<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 200549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 15, 1998
THE SPORTS CLUB COMPANY, INC.
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Delaware 1-13290 95-4479735
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Indentification
incorporation) No.)
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11100 Santa Monica Boulevard, Suite 300 90025
Los Angeles, California (Zip Code)
(address of principal executive offices)
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Registrant's telephone number, including area code (310) 479-5200
(Former name or former address, if changed since last report). Not applicable
Index of Exhibits on Page 2
Page 1 of 3
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ITEM 2. ACQUISITION OF ASSETS
On April 16, 1998, the Company acquired the Vertical Club, a 120,000 square
foot fitness and tennis club in Manhattan, New York, from Hilton Hotels Corp.,
for $4 million. One third of the purchase price was paid at closing, from
working capital, and the Company is required to make additional payments of $1.3
million on the first and second anniversary of the closing. The Company also
entered into a long term lease with respect to the facility. The Company is
currently operating the Club; however, the Company intends to perform
substantial renovations to the facility which may require that the Club be
closed for a period of time prior to reopening as a Sports Club. The Acquisition
is being accounted for as a purchase and accordingly the results of operations
of this Club will be included in the consolidated results of operations from the
date of acquisition.
ITEM 5. OTHER EVENTS
On April 17, 1998, the Company announced that it has signed an agreement to
acquire real property in Houston, Texas on which it will develop a full-service
sports and fitness complex. The new Sports Club will be a two story, 85,000
square foot facility located in the Greenway Plaza and Galleria Market area.
On April 27, 1998 the Company sold 500,000 shares of common stock in
connection with the underwriters exercise of the over-allotment option granted
as part of the Company's recent public offering.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) & (b) Financial statements of The acquisition described in Item 2 is
business acquired and not considered material to the
pro forma financial consolidated financial position or
information results of operations of the Company.
Accordingly, financial statements and
pro forma information in accordance
with Rule 3-05 of Registration S-X is
not required.
(c) Exhibits 1. Press Release dated April 16, 1998.
2. Asset Purchase Agreement dated as of
April 1, 1998 between Hilton Hotel
Corporation and RM Sports Club, Inc.
Page 2 of 3
<PAGE> 3
3. Assignment and Assumption of Asset
Purchase Agreement entered into as of
April 1, 1998 by and between RM Sports
Club, Inc., and The Sports Club Company,
Inc.
4. Press Release dated April 17, 1998.
5. Press Release dated April 28, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned hereunto
duly authorized.
THE SPORTS CLUB COMPANY, INC.
By: /s/ TIMOTHY O'BRIEN
------------------------------------
Timothy O'Brien
Chief Financial Officer
APRIL 30, 1998
Page 3 of 3
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EXHIBIT 1
[THE SPORTS CLUB COMPANY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT: JOHN M. GIBBONS
PRESIDENT AND
CHIEF OPERATING OFFICER
THE SPORTS CLUB COMPANY, INC.
(310) 479-5200
THE SPORTS CLUB COMPANY ANNOUNCES THE
ACQUISITION OF A CLUB IN MANHATTAN, NEW YORK
LOS ANGELES, CA (April 16, 1998) -- The Sports Club Company, Inc. (AMEX: SCY)
today announced that it has acquired the Vertical Club, a 120,000 square foot
fitness and tennis club in Manhattan, New York. The lease rights and club
operation were acquired for approximately $4,000,000, however a significant
investment is anticipated in connection with development of the club.
"The Vertical Club located on the upper East side of Manhattan will become one
of the premier clubs in New York," stated D. Michael Talla, Chairman and Chief
Executive Officer. "We are anxious to restore this club to Sports Club standards
and know that it will complement the successful West Side Reebok Sports Club/NY
and our newly announced development at Rockefeller Center," concluded Mr. Talla.
The Sports Club Company operates upscale health and fitness clubs throughout the
country. In addition to The Sports Club/LA and its sister clubs Reebok Sports
Club/NY, The Sports Club/Las Vegas and The Sports Club/Irvine, the Company
operates ten Spectrum Clubs. The Company is currently developing Sports Clubs in
Boston, San Francisco, New York and Washington, D.C. and two other Spectrum
Clubs in Southern California.
###
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EXHIBIT 2
================================================================================
ASSET PURCHASE AGREEMENT
between
HILTON HOTELS CORPORATION,
a Delaware corporation
and
RM SPORTS CLUB, INC.,
a California corporation
Dated as of April 1, 1998
================================================================================
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TABLE OF CONTENTS
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SECTION 1. PURCHASE AND SALE OF ASSETS. 1
1.1 ASSETS TO BE TRANSFERRED 1
1.2 EXCLUDED ASSETS 2
1.3 LIABILITIES TO BE ASSUMED 3
1.4 LIABILITIES NOT TO BE ASSUMED 3
1.5 PURCHASE PRICE 4
1.6 DELIVERIES INTO ESCROW 6
1.7 SELLER'S CONDITIONS TO CLOSING 7
1.8 PURCHASER'S CONDITIONS TO CLOSING 8
1.9 CLOSING 9
1.10 COSTS 10
1.11 PURCHASE PRICE ALLOCATION 11
1.12 SALES TAXES 11
1.13 ACCOUNTING TREATMENT 11
1.14 TAX CONSEQUENCES 11
1.15 PRORATIONS 12
1.16 DELIVERY OF DOCUMENTS 15
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER 15
2.1 DUE ORGANIZATION; ETC 15
2.2 MANAGER'S ESTOPPEL CERTIFICATE 15
2.3 ABSENCE OF CHANGES 15
2.4 TITLE TO ASSETS 16
2.5 EQUIPMENT, ETC. 16
2.6 FOREIGN PERSON 16
2.7 AUTHORITY; BINDING NATURE OF AGREEMENTS 16
2.8 NON-CONTRAVENTION; CONSENTS 16
2.9 INFORMATION 17
SECTION 3. "AS IS"; DUE DILIGENCE COMPLETED; DISCLAIMER OF ADDITIONAL
WARRANTIES OF SELLER 17
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER 17
4.1 DUE ORGANIZATION 17
4.2 AUTHORITY; BINDING NATURE OF AGREEMENT 18
4.3 NON-CONTRAVENTION; CONSENTS 18
SECTION 5. INDEMNIFICATION, ETC 18
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES 18
5.2 INDEMNIFICATION BY SELLER 19
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TABLE OF CONTENTS
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5.3 INDEMNIFICATION BY PURCHASER 19
5.4 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES 20
5.5 DEFENSE OF THIRD PARTY CLAIMS BY SELLER 20
5.6 DEFENSE OF THIRD PARTY CLAIMS BY PURCHASER 21
5.7 EXERCISE OF REMEDIES BY INDEMNITEES 21
SECTION 6. ADDITIONAL COVENANTS AND AGREEMENTS 21
6.1 INTERIM CONDUCT OF THE BUSINESS 21
6.2 STANDSTILL BY SELLER 22
6.3 PURCHASER'S ACCESS 22
6.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS 23
6.5 NO INCONSISTENT ACTION 23
6.6 DAMAGE OR DESTRUCTION 23
6.7 CONDEMNATION 23
6.8 LIQUOR LICENSE 24
6.9 [Intentionally omitted] 24
6.10 FIRPTA AFFIDAVIT 24
6.11 SEC REQUIRED FINANCIAL INFORMATION 24
6.12 INVESTMENT IN THE CLUB 24
SECTION 7. MISCELLANEOUS PROVISIONS 24
7.1 FURTHER ASSURANCES 24
7.2 ATTORNEYS' FEES 25
7.3 NOTICES 25
7.4 PUBLICITY; CONFIDENTIALITY 26
7.5 NONCOMPETITION/NONSOLICITATION 27
7.6 TIME OF THE ESSENCE 28
7.7 HEADINGS 28
7.8 COUNTERPARTS 28
7.9 GOVERNING LAW; VENUE 28
7.10 SUCCESSORS AND ASSIGNS 29
7.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE 29
7.12 NO CONSEQUENTIAL DAMAGES 29
7.13 WAIVER 29
7.14 AMENDMENTS 30
7.15 SEVERABILITY 30
7.16 PARTIES IN INTEREST 30
7.17 ENTIRE AGREEMENT 30
7.18 BROKERS 30
7.19 CONSTRUCTION 30
7.20 WAIVER OF JURY 31
7.21 AUTHORITY TO SIGN 31
7.22 SURVIVAL POST-CLOSING 31
7.23 FACSIMILE SIGNATURES 32
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EXHIBITS
Exhibit A: Certain Definitions
Exhibit B: Form of Assignment of Contracts
Exhibit C: Form of Assignment of Leases
Exhibit D: Form of Bill of Sale
Exhibit E: Form of Note
Exhibit F: [Intentionally omitted]
Exhibit G: [Intentionally omitted]
Exhibit H: Form of Assignment and Assumption
SCHEDULES
Schedule 1.1(e) Assumed Contracts
Schedule 1.4(a) Contracts and Leases Not to be Assumed
Schedule 1.8(a)(ii) Additional Seller Delivery Items
Schedule 1.16 Delivery of Due Diligence Documents
Schedule 2.5 Equipment Inventory
Disclosure Schedule
3
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
April 1, 1998 by and between HILTON HOTELS CORPORATION, a Delaware corporation
("Seller"), and RM SPORTS CLUB, INC., a California corporation ("Purchaser").
Certain capitalized terms used in this Agreement are defined on Exhibit A.
RECITALS
A. Seller desires to sell to Purchaser, and Purchaser desires to purchase
from the Seller, (the "Acquisition") substantially all of the assets used or
held for use by Seller in the operation of The Vertical Club located at 61st
Street, New York, New York (the "Club").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, Purchaser, and Seller, intending to be legally
bound, agree as follows
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of
this Agreement, on the Closing Date (as hereinafter defined) Seller shall sell,
transfer, convey, assign, and deliver to Purchaser and Purchaser shall purchase
and accept all of the business, rights, claims and assets (of every kind,
nature, character and description, whether real, personal or mixed, whether
tangible or intangible, whether accrued, contingent or otherwise), of the Seller
located at the Club, other than the Excluded Assets (as hereinafter defined)
relating to the Club (collectively, the "Purchased Assets"). The Purchased
Assets shall include, but not be limited to, the following:
(a) REAL PROPERTY. All real property, appurtenances thereto,
rights in connection therewith and interests therein owned by the Seller
relating to the Club and described on Part 7 of the Disclosure Schedule (the
"Real Property"). Real Property includes, without limitation, any Real Property
Leases and any interests of Seller therein and thereto.
(b) LEASED REAL PROPERTY. All real property leases of the Seller
described on Part 7 of the Disclosure Schedule (the "Real Property Leases"), if
any.
(c) PERSONAL PROPERTY LEASES. All leases of machinery,
equipment, vehicles, furniture and other personal property leased by Seller and
described on Part 6 of the Disclosure Schedule (the "Personal Property Leases").
(d) MACHINERY AND EQUIPMENT. All machinery, equipment, vehicles,
tools, supplies, spare parts, furniture and all other personal property not
included in inventory (other than personal property leased pursuant to Personal
Property Leases) owned, utilized or held for use by Seller and located at the
Club.
<PAGE> 6
(e) CONTRACTS. Other than the Membership Agreements, all
Contracts, contractual rights, purchase orders and sales orders (the "Assumed
Contracts") of Seller that are listed on Schedule 1.1(e) and expressly assumed
by Purchaser; provided, however, that even if one or more Personal Property
Leases are listed on Schedule 1.1(e), Purchaser shall not be obligated to assume
any Personal Property Leases if and to the extent the aggregate monthly payments
under all Personal Property Leases to be so assumed would exceed $1,500. Seller
shall pay off any Personal Property Leases that otherwise would be assumed
pursuant to this Section 1.1(e) if and to the extent necessary to cause such
aggregate monthly payments not to exceed such amount. Any Contract not
specifically listed on Schedule 1.1(e), other than the Membership Agreements,
shall conclusively be deemed to be a Contract expressly not being assumed by
Purchaser even if such contract is not specifically listed on Schedule 1.4(a).
(f) MEMBERSHIP AGREEMENTS. All of the Membership Agreements,
including rights to renewals, monthly membership fees subject to Section 1.15,
receivables and other rights and obligations related thereto.
(g) RECORDS AND FILES. All membership lists (in both written and
machine readable format), records, files, invoices, customer lists, blueprints,
specifications, designs, drawings, accounting records, business records,
operating data and other data of Seller relating to the Club (including, without
limitation, all billing/accounting hardware and software relating to the Club
that are owned by, leased by or licensed to Seller if and to the extent
assignable).
