan. As of the Closing Date,
Buyer shall make contributions to the multi-employer plan covering
the Bargaining Unit Employees, in accordance with the collective
bargaining agreement applicable to the Bargaining Unit Employees.
(e) Employee Benefit Indemnity. Buyer shall, and shall cause
each member of its Controlled Group to, indemnify and hold Seller
and its Affiliates harmless for any liability, loss, damage or
expense Seller or its Affiliates may incur as a result of: (i) (A)
any claim made by any Transferred Employee incurred on or after
Closing Date, with respect to any employee benefit plan or benefit
arrangement maintained, or contributed to, by Buyer and relating to
service with the Business after the Closing, and (B) Assumed
Liabilities relating to employee benefits, including severance and
any claim arising out of Buyer s failure to offer employment to the
Employees to the extent required by Section 6.10(c) hereof or
assume the collective bargaining agreement in accordance with the
provisions of Section 6.10(c) hereof and (ii) any claim relating to
the Worker Adjustment and Retraining Notification Act or any state
or local plant-closing law relating to the Business and based in
whole or in part on actions taken by Buyer on or after the Closing
Date; provided, however, that Seller s representation contained in
Section 4.6 hereof shall be accurate and that Seller shall have
complied with its agreements in Section 6.2(b) hereof.
(f) Third Party Claims. Nothing in this Section 6.10 is
intended as, nor shall be construed to, confer upon any Person,
other than the parties hereto and their successors and permitted
assigns, any rights or remedies by reason of this Section 6.10.
(g) German Employees.
(i) The term German Employees shall mean all current
employees, former employees and retired employees of the
Business located in Germany and the term German Employee
shall mean any of the German Employees. Set forth in Schedule
6.10(g) hereto is a complete list of all German Employees
currently employed in the Business in Germany.
(ii) Without limiting the effect of Sections 1.5, 1.6 or
the other provisions of this Section 6.10 (other than this
Section 6.10(g)(ii)), Seller and Buyer acknowledge that German
Employees currently employed are subject to the mandatory
rules of 613a of the German Civil Code.
6.11. Title and Survey.
(a) Delivery of Title Commitment and Survey. Seller shall
cause to be prepared and delivered to Buyer within 10 business days
after the date of this Agreement: (i) a current effective commit
ment for title insurance (the Title Commitment) issued by Chicago
Title Insurance Company (the Title Company), in the amount of the
fair market value of the Domestic Owned Real Property (as reason-
ably determined by Buyer) with Buyer as the proposed insured, and
accompanied by true, complete, and reasonably legible copies of all
documents referred to in the Title Commitment; and (ii) Seller's
existing ALTA-ACSM Land Title Survey(s) of the Domestic Owned Real
Property, redated to a date subsequent to the date hereof, revised,
if necessary, to include Table A items 2, 3, 4, 7(a), 7(b)1, 8, 9,
10, 11 and 13, provided, however, that such revisions shall not be
required if the inclusion thereof would substantially delay the
preparation of the redated survey or the cost thereof, and certi-
fied to Buyer and the Title Company (the Survey).
(b) Title Review and Cure. Buyer shall review title to the
Domestic Owned Real Property as disclosed by the Title Commitment
and Survey. Within 15 days of the delivery of the Title Commitment
and Survey (the Title Review Period ), Buyer shall deliver to
Seller a statement of any defects, encumbrances or objections to
title (a Statement of Title Defects). Seller will reasonably
cooperate with Buyer in curing Buyer's objections, but Seller shall
not be obligated to cure any such objections except liens and
security interests created by, through or under Seller, all of
which liens and security interests Seller shall cause to be re-
leased at Closing. Within 15 days of its receipt of Buyer's State-
ment of Title Defects, the parties shall memorialize in writing
those objections which Seller is obligated to cure, as aforesaid,
or has elected to cure at the Closing, and together with the Title
Company cause a revised Title Commitment to be issued. The term
Permitted Title Exceptions means all those exceptions shown on
the Title Commitment and the Survey other than those exceptions
which Seller has elected to cure in writing prior to the expiration
of the above described 30 day period. If there shall remain at the
Closing Date a defect or exception to title other than a Permitted
Title Exception, or, if after the parties memorialize the Permitted
Title Exceptions, the Title Company revises the Title Commitment,
or the surveyor revises the Survey to add or modify exceptions, or
to add or modify the conditions to obtaining any endorsement
requested by Buyer prior to the expiration of the Title Review
Period, then, if in Buyer s reasonable judgment such revisions
materially affect the value of the Domestic Owned Real Property,
Buyer may terminate this Agreement if provision for their removal
or modification satisfactory to Buyer is not made. Buyer shall
have been deemed to have approved any title exception that Seller
is not obligated to remove and to which either Buyer did not object
as provided above, or to which Buyer did object, but with respect
to which Buyer did not terminate this Agreement.
(c) Delivery of Title Policy at Closing. As a condition to
Buyer s obligation to close, the Title Company shall deliver to
Buyer at Closing an ALTA Owner s Policy (or Policies) (Revised 10-
17-70 and 10-17-84) of title insurance, with extended coverage
(i.e., with ALTA General Exceptions 1 through 5 deleted), issued by
the Title Company as of the date and time of the recording of the
Deed(s), in the respective amounts of the fair market value of the
parcels and improvements constituting the Domestic Owned Real
Property (as reasonably determined by Buyer), containing the
Buyer s Endorsements, insuring Buyer as owner of good, marketable
and indefeasible fee simple title to the Domestic Owned Real
Property, and subject only to the Permitted Title Exceptions and
such other title exceptions, if any, as Buyer shall have been
deemed to have approved pursuant to the last sentence of Section
6.11(b) of this Agreement (the Title Policy). Buyer's Endorse-
ments shall mean: (i) owner s comprehensive; (ii) access; (iii)
survey (accuracy of survey); (iv) location (survey legal matches
title legal); (v) separate tax lot; (vi) legal lot; (vii) zoning
3.1, excluding parking and loading docks; and (viii) such other
endorsements as Buyer may reasonably require during the Title
Review Period based on Buyer s review of the Title Commitment and
Survey, provided, however, that the addition of such other endorse-
ments shall not unduly delay the Closing. Seller shall execute at
Closing an ALTA Statement (Owner s Affidavit) and any other docu-
ments or agreements reasonably required by the Title Company to
issue the Title Policy in accordance with the provisions of this
Agreement. Seller shall also provide the Title Company with a gap
undertaking to enable the Title Company to issue the Title Policy
in the form required without exception for any item recorded
between the last date down of title approved by Buyer and the date
the Deed is recorded.
(d) Title and Survey Costs. Seller shall pay for the cost of
the Survey and the premium for the Title Policy. Buyer shall pay
the premium for Buyer's Endorsements and the cost of any Lender' s
title policy.
6.12. Casualty Event. The provisions of this Section 6.12
shall apply in the event (Casualty Event) of (a) any fire,
casualty or other destruction of the assets of the Life Fitness
Group which in any material respect prevents the normal and usual
conduct of the Business or materially impairs the value of the
Business or (b) any other physical damage or destruction of the
assets of the Life Fitness Group which would result in the non-
occurrence of a condition precedent contained in Section 7.1 hereof
to Buyer s obligation to consummate this Agreement. If a Casualty
Event shall occur and Seller, after exercise of its best efforts,
has not remedied the Casualty Event as of the Closing Date so as to
restore in all material respects the normal and usual conduct of
the Business or fulfill such condition precedent to Buyer's obliga-
tion to consummate the Agreement, Seller shall be entitled to one
or more reasonable extensions to a date no later than the Termina-
tion Date. In the event that Seller has not remedied the Casualty
Event by the end of the applicable extension period, or if the
Closing Date is not so extended, Buyer may elect to either termi-
nate this Agreement or proceed to close this Agreement on the
Closing Date. In the event that Buyer elects to proceed to close
this Agreement on the Closing Date, Seller shall, as Buyer's sole
and exclusive remedy for the Casualty Event, pay or assign to Buyer
the proceeds from any insurance policies covering the assets
subject to the Casualty Event to the extent such proceeds are
received by Seller and have not been used in or committed to the
restoration or replacement of such assets subject to the Casualty
Event as of the Closing Date.
