42
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20654
HEALTHTECH INTERNATIONAL, INC.
Nevada 36-3797495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1237 South Val Vista Drive
Mesa, Arizona 85204
(Address of principal executive offices)
602-396-0660
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of March 31,
1997, Registrant has a total of 8,740,000 common stock and 7,654,961 class A
warrants outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLDIATED BALANCE SHEETS
Unaudited
March 31, 1997 and September 30, 1996
<TABLE>
<CAPTION>
ASSETS
3/31/97 9/30/96
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 383,072 $ 9,018
Cash restricted (Note 1) 425,000
Accounts receivable - net of allowance for doubtful accounts 4,498,795 1,176,244
Notes receivable 29,003
Prepaid expenses and deposits 215,961 133,573
------------- ------------
Total current assets 5,551,831 1,318,835
Property, plant and equipment at cost, net of accumulated
depreciation of $1,068,168 and $456,656 for 1997 and 1996,
respectively 13,322,353 13,023,246
Land held for resale 60,000 60,000
Prepaid expenses (Note 4) 1,992,802 7,320,597
Costs in excess of net assets acquired, net of accumulated
amortization of $90,438 and 18,934 for 1997 and 1996,
respectively 7,082,211 1,385,932
Long-term certificate of deposit 100,000 100,000
Non-current marketable equity securities
Deferred tax asset 336,584
Notes receivable - long-term 750,000 750,000
Other assets, at cost, net 48,004 219,696
------------- ------------
Total assets $ 28,907,201 $ 24,514,890
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
March 31, 1997 and September 30, 1996
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY
3/31/97 9/30/96
<S> <C> <C>
Current liabilities
Current portion of notes payable and capitalized lease
obligations $ 1,303,880 $ 1,130,640
Accounts payable trade 571,404 769,573
Accounts payable related parties 368,786 259,981
Accrued expenses - other 438,829 135,089
Deferred revenues 1,453,402 871,755
Other current liabilities 319,175 429,299
Total current liabilities 4,455,476 3,596,337
Notes payable and capitalized lease obligations, less
current maturities 1,616,826 2,081,707
Total liabilities, commitments and contingencies 6,072,302 5,678,044
Shareholders' equity
Series D Preferred stock, $.001 par value, 10,000,000 shares authorized,
21,200 shares issued and 19,200 shares
outstanding 19 19
Common stock, $.001 par value, 500,000,000 shares authorized, 8,740,000 and
4,023,751 shares issued and outstanding for
3/31/97 and 9/30/96, respectively 8,740 4,024
Additional paid in capital 28,675,344 25,860,070
Net unrealized loss on non-current marketable equity securities (625,000) (625,000)
Accumulated deficit (5,224,205) (6,402,267)
Total shareholders' equity 22,834,899 18,836,846
$ 28,907,201 $ 24,514,890
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
For the periods ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
Quarter Year to Quarter Year to Date
Ended Date Ended
3/31/97 3/31/97 3/31/96 3/31/96
<S> <C> <C> <C> <C>
Revenues
Health center revenues $ 5,282,305 $ 6,743,780 $ 830,456 $1,627,772
Equipment sales 723,301 1,236,162 491,595 885,878
------------ ------------ ----------- -----------
Total revenues 6,005,606 7,979,942 1,322,051 2,513,650
Less reserves and allowances (1,961,174) (2,203,940) (117,950) (155,437)
----------- ------------ ----------- -----------
Net revenues 4,044,433 5,776,002 1,204,101 2,358,213
Costs and operating expenses:
Cost of sales 498,286 849,703 321,856 618,031
Selling, general and administrative 1,778,232 2,561,177 1,030,418 2,133,446
Depreciation and Amortization 163,082 377,042 138,006 276,189
------------ ------------ ---------- ----------
Total costs and operating
expenses 2,439,599 3,787,921 1,490,280 3,027,666
Gain (loss) from operations 1,604,833 1,988,080 (286,179) (669,453)
Other income (expenses):
Interest income 16,785 33,750 - -
Interest expense (72,807) (136,705) (44,389) (84,423)
------------ ----------- ----------- -----------
Total other income (expense) (56,022) (102,955) (44,389) (84,423)
Gain (loss) before income taxes and
extraordinary items 1,548,811 1,885,125 (330,568) (753,876)
Provision (benefit) for income taxes 526,596 640,943 (112,393) (256,318)
------------ ------------ ----------- -----------
Net Loss Before Extraordinary Item 1,022,215 1,244,182 (218,175) (497,558)
Forgiveness of Debt - - 300,000 300,000
------------ ----------- ---------- -----------
Net Income (Loss) $1,022,215 $1,244,182 $ 81,825 $(197,558)
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Unaudited
For the periods ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
Quarter Year to Quarter Year to
Ended Date Ended Date
3/31/97 3/31/97 3/31/96 3/31/96
<S> <C> <C> <C> <C>
Primary earnings per common share and
common share equivalents
Gain (loss) from continuing operations $ 0.16 $ 0.19 $ (0.06) $ (0.13)
Net income from extraordinary items - - $ 0.08 $ 8.08
Net Income (Loss) $ 0.16 $ 0.19 $ 0.02 $ (0.05)
Weighted average number of common
shares outstanding 6,528,346 6,528,346 3,748,671 3,748,671
Fully diluted earnings per common share and common share
equivalents
Gain (loss) from continuing operations $ 0.12 $ 0.15 $ (0.04) -
Net income from extraordinary items - - $ 0.05 -
Net income $ 0.12 $ 0.15 $ 0.01 -
Weighted average number of fully diluted common
shares outstanding 8,448,346 8,448,346 5,668,671 -
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
For the periods ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
3/31/97 3/31/96
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,244,182 $ (197,558)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 377,042 462,142
Provision for doubtful accounts 2,203,940 -
Issuance of common stock for consulting fees 784,685 290,536
Change in operating assets and liabilities:
Increase (decrease) in deferred tax asset (336,584) 256,318
(Increase) in accounts receivable (3,178,612) (322,268)
(Increase) in notes receivable (29,003)
Decrease in inventory - 4,177
(Increase) in prepaid expense and other (77,135) (81,617)
(Increase) in deposits (5,253) (6,381)
Increase (decrease) in accounts payable (89,364) (132,203)
Increase (decrease) in accrued expenses 303,740 (252,377)
Increase (decrease) in other current liabilities (110,124) 23,987
Increase (decrease) in deferred revenues 581,647 (47,886)
Increase (decrease) in advance vendor deposits 61,214 -
------------ -----------
Net cash provided by (used in) operating activities 1,730,375 (3,130)
Cash flows from investing activities:
Acquisition of certificates of deposit (425,000) -
Acquisition of property, plant and equipment (370,000) -
Acquisition of accounts receivable (370,000) -
------------ -----------
Net cash provided by (used in) investing activities (1,295,000) -
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Unaudited
For the periods ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
3/31/97 3/31/96
<S> <C> <C>
Cash flows from financing activities:
Retirements and payments of debt (785,988) (1,196,159)
Forgiveness of debt - 300,000
Issuance of common stock for cash 200,000 425,000
Issuance of common stock for settlements & debt payments 524,667 134,053
------------- ------------
Net cash provided by (used in) financing activities (61,321) (337,106)
Net increase (decrease) in cash 374,054 (340,236)
------------- -------------
Cash and cash equivalents at beginning of year 9,018 372,836
------------- -------------
Cash and cash equivalents at 3/31/97 and 3/31/96, respectively $ 383,072 $ 32,600
============= =============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 136,705 $ 44,548
Income tax - -
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Unaudited
For the periods ended March 31, 1997 and 1996
1997
Supplemental schedule of non-cash and financing activities:
Issuance of 721,378 shares of common stock in exchange for
services. $ 784,685
Issuance of 230,000 shares of common stock in exchange for
cash and other current assets. $ 230,000
Issuance of 2,753,871 shares of restricted (R-144) common stock
in settlement of debt. $ 524,667
Purchase of 100% of the outstanding shares of Primus Health
Care Systems, Incorporated and the payment of associated
commissions through the issuance of 1,000,000 shares of
restricted (R-144) common stock and 48,000 shares of
free-trading common stock. $ 1,220,000
1996
Issuance of 281,268 shares of free-trading common stock (S-8)
and 163,280 class A warrants for payment of salaries and services $ 696,304
Issuance of 400,000 shares of restricted (R-144) common stock and
400,000 shares of restricted (R-144) class A warrants in partial
settlement of current note payable to Freeway 405, Inc. $ 1,000,000
Issuance of 79,084 shares of restricted (R-144) common stock in
partial settlement of senior debentures $ 129,587
Issuance of 17,583 shares of restricted (R-144) common stock
and 17,583 restricted (R-144) class A warrants in settlement of
wholly owned subsidiary's current note payable $ 64,980
Issuance of 1,400 shares of restricted (R-144) common stock and
790 restricted (R-144) class A warrants in settlement of
current accounts payable of the Company $ 6,466
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 AND 1996
---------------------------------------------
NOTE 1. BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Organization -
HealthTech International, Inc. (the Company), a Nevada corporation, was formed
February 8, 1995, for the purpose of being a holding company for subsidiaries
engaged in fitness, pre-employment testing, physical therapy and rehabilitation
businesses.
Currently HealthTech International, Inc. and its wholly owned subsidiaries;
Results Sports and Fitness, Inc., IFM Investments, Inc., Fitness Performance,
Inc., Results Riverbend, Inc., Results Stark Street, Inc. and Primus Health Care
Systems, Inc. (collectively "the Company") develop and operate health and
fitness clubs, provide medical services through clinics within its clubs, and
market and sell fitness equipment.
Per Share Information -
Primary earnings or loss per common share has been computed based upon the
weighted average number of common equivalent shares outstanding. Primary and
fully diluted earnings per share have been presented separately for the period
ended March 31, 1997, whereas for March 31, 1996, primary and fully diluted
earnings per share have been only been presented for the quarter ended March 31,
1996. Primary and fully diluted earnings per share for the year to date as of
March 31, 1996 are the same since the Company experienced losses for that
period; dilutive common stock equivalents are excluded from the calculation of
loss per share as the effect would be antidilutive. The number of common and
common equivalent shares utilized in the per share computations were 6,528,346
and 3,748,671 for March 31, 1997 and 1996, respectively.
Accounting Estimates -
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Cash restricted -
During the quarter ended March 31, 1997, the Company opened lines of credit
which are secured by $425,000 in certificates of deposit. The Company borrowed a
total of $380,000 during the quarter on these credit lines.
<PAGE>
Income Taxes -
The Company adopted the provisions of Financial Accounting Standards Board No.
109 (FAS 109) effective as of October 1, 1994. Under FAS 109, deferred income
taxes are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. The application of FAS
109 did not have a material effect on the Company's consolidated financial
statements.
Non-current Marketable Equity Securities -
The non-current portfolio of marketable securities is stated at the lower of
aggregate cost or market at the balance sheet date and consists of common
stocks.
Realized gains or losses are determined on the specific identification method
and are reflected in income. Net unrealized losses on non-current marketable
securities are recorded directly in a separate shareholders' equity account
except those unrealized losses that are deemed to be other than temporary, which
losses are reflected in income.