(h) TELEPHONE NUMBERS. All local telephone numbers associated
with the Club that are within Seller's control to assign at Closing
(i) LICENSES; PERMITS. Except as may be expressly set forth in
Parts 10 and 11 of the Disclosure Schedule, all licenses, permits and approvals
held by Seller, including without limitation, all Governmental Authorizations.
(j) INVENTORY. All inventories of raw materials, work-in-process
and finished goods (including all such in transit) of the Seller, together with
related packaging materials (collectively the "Inventory").
(k) MANAGEMENT AGREEMENT. The Management Agreement, together
with all right, title and interest of Seller in any and all claims, demands and
causes of action that Seller may have against Manager arising out of or in
connection with the Management Agreement.
1.2 EXCLUDED ASSETS. The provisions of Section 1.1 notwithstanding,
Seller shall not sell, transfer, assign, convey or deliver to Purchaser, and
Purchaser will not purchase or accept the following assets of Seller
(collectively the "Excluded Assets"):
(a) CONSIDERATION. The consideration delivered by Purchaser to
Seller
<PAGE> 7
pursuant to this Agreement.
(b) TAX CREDITS. Federal, state and local income and franchise
tax credits and tax refund claims.
(c) FRANCHISE. Seller's franchise to be a corporation, its
articles of incorporation, stock book, minute book, corporate seal, and its
books and records having exclusively to do with its organization and
capitalization.
(d) TAX RECORDS. Seller's income and franchise tax returns and
tax records.
(e) MARK. The right to use the "Vertical Club" service mark.
1.3 LIABILITIES TO BE ASSUMED. Subject to the terms and conditions of
This Agreement, on the Closing Date, Purchaser shall assume and agree to perform
and discharge to the extent indicated below the following, and only the
following, specific debts, liabilities and obligations of the Seller
(collectively the "Assumed Liabilities"):
(a) MEMBERSHIP AGREEMENTS. Subject to Section 1.15, Seller's
obligation to honor and service the Membership Agreements, other than any
refunds arising under any Governmental Authorization, Legal Requirement or Order
solely as a result of the Closing, the payment of which shall be the sole
responsibility of Seller and shall be paid by Seller directly.
(b) SPECIFIED CONTRACTUAL LIABILITIES. The Specified Contractual
Liabilities.
(c) LIABILITIES UNDER LEASES, PERMITS AND LICENSES. Seller's
obligations arising from and after the Closing Date under the Real Property
Leases, any Personal Property Leases not described in Schedule 1.4(a) and any of
the permits or licenses assigned to Purchaser at the Closing.
1.4 LIABILITIES NOT TO BE ASSUMED. Except as and to the extent
specifically set forth in Section 1.3, Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Seller and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Seller. Notwithstanding the provisions of Section 1.3 and without limiting
the generality of the foregoing, Purchaser is not assuming and the Seller shall
not be deemed to have transferred to Purchaser the following debts, liabilities,
obligations and contracts of Seller:
(a) CERTAIN CONTRACTS. The obligations of the Seller under and
pursuant to the Contracts set forth on Schedule 1.4(a) and any other Contracts
not specifically listed on Schedule 1.1(e).
(b) TAXES ARISING FROM TRANSACTION. Any United States, foreign,
state or other taxes applicable to, imposed upon or arising out of the sale or
transfer of the
<PAGE> 8
Purchased Assets to Purchaser and the other transactions contemplated by this
Agreement, including but not limited to any transfer, sales, use, gross receipts
or documentary stamp taxes.
(c) INCOME AND FRANCHISE TAXES. Any liability or obligation of
the Seller for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account thereof).
(d) INSURED CLAIMS. Any liability of the Seller insured against,
to the extent such liability is or will be paid by an insurer.
(e) LITIGATION MATTERS. Any liability or obligation with respect
to any suits, actions, claims or Proceedings arising out of or in any way
related to the operation of the Club prior to Closing, whether or not described
on Part 15 of the Disclosure Schedule.
(f) TRANSACTION EXPENSES. All liabilities, costs, obligations or
expenses incurred by, or on behalf of the Seller in connection with this
Agreement and the transactions contemplated herein.
(g) LIABILITY FOR BREACH. Liabilities and obligations of the
Seller for any breach or failure to perform any of the Seller's covenants and
agreements contained in, or made pursuant to, this Agreement, or, prior to the
Closing, any other Contract, whether or not assumed hereunder, including any
breach arising from assignment of such contracts hereunder without consent of
third parties, unless Purchaser accepts such assignment with Knowledge that such
consent was not obtained.
(h) LIABILITIES TO AFFILIATES. Liabilities and obligations of
the Seller to its Affiliates.
(i) VIOLATION OF LAW. Any liability or obligation with respect
to any violation of or failure to comply with any Legal Requirement or Order
arising out of or in any way related to the Club or its operations on or before
Closing.
(j) INFRINGEMENTS. Any liability to a third party under the
Seller's Proprietary Assets, if any.
(k) SERVICE MARK LICENSE AGREEMENT. The Service Mark License
Agreement.
1.5 PURCHASE PRICE.
(a) As consideration for the sale of Purchased Assets, at
Closing Purchaser shall (i) pay to the Seller a total of $4,000,000 (the
"Purchase Price"), as adjusted by Section 1.15, and (ii) assume the Assumed
Liabilities by executing and delivering to Seller an Assignment of Contracts
(the "Contract Assignment") in substantially the form of Exhibit B, an
Assignment of Leases (the "Lease Assignment") in substantially the form of
Exhibit C
<PAGE> 9
and a Bill of Sale (the "Bill of Sale") in substantially the form of Exhibit D.
The Purchase Price shall be payable by Purchaser as follows:
(b) On or before the close of business on Thursday, April 2,
1998, Purchaser shall have deposited into an interest bearing escrow (the
"Escrow") established with Chicago Title Company ("Deposit Holder") the sum of
$1,000,000, in immediately available funds (such amount, together with the
interest earned thereon, being hereinafter referred to as the "Deposit"). The
Deposit shall be credited against the Purchase Price.
(c) At Closing, (i) Purchaser's promissory note in the amount of
$2,666,666 in the form attached hereto as Exhibit E (the "Note") and (ii) such
sum as may be necessary to make Purchaser's total cash deposit with Deposit
Holder equal the Purchase Price, after giving effect to any and all of
Purchaser's and Seller's credits and debits pursuant hereto, including, without
limitation, the Deposit and the face amount of the Note.
(d) [Intentionally omitted]
(e) [Intentionally omitted]
(f) Purchaser and Seller agree that all sums deposited by
Purchaser pursuant hereto shall be invested in treasury bills, certificates of
deposit, short term money market instruments or bank repurchase contracts
approved by Purchaser and Seller, in such manner as to make all such sums (and
the interest earned thereon) available on the date for Closing. Purchaser and
Seller hereby instruct Deposit Holder to so invest such sums and to return to
Purchaser, upon Closing, all sums in excess of those needed to satisfy
Purchaser's obligations hereunder to Seller. Interest earned thereon shall be
for the account of Purchaser, and Purchaser shall provide Deposit Holder with
Purchaser's taxpayer identification number for use in opening the Escrow.
(g) Any funds to be delivered hereunder shall be immediately
available federal funds wire transferred. It shall be Purchaser's responsibility
to obtain adequate wiring instructions for an escrow account of Deposit Holder.
<PAGE> 10
(h) If the Closing shall fail to occur solely because of the
breach of Purchaser under this Agreement, then Deposit Holder shall deliver the
Deposit to Seller, and Seller shall be entitled to retain the Deposit, as
liquidated damages and not as a penalty and as Seller's sole remedy; it being
agreed, for purposes of this Section 1.5(h) only, that it shall be a breach of
Purchaser under this Agreement if, without limitation, Purchaser shall not have
entered into the Assignment and Assumption with The Sports Club Company, Inc.
However, if Closing shall thereafter fail to occur for any other reason or
reasons, then Deposit Holder shall return the Deposit promptly to Purchaser upon
Purchaser's request therefor at any time after the scheduled date for Closing,
or on such sooner date as this transaction is cancelled by Purchaser and Seller.
THE PARTIES AGREE THAT THEY HAVE NEGOTIATED WITH REGARD TO THE DETERMINATION OF
DAMAGES AND HAVE CONCLUDED THAT, IF CLOSING FAILS TO OCCUR SOLELY BECAUSE OF THE
BREACH OF PURCHASER UNDER THIS AGREEMENT, WHEN ALL CONTINGENCIES TO CLOSING HAVE
OTHERWISE BEEN SATISFIED OR WAIVED, THEN IT WOULD BE IMPRACTICABLE OR EXTREMELY
DIFFICULT TO DETERMINE THE SELLER'S DAMAGES, THAT THE AMOUNT OF THE DEPOSIT IS A
REASONABLE ESTIMATE OF THE DAMAGES IN SUCH EVENT, AND THAT THE SELLER, AS ITS
SOLE REMEDY AND NOT AS A PENALTY, SHALL BE ENTITLED TO RETAIN THE DEPOSIT AS
LIQUIDATED DAMAGES. UPON PAYMENT OF SAID SUM TO SELLER, PURCHASER SHALL BE
RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY ESCROW CANCELLATION FEES
AND TITLE COMPANY CHARGES SHALL BE PAID BY PURCHASER. THE PARTIES HEREBY
ACKNOWLEDGE THAT THEY ARE IN EQUAL BARGAINING POSITIONS, ARE SOPHISTICATED IN
BUSINESS MATTERS AND WERE REPRESENTED BY COUNSEL AT ALL TIMES DURING THE
NEGOTIATION OF THIS LIQUIDATED DAMAGES PROVISION.
-------------------- -----------------
Purchaser Seller
1.6 DELIVERIES INTO ESCROW.
(a) On or before the Closing Date, Seller, shall deposit the
following items (collectively, the "Seller Delivery Items") into the Escrow:
(i) An estoppel certificate from each of the Subtenants
whose Subleases are to be an Assumed Contract in the form last delivered by
Seller to Purchaser prior to the execution of this Agreement.
(ii) Manager's Estoppel Certificate in the form last
delivered by Seller to Purchaser prior to the execution of this Agreement.
(b) On or before the Closing Date, Purchaser shall deposit the
following items (collectively, the "Purchaser Delivery Items") into Escrow:
(i) The Purchase Price, subject to and in accordance with
the terms and conditions of Section 1.5.
<PAGE> 11
(ii) One executed original of the Note.
(c) On or before the Closing Date, Seller and Purchaser shall
deposit the following items (collectively, the "Joint Delivery Items") into the
Escrow:
(i) Four fully executed originals of the Contract
Assignment.
(ii) Four fully executed and notarized originals of the
Lease Assignment.
(iii) Four fully executed originals of the Bill of Sale.
The Seller Delivery Items, the Purchaser Delivery Items and the Joint Delivery
Items are referred to, collectively, as the "Delivery Items".
1.7 SELLER'S CONDITIONS TO CLOSING.
(a) Seller's obligations to consummate the Transactions are
conditioned upon the following, each of which shall be a condition precedent:
(i) All Purchaser Delivery Items and all Joint Delivery
Items executed by Purchaser shall have been deposited into the Escrow.
(ii) All of the representations and warranties of Purchaser
contained herein shall be true and correct in all material respects on and as of
the Closing Date as though remade and republished on and as of said date.
(iii) Purchaser shall have performed and complied with all
of its obligations and covenants hereunder in all material respects.
(iv) The execution and delivery of this Agreement by
Purchaser, and the performance of Purchaser's covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and
Seller shall have received copies of all resolutions pertaining to that
authorization, certified by the secretary of Purchaser.
(v) Seller shall be relieved of any and all future
liability under the Master Lease upon the expiration of its primary term;
provided, however, that Seller may instead, in its sole discretion, accept a
lease guaranty of the Master Lease from an entity having a net worth at Closing,
exclusive of goodwill, in excess of $250 million in lieu of Seller being so
relieved.
(vi) The form and substance of all certificates,
instruments, opinions, and other documents delivered to Seller under this
Agreement shall be satisfactory in all reasonable respects to Seller and its
counsel.
(vii) Purchaser and The Sports Club Company shall have
entered into the Assignment and Assumption.
<PAGE> 12
(b) There is no Proceeding pending or threatened pertaining to
the Transactions or their consummation that shall have been instituted or
threatened by any Governmental Body or Person.
1.8 PURCHASER'S CONDITIONS TO CLOSING.
(a) Purchaser's obligations to consummate the Transactions are
conditioned upon the following, each of which shall be a condition precedent,
except for Section 1.8(a)(vii), which shall be a condition concurrent:
(i) All Seller Delivery Items and all Joint Delivery Items
executed by Seller shall have been deposited into the Escrow.