6.13. Illinois Responsible Property Transfer Act. Promptly
after the execution of this Agreement (but in no event later then
five business days thereafter) Seller shall furnish to Buyer an
affidavit of Craig Jenks, Director of Manufacturer Services of
Seller (or of another knowledgeable employee of Seller, acceptable
to Buyer), in form an substance reasonably satisfactory to Buyer
establishing that the consummation of the transactions contemplated
by this Agreement does not require the filing of a Disclosure
Document pursuant to the provisions of the Illinois Responsible
Property Transfer Act of 1988, as amended, Ill. Rev. Stat. ch. 30,
para. 901 et seq. ( IRPTA ). In the event Seller shall fail to
deliver to Buyer the affidavit described in the immediately preced
ing sentence within five business days following the execution of
this Agreement, or if Buyer shall reject such affidavit by notice
to given to Seller no later than three business days following
receipt thereof, then Seller shall promptly (but in any event prior
to the Closing Date) comply with IRPTA, as if applicable to the
transfer of ownership of any real property pursuant to this Agree
ment and shall deliver to Buyer true and complete copies of all
documents which Seller would be required to deliver pursuant to
IRPTA. Seller shall bear all costs relating to compliance with
IRPTA which are (or which are deemed hereunder to be) applicable to
the transfer of ownership of any real property pursuant to this
Agreement.
6.14. Certificates of Resale. Buyer shall furnish to
Seller, certificates of resale dated as of the Closing Date with
respect to inventory as to the extent required by California,
Illinois or any other applicable state taxing authority (the
Certificates of Resale) and Seller shall promptly file such
Certificates of Resale with the California, Illinois or any other
applicable state taxing authority.
6.15. Further Actions.
(a) Seller and Buyer agree to use all reasonable good faith
efforts to take all actions and to do all things necessary, proper
or advisable to consummate the transactions contemplated hereby by
the Closing Date.
(b) Seller and Buyer will, as promptly as practicable, file
or supply, or cause to be filed or supplied, all applications,
notifications and information required to be filed or supplied by
either of them, respectively, pursuant to Applicable Law in connec-
tion with this Agreement, and the consummation of the transactions
contemplated hereby, including, but not limited to, filings pursu-
ant to the HSR Act and pursuant to similar laws and regulations
pertaining to the Subsidiaries and in obtaining any necessary
consents or approvals of Governmental Authorities pursuant thereto.
In connection with the transactions contemplated by this Agreement:
(i) Buyer will pay all fees in respect of the filing of all notifi-
cations and information required to be filed or supplied pursuant
to the HSR Act, and (ii) all fees in respect of any filing of
notifications and information required to be filed or supplied
pursuant to similar laws of other jurisdictions shall be payable
by the party designated in the applicable law.
(c) Each of Seller and Buyer will, and will cause each of its
Affiliates to, coordinate and cooperate with the other in exchanging
such information and supplying such assistance as may be
reasonably requested by the other in connection with the filings
and other actions contemplated by Section 6.15(b).
(d) Seller will, as promptly as practicable, cause and
continue to cause to be terminated or removed from public filing
offices all lien perfection instruments pertaining to indebtedness
of Seller or the Subsidiaries previously discharged.
(e) Each of Seller and Buyer will coordinate and cooperate
with the other in obtaining, as promptly as practicable, consents
necessary to assign, effective as of the Closing Date, the policies
of insurance referred to in Schedule 7.1(f) hereto.
(f) Each of Seller and Buyer will coordinate and cooperate
with the other in obtaining, as promptly as practicable, a nova-
tion, effective as of the Closing Date, with respect to that
certain G.S.A. Contract GS07F-9380G, effective January 1, 1997
between Seller and G.S.A.
6.16. Name Change. Within 5 Business Days after the
Closing, Seller shall take, and shall cause the Parent to take, all
such partnership action as is necessary to effect the change of
their respective partnership names to any name that does not
contain the phrase Life Fitness or any variant thereof, and shall
promptly deliver to Buyer evidence of the filing in all appropriate
jurisdictions of such certificates as shall be necessary to effect
such name change of record. In connection with enabling Buyer, at
or as soon as practicable after the Closing Date, to use Life
Fitness or any variant thereof in the corporate name of one or
more subsidiaries, Seller will, and will cause the Parent to,
execute and deliver to Buyer at the Closing consents to the use of
the Life Fitness name and any variant thereof.
6.17. Cash Transfer. From and after the Closing, Buyer
will, subject to Buyer s exercise of the option accorded Buyer
pursuant to Section 10.16 of this Agreement, use all reasonable
efforts to assist Seller and its representatives, and will provide
Seller and its representatives reasonable access to the properties
and records pertaining to the Business as necessary for the purpose
of enabling Seller (a) to locate, identify, collect and otherwise
reduce to Seller s control or possession, all Cash items of Seller,
as of the Closing Date (including items or transfers subject to
deposit, clearance, collection or advice of receipt or availabil-
ity) and (b) otherwise fully to complete the Cash Transfer after
the Closing Date to the extent Seller was unable to or did not
complete the same prior to or at the Closing. All portions of the
Cash Transfer with respect to the Subsidiaries shall be completed
by the Closing Date.
6.18 Transfer of Other Shares. Seller shall, at the Closing
or any Delayed Closing, cause each Person other than Seller owning
of record any shares of outstanding capital stock of any Share
Subsidiary to transfer such shares to Buyer without additional
consideration therefor.
7. Conditions to Closing.
7.1. Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to consummate the purchase under this Agree-
ment are subject to the fulfillment, prior to or at the Closing, of
each of the following conditions (any or all of which may be waived
by Buyer):
(a) the representations and warranties of Seller set forth in
Section 4 of this Agreement in the aggregate shall be true and
correct in all material respects at the time of the Closing with
the same effect as though those representations and warranties had
been made at and as of that time, provided however, that for
purposes of this Section 7.1(a) the truth and correctness of any
particular representation and warranty of Seller set forth in
Section 4 of this Agreement shall be determined without regard to
any limitation or qualification as to materiality (other than
limitations or qualifications stated by reference to a specific
monetary amount) set forth in such representation or warranty;
(b) Seller shall have performed and complied in all material
respects with all obligations and covenants required by this
Agreement to be performed or complied with by Seller prior to or at
the Closing;
(c) Buyer shall have been furnished with a certificate (dated
the Closing Date and in form and substance reasonably satisfactory
to Buyer) executed by a duly authorized officer of each partner of
Seller in his or her respective representative capacities, and not
individually, certifying to the fulfillment of the conditions
specified in Sections 7.1(a) and 7.1(b) hereof, except to the
extent such conditions have been waived by Buyer hereunder in
writing;
(d) Buyer shall have been furnished with opinions of (i)
Jacobs Persinger & Parker, counsel to Seller, in substantially the
form of Exhibit 7.1(d)(i) hereto, and (ii) Freeborn & Peters,
special counsel to Seller, in substantially the form of Exhibit
7.1(d)(ii) hereto;
(e) Buyer shall have been furnished with the affidavit of
Seller required by Section 1445(b)(2) of the Code;
(f) Buyer shall have received evidence, in form and substance
reasonably satisfactory to it, that (i) the consents to assignment
of the Contracts referred to on Schedule 7.1(f) hereto have been
obtained, and (ii) such other licenses, permits, consents, waivers,
approvals, authorizations, qualifications and orders of Governmen-
tal Authorities and parties to contracts, licenses and other
agreements with members of the Life Fitness Group have been ob-
tained, other than those which, if not obtained, could not reason-
ably be expected to have a Material Adverse Effect;
(g) there shall not be in effect any preliminary or permanent
injunction or other order issued by a court or other governmental
body or agency of competent jurisdiction directing that the trans-
actions contemplated hereby not be consummated;
(h) in respect of the notifications of Seller and Buyer
pursuant to the HSR Act, the applicable waiting and review periods
and any extensions thereof shall have expired or been terminated;
(i) subject to the provisions of Section 3.2 of this Agree-
ment permitting Delayed Closings, in respect of the actions re-
quired to be taken pursuant to laws and regulations similar to the