On December 2, 1994, the Company acquired 5,000,000 shares of common stock of
the Equitas Group, a related party controlled by the Chairman of the Board.
Due to the restrictive nature of these securities and unavailability of market
quotes to determine the present market value, the Company has reflected the
total carrying value of $625,000 as unrealized loss on non-current marketable
equity securities as a separate component in shareholders' equity.
NOTE 2. CHANGES IN SUBSIDIARIES BEING CONSOLIDATED
The consolidated financial statements presented for the periods ended March 31,
1996 and 1997 included the results of operations of the Company and its wholly
owned subsidiaries. The following indicates which subsidiaries were consolidated
for the appropriate periods:
March 31, 1996
Subsidiaries: Results Sports and Fitness, Inc.
Fitness Performance, Inc.
IFM Investments, Inc.
Results Riverbend, Inc.
March 31, 1997
Subsidiaries: Results Sports and Fitness, Inc. (Tucson, Arizona club)
Fitness Performance, Inc. (seller of fitness equipment)
IFM Investments, Inc. (Midland, Texas club)
Results Riverbend, Inc. (Ft. Worth, Texas club)
Results Stark Street, Inc. (Portland, Oregon club)
Primus Health Care Systems, Inc.
Due to a changes in consolidated subsidiaries and their respective activities
for each of the periods reported, the consolidated financial statements are not
comparable between periods.
<PAGE>
NOTE 3. ACQUISITIONS
Effective January 1, 1997, the Company acquired Primus Health Care Systems, Inc.
(Primus). The acquisition consisted of the following consideration:
Common stock issued - $ 1,220,000
Transfer of prepaid advertising credits 5,400,000
---------
$ 6,620,000
=========
The acquisition was recorded using the purchase method of accounting and was
allocated to the assets acquired as follows:
Medical receivables $ 500,000
Equipment 330,000
Furniture and fixtures 40,000
Costs in excess of net assets acquired 5,750,000
---------
$ 6,620,000
=========
The following pro forma financial data presents the Company's unaudited, pro
forma statements of operations for the six months ended March 31, 1997, giving
effect to the consummation of the Primus acquisition as if the transaction had
occurred on October 1, 1996. The unaudited pro forma condensed statement of
operations do not purport to represent what the Company's actual results of
operations would have been had such transaction in fact occurred on that date.
The unaudited pro forma condensed statements of operations also do not purport
to project the results of operations of the Company for any future period.
Revenue, less reserves and allowances $ 7,400,000
Net income $ 2,400,000
Primary earnings per share $ 0.37
NOTE 4. PREPAID ADVERTISING CREDITS
The Company acquired deferred advertising and broadcast air-time credits,
primarily in exchange for common stock, from related parties aggregating
$7,300,000. The advertising and broadcast credits were recorded at net
realizable value, based upon the seller's published rate cards at the date of
acquisition or the historical founder's cost as it relates to related party
transactions, whichever was lower. These credits have expirations ranging from 5
to 10 years from date of issuance of September 29, 1995, and January 1, 1994,
respectively.
During the quarter ended March 31, 1997, the Company exchanged $5,400,000 of
these credits as part of the consideration in the Primus acquisition. The
details of the Primus acquisition were included in the previously filed Form
10-K/A, incorporated herein by reference. Management intends to utilize the
balance of these credits totaling $1,900,000 in similar acquisitions and joint
ventures.
<PAGE>
NOTE 5. INCENTIVE COMPENSATION PLANS
The Company has an Incentive Compensation Plan which provides awards to
officers, employees and consultants of the Company, who, individually or as a
group, contribute in a substantial degree to the success of the Company. The S-8
registration dated June 1, 1996, allowed for the designation of 1,000,000 units
for awards pursuant to this plan. During the six months ended March 31, 1997,
the Company issued 872,641 shares for a value of $1,017,217.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Contingent liabilities -
IFM acquisition contingency -
On June 5, 1995, the Company entered into a purchase agreement for all of the
issued and outstanding stock of IFM, Inc. Pursuant to this agreement and a
related consulting agreement, the Company agreed to pay the former stockholder
of IFM a consulting fee of $10,000 per month and guaranteed that in conjunction
with the consulting fees and sale of the stock, after the restriction period of
24 months, he would realize a minimum of $900,000. It is estimated that the
Company's stock would have to decrease to $1.94 per unit before additional
shares and/or consulting fees are due.
Notes payable stock commitment -
Under terms of the loan agreement refinancing the Midland club, the Company
pledged, among other things, 50,000 fully paid and unrestricted shares of common
stock of HealthTech. If the value of these shares become less than $150,000 at
the end of any given calendar quarter, the Company is obligated to deposit with
the bank within 10 business days, additional fully paid and unrestricted shares
of common stock of HealthTech such that the value of all shares pledged is a
minimum of $150,000. During the second quarter of fiscal 1997, the Company
pledged an additional 51,351 shares to meet this requirement for the quarter
ended December 31, 1996. The Company is also a primary guarantor under terms of
the note which at March 31, 1997 was approximately $781,000.
Results - Stark Street, Inc. Loan -
As part of the acquisition of the Stark Street Club, the Company assumed a loan
originated through a local bank and the Small Business Administration. The loan
agreements contain a "due on sale" clause if the property is transferred without
prior written approval of the lending institution. Such approval was not
obtained in conjunction with the acquisition of the club. While the Company is
currently in substantial performance with other provisions and covenants
contained in the loan agreements, should the lending institution discover the
property was transferred without approval, the remaining unpaid balance could be
accelerated and become immediately due and payable. The remaining balance at
March 31, 1997, was approximately $361,000.
NOTE 7. SUBSEQUENT EVENTS
In March, 1997, the Company entered into an agreement to acquire all of the
assets of Stronghold, Inc. in Bedford, Texas, effective as of April 1, 1997. The
Company acquired all of the assets in exchange for the assumption of certain
lease, service and tax obligations (see Exhibit 1).
<PAGE>
NOTE 8. INDUSTRY SEGMENTS
The Company classifies its revenues into two divisions: Health Care Centers and
Equipment Sales.
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
In the first two quarters of fiscal 1997 HealthTech International, Inc. (the
Company, HealthTech or the Registrant"), through the operations of its Health
Care Centers, substantially grew in size (assets and revenues). The financial
statements presented in Item 1 of Part I hereof are incorporated by this
reference and the following discussion should be read in conjunction therewith.
When comparing the current operating results with operating results of prior
periods it must be noted that: (i) the Company made certain operational
divestitures prior to mid-fiscal 1995; (ii) the Company acquired three health
clubs in various periods in fiscal 1995; (iii) the Company acquired a fourth
health club during the third quarter of fiscal 1996, (iv) the Company acquired
Primus in the first quarter of fiscal 1997 and its operations were first
recognized in the second quarter of fiscal 1997; (v) the Company made an
operational transition from health and fitness to health care by providing
medical services; and, (vi) the Company acquired its fifth health center in the
second quarter of fiscal 1997 and which was operational as of the date of this
report. The newly acquired facility will be fully operational as a Health Care
Center in the fourth quarter of fiscal 1997.
OVERVIEW AND CHANGES IN OPERATIONS:
COMPANY STRUCTURE AND HEALTH CENTER OPERATIONS:
As a result of the acquisitions of Primus Health Care Systems, Inc. ("Primus")
and a license agreement with ULTI-MED Health Centers, Inc. ("ULTI-MED") the
management of HealthTech reorganized the Company's operations in the first
quarter of fiscal 1997. The Company's new operational organization is centered
around the formation and operation of "Health Care Centers" which are comprised
of "Primary Care Medical Clinics" and "Health Centers". Health Centers offer
state of the art physical fitness equipment that is used by clientele for
rehabilitation and general strength, sports and fitness training. HealthTech's
Primary Care Medical clinics provides protocol based primary care medical and
chiropractic care, advanced diagnostic testing and therapeutic and post surgical
rehabilitation. Each of the clinics is situated within one of the Company's
Health Centers in approximately a 2,000 square foot space. The combination of
Primary Care Medical Clinics and Health Centers creates the Company's primary
operating unit . . . Health Care Centers. Health Care Centers offer
comprehensive primary care medical and health and fitness services to their
clientele. HealthTech's expansion and acquisition strategy is to find management
distressed facilities and acquire such by using the Company's (R-144) stock and
minimal cash or no cash or by leasing facilities on favorable lease terms and
convert those facilities into Health Care Centers.
In February of 1997 the Company reported the details of the Primus (as
subsequent event) and ULTI-MED transactions in its annual report on Form 10-K
for the fiscal year ending September 30, 1996 (the "1996 Form 10-K") which the
Company hereby incorporates and makes a part of this Quarterly Report on Form
10-Q for the Company's second quarter of operations ending March 31, 1997 (this
"Form 10-Q Report").
<PAGE>
HEALTH CENTER OPERATIONS:
HealthTech's operational plans and strategy for all of its present and to be
acquired Health Centers is that they be converted into Health Care Centers. At
March 31, 1997, the Company's Health Center Operations Division operated four
facilities at the locations set forth in the 1996 Form 10-K. At March 24, 1997,
the Company acquired a 31,000 square foot center in the city of Bedford, Texas
(part of the Dallas/Ft. Worth metroplex area/the "Bedford" facility), which the
Company began operating in April, 1997. The Company's Heath Center operations
totaled five facilities at March 31, 1997. In keeping with its strategy of
creating Health Care Centers by placing "Primary Care Medical" clinics in all of
the Company's Health Centers, HealthTech has renovations underway at the Bedford
facility for conversion of the facility to a Health Care Center. The clinic
construction at the Bedford facility will be completed in July, 1997. The
purchase of the new Bedford facility was achieved with no stock and no cash but
rather in exchange only for HealthTech's management expertise and the assumption
of certain leases and ad valorem tax obligations.
As of April 1, 1997, HealthTech took over the management of two additional
facilities in Arlington and Sherman, Texas which were formerly managed by
Primus. The Arlington and Sherman facilities have fully operational Health
Centers (smaller than the Company's other facilities ) and full size and fully
operational Primary Care Medical Clinics which operate as Health Care Centers.
With the addition of the Arlington and Sherman Health Center operations the
Company has seven Health Centers and four fully integrated health care
facilities.
The Company's health and fitness management consulting services and real estate
services are also part of the Health and Fitness Operations.
HEALTH AND FITNESS EQUIPMENT DISTRIBUTION:
At March 31, 1997 the Health and Fitness Equipment distribution Division is
operated through the Company's wholly owned subsidiary Fitness Performance Inc.
which distributes equipment and other health related goods to health clubs
including the clubs owned by the Company.
MEDICAL OPERATIONS;
At March 31, 1997 the Company operated four "Primary Care Medical" clinics. The
clinics are located in Midland, Texas, Fort Worth (Riverbend), Texas, Arlington,
Texas and Sherman, Texas. Certain of the Company's clinics are operating at
close to full capacity and in the third quarter of 1997 the Company will begin
implementation of an acquisition and expansion plan to acquire "Satellite
Clinics" which will not be located in the Company's Health Centers but will
augment the clinics that have reached full operating capacity. The Satellite
Clinics will provide the same services as the clinics in the Health Care Centers
and will allow the Company to increase its customer base, create neighborhood
access and fully utilize the referral capacity of the Health Centers. The
Company plans to expand its operations into the Satellite Clinics using the same
expansion strategies that it has used for its other expansion and acquisitions.