(ii) All items listed on Schedule 1.8(a)(ii) shall have been
delivered to Purchaser on or before Closing, except (A) if and to the extent
otherwise expressly provided in Schedule 1.8(a)(ii) and (B) the keys and
security code for the Club shall be present at the Club at Closing.
(iii) All of the representations and warranties of Seller
contained herein shall be true and correct in all material respects on and as of
the Closing Date as though republished and remade on and as of that date; it
being expressly understood and agreed, however, that changes in representations
and warranties which do not have a material adverse effect upon the business of
the Club shall in no event be a basis giving rise to a right of Purchaser to
terminate this Agreement pursuant to Section 1.8(c).
(iv) Seller shall have performed and complied with all of
its obligations and covenants hereunder in all material respects.
(v) The "Due Diligence Period" shall conclusively be deemed
to have expired upon the execution of this Agreement by Purchaser and Seller.
(vi) There is no Proceeding pending or threatened pertaining
to the Transactions or their consummation that shall have been instituted or
threatened by any Governmental Body or Person.
(vii) No Legal Requirement or Order shall have been enacted,
entered, issued, promulgated or enforced by any Governmental Body, nor shall any
Proceeding have been instituted or, to the best knowledge of Seller, threatened
and remain so by any Governmental Body, at what would otherwise be the Closing
Date which would impair Purchaser's ability, following the Closing Date, to
continue to operate the Club as presently operated, except for any Legal
Requirement affecting the operation of an adult entertainment venue within a
residential neighborhood.
(b) Seller shall have the right to modify, update and supplement
all
<PAGE> 13
representations, warranties, exhibits and schedules attached to or delivered in
connection with this Agreement through the Closing Date (any such modification,
update or supplement, a "Modification"). Notwithstanding the foregoing, if
Seller makes any Modification and if such Modification would be likely to have a
material adverse effect upon the Club and/or its operations, then Purchaser
shall have the right to terminate this Agreement by giving a notice to Seller
terminating this Agreement within 5 days of Purchaser's receipt of the
Modification, and whether or not the Due Diligence Period has expired. If such
5-day period would expire after the Outside Closing Date (as defined below),
then the Outside Closing Date shall be extended accordingly. In the event of any
such termination, the Deposit shall be returned promptly to Purchaser, and the
parties will have no further obligations to each other hereunder. Purchaser's
failure to give any such termination notice to Seller within such 5-day period
shall conclusively be deemed to be Purchaser's approval of any such
Modification. From the date hereof until Closing, if Barbara Boultinghouse or
Kevin Luebbers, on behalf of Seller, learns of any fact or circumstance which
causes, or has a reasonable likelihood of causing, a representation or warranty
of Seller's hereunder to be untrue or misleading, or learns of any other fact or
circumstance which materially affects the Purchased Assets, Seller shall notify
Purchaser within five days after Barbara Boultinghouse or Kevin Luebbers learns
thereof (but in no event later than Closing).
(c) If (i) Seller shall not have been able to obtain any
required government or third party consent or approval, (ii) any material
representation or warranty of Seller shall prove to have been inaccurate or
untrue in any material respect when first made or (iii) Seller shall not have
performed, in any material respect, any of its material covenants contained in
this Agreement, and in each case by Closing, then Purchaser shall be entitled,
without limitation, (A) not to consummate, pursuant to Section 1.9(a), the
Transactions and have the Deposit Holder or Seller, as applicable, return to
Purchaser the Deposit (but without any interest thereon for such period of time,
if any, as it may have been held by Seller) less any termination fees and
expenses of Deposit Holder, or (B) to consummate the Transactions if Purchaser,
in its sole discretion, is willing to consummate the Transactions on such basis.
1.9 CLOSING.
(a) Closing shall occur, if at all, on or before Wednesday,
April 15, 1998 (the "Outside Closing Date"). If all conditions precedent set
forth in Sections 1.7 and 1.8 have not been satisfied or waived and the Closing
shall not have occurred on or before the Outside Closing Date, then either
Purchaser or Seller may unilaterally cancel this Agreement, at any time
thereafter prior to such satisfaction or waiver, by notice to the other, except
that if the unsatisfied condition(s) is for the benefit of the party not giving
said notice, then such party shall have the right, within ten days after its
being served with said notice, to waive such unsatisfied condition(s) and
proceed to effect Closing immediately. Eleven days after the effective date of
said notice, if Closing has not been agreed to by the party not giving said
notice, as provided above, then, subject to Section 1.5(h), all funds deposited
by Purchaser, and all interest earned thereon, shall be returned immediately to
Purchaser.
(b) Consummation of the Transactions (the "Closing") will take
place at the offices of Resch Polster Alpert & Berger LLP, 10390 Santa Monica
Boulevard,
<PAGE> 14
Fourth Floor, Los Angeles, California 90025-5058 on the Closing Date.
(c) If Closing has not occurred in accordance with the terms and
conditions of this Agreement, then this Agreement shall automatically terminate
without any further action required, and the parties shall have no further
liability hereunder.
(d) When all conditions precedent to Closing set forth in
Sections 1.7 and 1.8 shall have been satisfied, or Deposit Holder shall have
received written instruction from the party or parties, or their respective
counsel, for whose benefit any such unsatisfied condition precedent exists
waiving the satisfaction of such conditions precedent, and when each of the
parties hereto shall have otherwise instructed Deposit Holder to proceed with
the Closing, then Deposit Holder shall take the following actions in the
following order:
(i) Insert the "Endorsed Date" (as defined therein) on the
last page of the Note.
(ii) Disburse the Purchase Price (including the originally
executed Note) to Seller in accordance with Seller's instructions.
(iii) Deliver two fully executed original copies of each of
the Contract Assignment, Lease Assignment and Bill of Sale to Seller.
(iv) Deliver two fully executed original copies of each of
the Contract Assignment and Bill of Sale, one fully executed original of the
Lease Assignment and one nonoriginal copy of the Note to Purchaser.
(v) Record the Lease Assignment and deliver conformed
copies of the duly recorded Lease Assignment to each of Seller and Purchaser.
(vi) Deliver the estoppel certificates referenced in
Sections 1.6(a)(i) and (ii) to Purchaser.
1.10 COSTS.
(a) Seller shall pay the following:
(i) One-half of all fees and costs of Deposit Holder.
(ii) All recording fees and charges, intangible taxes and
similar costs, relating to the transfer of the Purchased Assets pursuant hereto.
(iii) All documentary transfer taxes and fees, real property
transfer or gains taxes, governmental transfer fees and all sales, use, and
similar taxes, if any, payable in connection with the Transactions.
<PAGE> 15
(iv) Cost of obtaining all reports Seller is required
hereunder or by law to deliver to Purchaser.
(v) Subject to the provisions of Section 5 (including the
indemnification and other obligations of Purchaser thereunder), Seller's own
Transaction Costs and all Transaction Costs that have been incurred or that are
in the future incurred by, on behalf of or for the benefit of, the Seller (the
"Seller Transaction Costs).
(b) Purchaser shall pay the following:
(i) Costs of obtaining the Title Policy.
(ii) Costs of obtaining any Survey.
(iii) One-half of all fees and costs of Deposit Holder.
(iv) Subject to the provisions of Section 5 (including the
indemnification and other obligations of Seller thereunder), Purchaser's own
Transaction Costs and all Transaction Costs (including all legal fees and
expenses payable to Resch Polster Alpert & Berger LLP) that have been incurred
or that are in the future incurred by, or on behalf of or for the benefit of,
Purchaser (the "Purchaser Transaction Costs").
1.11 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
among the Purchased Assets as follows (the "Allocation Statement"): (i) $250,000
to the equipment being purchased; (ii) $3,750,000 to the Membership Agreements
being purchased; and (iii) nothing to any of the other Purchased Assets. The
parties agree to report (on Form 8594 and otherwise) the allocation of the
Purchase Price in a manner consistent with the Allocation Statement. The
allocation prescribed by the Allocation Statement shall be conclusive and
binding upon each party for all purposes. No party shall file any tax return or
other document with, or make any statement or declaration to, any governmental
body if such document, statement or declaration is inconsistent with the
allocation prescribed by the Allocation Statement.
1.12 SALES TAXES. The Seller shall bear and pay any sales taxes, use
taxes, transfer taxes, documentary charges, recording fees, or similar taxes,
charges, fees or expenses that are or may become payable in connection with the
sale of the Purchased Assets to Purchaser or in connection with any of the
Transactions.
1.13 ACCOUNTING TREATMENT. The parties intend that the Acquisition
will be treated as a purchase for accounting purposes.
1.14 TAX CONSEQUENCES. For federal income tax purposes, the
Acquisition is intended to constitute a taxable transaction.
<PAGE> 16
1.15 PRORATIONS.
(a) Except as otherwise hereinafter provided, at and as of
Closing, Purchaser and Seller shall prorate in cash (i) real property taxes and
assessments for the Purchased Assets on the basis of the current fiscal year if
and to the extent that Seller shall be liable for real property taxes and
assessments under the Real Property Leases, (ii) rents under the Real Property
Leases, (iii) rents under any Personal Property Leases described in Schedule
1.1(e), (iv) utility and sewer charges, (v) management fees under the Management
Agreement, (vi) payments under the Assumed Contracts, (vii) operating expenses,
and (viii) other items customarily prorated in transactions of this sort. Seller
shall give Purchaser a credit at Closing in the amount of any deposits under any
Subleases that are to be Assumed Contracts.
(b) No pro ration shall be made for insurance premiums on
insurance policies of Seller (none of which Purchaser elects to accept and none
of which Seller elects to assign), for employee salaries, vacations, benefits,
bonuses, payroll taxes or other employee costs. Seller shall terminate, or cause
to be terminated, as of Closing all employees and independent contractors
working at the Club and shall pay, or cause to be paid, all employee salaries,
vacations, benefits, bonuses, payroll taxes and other employee and independent
contractor costs as of and including the Closing Date. Seller represents and
warrants to Purchaser that it has fewer than 50 employees working at the Club
who are full time employees, as full time employees are defined under the WARN
Act. Subject to the willingness of such employees and independent contractors to
be interviewed and, if asked by Purchaser, to be rehired, Purchaser shall be
permitted to interview and, at its election, rehire, from and after Closing, any
or all of such terminated employees and independent contractors and shall
provide all such rehired employees (but not any rehired independent contractors)
with health care insurance and benefits and worker's compensation insurance
generally consistent with that generally provided by Purchaser to its employees.
(c) At and as of the Closing Date, Purchaser and the Seller
shall proportionately allocate all prepaid items of income ("Prepaid Income"),
including without limitation monthly dues, Prepaid Dues, and gift certificates;
provided that there shall be no such proportionate allocation of up to 36,000
months of Prepaid Dues. "Prepaid Dues" shall mean total cash consideration,
whether designated as membership fees or otherwise, paid in advance for months
of membership sold at the Club; provided, however, that if a Member is not
obligated, from and after Closing, to pay monthly dues, then all such periods of
time from and after Closing for which such Member is not obligated to pay
monthly dues shall be considered when calculating whether there may be more than
36,000 months of Prepaid Dues. Dues payable on a monthly basis shall not
constitute Prepaid Dues. There shall be no proportionate allocation of
initiation fees, if any, paid and collected in the Ordinary Course of Business.
A blended average monthly rate for the total consideration paid in advance
(whether paid in cash or "financed") for months of membership in connection with
all Prepaid Dues shall be used for purposes of calculating the dollar value of
any Prepaid Dues in excess of 36,000 months. Payments collected by Purchaser or
Seller, as applicable, from Members within 30 days following the Closing Date
shall be applied (A) first to any prorated amounts due Seller for the month in
which the Closing shall have occurred, (B) next to any prorated
<PAGE> 17
amounts due Purchaser for the month in which the Closing shall have occurred,
(C) next to any amounts due Purchaser for the month following the month in which
the Closing shall have occurred and (D) then to any accounts receivable due
Seller as of the Closing Date for any periods prior to the month in which the
Closing shall have occurred; provided, however, that any payment, other than
monthly dues, made by a Member after Closing shall belong to Purchaser if such
Member is not obligated to pay monthly dues after the making of such payment.
Payments from Members received by Purchaser or Seller, as applicable, more than
30 days following the Closing Date shall be applied first to the current period
and then to past periods in reverse chronological order, i.e. to more recent
periods before less recent periods; provided, however, that any payment, other
than monthly dues, made by a Member after Closing shall belong to Purchaser if
such Member is not obligated to pay monthly dues after the making of such
payment. Any payments from Members collected by the Seller from and after the
Closing shall be held in trust for the account of Purchaser and shall be
promptly remitted to Purchaser minus any amounts owed to the Seller as set forth
in this Section 1.15(c) together with an accounting of such payments in
reasonable detail. Any payments from Members collected by Purchaser from and
after the Closing that are owed to the Seller as set forth in this Section
1.15(c) shall be held in trust for the account of the Seller and shall be
promptly remitted to the Seller together with an accounting of such payments in
reasonable detail.