HSR Act pertaining to the Subsidiaries any applicable waiting and
review period and any extensions thereof shall have expired or been
terminated and any consent, approval or waiver required thereunder
of any Governmental Authority shall have been obtained;
(j) the novation, in form and substance reasonably satisfac-
tory to Buyer, effective as of the Closing Date, with respect to
that certain G.S.A. Contract GS07F-9380G, effective January 1, 1997
between Seller and G.S.A. shall have been obtained;
(k) Seller and the Escrow Agent shall have executed and
delivered to Buyer counterparts of the Escrow Agreement;
(l) there shall have been no adverse change in the assets,
properties, prospects, business or financial condition of the Life
Fitness Group, since the date of execution hereof, that individu-
ally or in the aggregate would constitute or could reasonably be
expected to have a Material Adverse Effect;
(m) all amounts due and owing by Seller of principal, inter-
est, prepayment premiums, if any, fees, charges and other expenses
in respect of the Senior Notes and the Credit Agreement shall have
been satisfied in full and any liens or other encumbrances on the
Assets securing any of such indebtedness shall have been released
or discharged to the reasonable satisfaction of Buyer;
(n) all proceedings to be taken and all documents to be
executed and delivered by Seller in connection with the consumma-
tion of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Buyer and its counsel;
(o) Buyer shall have entered into employment agreements with
each of Augustine Nieto II, Andrew G. Maduza, Allen Fuller and
Herman Rutgers, provided, however, that this condition shall be of
no force or effect as to such of the foregoing individuals to whom
there is not outstanding as of the Closing Date an offer of employ-
ment from Buyer on terms and conditions no less favorable to such
individual than those reflected in a certain term sheet and related
materials delivered by Buyer to Augustine Nieto II and accepted, in
principle, by Augustine Nieto II, on or prior to the date hereof;
(p) Buyer shall have received satisfactory evidence of the
receipt by Seller of all of the certificates described in Section
7.2(j) of this Agreement;
(q) Buyer shall have received satisfactory evidence of the
termination (without continuing obligations or rights in favor of
Buyer, other than the assumption of the liability accrued to the
Closing Date in respect of payment obligations arising from such
terminations) of (i) that certain consulting agreement dated as of
November 18, 1992 between Seller and John S. Chamberlain; and (ii)
that certain letter agreement dated May 13, 1991 between Parent,
Seller and Mancuso & Company, as amended by letter dated March 10,
1994;
(r) Buyer shall have received an acknowledgment from each of
the individuals identified in Section 7.2(h) of this Agreement that
the consummation of the transactions contemplated by this Agreement
alone shall not trigger any payment obligations pursuant to such
individual s contract with Seller as listed on Schedule 4.17 hereto
and that Buyer s offer of employment is not violative of (i)
clauses (i) , (iii) , (iv) or (v) of the first sentence of
Paragraph 5 of such individual s contract, in the case of each of
such individuals other than Herman Rutgers, or (ii) clauses (i) ,
(iii) , (iv) or (v) of the first sentence of Paragraph 2 of
such contract, in the case of Herman Rutgers, provided, however,
that this condition shall be of no force or effect as to such of
the foregoing individuals to whom there is not outstanding as of
the Closing Date an offer of employment from Buyer on terms and
conditions which would not be violative of (i) clauses (i) ,
(iii) , (iv) or (v) of the first sentence of Paragraph 5 of
such individual s contract, in the case of each of such individuals
other than Herman Rutgers, or (ii) clauses (i) , (iii) , (iv) or
(v) of the first sentence of Paragraph 2 of such contract, in the
case of Herman Rutgers; and
(s) Buyer shall have received the documents required to be
delivered pursuant to Section 8.1 of this Agreement.
7.2. Conditions Precedent to Obligations of Seller. The
obligations of Seller to consummate the sale under this Agreement
are subject to the fulfillment, prior to or at the Closing, of each
of the following conditions (any or all of which may be waived by
Seller):
(a) the representations and warranties of Buyer set forth in
Section 5 of this Agreement in the aggregate shall be true and
correct in all material respects at the time of the Closing with
the same effect as though those representations and warranties had
been made at and as of that time provided however, that for pur-
poses of this Section 7.2(a) the truth and correctness of any
particular representation and warranty of Buyer set forth in
Section 5 of this Agreement shall be determined without regard to
any limitation or qualification as to materiality (other than
limitations or qualifications stated by reference to a specific
monetary amount) set forth in such representation or warranty;
(b) Buyer shall have performed and complied in all material
respects with all obligations and covenants required by this
Agreement to be performed or complied with by it prior to or at the
Closing;
(c) Seller shall have been furnished with a certificate
(dated the Closing Date and in form and substance reasonably
satisfactory to Seller) executed by a duly authorized officer of
Buyer in his or her representative capacity, and not individually,
certifying to the fulfillment of the conditions specified in
Sections 7.2(a) and 7.2(b) hereof, except to the extent such
conditions have been waived by Seller hereunder in writing;
(d) Seller shall have been furnished with an opinion of
Mayer, Brown & Platt, counsel to Buyer, in substantially the form
of Exhibit 7.2(d) hereto;
(e) there shall not be in effect any preliminary injunction
or other order issued by a court or other governmental body or
agency of competent jurisdiction directing that the transactions
contemplated hereby not be consummated;
(f) in respect of the notifications of Seller and Buyer
pursuant to the HSR Act, the applicable waiting and review periods
and any extensions thereof shall have expired or been terminated;
(g) Buyer shall have executed and delivered, to the extent
necessary, to Seller the Certificates of Resale referred to in
Section 6.14 hereof;
(h) each of Augustine Nieto II, Andrew G. Maduza, Allen
Fuller, Herman Rutgers, Jeff Loebbaka Jay Megna, Dennis Pickrel,
Homer Stewart, Mary Jill Watts shall have executed and delivered to
Seller a written release with respect to all liabilities and
obligations pursuant to his or her individual contract with Seller
as listed on Schedule 4.17 hereto or Buyer shall have executed and
delivered to Seller a written assumption of liability by Buyer of
each such individual contract in lieu of such release;
(i) Seller s liabilities and obligations under or in respect
of (i) the Senior Notes, (ii) the Credit Agreement, (iii) that
certain Program Agreement dated August 11, 1992 between Seller and
The CIT Group/Equipment Financing, Inc. (as amended by Amendment
Number 1 dated September 22, 1993, Amendment Number 2 dated Septem-
ber 29, 1994 and Amendment Number 3 dated August 15, 1995), (iv)
that certain Lease Purchase and Security Agreement dated as of
September 16, 1994 between Seller and Park Leasing Co., and (v)
that certain Floorplan Repurchase Agreement dated February 17, 1995
between Seller and Textron Financial Corporation shall have been
terminated in full (and any outstanding letters of credit issued
under or in connection with any of the foregoing shall have been
canceled or returned without having been drawn upon) and Seller
shall have received such instruments as it shall reasonably require
to evidence such termination (and cancellation or return);
(j) Seller shall have received certificates in the form of
Exhibit 7.2(j) attached hereto from each of the following officers
of the Life Fitness Group: Augustine Nieto II, Andrew G. Maduza,
Herman Rutgers, Homer Stewart, Mary Jill Watts and David Russo;
(k) the Parent s liabilities and obligations under or in
respect of that certain Guaranty dated as of May 25, 1995 by Parent
in favor of Textron Financial Corporation and each of its affili-
ates shall have been terminated in full and Seller shall have
received such instruments as it shall reasonably require to evi-
dence such termination;
(l) all proceedings to be taken and all documents to be
executed and delivered by Buyer in connection with the consummation
of the transactions contemplated hereby shall be reasonably satis-
factory in form and substance to Seller and its counsel;
(m) subject to the provisions of Section 3.2 of this Agree-
ment permitting Delayed Closings, in respect of the actions re-
quired to be taken pursuant to laws and regulations similar to the
HSR Act pertaining to the Subsidiaries, any applicable waiting and
review period and any extensions thereof shall have expired or been
terminated and any consent, approval or waiver required thereunder
of any Governmental Authority shall have been obtained;
(n) Buyer and the Escrow Agent shall have executed and
delivered to Seller counterparts of the Escrow Agreement; and
(o) Seller shall have received the documents required to be
delivered pursuant to Section 8.2 of this Agreement.