<PAGE>
FINANCIAL ANALYSIS
EBITDA
The EBITDA analysis below is one method to measure the performance and status of
the Company at March 31, 1997. The EBITDA analysis should not be considered an
alternative to any measure of performance or liquidity promulgated under
generally accepted accounting principals (GAAP) nor should it be considered as
an indicator of the Company's overall financial performance.
EBITDA is calculated as follows:
Quarter Ended Year to Date
3/31/97 3/31/97
Net income $1,022,215 $1,244,182
Interest expense 72,807 136,705
Provision for taxes 526,596 640,943
Depreciation and amortization 163,082 377,042
--------- --------
Earnings before interest, taxes
depreciation and amortization $1,784,700 $2,398,872
========= =========
Primary earnings per share are based on net income not EBITDA. Should the
primary earnings per share be calculated on EBITDA, the results for the period
ended March 31, 1997 for the quarter would be $0.28 and year to date would be
$0.37.
INCOME TAX CREDITS
The Company has sold those operations that previously created significant
operating losses; however, the Company was able to preserve certain tax credits
associated with the divestiture of these operations in the form of NOL ("net
operating losses") carry forwards. HealthTech's management believes that the
Company has approximately an eight million dollar credit of which a portion may
be able to be applied in this fiscal year and future years to reduce the tax
owed by the company. In the event the NOL carry forwards can be applied to the
Company's current year as a credit to the Company's tax liability for the first
six months of operations in fiscal 1997, the Company's operating income would be
increased by $641,000 to $1,885,000 in after tax profit from the currently
reported $1,244,000. However, the Federal Income Tax rules and guidelines for
the application of the NOL carry forwards are complex and stringent and the
application of this tax credit may or may not be able to be used or fully used
by the Company as a credit against tax liability. (See notes to financial
statement in the 1996 Form 10-K).
<PAGE>
LIQUIDITY
At March 31, 1997 the Company's debt to equity ratio was 1:5 and its current
ratio was 1.25:1. At September 30, 1996, the Company's current ratio was 1:3.
Management attributes the significant positive change in the current ratio to
the fiscal year to the net income after taxes of $1,244,182. As set forth in the
Company's 1996 Form 10-K the Company has continued to successfully follow its
plan to restructure short-term and long term debt. In the first two quarters of
fiscal 1997 the Company paid down the outstanding loan on the Fort
Worth/Riverbend facility by $100,000 and plans to continue to reduce short and
long-term debt to improve its debt to equity and current ratios for fiscal 1997.
(Note: in April 1997 the Company paid down the Ft. Worth/ Riverbend loan by
another $50,000). The Company recognized 5.7 million Goodwill as an asset for
the Primus truncation and the income stream associated with Primus' operations.
Since September 30, 1997 HealthTech has significantly improved its working
capital position in that cash has increased from $9,018 six months ago at
September 30, 1996 to $383,000 and $425,000 in current Certificates of Deposit
at March 31, 1997. The Company has obtained lines of credits which it has
secured with cash the Company has invested in the certificates of deposit, which
are now restricted as collateral. As set forth in the 1996 Form 10-K and the
information disclosed in this Form 10-Q Report, the Company believes its cash
flows are sufficient to meet its short-term cash requirements. During the past
two fiscal years and year to date fiscal 1997, the Company has satisfied some
cash requirements through the issuance of the registrants common stock and
securities in accordance with SEC regulations.
RESULTS OF OPERATIONS
The Company's revenues have grown substantially over the last two fiscal years
through the acquisition of existing health clubs. In the first quarter of fiscal
1997 Company's revenues were significantly impacted by recognition of the full
operations of one "Primary Care Medical" clinic and the operations of the
Company's first Health Care Center. In the second quarter of fiscal 1997
HealthTech added three Health Care Centers by integrating and adding the
operations of three additional "Primary Care Medical". The result of this
expansion was a significant increase in the Company's primary earning per share
for the second quarter of fiscal 1997 to $0.16 and $0.19 for the year to date
(six months of operation) compared to $0.10 in fiscal 1996 for twelve months of
primary earnings and ($0.66) in fiscal 1995. The Company's management believes
that the results for fiscal 1997 year to date are in line with its operational
projections set forth in the 1996 Form 10-K. Based upon the current operations,
the plan to open three more "Primary Care Medical" clinics in the Company's
existing Health Centers as well as the acquisition of additional health
Facilities for conversion into Health Care Centers and Satellite Clinics, will
likely produce revenues in excess of $25,000,000 for the twelve months of
operation in fiscal 1997 as compared to $5,598,000 for fiscal 1996. This
projection is based upon management annualizing the Company's current revenue,
past performance, industry trends and management's belief that its acquisition
and expansion plans are reasonable and achievable in fiscal 1997, however, such
projections are speculative since certain factors outside the Company's control
and/or other events may effect operational performance.
At March 31, 1997 HealthTech's management has reserved approximately 38% of the
revenues generated through the clinic operations. HealthTech's management
believes that it currently is realizing approximately 65% payment of its clinic
accounts receivables and while the current reserves may be adjusted in the
future, once the Company has historical information with which to make
adjustments, HealthTech's management believes the current 38% reserve is
appropriate. These reserves will enable the Company to recognize adequate income
from the medical operations without the uncertainty of future write-downs.
<PAGE>
Note - Debt to equity ratio is computed above by the formula - Debt to Equity
Ratio = Debt/ Equity. Current ratio is computed above by the formula - Current
Ratio = Current Assets / Current Liabilities.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 1. Stronghold, Inc. Asset Purchase Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 authorized.
HEALTHTECH INTERNATIONAL, INC.
By: /s/ Gordon L. Hall Date: April 28, 1997
Gordon L. Hall, Chief Executive Officer and
Chairman of the Board of Directors
By: /s/ Tim Williams Date: April 28, 1997
Tim Williams, President
By: /s/ Stephen L. Smith Date: April 28, 1997
Stephen L. Smith, Chief Financial Officer and
Vice President
<PAGE>
PART II
ITEM 6
EXHIBIT I
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement is made by and among RESULTS BEDFORD, INC. ("Buyer"), a
Texas corporation, STRONGHOLD, INC. ("Seller"), a Texas corporation, and TIMOTHY
MCKYER, in the capacity of a guarantor, for the purpose of establishing an
agreement of sale and purchase of certain assets between Buyer and Seller.
RECITALS:
WHEREAS, Seller owns and operates a health club under the name of
"Family Fitness Exchange," and all operations, activities, and services related
to said club shall collectively be referred to as the "Business"; and
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller certain assets of the Business.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties, intending to be legally bound,
agree as follows:
AGREEMENT
ARTICLE I.
Sale and Purchase of Assets
Section 1.01. Upon the terms and conditions set forth in this
Agreement, Seller agrees to sell, transfer, convey, and assign to Buyer, and
Buyer agrees to purchase from Seller, at the time of the closing hereinafter
provided for, all of the assets (the "Assets") of Seller's Business which are
owned by Seller and to be transferred to Buyer free and clear of any and all
claims, liens, and encumbrances of any kind or nature whatsoever, other than the
liens held by (1) Republic Leasing Company (Account No. 9495084 with monthly
payments of $560.83 and $43.46); (2) Standard Professional Services, LP (Account
no. 952-94 with a monthly payment of $887.00); (3) 3M Financing Services (with a
monthly
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payment of $399.99); (4) Lanier Leasing (with a monthly payment of $208.00); (5)
ADT Security Systems (Account No. 010034505095 with a monthly payment of
$125.00); (6) TCI Cable Television (with a monthly payment of $54.00); and (7)
Southwestern Bell Yellow Pages (with a monthly payment of $207.23);
(collectively, the "Contracts," with the aggregate monthly payments in the
amount of $2,485.51 to be referred to herein as the "Payments"), and the liens
for ad valorem taxes in the approximate amount of $25,852.00 on Seller's Assets,
consisting of:
(a) All of Seller's fixed assets located on the leased
premises (the "Fixed Assets"), including, but not limited to, all furniture,
furnishings, machines, exercise equipment, massage tables, physical therapy
equipment, rehabilitation equipment, office materials and supplies, phone
systems, computer systems, and other equipment. Such Fixed Assets include, but
are not limited to, those assets listed on Exhibit "A" attached hereto and
incorporated herein by reference for all purposes and all other tangible assets
not held by Seller for sale to the public in the ordinary course of the Business
and all assets of a character similar to that previously described in this
paragraph which were acquired by Seller between February 25, 1997, the effective
date of such list, and the date of closing.
(b) All of Seller's tenant improvements (the "Tenant
Improvements") made to the leased premises on which the Business is conducted.
(c) All costs and sales records and data, customer lists,
mailing lists, files, advertising material and methods, all accounting records,
personnel records, warranty records, telephone numbers, and any files required
to be retained after the closing by any applicable law or government regulation
(collectively, the "Records and Lists").
(d) All of Seller's health-related products for use
on and/or sale to customers (collectively, the
"Miscellaneous Inventory").
(e) All educational materials, such as books, video tapes
instructional manuals, etc.
(f) Buyer shall be the owner of any and all accounts
receivable relating to the Business as of the date
of closing.
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(g) All of Seller's security and/or other type of
deposits relating to any and all utilities.
(h) All licenses, permits, and/or authorizations (the
"Permits") held by Seller that relate to the Business.
Section 1.02. The only assets of the Business (or related thereto)
owned the Seller not being purchased by Buyer are those certain assets described
on Exhibit 'B" attached hereto and incorporated herein by reference for all
purposes. An asset or property on the leased premises which is not set forth on
Exhibit "B" shall be considered to be part of the Assets purchased by Buyer from
Seller. Further, any assets listed on Exhibit "B" which still remain on the
premises of the Business after five (5) days from the date of closing shall be
considered, and shall become, the property of Buyer.
ARTICLE II.
Purchase Price and Payment
Section 2.01. The total purchase price (hereinafter referred to as the
"Purchase Price") for the Assets is the cost of assuming the full balance
payable on the Contracts, and taking Seller's Assets subject to any ad valorem
taxes currently owed on the Assets.
Section 2.02. The Purchase Price shall be paid as follows:
(a) Buyer shall assume the full balance payable on
obligations of Seller under the Contracts; and
(b) Buyer accepts Seller's Assets subject to any ad valorem
taxes owed thereon. Buyer intends to attempt a compromise settlement agreement
plan to try to settle with taxing authorities on the taxes.
Section 2.03. Buyer agrees to hold TIMOTHY MCKYER harmless regarding
the ad valorem taxes as provided in the indemnity provision of this Agreement.
Section 2.04. Seller and TIMOTHY MCKYER guarantee, represent, and
warrant to Buyer that there are no claims outstanding against Seller that may be
asserted against the Assets by any party, other than the Contracts and
applicable taxing authorities in connection
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with ad valorem taxes owed on the Assets. Further, Seller and TIMOTHY MCKYER
hereby agree to hold Buyer harmless from any such claims as provided in the
indemnity portion of this Agreement, excluding from this indemnity the Contracts
and the ad valorem taxes. Buyer shall give Seller notice upon any claim arising
regarding this indemnity provision.