(d) For a period of ninety (90) days following the Closing,
Purchaser agrees that Purchaser shall, in accordance with Purchaser's standard
practice in conducting and operating clubs such as the Club, attempt to collect
any monthly dues under those Member Agreements assigned to and assumed by
Purchaser which are attributable to the period prior to the Closing; provided,
however, Purchaser shall have no obligation to commence any actions or
proceedings or take any further action to -------- ------- collect any such
compensation, fees, revenues or income due to Seller hereunder. After the
Closing, Seller shall not take any action against any party to any Membership
Agreement assigned to and assumed by Purchaser by reason of any unpaid monthly
dues owed Seller thereunder.
(e) If real estate taxes and/or assessments, utility charges or
any other item is prorated as of Closing on any basis other than actual amounts
charged for the current period, such item or items shall be re-prorated upon
determination of such actual amounts, and the party owing funds to the other
shall promptly remit such funds to the other; provided, however, that in no
event shall Seller be liable for payment of any increase in real estate taxes if
and to the extent occasioned by any reassessment of the Real Property as a
result of the Acquisition. If either party owing funds hereunder to the other
does not remit them within 30 days after demand therefor, such funds shall
thereafter bear interest at the lesser of 10% per annum and the maximum lawful
rate. In all events, the amount of any refund or credit shall be the amount the
refund or credit would have been without giving effect to the Transactions. The
parties shall further cooperate so as to calculate such net final proration
amount within 180 days of the Closing. Any disagreement with respect to such
final calculation shall be resolved pursuant to binding arbitration before a
"Big 4" accounting firm to be designated by Purchaser or any other accounting
firm that shall be mutually agreed upon by the parties. Each party shall bear
its own cost and expenses in connection with such arbitration and one-half of
the fees and expenses of the arbitrator.
<PAGE> 18
Each party shall be entitled to provide the arbitrator with such information as
each party shall deem appropriate with respect to the matters to be determined
by such arbitrator.
(f) Final proration of percentage rents and similar
apportionable items which are dependent for their calculation upon the economic
performance of any Entity over a specified interval of time shall be
accomplished as follows: The parties shall await the expiration of the specified
interval to determine the gross rents, gross receipts and other economic
performance over the entire interval and then prorate the item by allocating to
Seller the product of the rents or other similar apportionable item for the
entire interval multiplied by a fraction, the numerator of which is the number
of days within the specified interval which occur before Closing and the
denominator of which is the number of days in the entire specified interval.
(g) Operating expenses which are payable (or reimbursable) by
any present Subtenant shall not be prorated hereunder (except to the extent that
Seller is due a credit for having already paid such expense). Purchaser shall
send customary statements for reimbursement of operating expenses and taxes to
said tenants after consulting with Seller with respect to appropriate amounts
due therefor, and shall remit to Seller, upon receipt, Seller's prorated share
thereof, determined as provided in subsection (f) above.
(h) If any Subtenant shall owe any sums under its respective
Sublease at Closing, then Seller shall retain its right to pursue such Subtenant
for such sums. Any sums received by Purchaser or Seller, as applicable,
following the Closing Date from any Subtenant shall be applied first to the
current period and then to past periods in reverse chronological order, i.e., to
more recent periods before less recent periods. Any such sums collected by
Seller from and after the Closing shall be held in trust for the account of
Purchaser, and Seller shall promptly remit such sums to Purchaser. Any such sums
collected by Purchaser from and after the Closing that are owed to Seller as set
forth in this section 1.15(h) shall be held in trust for the account of Seller,
and Purchaser shall promptly remit such sums to Seller together with an
accounting of such sums in reasonable detail. Except as set forth in the next
sentence, Purchaser shall have no obligation to attempt to collect any sums due
under any Sublease assigned to and assumed by Purchaser if and to the extent
such sums are attributable to any period prior to the Closing. If Purchaser
pursues any Subtenant for any past due sums under the applicable Sublease, then
Purchaser shall do so only for all such sums that may be past due; provided,
however, that, while Purchaser may settle any past due sums relating to any
period after Closing, Purchaser shall not settle any past due sums relating to
any period prior to Closing without Seller's prior written consent.
(i) Prior to Closing, Purchaser and Seller shall prepare and
agree upon a proforma closing statement as if Closing were occurring at 12:01
a.m. on February 1, 1998 (the "Proforma Closing Statement"). Notwithstanding
anything to the contrary contained in this Agreement, the proration calculations
otherwise required by this Agreement shall, initially, be performed, at Closing,
based upon the Proforma Closing Statement. As soon as possible after Closing,
however, and in any event in accordance, without limitation, with Section
1.15(e), Purchaser and Seller shall further cooperate so as to calculate a net
final proration amount based upon actual operating results for the Club for the
period through
<PAGE> 19
and including the Closing Date.
1.16 DELIVERY OF DOCUMENTS. As soon as reasonably possible following
execution hereof, if Seller has not already done so, Seller shall deliver to
Purchaser for Purchaser's approval as to form and content, originals or legible
copies of the following , to the extent that they exist and are either in
Seller's possession or may reasonably be obtained by Seller (and, if any of the
following are discovered by and/or prepared by or on behalf of Seller after the
date hereof but prior to Closing, each such item shall be delivered to Purchaser
immediately):
(i) All Contracts; and
(ii) An inventory of all tangible personalty, prepared to
the best of Manager's knowledge, relating to the Club; provided, however, that
Purchaser, if it so elects, may prepare, at Purchaser's cost, such an inventory
itself, either in place of or in addition to Manager's inventory.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants, to and for the benefit of the Purchaser
Indemnitees, as follows:
2.1 DUE ORGANIZATION; ETC. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller is in good standing and qualified to do business under the laws of, and
in, the States of California and New York. Seller has all necessary power and
authority:
(i) to conduct its business in the manner in which its
business is currently being conducted;
(ii) to own and use its assets in the manner in which its
assets are currently owned and used; and
(iii) to perform its obligations under all Seller Contracts.
2.2 MANAGER'S ESTOPPEL CERTIFICATE. To Seller's Knowledge, the
representations and warranties of Manager contained in Manager's Estoppel
Certificate are true, accurate and complete in all material respects.
2.3 ABSENCE OF CHANGES. To Seller's Knowledge, there has not been any
material adverse change in the Seller's business, condition, assets,
liabilities, operations, financial performance or net income, and no event has
occurred that is likely to have a material adverse effect upon any thereof.
Seller shall immediately notify Purchaser of the material details of any such
material adverse change or such event promptly upon either Barbara Boultinghouse
or Kevin Luebbers having actual knowledge of the same. If any such material
adverse change or such event shall occur within 5 days of the otherwise
scheduled date
<PAGE> 20
for Closing, then the scheduled date for Closing shall be extended until 5
Business Days from the earlier of (a) Purchaser's actual knowledge of the
material details of such material adverse change or such event or (b)
Purchaser's receipt of notice from Seller to Purchaser of the material details
of such material adverse change or such event.
2.4 TITLE TO ASSETS.
(a) Subject to Section 1.1(e), at Closing, Seller will own, and
have good and valid title to, all of the Purchased Assets, including, without
limitation, the Membership Agreements, free and clear of any Encumbrances.
(b) Subject to Section 1.1(e), all leases and licenses
pertaining to any Purchased Assets will be satisfied prior to Closing, and all
Purchased Assets shall be transferred to Purchaser free and clear of such leases
and licenses and any other Encumbrances.
2.5 EQUIPMENT, ETC. Schedule 2.5 identifies all equipment owned or
held for use by the Seller in connection with the Club. All equipment owned or
held for use by the Seller in connection with the Club will be transferred,
subject to Section 1.2, free and clear of all Encumbrances as part of the
Purchased Assets at Closing. Neither Manager nor any third party owns any of
such equipment.
2.6 FOREIGN PERSON. Seller is not a "foreign person" within the
meaning of Section 1445 of the U.S. Internal Revenue Code of 1986.
2.7 AUTHORITY; BINDING NATURE OF AGREEMENTS. Seller has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement and the other Transactional Agreements to which
it is a party; and the execution, delivery and performance by the Seller of this
Agreement and the other Transactional Agreements have been duly authorized by
all necessary action on the part of the Seller. This Agreement constitutes the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
2.8 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery
of any of the Transactional Agreements, nor the consummation or performance of
any of the Transactions, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Seller's articles of incorporation or bylaws or
(ii) any resolution adopted by the Seller's stockholders, board of directors or
any committee of the board of directors; or
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Transactions or to
<PAGE> 21
exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which the Seller, or any of the Purchased Assets is subject.
(c) The Seller was not, is not or will not be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions
2.9 INFORMATION. Seller has furnished and will continue to furnish
promptly to Purchaser detailed information with respect to the Club, Purchased
Assets, Assumed Liabilities, Assumed Contracts and earnings and business
operations of Seller and the Club. To Seller's Knowledge, all information
contained in the exhibits and schedules attached to this Agreement and in the
documents furnished to Purchaser by Seller pursuant to this Agreement or
otherwise, is and shall be at the Closing, true, correct and complete. To
Seller's Knowledge, all underlying documents incorporated or referred to in such
exhibits and schedules, or in documents otherwise furnished to Purchaser by or
on behalf of Seller, are true, correct and complete copies thereof, as the same
have been or shall be amended or modified.
SECTION 3. "AS IS"; DUE DILIGENCE COMPLETED; DISCLAIMER OF ADDITIONAL WARRANTIES
OF SELLER.
Purchaser acknowledges that Purchaser has had or will have the opportunity
to review all documents and other information made available to Purchaser or its
Representatives. In addition, Purchaser has had or will have the opportunity to
review all reports, studies, inspections, audits, appraisals, and other similar
items which Purchaser may perform or have performed in connection with the
Transactions, and Purchaser will otherwise do what it deems necessary in order
to evaluate the financial condition, status of title, zoning and land use and
the economical and operational viability of the Club. Purchaser acknowledges
further that, prior to Closing, it will complete, or have had the opportunity to
complete, physical and financial examinations relating to the Club and will
consummate the Transactions on the basis of all such examinations. Purchaser
further acknowledges to and agrees with Seller that, except for the
representations and warranties set forth in Section 2 hereof, and subject to the
terms and conditions of this Agreement, the Club shall be sold, at Closing, "AS
IS" without any warranties or representations either expressed or implied, of
any nature or type whatsoever from or on behalf of Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants, to and for the benefit of the Seller
Indemnitees, as follows:
4.1 DUE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all necessary power and authority:
<PAGE> 22
(a) to conduct its business in the manner in which its business
is currently being conducted; and
(b) to own and use its assets in the manner in which its assets
are currently owned and used.
4.2 AUTHORITY; BINDING NATURE OF AGREEMENT.
(a) Purchaser has the absolute and unrestricted right, power and
authority to enter into and perform its obligations under this Agreement and the
other Transactional Agreements to which it is a party;
(b) The execution, delivery and performance of this Agreement
and the other Transactional Agreements by Purchaser has been, or at Closing will
have been, duly authorized by all necessary action on the part of Purchaser and
its board of directors; and
(c) Each of this Agreement and the other Transactional
Agreements constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
4.3 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery
of any of the Transactional Agreements, nor the consummation or performance of
any of the Transactions, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of Purchaser's certificate or articles of incorporation or
bylaws, or (ii) any resolution adopted by Purchaser's stockholders, Purchaser's
board of directors or any committee of Purchaser's board of directors;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Purchaser, or any of the assets owned or
used by the Purchaser, is subject;
(c) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of, or give any Person the right
to declare a default under, any contract to which Purchaser is a party or by
which it or any of its assets are bound.
SECTION 5. INDEMNIFICATION, ETC.
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
<PAGE> 23
(a) The representations and warranties made by the parties
hereto in this Agreement shall survive the Closing and shall expire on the first
anniversary of the Closing Date: provided, that if, at any time prior to the
first anniversary of the Closing Date any Indemnitee (acting in good faith)
delivers a written notice alleging the existence of a Breach of any of such
representations and warranties and asserting a claim for recovery under Section
5 based on such alleged Breach, then the claim asserted in such notice shall
survive the first anniversary of the Closing until such time as such claim is
fully and finally resolved.