8. Documents to be Delivered at the Closing.
8.1. Documents to be Delivered by Seller. Subject to Section
3.2 and 10.17 of this Agreement, at the Closing, Seller shall
deliver, or cause to be delivered, to Buyer the following:
(a) executed deeds, bills of sale, share purchase agreements
(in form as mutually agreed to by Buyer and Seller to comport to
the laws, custom and usage of the jurisdiction of organization of
the Share Subsidiary to which such agreement relates), assignments
of security interest, certificates of title (including for vehicles
constituting Assets), assignments of lease, assignments of licenses
or other documents of transfer, dated the Closing Date, transfer
ring to Buyer all of Seller s right, title and interest in and to
the Assets, free and clear of any lien or other encumbrance, other
than (i) imperfections of title, if any, that do not materially
detract from the value of the property subject thereto, or materi
ally interfere with the manner in which it is currently being used
in the Business, or materially impair the operations of the Busi-
ness, and (ii) liens relating to taxes and general or special
assessments which are not delinquent or which can be paid without
material penalty or which are being contested in good faith by
appropriate proceedings and which if resolved adversely could not
reasonably be expected to result in the imposition of a material
liability; each deed delivered in respect of the Domestic Owned
Real Property (each a Deed) shall be a Special Warranty Deed or
equivalent deed in the applicable jurisdiction, in proper statutory
short form for recording, so as to convey to Buyer the right, title
and interest of Seller in and to the Domestic Owned Real Property,
subject only to the Permitted Title Exceptions);
(b) copies of (i) the provisions of Seller's Partnership
Agreement which grant to the Management Committee of Seller the
authority to act on behalf of Seller and the authority to execute,
deliver and perform this Agreement on behalf of Seller, and (ii)
resolutions of such Management Committee authorizing the execution,
delivery and performance of this Agreement by Seller and certifi-
cate of a duly authorized officer of Seller, dated the Closing
Date, that such provisions of Seller s Partnership Agreement and
such resolutions are in full force and effect;
(c) the certificate referred to in Section 7.1(c) hereof;
(d) the opinions referred to in Section 7.1(d) hereof;
(e) the affidavit of Seller required by Section 1445(b)(2) of
the Code;
(f) executed assignments of the Intellectual Property owned
by Seller listed in Schedule 4.10 hereto;
(g) any and all real property transfer tax returns and
similar filings which Seller is required by law to execute in
connection with the transactions contemplated hereby;
(h) the stock certificates representing (or other documents
evidencing ownership of) (i) the Shares of each Share Subsidiary
and (ii) the remaining shares of LF Holland owned by the Parent,
duly endorsed in blank or accompanied by stock powers (or other
applicable transfer documents) duly executed in blank, in proper
form for transfer, together with evidence of payment of any appli-
cable transfer taxes; and
(i) Estoppel certificates satisfying the conditions in
Section 4.8, dated (or recertified and updated as of a date) not
more than 30 days prior to the Closing Date; and
(j) Consents duly executed by Seller and Parent to the use of
the Life Fitness name and any variant thereof;
(k) Assignments to Buyer, effective as of the Closing Date,
of the right, title and interest of Seller in and to the policies
of insurance referred to in Schedule 7.1(f) hereto; and
(l) such other documents as Buyer shall reasonably request.
8.2. Documents to be Delivered by Buyer. Subject to Sections
3.2 and 10.17 of this Agreement, at the Closing, Buyer shall
deliver to Seller the following:
(a) evidence of the wire transfers referred to in Section 2.3
hereof;
(b) executed instruments of assumption and assignment, dated
the Closing Date, pursuant to which Buyer shall assume all of the
liabilities and obligations to be assumed by Buyer under this
Agreement and counterparts of the share purchase agreements re-
ferred to in Section 8.1(a) of this Agreement;
(c) copy of resolutions of the board of directors of Buyer
authorizing the execution, delivery and performance of this Agree-
ment by Buyer, and certificates of a duly authorized officer of
Buyer, dated the Closing Date, that such resolutions were duly
adopted and are in full force and effect;
(d) the certificate referred to in Section 7.2(c) hereof;
(e) the opinions referred to in Section 7.2(d) hereof;
(f) a release or an assumption of liability with respect to
each contract referred to in Section 7.2(h) hereof; and
(g) such other documents as Seller shall reasonably request.
9. Termination and Certain Continuing Obligations.
9.1. Termination. Anything herein to the contrary notwith
standing, this Agreement and the transactions contemplated hereby
may be terminated in any of the following ways at any time on or
before the Closing Date and in no other manner:
(a) By Buyer (subject to the provisions of Section 3.2
hereof) in the event that any of the conditions contained in
Section 7.1 hereof are not satisfied or waived prior to the close
of business on the Termination Date), provided that the failure to
satisfy such condition does not result from Buyer having breached
its obligations hereunder.
(b) By Seller (subject to the provisions of Section 3.2
hereof) in the event that the conditions contained in Section 7.2
hereof are not satisfied or waived prior to the close of business
on the Termination Date), provided that the failure to satisfy such
condition does not result from Seller having breached its obliga-
tions hereunder.
9.2. Effect of Termination; Certain Continuing Obligations.
(a) Except as set forth in Section 9.2(b), in the event of
any termination of this Agreement pursuant to Section 9.1, Buyer
and Seller shall have no liability to each other except in the
event of a deliberate breach of any of the provisions hereof.
(b) Anything in this Agreement to the contrary notwithstand-
ing, Buyer's obligations under Section 6.1 hereof and under the
confidentiality agreement dated April 15, 1997 (the Confidential-
ity Agreement), between Buyer and SBC Warburg Inc., as financial
advisor to and on behalf of Seller, shall survive the termination
of this Agreement.
10. Miscellaneous.
10.1. Finders. Buyer and Seller each respectively agree
that they shall be liable for any compensation or other amounts
payable to any financial advisor, broker or finder employed or
utilized by it in connection with this Agreement or the transac-
tions contemplated hereby and each shall indemnify the other party
for any and all such claims.
10.2. Entire Agreement. This Agreement (with its Schedules
and Exhibits) contains, and is intended as, a complete statement of
all of the terms of the arrangements between the parties with
respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to
those matters, except for the Confidentiality Agreement, and cannot
be changed or terminated orally.
10.3. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in New York
without regard to the principles thereof regarding the choice of
law. Buyer and Seller hereby irrevocably submit to the jurisdic-
tion of the courts of (a) the State of New York and the Federal
courts of the United States of America located in the State, City
and County of New York and (b) the State of Illinois and the
Federal court of the United States of America located in the State
of Illinois, Cook County in respect of the interpretation and
enforcement of the provisions of this Agreement and of the docu-
ments referred to in this Agreement, and hereby waive, and agree
not to assert, as a defense in any action, suit or proceeding for
the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or pro-
ceeding may not be brought or is not maintainable in said courts or
that the venue thereof may not be appropriate or that this Agree-
ment or any such document may not be enforced in or by said courts.
Buyer and Seller hereby consent to and grant any such court juris
diction over the person of such parties and over the subject matter
of any such dispute and agree that mailing of process or other
papers in connection with any such action or proceeding in the
manner provided in Section 10.6 hereof, or in such other manner as
may be permitted by law, shall be valid and sufficient service
thereof.
10.4. Expiration of Representations and Warranties. The
respective representations and warranties of Seller and Buyer
contained herein or in any certificates or other documents deliv-
ered prior to or at the Closing (or as applicable any Delayed
Closing) shall not be deemed waived or otherwise affected by any
investigation made by any party hereto. Notwithstanding anything
in this Agreement to the contrary, each and every such representa-
tion and warranty shall expire with and be terminated and extin-
guished by the Closing (except that any such representations as
shall be set forth in any share purchase agreement related to a
Delayed Closing shall expire with and be terminated and extin-
guished by such Delayed Closing) and thereafter Seller, Buyer and
any officer director, partner, employee, representative or agent
thereof shall not be under any liability whatsoever with respect to
any such representation or warranty, provided, however, that this
Section 10.4 shall have no effect upon any obligation of the
parties hereto described in Articles 1, 2 and 6 and in Sections
3.2, 10.1, 10.8, 10.9, 10.11, 10.12 and, 10.13, 10.16 and 10.17
whether to be performed before or after the Closing Date.
10.5. Table of Contents and Headings; Interpretation. The
table of contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
10.6. Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly
given if (a) delivered personally, (b) mailed by first-class,
registered or certified mail, return receipt requested, postage
prepaid, (c) sent by next-day or overnight mail or delivery, or (d)
sent by telecopy or telegram:
(i) if to the Seller to:
Life Fitness
10601 West Belmont Avenue
Franklin Park, Illinois 60131
Attn: Augustine Nieto II
President
Fax No.: (847) 288-3701
with a copy to:
Marc J. Adelsohn
Jacobs Persinger & Parker
77 Water Street, 17th Floor
New York, New York l0005
Fax No.: (212) 742-0938
(ii) if to Buyer to:
Brunswick Corporation
One North Field Court
Lake Forest, Illinois 60045-4811
Attn: General Counsel
Fax No.: (847) 735-4050
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: John R. Sagan
Fax No.: (312) 701-7711
or, in each case, at such other address as may be specified in
writing to the other parties hereto.