Section 2.05. Starting on April 1, 1997, Buyer agrees to escrow the
first $2,485.51 (or a lesser amount if applicable as contracts are paid in full)
of funds that are collected in each month from the operation of the Business and
to use such escrowed funds to pay any of the Payments due and owing upon the
Contracts. This shall be a continuing obligation. Each month such escrowed funds
shall be wired to Buyer's attorney, T. Alan Owen, IN TRUST, and Mr. Owen shall,
immediately upon receipt of such funds pay any and all Payments due and owing
upon the "Contracts."
ARTICLE III.
Warranties, Claims, and Liabilities
Section 3.01. It is hereby stipulated and agreed that Seller is liable
for all financial obligations of the Business up to and prior to April 1, 1997,
including, but not limited to, claims sounding in tort, contract, or otherwise.
Further, Seller and TIMOTHY MCKYER agree to indemnify Buyer (and its assignees
and successors in interest) against and hold Buyer (and its assignees and
successors in interest) harmless from any claim, action, or cause of action
arising prior to April 1, 1997, according to the indemnity provision of this
Agreement.
Notwithstanding the above and foregoing, Buyer expressly
agrees to assume all sums due under the Contracts accruing or to accrue on and
after April 1, 1997, and accepts the Assets subject to the ad valorem taxes owed
thereon. Buyer is liable for all financial obligations of the Business arising
on or after April 1, 1997, including, but not limited to, claims sounding in
tort, contract, or otherwise, and Buyer agrees to hold Seller and TIMOTHY MCKYER
harmless from any such claim, action, or cause of action according to the
indemnity provision of this Agreement.
Section 3.02. Buyer assumes any and all contracts and agreements of
Seller to perform services for or on customers and/or their assignees effective
April 1, 1997. Buyer agrees to indemnify Seller from any claim, action, or cause
of action on the contracts
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or agreements of Seller assumed according to this provision, such hold harmless
being in accordance with the indemnity provision of this Agreement.
Section 3.03. Except as expressly set forth in this Agreement, Buyer
does not assume any liabilities or contracts of Seller, nor take title to any of
the Assets subject to any liens or encumbrances of any kind or nature
whatsoever, other than the Contracts and the ad valorem taxes owed on Seller's
Assets. Included in the foregoing, by way of illustration and not by limitation,
are mortgages, liens, encumbrances, liens or liabilities for unpaid taxes (other
than ad valorem taxes), installment sales contracts, leases, labor agreements,
payroll items, vacation pay, sick pay, disability pay, retirement benefits,
medical benefits, and any and all other fringe benefits and the like. Buyer does
not agree to assume any past, current, or future responsibility for such items,
whether or not Buyer may elect to hire or not hire any of Seller's current
employees. Buyer does not agree to the continued employment of any of Seller's
employees, except as Buyer may from the date of closing separately contract with
such employees, agents, consultants, or independent contractors. Seller and
Buyer specifically acknowledge that Buyer does not assume in any manner
whatsoever any union contracts that may be outstanding with respect to the
Business.
ARTICLE IV.
Closing
Section 4.01. The closing of the purchase and sale of the Assets of
Seller's Business shall take place at the offices of Buyer's counsel, T. Alan
Owen, 2017 East Lamar, Suite 100, Arlington, Texas 76006, on or before March 19,
1997. The closing will have an effective date of April 1, 1997, at which time
Seller will cause all funds (dues) from the operation of the Business to be
deposited into Buyer's accounts (from and after April 1, 1997).
Section 4.02. At the closing, Seller will cause all of the following to
be delivered to Buyer:
(a) Executed copies of all documents reasonably required
pursuant to the provisions of this Agreement in order to consummate this
transaction.
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<PAGE>
(b) Such instruments of conveyance, negotiation, assignment,
and/or transfer as Buyer may reasonably request to accomplish the transfer of
the ownership of the purchased Assets to Buyer, including, but not limited to, a
bill of sale with general warranty and any other documents that Buyer may
reasonably request to fully and completely transfer to Buyer those Assets,
rights, deposits, and claims to which Buyer is entitled under the terms of this
Agreement.
(c) All keys to the premises occupied by the Business in
its possession or control.
ARTICLE V.
Representations and Warranties
Section 5.01. Seller represents, warrants, and agrees to and with Buyer
as follows:
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the
State of Texas.
(b) Seller has the full and unrestricted right and power (i)
to make and give, and to bind itself by these representations, warranties, and
agreements; and (ii) to sell, transfer, convey, and assign the Assets of Seller
to Buyer.
(c) Seller is duly authorized, qualified, and licensed under
any and all applicable laws and regulations to carry on the Business in the
place and in the manner presently being conducted.
(d) Seller has or will have at the date of closing good and
merchantable title (and complete right of possession) to all of the Assets to be
transferred hereunder, and will transfer and convey the Assets to Buyer, free
and clear of any liens, claims, encumbrances, and charges whatsoever, other than
the Contracts and the ad valorem taxes owed on Seller's Assets. The instruments
of assignment and transfer delivered by Seller on the date of Closing will be
adequate to convey all rights of Seller in and to the Assets purchased
hereunder. All of the Assets will be conveyed to Buyer by Seller on the date of
closing in an "AS IS" condition.
(e) There is no agreement presently in effect between
Seller and any person, organization, corporation, or other entity
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(except with Buyer pursuant hereto) pursuant to which Seller will, upon the
occurrence of certain conditions, sell, transfer, convey, assign, or in any way
encumber the Assets.
(f) Neither the execution nor the delivery nor the performance
of this Agreement will violate any provisions of federal, Texas, or local law;
any order of any court or other governmental agency or authority, whether
federal, state, or local; or any agreement or other instrument to which Seller
is a party or by which Seller is bound. This Agreement constitutes the legal,
valid, and binding obligations of Seller, enforceable in accordance with its
terms.
(g) No consent or approval by any governmental agency or
authority or nongovernmental person or entity is required in connection with the
execution, performance, and delivery by Seller of this Agreement or the
consummation by Seller of the transactions contemplated herein.
(h) Seller is not in violation of any federal, state, or local
law or regulatory requirement applicable to the Business. Seller has not
received any notice or complaint from any governmental agency or authority in
respect of any claim or violation of any law, regulation, order, license,
permit, or standard related to any such legal requirement.
(i) Seller will indemnify and hold Buyer harmless from any
loss resulting from a breach of any representation or warranty contained in this
Agreement. The representations and warranties of Seller shall survive the
closing.
Section 5.02. Buyer represents, warrants, and agrees to and with Seller
as follows:
(a) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas.
(b) The execution, delivery, and performance of this Agreement
by Buyer (including the execution of all documents incident to the consummation
of the transactions contemplated herein) will be duly authorized by all
necessary corporate action and will not violate any provision of Buyer's
Articles of Incorporation or Bylaws or any agreement or other instrument to
which Buyer is a party or by which it is bound.
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(c) Buyer will indemnify and hold Seller harmless from any
loss resulting from a breach or any representation or warranty contained in this
agreement. The representations and warranties of Buyer shall survive the
closing.
ARTICLE VI.
Covenants
Section 6.01 Seller covenants and agrees that, except as may
otherwise be consented to or approved by Buyer in writing,
Seller:
(a) will conduct its Business only in the ordinary course,
retaining its Business organization and using all reasonable efforts to retain
the goodwill of its suppliers, customers, and others having business relations
with it and to keep available the services of its present employees, if any;
(b) will not enter into any transaction other than in the
ordinary course of business or incur or agree to incur any obligation or
liability except obligations or liabilities incurred in the ordinary course of
business;
(c) will not sell or otherwise dispose of any Fixed
Assets, Records and Lists, or other Assets;
(d) will comply with all laws affecting the operation of
the Business; and
(e) will not allow any Permits to lapse.
Section 6.02. Buyer covenants and agrees that it:
(a) will obtain consents, authorizations, or approvals
of any governmental or nongovernmental entity necessary for the consummation of
the transactions contemplated by this Agreement; and
(b) will promptly do all such reasonable acts and take all
such reasonable measures as may be appropriate to enable it to perform the
agreements, obligations, and covenants herein provided to be performed by it.
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ARTICLE VII.
Assignment
Neither party shall have the right to assign all or any portion of the
obligations, duties, and benefits of this Agreement without the prior consent of
the other party.
ARTICLE VIII.
Conditions Precedent to Obligations of Buyer
Section 8.01. All obligations of Buyer under this Agreement are subject
to the fulfillment, on or before the closing or funding (as applicable), of the
following conditions:
(a)Buyer shall have received from Seller the certificates and
documents set forth in this Agreement; and
(b) No suit, action, proceeding, or investigation shall be
pending or threatened before any court or other governmental agency or
instrumentality against, by, or affecting Seller or the Assets of the Business,
which would prevent the consummation of this Agreement or any of he transactions
contemplated hereby.
ARTICLE IX.
Indemnity
Section 9.01 Seller and TIMOTHY MCKYER agree to indemnify and hold
Buyer harmless against and in respect of:
(a) Any and all claims, demands, expenses, losses, damages, or
deficiencies of any nature whatsoever resulting from, arising out of, or
attributable to (i) any misrepresentation by Seller, (ii) any breach of any
representation or warranty made by Seller, (iii) non-fulfillment of any covenant
on the part of Seller, (iv) any inaccuracy or omission in any certificate or
other instrument furnished by Seller hereunder, or (v) any debt, liability, or
obligation of Seller relating to the Business that originated prior to April 1,
1997, not expressly assumed by Buyer, whether or not such debt, obligation, or
liability is absolute, accrued, or contingent;
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(b) Any and all actions, demands, judgments, costs,
interests, and legal and other expenses incident to any of the foregoing; and
(c) All agreements expressed in this contract for a hold
harmless or indemnity shall be included in this indemnity provision.
Section 9.02 Buyer agrees to indemnify and hold Seller and TIMOTHY
MCKYER harmless against and in respect of:
(a) Any and all claims, demands, expenses, losses, damages, or
deficiencies of any nature whatsoever resulting from, arising out of, or
attributable to (i) any misrepresentation by Buyer, (ii) any breach of any
representation or warranty made by Buyer, (iii) non-fulfillment of any covenant
on the part of Buyer, (iv) any inaccuracy or omission in any certificate or
other instrument furnished by Buyer hereunder, or (v) any debt, liability, or
obligation of Buyer relating to the Business that originated after April 1,
1997, whether or not such debt, obligation, or liability is absolute, accrued,
or contingent;
(b) Any and all actions, demands, judgments, costs,
interests, and legal and other expenses incident to any of the foregoing; and
(c) All agreements expressed in this contract for a hold
harmless or indemnity shall be included in this indemnity provision.
Section 9.03. Procedure on Indemnity. In the event a claim for
indemnify or hold harmless arises according to this Agreement, the party making
the claim for indemnity or hold harmless shall give notice in writing to the
other party, identifying fully the basis for the claim, action, or cause of
action upon which an indemnity or hold harmless is sought. The receiving party
shall then determine in its exercise of good business judgment whether or not to
make immediate payment or resolution by settlement of the claim or action; or to
defend the action.