(b) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule shall be deemed to be a
representation and warranty in this Agreement made by the party by whom such
schedule was delivered.
5.2 INDEMNIFICATION BY SELLER. Seller shall hold harmless and
indemnify each of the Purchaser Indemnitees from and against, and shall
compensate and reimburse each of the Purchaser Indemnitees for, any Damages
which are suffered or incurred by any of the Purchaser Indemnitees or to which
any of the Purchaser Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third-party claim) and
which arise from, or as a result of, or are connected with:
(a) any Breach of any representation or warranty made by Seller
in this Agreement or any of the Transactional Agreements;
(b) any Breach of any covenant or obligation of Seller;
(c) any Liability that arises from or relates to any Seller
Transaction Costs; or
(d) any Liability to which any of the Purchaser Indemnitees may
become subject and that arises from or relates to (i) any of the Purchased
Assets prior to Closing or (ii) Excluded Assets or (iii) any Liability of the
Seller not specifically assumed by Purchaser pursuant to this Agreement or (iv)
the operation of the Club through and including Closing;
(e) any Proceeding commenced relating to any Breach, Liability
or matter of the type referred to in clauses (a), (b), (c) or (d) of this
Section 5.2.
5.3 INDEMNIFICATION BY PURCHASER. Purchaser shall hold harmless and
indemnify each of the Seller Indemnitees from and against, and shall compensate
and reimburse each of the Seller Indemnitees for, any Damages which are suffered
or incurred by any of the Seller Indemnitees or to which any of the Seller
Indemnitees may otherwise become subject at any time (regardless of whether or
not such Damages relate to any third-party claim) and that arise from, or as a
result of, or are connected with:
(a) any Breach of any representation or warranty made by
Purchaser in this Agreement or any of the Transactional Agreements;
<PAGE> 24
(b) any Breach of any covenant or obligation of Purchaser in
this Agreement or any of the Transactional Agreements;
(c) any Liability that arises from or relates to any Purchaser
Transaction Costs;
(d) any Liability to which any of the Seller Indemnitees may
become subject and that arises from or relates to (i) any of the Purchased
Assets subsequent to Closing or (ii) any Assumed Liability, (iii) the operation
of the Club after Closing or (iv) any act or omission by Purchaser with respect
to the Management Agreement from and after Closing;
(e) any Proceeding commenced relating to any Breach, Liability
or matter of the type referred to in any of clauses (a), (b) (c) or (d) of this
Section 5.3; and
(f) any Liability that arises under the WARN Act as a result of
Seller not having given any advance notice to its employees and independent
contractors working at the Club regarding their termination at Closing pursuant
to Section 1.15(b).
5.4 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Section 5 shall not be deemed to be
exclusive. Accordingly, the exercise by any Person of any of its rights under
this Section 5 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise.
5.5 DEFENSE OF THIRD PARTY CLAIMS BY SELLER. In the event of the
assertion or commencement by any Person of any claim or Proceeding with respect
to which Seller may become obligated to indemnify, hold harmless, compensate or
reimburse any Purchaser Indemnitee pursuant to this Section 5, Seller shall
defend such claim or Proceeding at its sole expense, in which case:
(a) Seller shall proceed to defend such claim or Proceeding in a
diligent manner with counsel reasonably satisfactory to Purchaser;
(b) Purchaser shall make available to Seller any non-privileged
documents and materials in the possession of Purchaser that may be necessary to
the defense of such claim or Proceeding;
(c) Seller shall endeavor to keep Purchaser informed of all
material developments and events relating to such claim or Proceeding;
(d) Purchaser shall have the right to participate, at its own
cost, in the defense of such claim or Proceeding;
(e) Purchaser shall cooperate with Seller, in a timely manner,
in the
<PAGE> 25
defense of such claim or Proceeding; and
(f) Seller shall have the right to settle, adjust or compromise
such claim or Proceeding with the prior written consent of Purchaser; provided,
however, that Purchaser shall not unreasonably withhold, delay or condition such
consent.
5.6 DEFENSE OF THIRD PARTY CLAIMS BY PURCHASER. In the event of the
assertion or commencement by any Person of any claim or Proceeding with respect
to which Purchaser may become obligated to indemnify, hold harmless, compensate
or reimburse any Seller Indemnitee pursuant to this Section 5, Purchaser shall
defend such claim or Proceeding at its sole expense, in which case:
(a) Purchaser shall proceed to defend such claim or Proceeding
in a diligent manner with counsel reasonably satisfactory to Seller;
(b) Seller shall make available to Purchaser any non-privileged
documents and materials in the possession of Seller that may be necessary to the
defense of such claim or Proceeding;
(c) Purchaser shall endeavor to keep Seller informed of all
material developments and events relating to such claim or Proceeding;
(d) Seller shall have the right to participate, at its own cost,
in the defense of such claim or Proceeding;
(e) Seller shall cooperate with Purchaser, in a timely manner,
in the defense of such claim or Proceedings; and
(f) Purchaser shall have the right to settle, adjust or
compromise such claim or Proceeding with the prior written consent of Seller;
provided, however, that Purchaser shall not unreasonably withhold, delay or
condition such consent.
5.7 EXERCISE OF REMEDIES BY INDEMNITEES. Notwithstanding anything
herein to the contrary, no Indemnitee (other than Purchaser or any successor
thereto or assign thereof for the Purchaser Indemnitees or Seller or any
successor thereto or assign thereof for the Seller Indemnitees) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement.
SECTION 6. ADDITIONAL COVENANTS AND AGREEMENTS.
6.1 INTERIM CONDUCT OF THE BUSINESS. At all times from and after
January 29, 1998 and through and including the Closing Date, Seller shall not
deviate from its ordinary and customary operation, maintenance or management of
the Purchased Assets and shall not engage in any transaction other than in the
lawful, ordinary and usual course of business as heretofore conducted. Without
limiting the foregoing, Seller shall maintain in full force and effect until the
Closing Date a policy or policies of insurance on the Purchased
<PAGE> 26
Assets which provide a scope and amount of coverage which are usual and
customary in Seller's business; not make any non-ordinary wage or salary
increases or severance packages; subject to Purchaser's prior reasonable written
approval, not make any material changes in its member billing practices or
rates, or enter into any material third party agreements; not declare, set
aside, or make any dividend or distribution; not directly or indirectly purchase
or redeem any interests in Seller; not pay any obligation other than current
liabilities, not waive or compromise any claim or right, and not cancel, without
full payment, any obligation; shall have directed Manager, from and after
November 17, 1997, to sign Members only to Membership Contracts which provide
for a term and payments of month-to-month or less; and not take, or omit to
take, any action which would cause a default under the Master Lease. Seller
shall maintain all of the Purchased Assets in good repair through Closing,
ordinary wear and tear excepted. Without limiting the generality of the
foregoing, Seller shall repair, at its sole cost and expense, all defects in the
material or workmanship thereof prior to Closing. Seller shall remedy prior to
Closing any and all violations of or any Legal Requirement relating to all or
any part of the Purchased Assets of which Seller had Knowledge prior to Closing.
Seller shall obtain promptly all government and third party consents and
approvals to the consummation of the Transactions. From and after the date
hereof until Closing, Seller shall lease or rent no space at the Real Property
(including renewal of an existing tenancy) without Purchaser's prior approval,
nor shall Seller otherwise deviate from its ordinary and customary operation,
maintenance, or management of the Purchased Assets. Seller shall not further
encumber the Purchased Assets or any part thereof, convey any interest therein
(other than to Purchaser pursuant hereto) without Purchaser's prior consent, or
accept any additional advance or funds secured or to be secured by any existing
encumbrance on any of the Purchased Assets, or permit any encumbrance to which
any part of the Purchased Assets is subject to become in default prior to
Closing. Seller shall not enter into any new service, maintenance, supply or
other contract affecting the Purchased Assets in any way prior to Closing
without Purchaser's prior approval, unless such contract is cancelable at any
time on thirty days' notice or less, without cost to Purchaser.
6.2 STANDSTILL BY SELLER. From and after January 29, 1998 and through
and including the Closing and for so long as Purchaser shall not be in default
under this Agreement, Seller shall not directly or indirectly, solicit or
initiate discussions or engage in negotiations with, or provide any information
to, or authorize any financial advisor or other person to solicit or initiate
discussions or engage in negotiations with, or provide any such information to,
any corporation, partnership, person or other entity or group (other than
Purchaser) concerning any possible proposal regarding a sale of interests in or
a merger, consolidation, sale of assets or other similar transaction involving,
Seller or any division or asset of Seller pertaining to the Purchased Assets.
6.3 PURCHASER'S ACCESS. From January 28, 1998, through the Closing
Date, Seller shall give Purchaser and its Representatives, or cause them to be
permitted, during normal business hours and upon reasonable notice, full access
to all properties, books, files, data, contracts, leases, commitments and
records of Seller and the Club, and during this period Seller shall furnish
Purchaser with all financial and operating data and all other information as to
the business, properties and assets of Seller and the Club as Purchaser may from
time to time reasonably request; provided, however, that such access and
investigation
<PAGE> 27
shall not interfere with the conduct of the Club by Seller. At Purchaser's
reasonable request, Seller shall direct its Representatives to cooperate with
Purchaser pursuant to this Section 6.3 at no additional cost to Purchaser. In
undertaking its due diligence, Purchaser shall not disturb, to the minimum
extent reasonably possible, the operations of the Club. The exercise by
Purchaser of any of the preceding rights, or any other act of Purchaser, shall
not negate any representation, warranty or covenant of Seller or modify any of
Purchaser's rights or Seller's obligations in the event of any Breach by Seller
of any of Seller's representations, warranties or covenants of this Agreement.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all Damages arising out of any entry within the Club by Purchaser or its
Representatives. The indemnification of Seller by Purchaser in the preceding
sentence shall survive any termination of this agreement or the Closing for a
period of 1 year from and after the date of termination or the Closing, as the
case may be.
6.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS. From January 29, 1998
until the Closing, Seller shall use its commercially reasonable efforts to
preserve the Club's business and its organization intact, including without
limitation to preserve Seller's present relationships with suppliers, customers
and others having business relationships with Seller regarding the Club. Seller
shall promptly arrange for utility telephone service to be transferred to
Purchaser at Closing.
6.5 NO INCONSISTENT ACTION. Each of the parties hereto will use such
party's commercially reasonable efforts to consummate the transaction
contemplated by this Agreement and shall not take any action inconsistent with
such party's obligations hereunder or which could hinder or delay the
consummation of the transactions contemplated hereby.
6.6 DAMAGE OR DESTRUCTION. If prior to Closing the Purchased Assets
shall sustain damage caused by fire or other casualty that is insured and that
would cost One Hundred Thousand Dollars ($100,000) or more to repair or if any
uninsured loss or casualty occurs that would cost One Hundred Thousand Dollars
($100,000) or more to repair, Purchaser may elect to terminate this Agreement as
set forth in Section 1.8(b); it being agreed that the occurrence of any such
damage shall require Seller to issue a Modification to Purchaser, as set forth
in Section 1.8. If Purchaser does not so elect to terminate its obligations
under this Agreement, or if the loss or casualty would cost less than One
Hundred Thousand Dollars ($100,000) to repair, the Closing shall take place as
provided herein, and Purchaser shall receive (i) a credit for the amount of
Seller's deductible or retention and (ii) an assignment of Seller's rights to
insurance proceeds with respect to any unrepaired damage (including any rental
loss proceeds for periods after the Closing), loss or casualty in question, but
subject to the rights of existing lienholders. Subject to such rights, Purchaser
shall be entitled to settle the loss with Seller's insurers. Seller shall retain
all interest in and to the insurance proceeds that may be payable to Seller on
account of damage repaired and completed by Seller before Closing, but Seller
shall have no obligation of repair or replacement.
6.7 CONDEMNATION. In the event that the Purchased Assets or any part
thereof becomes the subject of a condemnation proceeding other than of a minor
immaterial nature prior to Closing, Seller agrees to immediately advise
Purchaser thereof. In the event of
<PAGE> 28
such condemnation, Purchaser shall have the option, pursuant to Section 1.8(b),
to (1) take title in accordance with the terms and conditions of this Agreement
and negotiate with the said condemning authority for the condemnation award and
receive the benefits thereof without affecting the Purchase Price, or (2)
terminate this Agreement.
6.8 LIQUOR LICENSE. Seller shall cooperate with Purchaser (without
cost or liability to Seller) in Purchaser's obtaining a transfer of any existing
liquor license for the Club or, if such transfer shall not be possible,
obtaining a new liquor license; to Seller's Knowledge, there is no such liquor
license currently existing.