All such notices, requests, demands, waivers and other commu-
nications shall be deemed to have been received (A) if by personal
delivery on the date of such delivery, (B) if by certified or
registered mail, on the seventh Business Day after the mailing
thereof, (C) if by next-day or overnight mail or delivery, on the
day delivered, (D) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent.
10.7. Severability. If at any time subsequent to the date
hereof, any provision of this Agreement shall be held by any court
of competent jurisdiction to be illegal, void or unenforceable,
such provision shall be of no force and effect, but the illegality
or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this
Agreement.
10.8. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors
and permitted assigns. No assignment of this Agreement or of any
rights or obligations hereunder may be made by any party (by
operation of law or otherwise) without the prior written consent of
the other party and any attempted assignment without the required
consent shall be void, except that Buyer may assign this Agreement,
in whole or in part, or any of its rights or obligations hereunder
to any wholly-owned subsidiary of Buyer provided, however, that
such subsidiary agrees to be bound by all of the terms and provi-
sions of this Agreement binding upon Buyer, and, provided, further,
however, that in all cases Buyer shall remain fully liable for the
liabilities and obligations hereunder assumed by such subsidiary.
10.9. Payment of Real Property Transfer and Sales Taxes.
Except as otherwise provided for in this Agreement, all filing fees
and sales, use, transfer, document, recording, gross receipt and
similar taxes, of any nature whatsoever, applicable to, or result
ing from, the purchase and sale of the Assets, shall be borne one-
half by Seller and one-half by Buyer; provided however, that (a)
Seller shall pay all state and county transfer taxes resulting from
the transfer of the Domestic Owned Real Property; and (b) all local
transfer taxes resulting from such transfer, if any, shall be
payable by the party designated in the applicable ordinance.
10.10. Seller s Knowledge. All references to Seller's
knowledge contained in this Agreement or in any Schedule, Exhibit,
certificate or other instrument furnished or to be furnished
pursuant to this Agreement shall refer to the actual knowledge,
following due inquiry of the officers of Seller listed on Schedule
10.10 hereto.
10.11. Further Assurances. Seller and Buyer will, whenever
and as often as reasonably requested to do so by the other, do,
execute, acknowledge and deliver any and all such other and further
acts, assignments, transfers and any instruments of further assur-
ance, approvals and consents as are necessary or proper in order to
complete, ensure and perfect the sale, transfer and conveyance to
Buyer contemplated hereby. Without limiting the generality of the
foregoing Seller (a) shall provide reasonable assistance and cause
its partners, officers, employees and Affiliates to provide reason
able assistance to Buyer in any legal actions or proceedings (the
"Assumed Actions") assumed by Buyer as assumed liabilities, includ-
ing document production and preparation for and appearances at
examinations, depositions, trials or settlement conferences; and
(b) provided that Buyer is fulfilling its obligations in respect of
the liabilities assumed pursuant to Section 1.5(j) of this Agree-
ment, shall promptly remit or cause to be remitted to Buyer all
proceeds received by Seller or its partners or its or their Affili-
ates of any liability insurance policies maintained by Seller prior
to the Closing Date or by Buyer after the Closing Date naming any
such recipient as insured in respect of the Assumed Actions.
10.12. Amendments; Waivers. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived,
only by an instrument in writing signed by each of the parties
hereto or, in the case of a waiver, by or on behalf of the party
waiving compliance therewith. Any such waiver shall constitute a
waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting
such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default
under any of the provisions of this Agreement, nor the failure by
any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provi-
sions, rights or privileges hereunder.
10.13. Bulk Sales Laws. Buyer hereby waives compliance by
Seller with the provisions of any bulk sales law of any jurisdiction.
10.14. Limitation of Partner Liability. No partner of Seller
shall be responsible for any liabilities or obligations of Seller
under this Agreement, and Buyer agrees that, in asserting any
rights or claims under this Agreement, it shall look only to the
assets and property of Seller in settlement of such rights or
claims, and not to the partners of Seller (or any Person owning or
holding any interest in any such partner).
10.15 No Third Party Beneficiaries. Nothing in this Agree-
ment shall confer any rights upon any Person other than the parties
hereto and their respective heirs, successors and permitted as
signs.
10.16 Subsidiary Cash Option. In connection with the Cash
Transfer, Buyer shall have the right to cause Seller to forego any
distribution or transfer of Cash of any Subsidiary, to the extent
Buyer shall have agreed in writing not later than 10 days prior to
the Closing Date to reimburse Seller (or such other Persons as
Seller may direct) at the Closing on a dollar for dollar basis
(based upon foreign exchange rates in effect as of the Closing
Date) for the amount of any Cash of any Subsidiary as to which
Seller has been requested to forego distribution or transfer.
Payments if any by Buyer pursuant to this Section 10.16 shall be
deemed to be an addition to the Purchase Price.
10.17 Buyer's Option To Acquire Assets of LF Germany. Any
provision of this Agreement to the contrary notwithstanding, Buyer
shall have the option (the German Subsidiary Option) subject to
the conditions set forth in this Section 10.17, in lieu of acquir-
ing the shares of LF Germany from Seller, to acquire directly (or
through a subsidiary) in a direct transaction with LF Germany (the
Alternative Transaction) all of the assets and properties of LF
Germany (excluding cash thereof transferable to Seller in connec-
tion with the Cash Transfer) and in connection therewith to assume
all of the obligations and liabilities of LF Germany, such that
upon the consummation of the Alternative Transaction Buyer (or
Buyer's subsidiary) shall have directly acquired all assets and
assumed all liabilities as would have been indirectly acquired and
assumed by Buyer as a result of the acquisition of the shares of LF
Germany pursuant to this Agreement. The conditions to the exercise
of the German Subsidiary Option are as follows: (a) the Buyer shall
deliver a written notice to Seller not later than 10 days after the
execution of this Agreement stating that Buyer has elected the
German Subsidiary Option and specifying the consideration to be
allocated (subject to adjustment pursuant to the appraisal de-
scribed in Section 2.4 of this Agreement) by Buyer in respect of
the Alternative Transaction; (b) Buyer shall agree to and shall
upon closing of the Alternative Transaction pay on behalf of Seller
(i) all taxes imposed by the Federal Republic of Germany or any
political subdivision or taxing authority thereof upon LF Germany,
its shareholders, Seller and Seller's partners and their respective
partners in respect of or as a consequence of the consummation of
the Alternative Transaction, in excess of those that would have
been imposed upon the consummation of the sale of the shares of LF
Germany as contemplated by Section 1.1 this Agreement, (ii) all
costs (including legal fees) of LF Germany or Seller incurred in
connection with the consummation of the Alternative Transaction in
excess of those that would have been incurred in connection with
the consummation of the sale of the shares of LF Germany as contem-
plated by Section 1.1 this Agreement, and (iii) all costs of the
dissolution of LF Germany, (c) Seller shall be reasonably satisfied
that the of closing of the Alternative Transaction will be consum
mated not later than July 21, 1997, and (d) Seller shall be reason
ably satisfied that Seller will be able to effectuate the dissolu
tion of LF Germany within 90 days following the consummation of the
Alternative Transaction. In the event Buyer shall duly exercise
the German Subsidiary Option, Seller shall cause LF Germany to
enter into and Buyer shall enter into an asset purchase agreement
in form and mutually agreed to by Buyer and Seller to provide for
any issues of mechanics and ministerial issues occasioned by the
Alternative Transaction and comporting to the laws, custom and
usage of the Federal Republic of Germany and the parties shall
cause the Alternative Transaction to be consummated on the Closing
Date in accordance with the terms of this Agreement and such asset
purchase agreement.
10.18 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more coun
terparts have been signed by each of the parties hereto and deliv
ered to each of the other parties hereto.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement as of the date first written above.
SELLER:
LIFE FITNESS
By: /s/ Augustine Nieto II
Augustine Nieto II, President
and
By: The Life Fitness Companies L.P.,
Its General Partner
By: Mancuso/Equity Partnership No. 2, L.P.,
Its General Partner
By: LF HMG Inc., Its General Partner
By: /s/ Robert F. Mancuso
Robert F. Mancuso, President
and
By: LF HMG Inc., Its General Partner
By: /s/ Robert F. Mancuso
Robert F. Mancuso, President
BUYER:
BRUNSWICK CORPORATION
By: /s/ Peter B. Hamilton
Peter B.Hamilton, Senior Vice
President and Chief Financial Officer
APPENDIX I TO
ASSET PURCHASE AGREEMENT, dated as of
June 3, 1997, between LIFE FITNESS, a
New York general partnership ("Seller") and
BRUNSWICK CORPORATION, a Delaware corporation ("Buyer").