Notice in writing shall then be given within ten (10) working
days after a demand for an indemnify or hold harmless as to the determination
made by the indemnifying party to resolve, settle, or defend the claim or
action. The costs of defense shall
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be borne and paid by the indemnifying party, which shall include the cost of
attorneys' fees and court costs.
The party seeking indemnity shall cooperate fully with the
indemnifying party in order to minimize duplication of effort in the defense of
the claim or action, and shall fully cooperate in allowing a defense to be made
in the name of the party seeking indemnity or seeking to be held harmless.
Upon a final resolution by final judgment of a court of law
having jurisdiction of the dispute, the indemnifying party shall make payment in
full of any costs, and expenses, and any damages that may be finally adjudged in
the claim or action within ten (10) business days after the final judgment.
ARTICLE X.
Brokers and Expenses
Each party hereto represents to the other that it has not authorized
any broker or finder to act on its behalf in connection with the sale and
purchase hereunder and that it has not dealt with any broker or finder
purporting to act for any other party. Each party hereto agrees to indemnify and
hold harmless the other party from and against any and all liabilities, costs,
damages, and expenses of any kind or character arising from any claims for
brokerage or finder's fees, commissions, or other similar fees in connection
with the transactions contemplated herein insofar as such claims shall be based
upon alleged arrangements or agreements made by such party or on its behalf.
ARTICLE XI.
Default and Remedies
Section 11.01. Seller shall be deemed in default hereunder upon the
occurrence of any one or more of the following events:
(a) Any of Seller's warranties or representations set
forth herein are untrue when made or at closing and are determined to be
material; or
(b) Seller fails to meet, comply with, or perform any
covenant, agreement, or obligation on its part required within the time limits
and in the manner required in this Agreement.
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Section 11.02.
(a) Buyer shall be deemed to be in default hereunder if Buyer
fails to deliver, at the closing, any of the items specified in Section 2.02 of
this Agreement, or if Buyer shall breach any other provision of this Agreement,
or if Buyer terminates this Agreement prior to closing without cause.
(b) In the event Buyer shall default in the payment of "the
Contracts" identified in Section 1.01, Seller shall be entitled to give notice
of breach to Buyer. Unless Buyer cures the breach within thirty (30) days after
receipt of notice, Seller shall be entitled to immediate return of the Assets
transferred and conveyed under this agreement (including all replacement
property) and to immediate possession of the premises, and to take over the
operation of the Business facility.
Section 11.03 In the event Seller is deemed to be in default
hereunder, Buyer may, at Buyer's sole option, do any one of the following:
(a) Terminate this Agreement by written notice delivered
to Seller on or before the closing; or
(b) Enforce specific performance of this Agreement against
Seller; or
(c) Exercise any other right or remedy Buyer may have under
Section 11.02(b) of this Agreement and/or may have at law or in equity by reason
of such default, including, but not limited to, the recovery of attorneys' fees
incurred by Buyer in connection herewith and the reasonable reliance on Seller's
promise to sell the Assets in accordance with the terms of this Agreement.
ARTICLE XII.
Miscellaneous
Section 12.01. Any notices, requests, demands, or other
communications hereunder shall be in writing and shall be deemed to have been
duly given when mailed by United States mail, postage pre-paid, registered or
certified mail, to the following addresses:
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If to Buyer: RESULTS BEDFORD, INC.
1237 Val Vista Drive
Mesa, Arizona 85204
Attn: Gordon Hall
If to Seller: STRONGHOLD, INC.
2602 Harwood Road
Bedford, Texas 76021
Attn: Jeff Parker
If to Timothy McKyer: Timothy McKyer
18225 Kalabash Road
Charlotte, North Carolina 28278
Either party hereto may change its address for notification purposes by giving
notice thereof in writing, as aforesaid.
Section 12.02. All representations, warranties, covenants, and
agreements included or provided in this Agreement or any exhibit hereto or
instrument of transfer or other certificate or document delivered pursuant
thereto, shall survive the closing.
Section 12.03. Each party hereto shall from time to time after closing,
at the reasonable request of the other party and without further consideration,
execute and deliver such further instruments of conveyance, assignment, and
transfer and take such other action as the other may reasonably request in order
to more effectively convey and transfer the Assets conveyed hereunder and
otherwise to effect the objectives hereof.
Section 12.04. This Agreement constitutes the entire agreement between
the parties and there are no representations, warranties, or covenants except as
provided herein.
Section 12.05. This Agreement supersedes all prior agreements,
understandings, negotiations, and discussions, whether written or oral. This
Agreement shall not be modified or amended except by an instrument in writing
signed by or on behalf of the parties hereto. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, assigns, and heirs. Nothing in this Agreement is intended or shall
be construed to confer upon or give nay person other than the parties hereto and
their successors, assigns, and heirs any rights or remedies under or by reason
of this Agreement.
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 13
<PAGE>
Section 12.06. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas. VENUE FOR ANY CAUSE
OF ACTION REIATING TO THIS AGREEMENT SHALL BE EXCLUSIVELY TARRANT COUNTY, TEXAS.
Section 12.07. Any waiver by any party of any violation of, breach of,
or default under any provision of this Agreement shall not be construed as or
constitute a waiver of any subsequent violation, breach of, or default under
such provision or a waiver of any such party's rights under any provision of
this Agreement.
Section 12.08. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.09. The parties to this Agreement covenant to act in good
faith in the implementation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed to be effective as of the 25th day of February, 1997.
BUYER:
RESULTS BEDFORD, INC.
a Texas corporation
By: /s/ T. Alan Owen
T. ALAN OWEN
Agent and Attorney-in-Fact
SELLER:
STRONGHOLD, INC.
a Texas corporation
By: /s/ Timothy McKyer
TIMOTHY MCKYER
President
GUARANTOR:
By: /s/ Timothy McKyer
TIMOTHY MCKYER
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 14
<PAGE>
EXHIBIT "A"
FAMILY FITNESS EXCHANGE
INVENTORY CONTROL SHEET
ITEM NAME ............................................................. QUANTITY
MAROON BLINDS/PER WINDOW ............................................ 18
CHAIRS .............................................................. 58
COUCHES ............................................................. 8
ROUND TABLES ........................................................ 13
DESKS ............................................................... 9
COMPUTERS ........................................................... 2
TELEPHONES .......................................................... 12
FILING CABINETS ..................................................... 9
TOWELS .............................................................. 203
AEROBIC EQUIPMENT SHEET ATTACHED
*STAIR STEPPERS ..................................................... 6
*TREADMILLS ......................................................... 6
*CARDIO BIKES ....................................................... 12
*AEROBIC STEPS & RISERS ........................................... 23 & 92
REFRIGERATOR ........................................................ 2
FREEZER ............................................................. 1
PARAMOUNT EQUIPMENT SHEET ATTACHED
FREE WEIGHTS SHEET ATTACHED
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EKA) PAGE 1
<PAGE>
DUMBBELLS ................................................................ 1
CEILING FANS ............................................................. 13
REGISTER ................................................................. 1
MICROWAVE ................................................................ 1
STOVE .................................................................... 1
OVEN ..................................................................... 1
BASKETBALLS .............................................................. 10
RACQUETBALLS & RACQUETS ................................................ 50 & 3
SOCCER BALLS ............................................................. 4
LADDERS .................................................................. 2
WOODEN SHELVES ........................................................... 4
DRY SAUNAS ............................................................... 2
LOCKER ROOM BENCHES ...................................................... 14
LOCKERS .................................................................. 520
STEAM ROOMS .............................................................. 2
SHOWER CURTAINS .......................................................... 5
SOAP DISPENSERS .......................................................... 15
PAPER TOWEL HOLDERS ...................................................... 5
RED LOCKER ROOM MATS ..................................................... 200
NURSERY BEDS W/MATTRESSES ................................................ 4
DRESSERS ................................................................. 1
THUMB TACK BOARDS ........................................................ 3
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 2
<PAGE>
CHANGING TABLES ........................................................... 2
NURSERY READING BOOKS ..................................................... 85
NURSERY MOVIE TAPES ....................................................... 58
TRASH CANS ................................................................ 13
POOL CHAIRS ............................................................... 18
CLOCKS .................................................................... 5
TELEVISIONS ............................................................... 2
PLANTS .................................................................... 7
SHOWER CHAIRS ............................................................. 3
3-HOLE PAPER PUNCH ........................................................ 1
WALL PICTURES ............................................................. 15
WASHING MACHINE ........................................................... 1
DRYER ..................................................................... 1
TIME CLOCK ................................................................ 1
SILVER METAL SUPPLY SHELVES ............................................... 5
HANGING SHOWER CADDIES .................................................... 4
*COPY MACHINE ............................................................. 1
*VIDEO GAMES .............................................................. 5
*COFFEE POT ............................................................... 1
*COLD DRINK MACHINES ...................................................... 6
*BLACK FLOOR MATS/RUGS .................................................... 14
*CANDY MACHINES ........................................................... 9
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 3
<PAGE>
*SNACK/VENDING MACHINE ................................................. 2
PAPER CUTTER .................................................. 1
STAPLER .................................................... 5
TAPE DISPENSERS ................................................... 5
LAMPS .................................................... 2
*CREDIT CARD TERMINAL .................................................. 1
*CREDIT CARD PRINTER ................................................. 1
COMPUTER MOUSE .................................................. 1
ELECTRIC PENCIL SHARPENER .................................................. 1
BLUE ROLLING DESK CHAIRS ................................................. 7
FLOOR MOPS ................................................... 2
BROOMS ................................................... 1
DUST PANS .................................................... 1
COMPUTER KEYBOARDS .................................................. 2
POOL HEATER ................................................... 1
POOL PUMP .................................................... 1
SPA HEATER ................................................... 1
SPA PUMP ................................................... 1
INDOOR POOL ................................................... 1
INDOOR SPA/HOT TUB .................................................. 1
HIGH CHAIRS ................................................... 2
BABY WALKERS .................................................... 5
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 4
<PAGE>
WALL LENGTH COAT RACK
CHILDREN'S PICNIC TABLES .................................................. 4
WHITE LOUNGE BENCHES .................................................. 3
BABY SWINGS ................................................... 3
WATER HOSE .................................................... 1
PODIUM .................................................... 1
WINDOW CURTAINS .................................................. 9
ROCKING CHAIRS ................................................... 2
POTTY CHAIR ................................................... 1
DIAPER GENIE ................................................... 2
CHILDREN'S SLIDE CENTER ................................................. 1
AEROBIC EQUIPNENT ................................................ QUANTITY
RADIO ................................................... 1
BLUE AB MATS ................................................... 16
YELLOW BANDS ................................................... 9
GREEN BANDS ................................................... 12
WEIGHT BELTS ................................................... 3
RECHARGEABLE BATTERIES .................................................. 2
1-LB. DUMBBELL ................................................... 22
2-LB. DUMBBELL ................................................... 16
5-LB. DUMBBELL ................................................... 8
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 5
<PAGE>
8-LB. DUMBBELL ........................................................... 1
10-LB. DUMBBELL .......................................................... 5
12-LB. DUMBBELL ......................................................... 2
15-LB. DUMBBELL ......................................................... 2
20-LB. DUMBBELL ......................................................... 2
25-LB. DUMBBELL ......................................................... 2
30-LB. DUMBBELL ......................................................... 2
35-LB. DUMBBELL ......................................................... 4
40-LB. DUMBBELL ......................................................... 3
45-LB. DUMBBELL ......................................................... 2
50-LB. DUMBBELL ......................................................... 2
55-LB. DUMBBELL ......................................................... 2
60-LB. DUMBBELL ......................................................... 2
65-LB. DUMBBELL ......................................................... 2
70-LB. DUMBBELL ......................................................... 2
75-LB. DUMBBELL ......................................................... 2
85-LB. DUMBBELL ......................................................... 2
100-LB. DUMBBELL ........................................................... 2
PARAMOUNT EQUIPMENT QUANTITY
LEG SLED 1
ROMAN BENCH 1
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 6
<PAGE>
INNER THIGH ................................................................ 1
OUTER THIGH ................................................................ 1
MULTI HIP .................................................................. 1
ABDOMINAL .................................................................. 1
LEG CURL ................................................................... 1
LEG EXTENSION .............................................................. 1
CALF RAISE ................................................................. 2
LEG PRESS .................................................................. 1
SEATED ROW ................................................................. 1
LAT PULL ................................................................... 1
ROTARY TORSO ............................................................... 1
DELTOID .................................................................... 1
SHOULDER PRESS ............................................................. 1
SEATED CHEST ............................................................... 1
VERTICAL BUTTERFLY ......................................................... 1
BICEP CURL ................................................................. 1
PULLEY SEATED ROW .......................................................... 1
SMITH MACHINE .............................................................. 1
ADJUSTABLE INCLINE BENCH ................................................... 1
ABDOMINAL LIFT ............................................................. 1
DECLINE BENCH .............................................................. 1
INCLINE BENCH .............................................................. 1
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 7
<PAGE>
BENCH PRESS ................................................. 2
PREACHER CURL ................................................. 1
ADJUSTABLE DECLINE BENCH ................................................. 1
SQUAT MACHINE ................................................. 1
ADJ. SIT-UP BOARD ................................................. 1
WEIGHT PLATES ................................................QUANTITY
POWER RACK .................................................. 1
VERTICAL WEIGHT PLATE RACK ................................................ 2
DOUBLE D.B. RACK .................................................. 2
2-1/2 LB ................................................... 8
5-LB ................................................... 16
10-LB .................................................... 25
25-LB .................................................... 10
35-LB .................................................... 6
45-LB .................................................... 14
100-LB ................................................... 4
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 8
<PAGE>
EXHIBIT B
PERSONAL ASSETS OF TIM MCKYER
486 Compudyne Personal Computer
Laser printer
Fax machine
Credit card swipe machines
Photographs of Tim McKyer and family
EXHIBIT B SOLO PAGE
(TJC/1173.B)
ASSET PURCHASE AGREEMENT
This Agreement is made by and among RESULTS BEDFORD, INC. ("Buyer"), a Texas
corporation, STRONGHOLD, INC. ("Seller"), a Texas corporation, and TIMOTHY
MCKYER, in the capacity of a guarantor, for the purpose of establishing an
agreement of sale and purchase of certain assets between Buyer and Seller.