6.9 [Intentionally omitted]
6.10 FIRPTA AFFIDAVIT. At or prior to Closing, Seller shall provide to
Purchaser an affidavit signed under penalty of perjury and complying with the
requirements of U.S. Internal Revenue Code Section 1445(b)(2) and an equivalent
Form 590RE provided under the Revenue and Taxation Code of the State of
California. If Seller shall not have timely furnished to Purchaser said
affidavit, Purchaser may, at its option, either (i) adjourn the closing until
such time as Seller has complied with the conditions set forth herein, and such
adjournment shall not place Purchaser in default of its obligations hereunder,
or alternatively (ii) Purchaser may withhold from the Purchase Price and remit
to the Internal Revenue Service and the Franchise Tax Board such withholding as
may be required of Purchaser in accordance with the withholding obligations
imposed upon Purchaser pursuant to Internal Revenue Code Section 1445 and
equivalent statutes under the Revenue and Taxation Code of the State of
California. Such withholding shall not place Purchaser in default under this
Agreement, and Seller shall not be entitled to claim that such withholding shall
excuse Seller's performance under this Agreement.
6.11 SEC REQUIRED FINANCIAL INFORMATION. At Purchaser's request at any
time from and after January 28, 1998 until the date that is one (1) year after
the Closing Date, Seller shall, at Purchaser's expense, provide to Purchaser's
designated independent auditor reasonable access to the books and records of the
Purchased Assets, regarding the period for which Purchaser is required to have
audited financial statements prepared with respect to the Purchased Assets as
may be required by the Securities and Exchange Commission, but only to the
extent that such books, records and related information are in Seller's
possession or control and relate to the period during which Seller held title to
the Purchased Assets.
6.12 INVESTMENT IN THE CLUB. Within thirty (30) months after the
Closing Date, but subject to force majeure and any delay caused by any
Governmental Body, Legal Requirement, Order or Proceeding, Purchaser shall
spend, or cause to be spent, no less than ten million dollars ($10,000,000) on
improvements to the Club, inclusive of fixtures, furnishings and equipment.
<PAGE> 29
SECTION 7. MISCELLANEOUS PROVISIONS.
7.1 FURTHER ASSURANCES. Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions. Without limiting the generality of the
foregoing, at any time and from time to time after the Closing Date, the parties
shall duly execute, acknowledge and deliver all such further assignments,
conveyances, instruments and documents, and will take such other action
consistent with the terms of this Agreement, in each case, as may be reasonably
necessary to assign, transfer and convey to Purchaser good and marketable title
to any and all of the Purchased Assets, free and clear of all Encumbrances, to
carry out the transactions contemplated by this Agreement, and to comply with
the terms hereof. No party will take or knowingly permit to be taken any action
or do or knowingly permit to be done anything in the conduct of its business, or
otherwise, which would be contrary to or in breach of any of the terms or
provisions of this Agreement, or which would cause any of the representations or
warranties contained herein to become untrue or incomplete. Each party agrees to
cause its Affiliates to comply with any obligations hereunder for which the
assistance of such Affiliate is necessary or advisable and to take any other
action which may be necessary or reasonably requested by the other party in
order to consummate the Transactions.
7.2 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
and expert witness fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled). Attorneys' fees incurred
in enforcing any judgment in respect of this Agreement are recoverable as a
separate item. The preceding sentence is intended to be severable from the other
provisions of this Agreement and to survive any judgment and, to the maximum
extent permitted by law, shall not be deemed merged into any such judgment.
7.3 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered or certified mail, return receipt requested, by courier or express
delivery service or by telecopier with proof of transmission and receipt) to the
address or telecopier number set forth beneath the name of such party below (or
to such other address or telecopier number as such party shall have specified in
a written notice given to the other parties hereto). In the case of any notice
given by telecopier, a confirming copy shall be sent, as soon as reasonably
possible thereafter, by another approved means specified above.
<PAGE> 30
if to Purchaser: RM Sports Club, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Attention: Chief Executive Officer,
President and Real Estate Notices
Telephone: (310) 479-5200
Telecopier: (310) 479-4350
with a copy (not constituting notice) to:
Resch Polster Alpert & Berger LLP
10390 Santa Monica Boulevard
Fourth Floor
Los Angeles California 90025-5058
Attention: Ronald M. Resch, Esq.
Telephone: (310) 277-8300
Telecopier: (310) 552-3209
if to Seller: Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attention: Chief Financial Officer
Telephone: 310/278-4321
Telecopier: 310/205-4611
with a copy (not constituting notice) to.
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, California 90210
Attention: General Counsel
Telephone: 310/278-4321
Telecopier: 310/205-4613
if to Deposit Holder: Chicago Title Company
700 South Flower Street, #920
Los Angeles, California 90017
Attention: Rose Martinez re escrow no. 7151506X43
Telephone: 213/488-4300
Telecopier: 213/488-4384
with a copy (not constituting notice) to the party
or parties not giving such notice to Deposit
Holder.
If notice is sent by telecopier, a copy of such notice shall be concurrently
sent by one of the
<PAGE> 31
other means set forth in this section. Failure to do so will not affect the
validity and due delivery of such notice.
7.4 PUBLICITY; CONFIDENTIALITY. At all times before and after the
Closing Date and except as may otherwise be required by any Legal Requirement or
by the rules and regulations of the New York Stock Exchange, the American Stock
Exchange, NASDAQ or the Securities and Exchange Commission:
(a) Prior to the Closing, no press release or other publicity
concerning any of the Transactions shall be issued or otherwise disseminated by
or on behalf of the parties hereto unless mutually agreed upon by the parties in
advance. The parties shall issue a mutually approved press release promptly
following Closing. Each of the parties shall continue to keep the existence and
terms of this Agreement and the other Transactional Agreements strictly
confidential except to the extent such information is publicly available,
lawfully obtained from independent sources or as may be required by any Legal
Requirement or as may otherwise be determined by Purchaser, in good faith, to be
appropriate.
(b) Prior to the Closing, Purchaser agrees to keep confidential
and not to disclose to any third party, other than to Purchaser's actual or
potential lenders or investors or their Representatives, who in turn will agree
to hold such information confidential, any information and material obtained
from Seller or any of its Representatives or to which Purchaser has access
related to the business and assets of Seller except to the extent such
information is publicly available, previously lawfully known to Purchaser,
lawfully obtained from independent sources or as may be required by any Legal
Requirement. No such information shall be used by any such party for their own
benefit. Purchaser will promptly return, and cause all of its actual and
potential lenders, investors and each of its and their respective
Representatives promptly to return, any and all such information to Seller if
Closing does not occur, for any reason whatsoever.
(c) Prior to the Closing, Seller agrees to keep confidential and
not to disclose to any third party, other than to Seller's actual or potential
lenders or investors or their Representatives, who in turn will agree to hold
such information confidential, any information and material obtained from
Purchaser or any of their respective Representatives or to which Seller has
access related to the business and assets of Purchaser except to the extent such
information is publicly available, previously lawfully known to Seller, lawfully
obtained from independent sources or as may be required by any Legal
Requirement. No such information shall be used by any such party for their own
benefit. Seller will promptly return, and cause all of its actual and potential
lenders, investors and each of its and their respective Representatives promptly
to return, any and all such information to Purchaser if Closing does not occur,
for any reason whatsoever.
7.5 NONCOMPETITION/NONSOLICITATION.
(a) Seller agrees that, after the Closing, Purchaser shall be
entitled to the goodwill and going concern value of the Club and to protect and
preserve the same to the maximum extent permitted by law. Seller also
acknowledges that its management
<PAGE> 32
contributions to the Club have been uniquely valuable and that Seller has
proprietary information that would be competitively unfair to make available to
any competitor of the Club. For these and other reasons, and as an inducement to
Purchaser to enter into this Agreement, for a period of 3 years from and after
the Closing Date neither Seller nor any Entity in which Seller shall be the real
party in interest shall own or manage any health or fitness or other similar
facility located within Manhattan. It shall not, however, be a breach of this
Section 7.5(a) if Seller, or any Entity in which Seller shall be the real party
in interest shall own or manage any health or fitness or other similar facility
of less than 20,000 square feet located within any hotel as an ancillary service
for guests of such hotel.
(b) In addition, to protect Purchaser against any efforts by
Seller to cause employees and/or independent contractors of the Club to
terminate their employment, Seller agrees that for a period of 5 years from and
after the Closing Date, neither Seller nor any Entity in which Seller shall be
the real party in interest shall, directly or indirectly, (i) induce any
employee or independent contractor of the Club to leave the Club or to accept
any other employment or position or (ii) assist any other Entity in hiring such
person.
(c) Seller recognizes and agrees that a breach by Seller, or any
Entity in which Seller shall be the real party in interest, of any of the
covenants set forth in this Section 7.5 could cause irreparable harm to
Purchaser, that Purchaser's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach a restraining
order or injunction or both may be issued against Seller or any such Entity, in
addition to any other rights and remedies which are available to Purchaser. If
this section is more restrictive than permitted by the Legal Requirements of any
jurisdiction in which Purchaser seeks enforcement hereof, then this Section 7.5
shall be limited to the extent required to permit enforcement thereunder. In
particular, the parties intend that the covenants contained in the preceding
portions of this Section 7.5 shall be construed as a series of separate
covenants, one for each county and city within the radius described above.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms. If, in any judicial proceeding, a court shall refuse to
enforce any of these separate covenants deemed included in this paragraph, then
such unenforceable covenant shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
(d) No consideration shall be allocated to the covenants set
forth in this Section 7.5.
7.6 TIME OF THE ESSENCE. In connection with consummation of the
Acquisition and the Transactions, the parties agree that time is of the essence;
provided, however, that if any period or time set forth in this Agreement ends
or occurs on a day which is not a Business Day, then such period or time shall
instead end on the next immediately following Business Day.
7.7 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
<PAGE> 33
7.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
7.9 GOVERNING LAW; VENUE. This Agreement shall be construed in
accordance with, and governed in all respects by the internal laws of the State
of California (without giving effect to principles of conflicts of laws). The
exclusive venue for any dispute arising out of this letter shall be in either
the federal or state courts located within Los Angeles County, California. Each
party waives the defense of forum non conveniens or any similar doctrine.
Service of process may be made in accordance with the applicable local rules.
7.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Seller and its successors and assigns (if any); and Purchaser and its successors
and assigns (if any). This Agreement shall inure to the benefit of: Seller;
Purchaser; and the respective successors and assigns (if any) of the foregoing.
Purchaser may only assign all of its rights under this Agreement (including its
indemnification rights under Section 5.2, and not any part thereof, and then
only if (a) the proposed assignee is The Sports Club Company, Inc., and (b)
Seller is provided with a written assignment and assumption agreement, in the
form attached hereto as Exhibit H (the "Assignment and Assumption"), executed by
Purchaser and such assignee and pursuant to which such assignee assumes all of
Purchaser's rights, duties and obligations under the Transactional Agreements.
Any such permitted assignment and assumption shall relieve Purchaser of all of
its duties and obligations under the Transactional Agreement.
7.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). Seller
agrees that in the event of any Breach or threatened Breach by Seller of any
covenant, obligation or other provision set forth in this Agreement, Purchaser
shall be entitled (in addition to any other remedy that may be available to it)
to (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and
(ii) an injunction restraining such Breach or threatened Breach.
7.12 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to the
contrary that may be contained elsewhere in this Agreement, no party (or its
Affiliates) shall, in any event, be liable to any other party (or its
Affiliates) for any consequential damages including, but not limited to, loss of
revenue or income, cost of capital, or loss of business reputation or
opportunity relating to the breach or alleged breach of this Agreement.
<PAGE> 34
7.13 WAIVER.
(a) Except as expressly set forth herein, no failure on the part
of any Person to exercise any power, right, privilege or remedy under this
Agreement, and no delay on the part of any Person in exercising any power,
right, privilege or remedy under this Agreement, shall operate as a waiver of
such power, right, privilege or remedy; and no single or partial exercise of any
such power, right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or remedy.
(b) Except as expressly set forth herein, no Person shall be
deemed to have waived any claim arising out of this Agreement, or any power,
right, privilege or remedy under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such Person: and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
7.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Purchaser and Seller.
7.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
7.16 PARTIES IN INTEREST. Except for the provisions of Section 5
hereof, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
7.17 ENTIRE AGREEMENT. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
7.18 BROKERS. Purchaser and Seller each represents and warrants to the
other that the representing party has not been represented by or dealt with any
broker in connection with the Acquisition. Purchaser and Seller each agrees to
indemnify, defend and hold the other harmless from any Damages arising out of or
in connection with any claim for any brokerage commission, finder's fee,
acquisition fee or like payment asserted against the indemnified party by virtue
of any action taken or allegedly taken by the indemnifying party in connection
with the Acquisition.