The terms defined in this Appendix I, whenever used in this
Agreement (including in the Schedules), shall have the respective
meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a
Section, Article or Schedule of or to this Agreement, unless
otherwise indicated.
"Accounting Policies" as defined in Section 2.2(c) of this
Agreement.
"Adjusted Net Tangible Assets" as defined in Section 2.2(c) of
this Agreement.
"Adjusted Net Tangible Assets Certificate" as defined in
Section 2.2(d) of this Agreement.
"Affiliate" of any Person, any partner, officer or director of
such Person or any Person that directly or indirectly controls, or
is controlled by, or is under common control with, such Person.
"Agented Business" as defined in Section 3.2(a) of this
Agreement.
"Allocation" as defined in Section 2.4 of this Agreement.
"Alternative Transaction" as defined in Section 10.17 of this
Agreement.
"Anderson" as defined in Section 1.5(f) of this Agreement.
"Applicable Law" all applicable provisions of all (a) consti-
tutions, treaties, statutes, laws (including the common law),
rules, regulations, ordinances, codes or orders of any Governmental
Authority, (b) consents, approvals or authorizations of, or desig-
nations, declarations or filings with, or reports to, or permits,
franchises or concessions from any Governmental Authority and (c)
orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.
"Approval" as defined in Section 4.12(a) of this Agreement.
"Assets" as defined in Section 1.1 of this Agreement.
"Assumed Actions" as defined in Section 10.11 of this Agree-
ment.
"Assumed Liabilities" as defined in Section 1.5 of this
Agreement.
"Bargaining Unit Employees" as defined in Section 6.10(c) of
this Agreement.
"Benefit Plan" as defined in Section 4.5(a) of this Agreement.
"Business" as defined in the first recital of this Agreement.
"Business Benefit Plan" as defined in Section 4.5(a) of this
Agreement.
"Business Day" a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required to close.
"Buyer" as defined in the first paragraph of this Agreement.
"Buyer Material Adverse Effect" as defined in Section 5.3 of
this Agreement.
"Buyer's Endorsements" as defined in Section 6.11(c) of this
Agreement.
"Cash" all cash, checks, drafts, certificates of deposit,
commercial paper, bills, notes, bonds, acceptances and other
instruments, and securities, bank and brokerage account balances,
money or items in the actual or constructive possession of a member
of the Life Fitness Group, or of banks, brokerage firms or other
custodians holding for the benefit of any member of the Life
Fitness Group and any other items, transfers, balance or accounts
all to the extent that any of the foregoing would be classified as
of a particular date of determination as cash or a cash equivalent
on a balance sheet prepared in accordance with generally accepted
accounting principles or would be so classified but for the fact
that the same is as of such date subject to clearance, collection,
or advice of receipt or availability which has not occurred or been
received.
"Cash Transfer" as defined in Section 1.2 of this Agreement.
"Casualty Event" as defined in Section 6.12 of this Agreement.
"Certificates of Resale" as defined in Section 6.14 of this
Agreement.
"Closing" as defined in Section 3.1 of this Agreement.
"Closing Date" as defined in Section 3.1 of this Agreement.
"COBRA" as defined in Section 4.5(d) of this Agreement.
"Code" as defined in Section 1.5(i) of this Agreement.
"Confidentiality Agreement" as defined in Section 9.2(b) of
this Agreement.
"Contracts" as defined in Section 1.1(g) of this Agreement.
"Controlled Group" as defined in Section 6.10(a)(i) of this
Agreement.
"Credit Agreement" as defined in Section 1.6 of this Agree-
ment.
"Deed" as defined in Section 8.1(a) of this Agreement.
"Delayed Closing" as defined in Section 3.2 of this Agreement.
"Domestic Leased Real Property" as defined in Section 4.8(b)
of this Agreement.
"Domestic Owned Real Property" as defined in Section 4.8(a) of
this Agreement.
"Domestic Real Property Leases" as defined in Section 4.8(b)
of this Agreement.
"Domestic Tenant Agreements" as defined in Section 4.8(a) of
this Agreement.
"Employee" and "Employees" as defined in Section 6.10(a)(ii)
of this Agreement.
"Environmental Laws" as defined in Section 4.12(a) of this
Agreement.
"ERISA" as defined in Section 4.5(a) of this Agreement.
"Escrow Agent" United States Trust Company of New York or such
other bank or trust company with offices located in the City of New
York and/or the City of Chicago as jointly selected by Buyer and
Seller.
"Escrow Agreement" an agreement by and among the Escrow Agent,
Buyer and Seller substantially in the form annexed as Exhibit
2.3(b) to this Agreement.
"Escrow Adjustment Amount" as defined in Section 2.3(b) of
this Agreement.
"Estimated Adjustment" as defined in Section 2.3(b) of this
Agreement.
"Excluded Assets" as defined in Section 1.2 of this Agreement.
"Excluded Liabilities" as defined in Section 1.6 of this
Agreement.
"Final Certificate Date" as defined in Section 2.3(c) of this
Agreement.
"Final Net Tangible Assets Certificate" as defined in Section
2.3(c) of this Agreement.
"Financial Statements" as defined in Section 4.13 of this
Agreement.
"First Quarter Financials" as defined in Section 4.13 of this
Agreement.
"Foreign Acquiring Company" as defined in Section 3.2(c) of
this Agreement.
"German Employee" and "German Employees" as defined in Section
6.10(g)(i) of this Agreement.
"Governmental Authority" any nation or government, any state
or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without
limitation, any government authority, agency, department, board,
commission or instrumentality of the United States, any State of
the United States, any foreign country, or any political subdivi-
sion of any of the foregoing, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization.
"Group Benefit Plan" as defined in Section 4.5(a) of this
Agreement.
"Hazardous Substance" as defined in Section 4.12(a) of this
Agreement.
"HSR Act" as defined in Section 4.3 of this Agreement.
"Intellectual Property" as defined in Section 4.10 of this
Agreement.
"Interest" and "Interests" as defined in Section 1.3(a) of
this Agreement.
"IRPTA" as defined in Section 6.13 of this Agreement.
"Leased Real Property" as defined in Section 1.1(b) of this
Agreement.
"LF Belgium" as defined in Section 1.1(m) of this Agreement.
"LF Britain" as defined in Section 1.1(m) of this Agreement.
"LF China" as defined in Section 1.1(m) of this Agreement.
"LF Germany" as defined in Section 1.1(m) of this Agreement.
"LF Holland" as defined in Section 1.1(m) of this Agreement.
"LF Hong Kong" as defined in Section 1.1(m) of this Agreement.
"LF Italy" as defined in Section 1.1(m) of this Agreement.
"Life Fitness Group" as defined in the first recital of this
Agreement.
"Material Adverse Effect" any event, occurrence, fact, condi-
tion, change or effect that is materially adverse to (a) the
business, operations, results of operations, condition (financial
or otherwise), properties (including intangible properties), assets
(including intangible assets) or liabilities of (i) the Life
Fitness Group as a whole, (ii) Seller, (iii) LF Germany, (iv) LF
Britain, or (v) LF Belgium, or (b) Seller's ability to perform its
obligations under this Agreement.
"1996 Balance Sheet" as defined in Section 1.1(a) of this
Agreement.
"Overseas Business" as defined in Section 4.12(b) of this
Agreement.
"Overseas Owned Real Property" as defined in Section 4.8(c) of
this Agreement.
"Overseas Real Property Leases" as defined in Section 4.8(c)
of this Agreement.
"Owned Real Property" as defined in Section 1.1(b) of this
Agreement.
"Parent" as defined in Section 1.1(a) of this Agreement.
"Parent Partnership Agreement" the Amended and Restated
Limited Partnership Agreement of The Life Fitness Companies, L.P.,
dated as of October 28, 1991, as amended.
"Parent Partnership Options" an "Option" as defined in the
Parent Partnership Agreement.