RECITALS:
WHEREAS, Seller owns and operates a health club under the name of "Family
Fitness Exchange," and all operations, activities, and services related to said
club shall collectively be referred to as the "Business"; and WHEREAS, Seller
desires to sell to Buyer and Buyer desires to purchase from Seller certain
assets of the Business.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties, intending to be legally bound, agree as
follows:
AGREEMENT
ARTICLE I.
Sale and Purchase of Assets
Section 1.01. Upon the terms and conditions set forth in this Agreement,
Seller agrees to sell, transfer, convey, and assign to Buyer, and Buyer agrees
to purchase from Seller, at the time of the closing hereinafter provided for,
all of the assets (the "Assets") of Seller's Business which are owned by Seller
and to be transferred to Buyer free and clear of any and all claims, liens, and
encumbrances of any kind or nature whatsoever, other than the liens held by (1)
Republic Leasing Company (Account No. 9495084 with monthly payments of $560.83
and $43.46); (2) Standard Professional Services, LP (Account no. 952-94 with a
monthly payment of $887.00); (3) 3M Financing Services (with a monthly
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 1
<PAGE>
payment of $399.99); (4) Lanier Leasing (with a monthly payment of $208.00);
(5) ADT Security Systems (Account No. 010034505095 with a monthly payment of
$125.00); (6) TCI Cable Television (with a monthly payment of $54.00);
and (7) Southwestern Bell Yellow Pages (with a monthly payment of $207.23);
(collectively, the "Contracts", with the aggregate monthly payments in the
amount of $2,485.51 to be referred to herein as the "Payments"), and the
liens for ad valorem taxes in the approximate amount of $25,852.00 on Seller's
Assets, consisting of:
(a) All of Seller's fixed assets located on the leased
premises (the "Fixed Assets"), including, but not limited to, all furniture,
furnishings, machines, exercise equipment, massage tables, physical
therapy equipment, rehabilitation equipment, office materials and supplies,
phone systems, computer systems, and other equipment. Such Fixed Assets
include, but are not limited to, those assets listed on Exhibit "A" attached
hereto and incorporated herein by reference for all purposes and all other
tangible assets not held by Seller for sale to the public in the ordinary
course of the Business and all assets of a character similar to that
previously described in this paragraph which were acquired by Seller between
February 25, 1997, the effective date of such list, and the date of closing.
(b) All of Seller's tenant improvements (the "Tenant
Improvements") made to the leased premises on which the Business is conducted.
(c) All costs and sales records and data, customer
lists, mailing lists, files, advertising material and methods, all
accounting records, personnel records, warranty records, telephone numbers,
and any files required to be retained after the closing by any
applicable law or government regulation (collectively, the "Records and
Lists").
(d) All of Seller's health-related products for
use on and/or sale to customers (collectively, the "Miscellaneous
Inventory").
(e) All educational materials,such as books, video tapes,
instructional manuals, etc.
(f) Buyer shall be the owner of any and all accounts
receivable relating to the Business as of the date of closing.
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr)
Page 2
<PAGE>
(g) All of Seller's security and/or other type of
deposits relating to any and all utilities.
(h) All licenses, permits, and/or authorizations
(the "Permits") held by Seller that relate to the Business.
Section 1.02. The only assets of the Business (or related thereto) owned
the Seller not being purchased by Buyer are those certain assets described on
Exhibit 'B" attached hereto and incorporated herein by reference for all
purposes. An asset or property on the leased premises which is not set forth on
Exhibit "B" shall be considered to be part of the Assets purchased by Buyer from
Seller. Further, any assets listed on Exhibit "B" which still remain on the
premises of the Business after five (5) days from the date of closing shall be
considered, and shall become, the property of Buyer.
ARTICLE II.
Purchase Price and Payment
Section 2.01. The total purchase price (hereinafter referred to as the "Purchase
Price") for the Assets is the cost of assuming the full balance payable on the
Contracts, and taking Seller's Assets subject to any ad valorem taxes currently
owed on the Assets.
Section 2.02. The Purchase Price shall be paid as follows:
(a) Buyer shall assume the full balance payable on
obligations of Seller under the Contracts; and
(b) Buyer accepts Seller's Assets subject to any ad
valorem taxes owed thereon. Buyer intends to attempt a compromise settlement
agreement plan to try to settle with taxing authorities on the taxes.
Section 2.03. Buyer agrees to hold TIMOTHY MCKYER harmless regarding
the ad valorem taxes as provided in the indemnity provision of this Agreement.
Section 2.04. Seller and TIMOTHY MCKYER guarantee, represent, and
warrant to Buyer that there are no claims outstanding against Seller that may
be asserted against the Assets by any party, other than the Contracts
and applicable taxing authorities in connection
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 3
<PAGE>
with ad valorem taxes owed on the Assets. Further, Seller and TIMOTHY MCKYER
hereby agree to hold Buyer harmless from any such claims as provided in the
indemnity portion of this Agreement, excluding from this indemnity the Contracts
and the ad valorem taxes. Buyer shall give Seller notice upon any claim arising
regarding this indemnity provision.
Section 2.05. Starting on April 1, 1997, Buyer agrees to escrow the first
$2,485.51 (or a lesser amount if applicable as contracts are paid in full) of
funds that are collected in each month from the operation of the Business and to
use such escrowed funds to pay any of the Payments due and owing upon the
Contracts. This shall be a continuing obligation. Each month such escrowed funds
shall be wired to Buyer's attorney, T. Alan Owen, IN TRUST, and Mr. Owen shall,
immediately upon receipt of such funds pay any and all Payments due and owing
upon the "Contracts."
ARTICLE III.
Warranties, Claims, and Liabilities
Section 3.01. It is hereby stipulated and agreed that Seller is liable for
all financial obligations of the Business up to and prior to April 1, 1997,
including, but not limited to, claims sounding in tort, contract, or otherwise.
Further, Seller and TIMOTHY MCKYER agree to indemnify Buyer (and its assignees
and successors in interest) against and hold Buyer (and its assignees and
successors in interest) harmless from any claim, action, or cause of action
arising prior to April 1, 1997, according to the indemnity provision of this
Agreement.
Notwithstanding the above and foregoing, Buyer expressly agrees to assume
all sums due under the Contracts accruing or to accrue on and after April 1,
1997, and accepts the Assets subject to the ad valorem taxes owed thereon. Buyer
is liable for all financial obligations of the Business arising on or after
April 1, 1997, including, but not limited to, claims sounding in tort, contract,
or otherwise, and Buyer agrees to hold Seller and TIMOTHY MCKYER harmless from
any such claim, action, or cause of action according to the indemnity provision
of this Agreement.
Section 3.02. Buyer assumes any and all contracts and agreements of Seller
to perform services for or on customers and/or their assignees effective April
1, 1997. Buyer agrees to indemnify Seller from any claim, action, or cause of
action on the contracts
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 4
<PAGE>
or agreements of Seller assumed according to this provision, such hold
harmless being in accordance with the indemnity provision of this Agreement.
Section 3.03. Except as expressly set forth in this Agreement, Buyer does
not assume any liabilities or contracts of Seller, nor take title to any of the
Assets subject to any liens or encumbrances of any kind or nature whatsoever,
other than the Contracts and the ad valorem taxes owed on Seller's Assets.
Included in the foregoing, by way of illustration and not by limitation, are
mortgages, liens, encumbrances, liens or liabilities for unpaid taxes (other
than ad valorem taxes), installment sales contracts, leases, labor agreements,
payroll items, vacation pay, sick pay, disability pay, retirement benefits,
medical benefits, and any and all other fringe benefits and the like. Buyer does
not agree to assume any past, current, or future responsibility for such items,
whether or not Buyer may elect to hire or not hire any of Seller's current
employees. Buyer does not agree to the continued employment of any of Seller's
employees, except as Buyer may from the date of closing separately contract with
such employees, agents, consultants, or independent contractors. Seller and
Buyer specifically acknowledge that Buyer does not assume in any manner
whatsoever any union contracts that may be outstanding with respect to the
Business.