<PAGE> 35
7.19 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections", "Exhibits" and "Schedules" are intended to refer to
Sections of this Agreement and Exhibits and Schedules to this Agreement, all of
which Exhibits and Schedules are hereby incorporated herein by this reference as
if set forth fully herein.
7.20 WAIVER OF JURY. With respect to any dispute arising under or in
connection with this Agreement or any related agreement, as to which no party
invokes the right to arbitration hereinabove provided, or as to which legal
action nevertheless occurs, each party hereby irrevocably waives all rights it
may have to a jury trial, and each party agrees that it will not seek to
consolidate any such action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY PURCHASER AND SELLER AND EACH
ACKNOWLEDGES THAT NEITHER THE OTHER PARTY NOR ANY PERSON ACTING ON BEHALF OF THE
OTHER PARTY HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. PURCHASER AND SELLER EACH
FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS
WAIVER, BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT
HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. PURCHASER AND
SELLER EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING
AND RAMIFICATIONS OF THIS WAIVER PROVISION.
7.21 AUTHORITY TO SIGN. Each of the individuals executing this
Agreement on behalf of Purchaser and Seller, respectively, represents that he is
duly and validly authorized to do so.
7.22 SURVIVAL POST-CLOSING. Any provisions of this Agreement, or any
other Transactional Agreement, which require observance, performance or
enforcement after Closing shall survive Closing and shall continue to be binding
on the parties hereto, subject to and in accordance with the other terms and
conditions of this Agreement and the other
<PAGE> 36
Transactional Agreements.
7.23 FACSIMILE SIGNATURES. Purchaser and Seller each (i) has agreed to
permit the use, from time to time and where appropriate, of telecopied
signatures in order to expedite the transaction contemplated by this Agreement,
(ii) intends to be bound by its respective telecopied signature, (iii) is aware
that the other party will rely on the telecopied signature, and (iv)
acknowledges such reliance and waives any defenses to the enforcement of the
documents and notices effecting the transaction contemplated by this Agreement
based on the fact that a signature or notice was sent by telecopy.
The parties hereto have caused this Asset Purchase Agreement to be executed
and delivered as of the date first written above.
SELLER: Hilton Hotels Corporation,
a Delaware corporation
By: /s/ Matt Hart
------------------------------------
ITS: Executive Vice President and CFO
PURCHASER: RM SPORTS CLUB, INC.,
a California corporation
By: /s/ D. Michael Talla
------------------------------------
ITS: Chief Executive Officer
The undersigned hereby executes this Agreement to evidence its agreement to act
as Escrow Holder in accordance with the terms of this Agreement.
AGREED AND ACCEPTED:
Escrow Holder:
CHICAGO TITLE COMPANY
By
-------------------------------------
Its
----------------------------------
<PAGE> 37
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
1. ACQUISITION. "Acquisition" shall have the meaning specified in Recital
A of the Agreement.
2. ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving the sale or other disposition of all or any portion of the
Club's business or assets (other than in the Ordinary Course of Business).
3. ACT. "Act" shall have the meaning set forth in Section 2.19(a) of the
Agreement.
4. AFFILIATE. "Affiliate" shall mean and include any Entity, directly or
indirectly, controlling Seller, controlled by Seller or under common control
with Seller; it being agreed that, for these purposes, "control" shall mean the
ability to direct Seller, whether by reason of the ownership of equity interests
in Seller, by contract or otherwise.
5. ASSIGNMENT AND ASSUMPTION. "Assignment and Assumption" shall have the
meaning set forth in Section 7.10.
6. ASSUMED CONTRACTS. Assumed Contracts shall have the meaning set forth
in Section l.l(e).
7. ASSUMED LIABILITIES. Assumed Liabilities shall have the meaning set
forth in Section 1.3.
8. BILL OF SALE. "Bill of Sale" shall have the meaning set forth in
Section 1.5(a) of the Agreement.
9. BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been any
inaccuracy in or breach of, or any failure to comply with or perform such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach or failure.
10. BUSINESS DAY. "Business Day" shall mean any day other than Saturday,
Sunday or any other day which is a legal holiday under the laws of either the
State of California or, if different, the state where the Club is located.
11. CLOSING. "Closing" shall have the meaning specified in Section 1.9(b)
of the Agreement.
<PAGE> 38
12. CLOSING DATE. "Closing Date" shall mean the date on which the Closing
shall occur.
13. CLUB. "Club" shall have the meaning specified in Recital A of the
Agreement.
14. CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
15. CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
16. CONTRACT. "Contract" shall mean any written agreement, contract,
understanding, arrangement instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment covenant,
assurance or undertaking of any nature that relate to the Purchased Assets.
17. CONTRACT ASSIGNMENT. "Contract Assignment" shall have the meaning set
forth in Section 1.5(a) of the Agreement.
18. DAMAGES. "Damages" shall mean any loss, damage, injury, Liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
any reasonable legal fee, expert fee, accounting fee or advisory fee), charge,
reasonable cost (including any reasonable cost of investigation) or reasonable
expense of any nature.
19. DELIVERY ITEMS. "Delivery Items" shall have the meaning set forth in
Section 1.6 of the Agreement.
20. DEPOSIT. "Deposit" shall have the meaning set forth in Section 1.5(b)
of the Agreement.
21. DEPOSIT HOLDER. "Deposit Holder" shall have the meaning set forth in
Section 1.5(b) of the Agreement.
22. DUE DILIGENCE PERIOD. "Due Diligence Period" shall have the meaning
set forth in Section 1.8(a)(vi) of the Agreement.
23. ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, right of possession,
lease, tenancy, license, Order, option, right of first refusal, imperfection of
title, or Tax; provided that Encumbrance shall not include publicly recorded
Encumbrances (i) that are not liens or (ii) that do not restrict or affect the
intended use of the Purchased Assets. Encumbrance shall further not include any
Taxes that are not yet due and payable if such Taxes are to be prorated between
Purchaser and Seller. Encumbrance shall further not include any matter disclosed
in the Disclosure Schedule and expressly approved in writing by Purchaser as not
constituting an Encumbrance or any Permitted Exception.
<PAGE> 39
24. ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
company, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
25. ESCROW. "Escrow" shall have the meaning set forth in Section 1.5(b) of
the Agreement.
26. EXCLUDED ASSETS. "Excluded Assets" shall have the meaning set forth in
Section 1.2 of the Agreement.
27. EXCLUDED CONTRACT. "Excluded Contract" shall mean any Seller Contract,
other than the Membership Agreements, that:
(a) Seller has entered into in the Ordinary Course of Business;
(b) has a term of less than 30 days or may be terminated by the
Seller (without penalty) 30 days after the delivery of a termination notice by
the Seller; and
(c) does not contemplate or involve the payment of cash or other
consideration in an amount or having a value in excess of $10,000.
28. GAAP. "GAAP" shall mean generally accepted accounting principles,
applied on a basis consistent with the basis on which the applicable financial
statements were prepared.
29. GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issuable or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement; or
(b) right under any Contract with any Governmental Body.
30. GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office,
<PAGE> 40
commission council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
31. INDEMNITEES. "Indemnitees" shall as the context may indicate sometimes
refer to either the Purchaser Indemnitees or the Seller Indemnitees, or both.
32. INVENTORY. "Inventory" shall have the meaning set forth in Section
1.1(j) of the Agreement.
33. LEASES. "Leases" shall have the meaning set forth in Section 2.7(a) of
the Agreement.
34. LEASE ASSIGNMENT. "Lease Assignment" shall have the meaning set forth
in Section 1.5(a) of the Agreement.
35. LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state
local, municipal, foreign or other law, statute, legislation, constitution, law
resolution, ordinance, code edict, decree, proclamation, treaty, convention,
rule, regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation issued enacted adopted,
passed, approved, promulgated, made, implemented or otherwise put into effect by
or under the authority of any Governmental Body.
36. LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (whether known or unknown and whether absolute, accrued,
contingent or otherwise), regardless of whether such debt, obligation, duty or
liability would be required to be disclosed on a balance sheet prepared in
accordance with GAAP and regardless of whether such debt obligation, duty or
liability is immediately due and payable.
37. MANAGEMENT AGREEMENT. "Management Agreement" shall mean that certain
Management Agreement, dated January 9, 1996, by and between Manager and Bally
Entertainment Corporation, as owner. Seller is the successor to Bally
Entertainment Corporation under the Management Agreement.
38. MANAGER. "Manager" shall mean Bally Total Fitness Holding Corporation
(f/k/a Bally's Health & Tennis Corporation), a Delaware corporation.
39. MANAGER'S ESTOPPEL CERTIFICATE. "Manager's Estoppel Certificate" shall
mean an estoppel certificate executed by Manager.
40. MASTER LANDLORD. "Master Landlord" shall mean Hirschfeld Realty Club
<PAGE> 41
Corporation and 328 East 61 Corp.
41. MASTER LEASE. "Master Lease" shall mean, collectively, the following
three documents: (i) that certain Amended and Restated Net Operating Lease,
dated March 26, 1985, among, on the one hand, Master Landlord, as Landlord, and,
on the other hand, Vertical Fitness and Racquet Club, Ltd., as Tenant, (ii) that
certain Lease Modification Agreement dated July 1, 1990, among, on the one hand,
Master Landlord and, on the other hand, Vertical Fitness and Racquet Club, Ltd.,
and (iii) that certain Assignment and Assumption of Lease, dated January 8,
1996, between Vertical Fitness and Racquet Club, Ltd. and Bally Entertainment
Corporation, in each instance, regarding the premises occupied by the Club.
Seller is the successor tenant to Bally Entertainment Corporation under the
Master Lease by merger with Bally Entertainment Corporation.
42. MEMBER. "Member" shall mean an individual who as of the Closing Date
is a member in good standing of the Club under the terms of a valid Membership
Agreement.
43. MEMBERSHIP AGREEMENT. "Membership Agreement" shall mean any written
agreement between a Member and, or on behalf of, the Seller pursuant to which
such Member is entitled to use of the facilities and services of the Seller at
the Club.
44. MODIFICATION. "Modification" shall have the meaning set forth in
Section 1.8(b) of the Agreement.
45. NOTE. "Note" shall have the meaning set forth in Section 1.5(c).
46. ORDER. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other Governmental
Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is or has been entered
into in connection with any Proceeding.
47. ORDINARY COURSE OF BUSINESS. An action taken by or on behalf of the
Seller shall not be deemed to have been taken in the "Ordinary Course of
Business" unless
(a) such action is generally consistent with the Seller's past
practices and is taken in the ordinary course of the Seller's normal day-to-day
operations; and
(b) such action is not required to be authorized by the Seller's
stockholders, the Seller's board of directors or any committee of the Seller's
board of directors and does not require any other separate or special
authorization of any nature.
48. OUTSIDE CLOSING DATE. "Outside Closing Date" shall have the meaning
set forth
<PAGE> 42
in Section 1.9(a) of the Agreement.
49. PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
50. PERSONAL PROPERTY LEASES. "Personal Property Leases" shall have the
meaning set forth in Section 1.1(c) of the Agreement.
51. PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation brought, conducted or heard by or
before, or that otherwise involves, any Governmental Body, judge, arbitrator or
arbitration panel.
52. PURCHASE PRICE. "Purchase Price" shall have the meaning set forth in
Section 1.5(a) of the Agreement.
53. PURCHASED ASSETS. "Purchased Assets" shall have the meaning set forth
in Section 1.1 of the Agreement.
54. PURCHASER. "Purchaser" shall mean RM Sports Club, Inc., a California
corporation.
55. PURCHASER DELIVERY ITEMS. "Purchaser Delivery Items" shall have the
meaning set forth in Section 1.6(b) of the Agreement.
56. PURCHASER INDEMNITEES. "Purchaser Indemnitees" shall mean the
following Persons:
(a) Purchaser;
(b) Purchaser's current and future Affiliates and its and their
respective shareholders, officers, directors and employees;
(c) the respective Representatives of the Persons referred to in
clauses (a) and (b) above; and
(d) the respective successors and permitted assigns of the Persons
referred to in clauses (a), (b), and (c) above.
57. PURCHASER TRANSACTION COSTS. "Purchaser Transaction Costs" shall have
the meaning specified in Section 1.10(b)(iii) of the Agreement.
58. REAL PROPERTY. "Real Property" shall have the meaning specified in
Section 1.1(a) of the Agreement.
59. REAL PROPERTY LEASES. "Real Property Leases" shall have the meaning
set forth
<PAGE> 43
in Section 1.1(b).
60. REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives. Seller
and all other Related Parties shall be deemed to be "Representatives" of Seller.
61. SELLER. "Seller" shall mean Hilton Hotels Corporation, a Delaware
corporation.
62. SELLER CONTRACT. "Seller Contract" shall mean any Contract:
(a) to which the Seller is a party;
(b) by which the Seller or any of its assets is bound or under which
the Seller has any obligation; or
(c) under which the Seller has any right or interest.
63. SELLER DELIVERY ITEMS. "Seller Delivery Items" shall have the meaning
set forth in Section 1.6(b) of the Agreement.
64. SELLER INDEMNITIES. "Seller Indemnities" shall mean the following
Persons:
(a) Seller;
(b) Seller's current and future Affiliates and its and their
respective shareholders, officers, directors and employees;
(c) the respective Representatives of the Persons referred to in
clauses (a) and (b) above; and
(d) the respective successors and permitted assigns of the Persons
referred to in clauses (a), (b) and (c) above.
65. SELLER'S KNOWLEDGE. "Seller's Knowledge" shall mean the actual
knowledge of either Kevin Luebbers or Barbara Boultinghouse.
66. SELLER TRANSACTION COSTS. "Seller Transaction Costs" shall have the
meaning specified in Section 1.10(a)(vi) of the Agreement.
67. SERVICE MARK LICENSE AGREEMENT. "Service Mark License Agreement" shall
mean that certain Service Mark License Agreement, dated January 9, 1996, between
Manager and Bally Entertainment Corporation.
68. SPECIFIED CONTRACTUAL LIABILITIES. "Specified Contractual Liabilities"
shall mean the obligations of the Seller under the Assumed Contracts, but only
to the extent such obligations (a) arise after the Closing Date, (b) do not
arise from or relate to any breach by, or
<PAGE> 44
on behalf of, the Seller of any provision of any of such contracts, (c) do not
arise from or relate to any event, circumstance or condition occurring or
existing on or prior to the Closing Date that, with notice or lapse of time,
would constitute or result in a breach of, any of such contracts, and (d) are
ascertainable (in nature and amount) solely by reference to the express terms of
such contracts; provided, however that notwithstanding anything contained herein
or in the Agreement, the "Specified Contractual Liabilities" shall not include
and Purchaser shall not be required to assume or to perform or discharge, except
if and to the extent the same shall have been prorated as part of the Closing in
favor of Purchaser or except as may otherwise be expressly provided in the
Agreement:
(i) any Liability with respect to any accounts payable or any
short-term or long-term indebtedness of the Seller;
(ii) any Liability of the Seller arising from or relating to any
action taken by the Seller, or any failure on the part of the Seller to take any
action, at any time prior to, on or after the Closing Date;
(iii) any Liability of the Seller arising from or relating to (x)
any services performed or provided by the Seller, or (y) any claim, Order or
Proceeding against the Seller;
(iv) any Liability of the Seller for the payment of any Tax;
(v) any Liability of the Seller to any employee or former
employee of the Seller (whether for salaries, wages, severance pay, vacation
pay, benefits or other compensation);
(vi) any Liability under any Contact, if (x) an accurate and
complete copy, in all material respects, of such Contract and all amendments
thereto insofar as it and they pertain to such liability shall not have been
furnished to Purchaser by the Seller prior to the Closing Date or (y) any
Consent required to be obtained from any Person with respect to the assignment
or delegation to Purchaser of any rights or obligations under such Contract
shall not have been obtained prior to the Closing Date;
(vii) any obligation of the Seller to indemnify or defend any
other Person against or in connection with any infringement claim or similar
claim;
(viii) any Liability that is inconsistent with or that
constitutes an inaccuracy in, or that arises or exists by virtue of any Breach
of, any covenant or obligation of the Seller; or
(ix) any other Liability that is not specifically included in the
Specified Contractual Liabilities or otherwise is not expressly assumed by
Purchaser in the Agreement.
69. SUBLEASE. "Sublease" shall mean any sublease, license agreement,
concession
<PAGE> 45
agreement or other agreement, written or oral, pursuant to which any Person,
other than a Member, has any right to occupy or use any portion of the Club for
any purpose whatsoever.
70. SUBTENANT. "Subtenant" shall mean any party having the right to use or
occupy any portion of the Club under any Sublease.
71. TAX. "Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, estimated tax, gross receipts tax, value-added tax,
surtax, excise tax, ad valorem tax transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax-sharing agreement or similar Contract.
72. TITLE COMPANY. "Title Company" shall mean Chicago Title Company.
73. TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Contract Assignment;
(c) the Lease Assignment;
(d) the Bill of Sale;
(e) the Note; and
(f) the Assignment and Assumption.
74. TRANSACTION COSTS. "Transaction Costs" shall mean all fees, costs and
expenses (including all legal, auditing, accounting and investment banking
expenses) that have been incurred or that are in the future incurred by, on
behalf of or for the benefit of any party hereto in connection with:
(a) the negotiation, preparation and review of any letter of intent
or similar document relating to any of the Transactions;
(b) the investigation and review conducted by the Purchaser and its
Representatives with respect to the Seller's business;
(c) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule), the other Transactional Agreements and all
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the Transactions;
<PAGE> 46
(d) the preparation and submission of any filing or notice required
to be made or given in connection with any of the Transactions, and the
obtaining of any Consent required to be obtained in connection with any of the
Transactions; and
(e) the consummation and performance of the Transactions.
75. TRANSACTIONS. "Transactions" shall mean (a) the execution and delivery
of the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including:
(a) the Acquisition in accordance with the Agreement; and
(b) the performance by Seller and Purchaser of their respective
obligations under the Transactional Agreements and the exercise by the Seller
and Purchaser of their respective rights under the Transactional Agreements.
76. WARN ACT. "WARN Act" shall mean the Workers Adjustment and Retraining
Notification Act, 29 U.S.C. 2201, as amended and all rules, regulations,
directives and orders promulgated thereunder.
<PAGE> 1
EXHIBIT 3
ASSIGNMENT AND ASSUMPTION OF ASSET PURCHASE AGREEMENT
This Assignment and Assumption of Asset Purchase Agreement (the
"ASSIGNMENT") is made and entered into as of April 1, 1998, by and between RM
Sports Club, Inc., a California corporation ("ASSIGNOR"), and The Sports Club
Company, Inc., a Delaware corporation ("ASSIGNEE"), with regard to the following
facts and circumstances:
A. Assignor is the "Purchaser" under that certain Asset Purchase
Agreement dated as of April 1, 1998 (the "PURCHASE AGREEMENT") between Assignor
and Hilton Hotels Corporation, a Delaware corporation ("SELLER"), whereby
Assignor agreed to purchase from Seller and Seller agreed to sell to Assignor
the assets described in the Agreement and used or held for use by Seller in the
operation of The Vertical Club located at 61st Street, New York, New York.
B. Pursuant to Paragraph 7.10 (Successors and Assigns) of the Purchase
Agreement, Assignor has the right to assign its rights in the Purchase Agreement
to Assignee, without the consent of Seller.
C. The consummation of the acquisition contemplated by the Purchase
Agreement will not cause Assignee to become bankrupt or to be subject to any
creditor's rights action.
D. Assignor and Assignee now desire to provide for the assignment of all
of Assignor's right, title and interest in and to the Purchase Agreement to
Assignee, and the assumption by Assignee of all of the obligations of Assignor,
as Purchaser, under the Agreement, upon the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor and Assignee hereby agree as follows:
1. As of the date of the Agreement, Assignor hereby sells, grants,
assigns, conveys and transfers to Assignee all of Assignor's right, title and
interest, as Purchaser, in and to the Agreement, and Assignee hereby accepts
such assignment from Assignor and assumes the performance of all of the terms,
covenants and obligations imposed on Assignor, as Purchaser, under the
Agreement.
2. Assignee shall reimburse Assignor for any cash deposit (together with
the interest earned thereon) made by Assignor under the Purchase Agreement and
held by the escrow holder named therein.
3. Assignor and Assignee hereby acknowledge and agree that, as of the
date of
<PAGE> 2
the Purchase Agreement, Assignor shall be released from all obligations and
liabilities under the Purchase Agreement, except as expressly provided therein,
and Assignee shall be obligated to Seller under all of the terms of the Purchase
Agreement.
4. Assignee hereby agrees to indemnify, defend and hold Assignor harmless
from and against any and all losses, liabilities, damages, claims, costs and
expenses (including actual attorneys' fees and costs, and court costs) arising
out of or in connection with the Agreement (except to the extent that Assignor
has an interest in Assignee, if any, and then as limited by such interest).
5. Assignor and Assignee each hereby agree to execute such other
documents and perform such other actions as may be reasonably necessary or
desirable to effectuate the intent of this Assignment.
6. This Assignment shall be binding upon and shall inure to the benefit
of the heirs, executors, administrators, successors and assigns of the parties
hereto.
7. This Assignment shall be governed by and construed in accordance with
the laws of the State of California.
8. If any term or provision of this Assignment is illegal or invalid for
any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of this Assignment.
9. This Assignment may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Assignment.
IN WITNESS WHEREOF, Assignor and Assignee executed this Assignment as of
the date first set forth above.
"ASSIGNOR:" RM SPORTS CLUB, INC.,
a California corporation
By: /s/ D. Michael Talla
------------------------------------
Its: Chief Executive Officer
-------------------------------
"ASSIGNEE:" THE SPORTS CLUB COMPANY, INC.,
a Delaware corporation
By: /s/ John Gibbons
------------------------------------
Its: President
-------------------------------
<PAGE> 1
EXHIBIT 4
[THE SPORTS CLUB COMPANY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT: JOHN M. GIBBONS
PRESIDENT AND
CHIEF OPERATING OFFICER
THE SPORTS CLUB COMPANY, INC.
(310) 479-5200
THE SPORTS CLUB COMPANY TO ACQUIRE PROPERTY
AND DEVELOP A SPORTS AND FITNESS COMPLEX
IN HOUSTON, TEXAS
LOS ANGELES, CA (April 17, 1998) -- The Sports Club Company, Inc. (AMEX: SCY)
today announced that it has signed an agreement to acquire real property in
Houston, Texas on which it and will develop a full-service sports and fitness
complex. The new Sports Club will be a two story, 85,000 square foot facility
located in the Greenway Plaza and Galleria market area.
"The city of Houston provides the right member profile for an upscale
full-service fitness facility and we have been looking for the right location
there for over three years," said D. Michael Talla, Chairman and Chief Executive
Officer.
The new facility will offer a wide variety of fitness activities including
basketball, volleyball, aerobics, and weight training using state-of-the-art
equipment and sport specific training programs. The Club will also offer such
amenities as executive lockers, spa, childcare, hair salon, a restaurant and a
cardiovascular center. The complex is scheduled to open during the third quarter
of 1999.
The Sports Club Company operates upscale health and fitness clubs throughout the
country. In addition to The Sports Club/LA and its sister clubs Reebok Sports
Club/NY, The Sports Club/Las Vegas and The Sports Club/Irvine, the Company
operates ten Spectrum Clubs. The Company is currently developing Sports Clubs in
Boston, San Francisco, New York and Washington, D.C. and two Spectrum Clubs in
Southern California.
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<PAGE> 1
EXHIBIT 5
[THE SPORTS CLUB COMPANY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT: JOHN M. GIBBONS
PRESIDENT AND
CHIEF OPERATING OFFICER
THE SPORTS CLUB COMPANY, INC.
(310) 479-5200
THE SPORTS CLUB COMPANY ANNOUNCES EXERCISE
OF OVER-ALLOTMENT OPTION
LOS ANGELES, CA (April 28, 1998) -- The Sports Club Company, Inc. (AMEX: SCY)
today announced that the underwriters have exercised the over-allotment option
granted as part of the Company's recent public offering and have purchased
600,000 additional shares of the Company's common stock. The Company sold
500,000 shares, and Selling Stockholders sold 100,000 shares, each at a purchase
price of $8.00 per share.
The underwriters for the offering include Schroder & Co. Inc. as lead manager,
and Prudential Securities Incorporated and Sutro & Co. Incorporated as
co-managers. Net proceeds from the offering are being used to repay indebtedness
and for general corporate purposes, including capital expenditures and working
capital.
The Sports Club Company operates upscale health and fitness clubs throughout the
country. In addition to The Sports Club/LA and its sister clubs Reebok Sports
Club/NY, The Sports Club/Las Vegas and The Sports Club/Irvine, the Company
operates ten Spectrum Clubs. The Company is currently developing Sports Clubs in
Boston, Houston, San Francisco, New York and Washington, D.C. and two other
Spectrum Clubs in Southern California.
###