"Parent Partnership Option Rollover Fraction" a fraction
having: (a) as its numerator a number equal to (i) the number of
Parent Partnership Units that would be outstanding on the Closing
Date, assuming the exercise of all Parent Partnership Options that
would be exercisable as of the Closing Date (assuming the consumma-
tion of the transactions contemplated by this Agreement other than
the transactions constituting the termination, cancellation and
relinquishment of Parent Partnership Options Subject to Option
Rollovers), less (ii) a number equal to that number of Parent
Partnership Units that would have been issuable upon the exercise
of those Parent Partnership Options Subject to Option Rollovers,
and (b) as its denominator a number equal to the number described
in subclause "(i)" of clause "(a)" of this sentence.
"Parent Partnership Options Rollover Makewhole Amount" of any
holder of Parent Partnership Options Subject to Option Rollovers,
an amount equal to the product of:
(a) the total of (i) all obligations or liabilities arising
under the Senior Notes (including without limitation makewhole
payments) and the Credit Agreement, plus (ii) all liabilities of
Seller in respect of the fees, costs and expenses in connection
with the consummation of the transactions contemplated by this
Agreement; minus (iii) the amount of the Cash Transfer (including
any reimbursements required by the exercise of the option described
in Section 10.16 of this Agreement); multiplied by
(b) a fraction having (i) as its numerator the number of
Parent Partnership Options subject to termination, cancellation and
relinquishment pursuant to the agreement executed by the applicable
holder, and (ii) as its denominator a number equal to the number of
Parent Partnership Units that would be outstanding on the Closing
Date, assuming the exercise of all Parent Partnership Options that
would be exercisable as of the Closing Date (assuming the consumma-
tion of the transactions contemplated by this Agreement other than
the transactions constituting the termination, cancellation and
relinquishment of Parent Partnership Options Subject to Option
Rollovers).
"Parent Partnership Options Subject to Option Rollovers" those
Parent Partnership Options in respect of which Seller shall have
received no later than 5 days prior to the Closing Date an agree
ment in form and substance reasonably satisfactory to Seller duly
executed by the holder thereof: (a) terminating, canceling, relin-
quishing all rights of the holder in respect of, and releasing all
obligations of Seller or Parent in respect of such Parent Partner
ship Options, (b) agreeing to pay to Seller, on demand at Closing
and from time to time thereafter, such holder's Parent Partnership
Option Rollover Makewhole Amount, and (c) authorizing Seller to
deduct from payments which would otherwise be due to such holder
from Seller (on the Closing Date or from time to time thereof) as a
consequence of the transactions contemplated by the Agreement, the
amounts due to Seller from such holder pursuant to clause "(b)" of
this sentence, the agreements of such holder pursuant to clause
"(a)", "(b)" and "(c)" of this sentence, in each case, being
effective upon the consummation, as of the Closing Date, of the
transactions contemplated by this Agreement.
"Parent Partnership Unit" a "Unit" as defined in the Parent
Partnership Agreement.
"Permits" as defined in Section 4.18 of this Agreement.
"Permitted Title Exceptions" as defined in Section 6.11(b) of
this Agreement.
"Person" any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority
or other entity.
"Product Liability Claim" as defined in Section 1.5(c) of this
Agreement.
"Proprietary Rights" as defined in Section 4.10 of this
Agreement.
"Purchase Price" as defined in Section 2.1 of this Agreement.
"Retiree Welfare Plan" as defined in Section 4.5(a) of this
Agreement.
"Seller" as defined in the first paragraph of this Agreement.
"Seller's Partnership Agreement" as defined in Section 1.5(j)
of this Agreement.
"Senior Notes" as defined in Section 1.6 of this Agreement.
"Share Subsidiaries" as defined in Section 1.1(m) of this
Agreement.
"Shares" as defined in Section 1.1(m) of this Agreement.
"Statement of Title Defects" as defined in Section 6.11(b) of
this Agreement.
"Subsidiaries" collectively, the Share Subsidiaries and LF
Vertriebs GmbH, an Austrian corporation, Life Fitness Benelux N.V.,
a Belgian corporation, and life Med B.V.B.A., a Belgian corpora-
tion.
"Survey" as defined in Section 6.10(a) of this Agreement.
"Tax Returns" as defined in Section 2.4 of this Agreement.
"Taxes" as defined in Section 4.15 of this Agreement.
"Termination Date" as defined in Section 3.1 of this Agree-
ment.
"Title Commitment" as defined in Section 6.11(a) of this
Agreement.
"Title Company" as defined in Section 6.11(a) of this Agree-
ment.
"Title Policy" as defined in Section 6.11(c) of this Agree-
ment.
"Title Review Period" as defined in Section 6.11(b) of this
Agreement.
"Warranted Assets" as of any date, all assets and properties
of the Life Fitness Group (other than Excluded Assets and cash and
cash equivalents held by the Subsidiaries) to the extent shown or
reflected in the 1996 Balance Sheet or acquired, in the ordinary
course of business, after December 31, 1996, but excluding any such
assets or properties sold or otherwise disposed of, in the ordinary
course of business, after December 31, 1996.
"Welfare Plan" as defined in Section 4.5(a) of this Agreement.
Exhibit 2.2
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 to ASSET PURCHASE AGREEMENT, dated as of
July 9, 1997, between LIFE FITNESS, a New York general partnership
("Seller") and Brunswick Corporation, a Delaware corporation
("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer have entered into an Asset Purchase
Agreement dated as of June 3, 1997 (the "Asset Purchase Agreement")
with reference to the sale to Buyer of substantially all of the
assets and properties of Seller and the assumption by Buyer of
substantially all of the obligations and liabilities of Seller;
capitalized terms used herein and not otherwise defined herein
being used herein as defined in the Asset Purchase Agreement; and
WHEREAS, Seller and Buyer recognize and acknowledge that it is
necessary and appropriate to address certain additional matters in
connection with the Asset Purchase Agreement and to make certain
corrections to the Schedules thereto;
NOW, THEREFORE, in consideration of the covenants and agree-
ments set forth herein and in the Asset Purchase Agreement, Seller
and Buyer agree and follows:
1. Paragraph "(a)" of Section 1.2 "Excluded Assets" of the
Asset Purchase Agreement is hereby amended to read in its entirety
as follows:
(a) subject to Buyer's exercise of the option accorded
Buyer pursuant to Section 10.16 of this Agreement, all Cash as
of the Reconciliation Date.
2. The final paragraph of Section 1.2 "Excluded Assets" of
the Asset Purchase Agreement is hereby amended to read in its
entirety as follows:
Further, Buyer understands and acknowledges that, subject
to Buyer's exercise of the option accorded Buyer pursuant to
Section 10.16 of this Agreement, on or before the Closing,
Seller will cause each Subsidiary to distribute or transfer to
Seller or to such other Persons as Seller may direct all Cash
(including Cash resulting from the conversion or liquidation
of cash equivalents) of such Subsidiary as of or prior to the
Reconciliation Date and that Seller will on the Closing Date
distribute or transfer to its partners or to such other
Persons as Seller may direct all Cash (including Cash result-
ing from the conversion or liquidation of cash equivalents) of
Seller as of the Reconciliation Date (collectively, the "Cash
Transfer"). If the Reconciliation Date is a date other than
the Closing Date and if on the Closing Date the Cash available
for the Cash Transfer is insufficient to effectuate a Cash
Transfer in an amount equal to the Cash as of the Reconcilia-
tion Date (as determined by Arthur Andersen LLP in connection
with the determination of the Estimated Adjustment), then at
the Closing Buyer shall pay to Seller in cash an amount
(without duplication of amounts if any required to be paid
pursuant to Section 10.16 of this Agreement) equal to such
insufficiency. Subject to the foregoing, all Cash generated
after the Reconciliation Date shall be deemed to be an Asset.
3. Each of paragraphs "(a)", "(b)", "(c)", and "(d)" of
Section 2.2 "Adjustment of Purchase Price" of the Asset Purchase
Agreement is hereby amended to read in its entirety as follows:
(a) The Purchase Price shall be adjusted upward on a
dollar-for-dollar basis for the excess, if any, of the amount
of the Adjusted Net Tangible Assets (as defined below) of the
Life Fitness Group as of the Reconciliation Date over
$43,877,000 (being the amount of the Adjusted Net Tangible
Assets as reflected on the 1996 Balance Sheet).
(b) The Purchase Price shall be adjusted downward on a
dollar-for-dollar basis for the deficiency, if any, in the
amount of the Adjusted Net Tangible Assets (as defined below)
of the Life Fitness Group as of the Reconciliation Date below
$43,877,000 (being the amount of the Adjusted Net Tangible
Assets as reflected on the 1996 Balance Sheet).