ARTICLE IV.
Closing
Section 4.01. The closing of the purchase and sale of the Assets of
Seller's Business shall take place at the offices of Buyer's counsel, T. Alan
Owen, 2017 East Lamar, Suite 100, Arlington, Texas 76006, on or before March 19,
1997. The closing will have an effective date of April 1, 1997, at which time
Seller will cause all funds (dues) from the operation of the Business to be
deposited into Buyer's accounts (from and after April 1, 1997).
Section 4.02. At the closing, Seller will cause all of the following to be
delivered to Buyer:
(a) Executed copies of all documents reasonably required pursuant to the
provisions of this Agreement in order to consummate this transaction.
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 5
<PAGE>
(b) Such instruments of conveyance, negotiation, assignment, and/or
transfer as Buyer may reasonably request to accomplish the transfer of the
ownership of the purchased Assets to Buyer, including, but not limited to, a
bill of sale with general warranty and any other documents that Buyer may
reasonably request to fully and completely transfer to Buyer those Assets,
rights, deposits, and claims to which Buyer is entitled under the terms of this
Agreement.
(c) All keys to the premises occupied by the Business in its possession or
control.
ARTICLE V.
Representations and Warranties
Section 5.01. Seller represents, warrants, and agrees to and with
Buyer as follows:
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas.
(b) Seller has the full and unrestricted right and
power (i) to make and give, and to bind itself by these representations,
warranties, and agreements; and (ii) to sell, transfer, convey, and assign
the Assets of Seller to Buyer.
(c) Seller is duly authorized, qualified, and licensed
under any and all applicable laws and regulations to carry on the Business in
the place and in the manner presently being conducted.
(d) Seller has or will have at the date of closing
good and merchantable title (and complete right of possession) to all of
the Assets to be transferred hereunder, and will transfer and convey the
Assets to Buyer, free and clear of any liens, claims, encumbrances, and charges
whatsoever, other than the Contracts and the ad valorem taxes owed on Seller's
Assets. The instruments of assignment and transfer delivered by Seller on the
date of Closing will be adequate to convey all rights of Seller in and to the
Assets purchased hereunder. All of the Assets will be conveyed to Buyer by
Seller on the date of closing in an "AS IS" condition.
(e) There is no agreement presently in effect between
Seller and any person, organization, corporation, or other entity
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 6
<PAGE>
(except with Buyer pursuant hereto) pursuant to which Seller will, upon the
occurrence of certain conditions, sell, transfer, convey, assign, or in any way
encumber the Assets.
(f) Neither the execution nor the delivery nor the performance of this
Agreement will violate any provisions of federal, Texas, or local law; any order
of any court or other governmental agency or authority, whether federal, state,
or local; or any agreement or other instrument to which Seller is a party or by
which Seller is bound. This Agreement constitutes the legal, valid, and binding
obligations of Seller, enforceable in accordance with its terms.
(g) No consent or approval by any governmental agency or authority or
nongovernmental person or entity is required in connection with the execution,
performance, and delivery by Seller of this Agreement or the consummation by
Seller of the transactions contemplated herein.
(h) Seller is not in violation of any federal, state, or local law or
regulatory requirement applicable to the Business. Seller has not received any
notice or complaint from any governmental agency or authority in respect of any
claim or violation of any law, regulation, order, license, permit, or standard
related to any such legal requirement.
(i) Seller will indemnify and hold Buyer harmless from any loss resulting
from a breach of any representation or warranty contained in this Agreement. The
representations and warranties of Seller shall survive the closing.
Section 5.02. Buyer represents, warrants, and agrees to and with Seller
as follows:
(a) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas.
(b) The execution, delivery, and performance of this
Agreement by Buyer (including the execution of all documents incident to the
consummation of the transactions contemplated herein) will be duly
authorized by all necessary corporate action and will not violate any
provision of Buyer's Articles of Incorporation or Bylaws or any agreement or
other instrument to which Buyer is a party or by which it is bound.
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 7
<PAGE>
(c) Buyer will indemnify and hold Seller harmless from any
loss resulting from a breach or any representation or warranty contained in
this agreement. The representations and warranties of Buyer shall
survive the closing.
ARTICLE VI.
Covenants
Section 6.01 Seller covenants and agrees that, except as may otherwise be
consented to or approved by Buyer in writing, Seller:
(a) will conduct its Business only in the ordinary course, retaining its
Business organization and using all reasonable efforts to retain the goodwill of
its suppliers, customers, and others having business relations with it and to
keep available the services of its present employees, if any;
(b) will not enter into any transaction other than in the ordinary course
of business or incur or agree to incur any obligation or liability except
obligations or liabilities incurred in the ordinary course of business;
(c) will not sell or otherwise dispose of any Fixed Assets, Records and
Lists, or other Assets;
(d) will comply with all laws affecting the operation of the Business; and
(e) will not allow any Permits to lapse.
Section 6.02. Buyer covenants and agrees that it:
(a) will obtain consents, authorizations, or approvals of any governmental
or nongovernmental entity necessary for the consummation of the transactions
contemplated by this Agreement; and
(b) will promptly do all such reasonable acts and take all such reasonable
measures as may be appropriate to enable it to perform the agreements,
obligations, and covenants herein provided to be performed by it.
ASSET PURCHASE AGREEMENT
(tjc/1173-Sp3.agr) Page 8
<PAGE>
ARTICLE VII.
Assignment
Neither party shall have the right to assign all or any portion of the
obligations, duties, and benefits of this Agreement without the prior consent of
the other party.
ARTICLE VIII.
Conditions Precedent to Obligations of Buyer
Section 8.01. All obligations of Buyer under this Agreement are subject to
the fulfillment, on or before the closing or funding (as applicable), of the
following conditions:
(a) Buyer shall have received from Seller the certificates and documents
set forth in this Agreement; and
(b) No suit, action, proceeding, or investigation shall be pending or
threatened before any court or other governmental agency or instrumentality
against, by, or affecting Seller or the Assets of the Business, which would
prevent the consummation of this Agreement or any of he transactions
contemplated hereby.
ARTICLE IX.
Indemnity
Section 9.01 Seller and TIMOTHY MCKYER agree to indemnify and hold Buyer
harmless against and in respect of:
(a) Any and all claims, demands, expenses, losses, damages, or deficiencies
of any nature whatsoever resulting from, arising out of, or attributable to (i)
any misrepresentation by Seller, (ii) any breach of any representation or
warranty made by Seller, (iii) non-fulfillment of any covenant on the part of
Seller, (iv) any inaccuracy or omission in any certificate or other instrument
furnished by Seller hereunder, or (v) any debt, liability, or obligation of
Seller relating to the Business that originated prior to April 1, 1997, not
expressly assumed by Buyer, whether or not such debt, obligation, or liability
is absolute, accrued, or contingent;
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 9
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(b) Any and all actions, demands, judgments, costs, interests, and legal
and other expenses incident to any of the foregoing; and
(c) All agreements expressed in this contract for a hold harmless or
indemnity shall be included in this indemnity provision.
Section 9.02 Buyer agrees to indemnify and hold Seller and TIMOTHY MCKYER
harmless against and in respect of:
(a) Any and all claims, demands, expenses, losses, damages, or deficiencies
of any nature whatsoever resulting from, arising out of, or attributable to (i)
any misrepresentation by Buyer, (ii) any breach of any representation or
warranty made by Buyer, (iii) non-fulfillment of any covenant on the part of
Buyer, (iv) any inaccuracy or omission in any certificate or other instrument
furnished by Buyer hereunder, or (v) any debt, liability, or obligation of Buyer
relating to the Business that originated after April 1, 1997, whether or not
such debt, obligation, or liability is absolute, accrued, or contingent;
(b) Any and all actions, demands, judgments, costs, interests, and legal
and other expenses incident to any of the foregoing; and
(c) All agreements expressed in this contract for a hold harmless or
indemnity shall be included in this indemnity provision.
Section 9.03. Procedure on Indemnity. In the event a claim for indemnify or
hold harmless arises according to this Agreement, the party making the claim for
indemnity or hold harmless shall give notice in writing to the other party,
identifying fully the basis for the claim, action, or cause of action upon which
an indemnity or hold harmless is sought. The receiving party shall then
determine in its exercise of good business judgment whether or not to make
immediate payment or resolution by settlement of the claim or action; or to
defend the action.
Notice in writing shall then be given within ten (10) working days after a
demand for an indemnify or hold harmless as to the determination made by the
indemnifying party to resolve, settle, or defend the claim or action. The costs
of defense shall
ASSET PURCHASE AGREEMENT
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<PAGE>
be borne and paid by the indemnifying party, which shall include the cost
of attorneys' fees and court costs.
The party seeking indemnity shall cooperate fully with the indemnifying
party in order to minimize duplication of effort in the defense of the claim or
action, and shall fully cooperate in allowing a defense to be made in the name
of the party seeking indemnity or seeking to be held harmless.
Upon a final resolution by final judgment of a court of law having
jurisdiction of the dispute, the indemnifying party shall make payment in full
of any costs, and expenses, and any damages that may be finally adjudged in the
claim or action within ten (10) business days after the final judgment.
ARTICLE X.
Brokers and Expenses
Each party hereto represents to the other that it has not authorized any
broker or finder to act on its behalf in connection with the sale and purchase
hereunder and that it has not dealt with any broker or finder purporting to act
for any other party. Each party hereto agrees to indemnify and hold harmless the
other party from and against any and all liabilities, costs, damages, and
expenses of any kind or character arising from any claims for brokerage or
finder's fees, commissions, or other similar fees in connection with the
transactions contemplated herein insofar as such claims shall be based upon
alleged arrangements or agreements made by such
party or on its behalf.
ARTICLE XI.
Default and Remedies
Section 11.01. Seller shall be deemed in default hereunder upon the
occurrence of any one or more of the following events:
(a) Any of Seller's warranties or representations set forth herein are
untrue when made or at closing and are determined to be material; or
(b) Seller fails to meet, comply with, or perform any covenant, agreement,
or obligation on its part required within the time limits and in the manner
required in this Agreement.
ASSET PURCHASE AGREEMENT
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<PAGE>
Section 11.02.
(a) Buyer shall be deemed to be in default hereunder if Buyer fails to
deliver, at the closing, any of the items specified in Section 2.02 of this
Agreement, or if Buyer shall breach any other provision of this Agreement, or if
Buyer terminates this Agreement prior to closing without cause.
(b) In the event Buyer shall default in the payment of "the Contracts"
identified in Section 1.01, Seller shall be entitled to give notice of breach to
Buyer. Unless Buyer cures the breach within thirty (30) days after receipt of
notice, Seller shall be entitled to immediate return of the Assets transferred
and conveyed under this agreement (including all replacement property) and to
immediate possession of the premises, and to take over the operation of the
Business facility.
Section 11.03 In the event Seller is deemed to be in default hereunder,
Buyer may, at Buyer's sole option, do any one of the following:
(a) Terminate this Agreement by written notice delivered to Seller on or
before the closing; or
(b) Enforce specific performance of this Agreement against Seller; or
(c) Exercise any other right or remedy Buyer may have under Section
11.02(b) of this Agreement and/or may have at law or in equity by reason of such
default, including, but not limited to, the recovery of attorneys' fees incurred
by Buyer in connection herewith and the reasonable reliance on Seller's promise
to sell the Assets in accordance with the terms of this Agreement.