(c) For purposes of this Section 2.2, the term Adjusted
Net Tangible Assets shall mean, as of December 31, 1996 or
the Reconciliation Date, as the case may be (i) the
consolidated assets (as would appear on a balance sheet
prepared in accordance with generally accepted accounting
principles) of the Life Fitness Group before any allowances
for depreciation on assets for the period subsequent to
December 31, 1996, but after eliminating all Excluded Assets
(including for this purpose Cash of the Subsidiaries),
goodwill, patents, trademarks, service marks, tradenames,
copyrights, capitalized organization or development expenses
and other intangible items, less (ii) the consolidated
liabilities (as would appear on a balance sheet prepared in
accordance with generally accepted accounting principles) of
the Life Fitness Group, but after eliminating all Excluded
Liabilities. The Adjusted Net Tangible Assets as of the
Reconciliation Date shall be calculated in accordance with the
accounting policies, principles and assumptions used in
connection with the 1996 Balance Sheet, applied on a
consistent basis (the Accounting Policies ). The Adjusted
Net Tangible Assets as of the Reconciliation Date shall be
calculated without the taking of a physical count of
inventories. For the purpose of illustration, Schedule 2.2
hereto sets forth calculations of Adjusted Net Tangible Assets
as of December 31, 1996 and March 31, 1997, respectively (and
the resulting adjustment to the Purchase Price called for in
this Section 2.2) as if the Reconciliation Date were March 31,
1997. For the sake of clarity, it is understood that Cash
acquired pursuant to Section 10.16 of this Agreement shall be
deemed an Excluded Asset for the purposes of determining
Adjusted Net Tangible Assets.
(d) The initial calculation of the Adjusted Net Tangible
Assets as of the Reconciliation Date shall be made by Buyer.
Buyer shall render a certificate (the Adjusted Net Tangible
Assets Certificate ) showing such calculation; provided,
however, that such calculation shall be made by Buyer in
accordance with the Accounting Policies. Seller and Seller's
representatives shall have a right to review such calculation.
Buyer shall deliver the Adjusted Net Tangible Assets
Certificate to Seller as promptly as practicable after the
Closing but in no event later than 45 days following the
Closing Date.
4. Subparagraph "(i)" of Section 2.3(b) "Payment of Purchase
Price" of the Asset Purchase Agreement is hereby amended to read in
its entirety as follows:
(i) pay to Seller in cash an amount equal to:
(A) the product of (I) $310,000,000 plus or minus an
amount determined by Arthur Andersen LLP to be the estimated
amount of the adjustment to the Purchase Price to be made
pursuant to Section 2.2 hereof (the Estimated Adjustment),
which determination shall be made (x) as of the Reconciliation
Date, if the Reconciliation Date is a date other than the
Closing Date, and (y) a date no earlier than ten days prior to
the Closing Date, in all other cases, multiplied by (II) the
Parent Partnership Option Rollover Fraction, plus
(B) an amount equal to the aggregate exercise price that
would have been payable upon the exercise of Parent
Partnership Options Subject to Option Rollovers, less
(C) $1,000,000, (the Escrowed Adjustment Amount ), plus
(D) Cash transferred pursuant to Section 10.16 of this
Agreement, and
5. Section 10.11 "Further Assurances" of the Asset Purchase
Agreement is hereby amended to read in its entirety as follows:
Seller and Buyer will, whenever and as often as reasonably
requested to do so by the other, do, execute, acknowledge and
deliver any and all such other and further acts, assignments,
transfers and any instruments of further assurance, approvals
and consents as are necessary or proper in order to complete,
ensure and perfect the sale, transfer and conveyance to Buyer
contemplated hereby. Without limiting the generality of the
foregoing Seller (a) shall provide reasonable assistance and
cause its partners, officers, employees and Affiliates to
provide reasonable assistance to Buyer in any legal actions or
proceedings (the "Assumed Actions") assumed by Buyer as
assumed liabilities, including document production and
preparation for and appearances at examinations, depositions,
trials or settlement conferences; and (b) provided that Buyer
is fulfilling its obligations in respect of the liabilities
assumed pursuant to Section 1.5(j) of this Agreement, shall
promptly remit or cause to be remitted to Buyer all proceeds
received by Seller or its partners or its or their Affiliates
of any liability insurance policies maintained by Seller prior
to the Closing Date or by Buyer after the Closing Date naming
any such recipient as insured in respect of the Assumed
Actions. If the Reconciliation Date is other than the Closing
Date, the parties agree that for income tax purposes they will
treat the sale of the Assets and the assumption of the
Assumed Liabilities as having been effected as of the
Reconciliation Date. If this treatment is questioned by any
tax authority in connection with an audit of either party,
that party agrees to promptly notify the other party and to
keep the other party informed regarding the progress of such
audit and any administrative or judicial proceedings related
thereto.
6. Section 6.17 "Cash Transfer" of the Asset Purchase
Agreement is hereby amended to read in its entirety as follows:
6.17. Cash Transfer. If the Reconciliation Date is the
Closing Date, then from and after the Closing, Buyer will,
subject to Buyer s exercise of the option accorded Buyer
pursuant to Section 10.16 of this Agreement, use all
reasonable efforts to assist Seller and its representatives,
and will provide Seller and its representatives reasonable
access to the properties and records pertaining to the
Business as necessary for the purpose of enabling Seller (a)
to locate, identify, collect and otherwise reduce to Seller s
control or possession, all Cash items of Seller, as of the
Reconciliation Date (including items or transfers subject to
deposit, clearance, collection or advice of receipt or
availability) and (b) otherwise fully to complete the Cash
Transfer after the Closing Date to the extent Seller was
unable to or did not complete the same prior to or at the
Closing. All portions of the Cash Transfer with respect to
the Subsidiaries shall be completed by the Closing Date.
7. A new definition is added to Appendix I of the Asset
Purchase Agreement immediately following the definition of
"Purchase Price" to read in its entirety as follows:
"Reconciliation Date" (a) if the Closing Date is on or
before July 15, 1997, June 30, 1997, and (b) in all other
cases the Closing Date.
8. Section 10.9 "Payment of Real Property Transfer and
Sales Taxes" of the Asset Purchase Agreement is hereby amended by
adding the following at the end thereof:
Seller and Buyer agree that in the event for the convenience
of the parties and in order to facilitate the Closing (or any
Delayed Closing), Buyer shall advance on Seller's behalf any
filing fees, sales, use, transfer, document, recording, gross
receipt and similar taxes, of any nature whatsoever which
would pursuant to the provisions of this Section 10.9
otherwise be payable by Seller, then Seller shall promptly
upon Buyer's presentation to Seller of a statement therefor
reimburse Buyer for the amount so advanced, and, in the event
Seller shall fail promptly to so reimburse Buyer for such
amount, then Buyer shall be entitled to reimbursement therefor
from the Escrowed Adjustment Amount.
9. Schedule 4.8(a) to the Asset Purchase Agreement shall be
deleted in its entirety and replaced by the Amended Schedule 4.8(a)
annexed hereto.
10. Schedule 4.8(b) to the Asset Purchase Agreement shall be
deleted in its entirety and replaced by the Amended Schedule 4.8(b)
annexed hereto.
11. Attachment A to Schedule 4.10 to the Asset Purchase
Agreement shall be deleted in its entirety and replaced by the
Amended Attachment A annexed hereto.
12. Schedule 4.17 to the Asset Purchase Agreement shall be
deleted in its entirety and replaced by the Amended Schedule 4.17
annexed hereto.
13. Schedule 4.23 to the Asset Purchase Agreement shall be
deleted in its entirety and replaced by the Amended Schedule 4.23
annexed hereto.
14. Except as amended hereby the Asset Purchase Agreement and
the Schedules thereto shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have entered into this
Amendment No. 1 as of the date first written above.
SELLER:
LIFE FITNESS
By: /s/ Augustine Nieto II
Augustine Nieto II, President
and
By: The Life Fitness Companies L.P.,
Its General Partner
By: Mancuso/Equity Partnership No. 2, L.P.,
Its General Partner
By: LF HMG Inc., Its General Partner
By: /s/ Robert F. Mancuso
Robert F. Mancuso, President
and
By: LF HMG Inc., Its General Partner
By: /s/ Robert F. Mancuso
Robert F. Mancuso, President
BUYER:
BRUNSWICK CORPORATION
By: /s/ Mary D. Allen
Mary D. Allen, Vice President
and General Counsel