ARTICLE XII.
Miscellaneous
Section 12.01. Any notices, requests, demands, or other communications
hereunder shall be in writing and shall be deemed to have been duly given when
mailed by United States mail, postage pre-paid, registered or certified mail, to
the following addresses:
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 12
<PAGE>
If to Buyer: RESULTS BEDFORD, INC.
1237 Val Vista Drive
Mesa, Arizona 85204
Attn: Gordon Hall
If to Seller: STRONGHOLD, INC.
2602 Harwood Road
Bedford, Texas 76021
Attn: Jeff Parker
If to Timothy McKyer: Timothy McKyer
18225 Kalabash Road
Charlotte, North Carolina 28278
Either party hereto may change its address for notification purposes by giving
notice thereof in writing, as aforesaid.
Section 12.02. All representations, warranties, covenants, and agreements
included or provided in this Agreement or any exhibit hereto or instrument of
transfer or other certificate or document delivered pursuant thereto, shall
survive the closing.
Section 12.03. Each party hereto shall from time to time after closing, at the
reasonable request of the other party and without further consideration, execute
and deliver such further instruments of conveyance, assignment, and transfer and
take such other action as the other may reasonably request in order to more
effectively convey and transfer the Assets conveyed hereunder and otherwise to
effect the objectives hereof.
Section 12.04. This Agreement constitutes the entire agreement between the
parties and there are no representations, warranties, or covenants except as
provided herein.
Section 12.05. This Agreement supersedes all prior agreements, understandings,
negotiations, and discussions, whether written or oral. This Agreement shall not
be modified or amended except by an instrument in writing signed by or on behalf
of the parties hereto. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, assigns, and
heirs. Nothing in this Agreement is intended or shall be construed to confer
upon or give nay person other than the parties hereto and their successors,
assigns, and heirs any rights or remedies under or by reason of this Agreement.
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 13
<PAGE>
Section 12.06. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas. VENUE FOR ANY CAUSE
OF ACTION REIATING TO THIS AGREEMENT SHALL BE EXCLUSIVELY TARRANT COUNTY, TEXAS.
Section 12.07. Any waiver by any party of any violation of, breach of, or
default under any provision of this Agreement shall not be construed as or
constitute a waiver of any subsequent violation, breach of, or default under
such provision or a waiver of any such party's rights under any provision of
this Agreement.
Section 12.08. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.09. The parties to this Agreement covenant to act in good
faith in the implementation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed to be effective as of the 25th day of February, 1997.
BUYER:
RESULTS BEDFORD, INC.
a Texas corporation
By: /s/ T. Alan Owen
T. ALAN OWEN
Agent and Attorney-in-Fact
SELLER:
STRONGHOLD, INC.
a Texas corporation
By: /s/ Timothy McKyer
TIMOTHY MCKYER
President
GUARANTOR:
By: /s/ Timothy McKyer
TIMOTHY MCKYER
ASSET PURCHASE AGREEMENT
(tjc/1173-5p3.agr) Page 14
<PAGE>
EXHIBIT "A"
FAMILY FITNESS EXCHANGE
INVENTORY CONTROL SHEET
ITEM NAME ......................................... QUANTITY
MAROON BLINDS/PER WINDOW ....................................... 18
CHAIRS ......................................... 58
COUCHES ........................................ 8
ROUND TABLES ........................................ 13
DESKS ........................................ 9
COMPUTERS ........................................ 2
TELEPHONES ......................................... 12
FILING CABINETS ....................................... 9
TOWELS ......................................... 203
AEROBIC EQUIPMENT ................................ SHEET ATTACHED
*STAIR STEPPERS ....................................... 6
*TREADMILLS ........................................ 6
*CARDIO BIKES ....................................... 12
*AEROBIC STEPS & RISERS ...................................... 23 & 92
REFRIGERATOR ........................................ 2
FREEZER ........................................ 1
PARAMOUNT EQUIPMENT ...................................SHEET ATTACHED
FREE WEIGHTS ....................................SHEET ATTACHED
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EKA) PAGE 1
<PAGE>
DUMBBELLS ..... ................. 1
CEILING FANS ............... 13
REGISTER ................ 1
MICROWAVE ................. 1
STOVE ................. 1
OVEN ................ 1
BASKETBALLS ................ 10
RACQUETBALLS & RACQUETS ............... 50 & 3
SOCCER BALLS ............... 4
LADDERS ................. 2
WOODEN SHELVES ............... 4
DRY SAUNAS ................ 2
LOCKER ROOM BENCHES ............... 14
LOCKERS ................. 520
STEAM ROOMS ................ 2
SHOWER CURTAINS ................ 5
SOAP DISPENSERS ................ 15
PAPER TOWEL HOLDERS ............... 5
RED LOCKER ROOM MATS .............. 200
NURSERY BEDS W/MATTRESSES ............... 4
DRESSERS ................ 1
THUMB TACK BOARDS ................ 3
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 2
<PAGE>
CHANGING TABLES ....................................... 2
NURSERY READING BOOKS ...................................... 85
NURSERY MOVIE TAPES ...................................... 58
TRASH CANS ....................................... 13
POOL CHAIRS ....................................... 18
CLOCKS ....................................... 5
TELEVISIONS ....................................... 2
PLANTS ....................................... 7
SHOWER CHAIRS ....................................... 3
3-HOLE PAPER PUNCH ...................................... 1
WALL PICTURES ....................................... 15
WASHING MACHINE ....................................... 1
DRYER ........................................ 1
TIME CLOCK ....................................... 1
SILVER METAL SUPPLY SHELVES ..................................... 5
HANGING SHOWER CADDIES ....................................... 4
*COPY MACHINE ....................................... 1
*VIDEO GAMES ...................................... 5
*COFFEE POT ....................................... 1
*COLD DRINK MACHINES ..................................... 6
*BLACK FLOOR MATS/RUGS ..................................... 14
*CANDY MACHINES ....................................... 9
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
"A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 3
<PAGE>
*SNACK/VENDING MACHINE ....................................... 2
PAPER CUTTER ........................................ 1
STAPLER .......................................... 5
TAPE DISPENSERS ......................................... 5
LAMPS .......................................... 2
*CREDIT CARD TERMINAL ........................................ 1
*CREDIT CARD PRINTER ....................................... 1
COMPUTER MOUSE ........................................ 1
ELECTRIC PENCIL SHARPENER ........................................ 1
BLUE ROLLING DESK CHAIRS ....................................... 7
FLOOR MOPS ......................................... 2
BROOMS ......................................... 1
DUST PANS .......................................... 1
COMPUTER KEYBOARDS ........................................ 2
POOL HEATER ......................................... 1
POOL PUMP .......................................... 1
SPA HEATER ......................................... 1
SPA PUMP ......................................... 1
INDOOR POOL ......................................... 1
INDOOR SPA/HOT TUB ........................................ 1
HIGH CHAIRS ......................................... 2
BABY WALKERS .......................................... 5
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 4
<PAGE>
WALL LENGTH COAT RACK
CHILDREN'S PICNIC TABLES ........................................ 4
WHITE LOUNGE BENCHES ........................................ 3
BABY SWINGS ......................................... 3
WATER HOSE .......................................... 1
PODIUM .......................................... 1
WINDOW CURTAINS ........................................ 9
ROCKING CHAIRS ......................................... 2
POTTY CHAIR ......................................... 1
DIAPER GENIE ......................................... 2
CHILDREN'S SLIDE CENTER ....................................... 1
AEROBIC EQUIPNENT .......................................... QUANTITY
RADIO ......................................... 1
BLUE AB MATS ......................................... 16
YELLOW BANDS ......................................... 9
GREEN BANDS ......................................... 12
WEIGHT BELTS ......................................... 3
RECHARGEABLE BATTERIES ........................................ 2
1-LB. DUMBBELL ......................................... 22
2-LB. DUMBBELL ......................................... 16
5-LB. DUMBBELL ......................................... 8
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 5
<PAGE>
8-LB. DUMBBELL ................................................. 1
10-LB. DUMBBELL ................................................ 5
12-LB. DUMBBELL ............................................... 2
15-LB. DUMBBELL ............................................... 2
20-LB. DUMBBELL ............................................... 2
25-LB. DUMBBELL ............................................... 2
30-LB. DUMBBELL ............................................... 2
35-LB. DUMBBELL ............................................... 4
40-LB. DUMBBELL ............................................... 3
45-LB. DUMBBELL ............................................... 2
50-LB. DUMBBELL ............................................... 2
55-LB. DUMBBELL ............................................... 2
60-LB. DUMBBELL ............................................... 2
65-LB. DUMBBELL ............................................... 2
70-LB. DUMBBELL ............................................... 2
75-LB. DUMBBELL ............................................... 2
85-LB. DUMBBELL ............................................... 2
100-LB. DUMBBELL ................................................. 2
PARAMOUNT EQUIPMENT QUANTITY
LEG SLED 1
ROMAN BENCH 1
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 6
<PAGE>
INNER THIGH ............................... 1
OUTER THIGH
MULTI HIP ................................. 1
ABDOMINAL ................................. 1
LEG CURL .................................. 1
LEG EXTENSION ............................. 1
CALF RAISE
2
LEG PRESS ................................. 1
SEATED ROW ................................ 1
LAT PULL .................................. 1
ROTARY TORSO .............................. 1
DELTOID ................................... 1
SHOULDER PRESS ............................ 1
SEATED CHEST .............................. 1
VERTICAL BUTTERFLY ........................ 1
BICEP CURL ................................ 1
PULLEY SEATED ROW ......................... 1
SMITH MACHINE ............................. 1
ADJUSTABLE INCLINE BENCH .................. 1
ABDOMINAL LIFT ............................ 1
DECLINE BENCH ............................. 1
INCLINE BENCH ............................. 1
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 7
<PAGE>
BENCH PRESS ....................................... 2
PREACHER CURL ....................................... 1
ADJUSTABLE DECLINE BENCH ....................................... 1
SQUAT MACHINE ....................................... 1
ADJ. SIT-UP BOARD ....................................... 1
WEIGHT PLATES ......................................... QUANTITY
POWER RACK ........................................ 1
VERTICAL WEIGHT PLATE RACK ...................................... 2
DOUBLE D.B. RACK ........................................ 2
2-1/2 LB ......................................... 8
5-LB ......................................... 16
10-LB .......................................... 25
25-LB .......................................... 10
35-LB .......................................... 6
45-LB .......................................... 14
100-LB ......................................... 4
*CURRENTLY BEING LEASED
*NOT OWNED BY FAMILY FITNESS EXCHANGE
MARCH 19, 1997
EXHIBIT "A"
FAMILY FITNESS EXCHANGE INVENTORY CONTROL SHEET
(TJC/1173.EXA) PAGE 8
<PAGE>
EXHIBIT B
PERSONAL ASSETS OF TIM MCKYER
486 Compudyne Personal Computer
Laser printer
Fax machine
Credit card swipe machines
Photographs of Tim McKyer and family
EXHIBIT B SOLO
PAGE
(TJC/1173.B)
