EXHIBIT 29
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August 24, 2006
Pardus European Special Opportunities Master Fund, L.P.
0000 Xxxxxx xx xxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Re: CONFIDENTIALITY AGREEMENT
Ladies and Gentlemen:
In connection with your consideration of a possible negotiated
transaction (a "POSSIBLE TRANSACTION") with Bally Total Fitness Holding
Corporation (the "COMPANY"), the Company is prepared to make available to you
and your Representatives (as hereinafter defined) certain non-public
information concerning the business, financial condition, operations, assets
and liabilities of the Company and/or its subsidiaries, affiliates and
divisions. As a condition to such information being furnished to you and your
Representatives, you agree that you will treat the Evaluation Material (as
hereinafter defined) in accordance with the provisions of this letter agreement
and take or abstain from taking certain other actions as set forth herein. The
term "REPRESENTATIVES" shall include the members, directors, officers,
employees, agents, affiliates, partners and advisors of a party and those of
its subsidiaries, affiliates and/or divisions (including, without limitation,
attorneys, accountants, consultants, bankers, financial advisors and
prospective sources of debt financing for a Possible Transaction).
Notwithstanding anything to the contrary herein, the Company
hereby (x) acknowledges that you have engaged a consulting firm previously
identified to the Company by you (the "CONSULTANT") to act as a third party
advisor to you and, as such, the Consultant shall be deemed to be your
"Representative" in connection with a Possible Transaction, and (y) agrees to
provide the Consultant with direct access to the Evaluation Material. It is
understood and agreed that the Evaluation Material will be utilized by the
Consultant to prepare a report for you and your Representatives in respect of
the Company and its operations (the "REPORT"). You acknowledge that, as a
condition to being provided such direct access, the Consultant has agreed to
establish an internal wall reasonably acceptable to the Company to segregate
personnel working for you from information developed or received by, or in the
possession of, personnel working for the Company's creditors.
1. EVALUATION MATERIAL. The term "EVALUATION MATERIAL"
shall mean all information relating, directly or indirectly, to the Company
and/or its subsidiaries, affiliates and divisions, or the business, products,
strategies, markets, condition (financial or other), operations, assets,
liabilities, results of operations, cash flows or prospects of the Company
and/or its subsidiaries, affiliates and divisions (whether prepared by the
Company, its advisors or otherwise) which is delivered, disclosed or furnished
by or on behalf of the Company or its Representatives to you or to your
Representatives, on or after the date hereof, regardless of the manner in which
it is delivered, disclosed or furnished, or which you or your
Bally Total Fitness Holding Corporation
August 24, 2006
Representatives otherwise learn or obtain, through observation or through
analysis of such information or data, and shall also be deemed to include all
notes, analyses, compilations, studies, forecasts, interpretations or other
documents prepared by you or your Representatives (including the Report) that
contain, reflect or are based upon, in whole or in part, the information
delivered, disclosed or furnished to you or your Representatives pursuant
hereto. Notwithstanding any other provision hereof, the term Evaluation
Material shall not include information which (i) is or becomes generally
available to the public (including, without limitation, any public disclosure
of Evaluation Material made pursuant to Sections 2(i) and 6 of this letter
agreement) other than as a result of a disclosure by you or your
Representatives in violation of this letter agreement, (ii) was within your
possession prior to it being furnished to you by or on behalf of the Company
or its Representatives pursuant hereto (whether before or after the date
hereof), provided that you did not know or have reason to believe that the
source of such information was bound by a confidentiality agreement with, or
other contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information, (iii) becomes
available to you on a non-confidential basis from a source other than the
Company or any of its Representatives, provided that you do not know or have
reason to believe that the source of such information is bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the Company or any other party with respect
to such information or (iv) is developed independently by you or your
Representatives without use of the Evaluation Material or violating any of
your obligations under this letter agreement.
In addition, you acknowledge and agree that, because you have
requested that the Company disclose publicly certain Evaluation Material that
is disclosed to you or your Representatives pursuant hereto, the Company will
not disclose to you or your Representatives any information or data that the
Company determines in its sole discretion could, if disclosed publicly, have an
adverse impact on the Company for competitive or other reasons (such
information to be defined as "CERTAIN EVALUATION MATERIAL"). You acknowledge
that Certain Evaluation Material has been or will be made available to other
third parties that have participated or are participating in the Company's
ongoing process in respect of strategic alternatives. As promptly as
practicable (and in any event on or prior to September 1, 2006) following the
date hereof, the Company agrees to provide you a schedule that identifies the
general categories of such information not being made available to you, but
that have or will be made available to other third parties that have
participated or are participating in the Company's ongoing process in respect
of strategic alternatives. You agree that, unless and until you agree to hold
any Certain Evaluation Material confidential on substantially the same terms
and conditions as third parties who may have been or will be provided Certain
Evaluation Material, and you agree to release the Company from any affirmative
obligation to disclose Certain Evaluation Material hereunder, you and your
Representatives will not receive access to Certain Evaluation Material as those
other third parties.
2. USE AND DISCLOSURE OF EVALUATION MATERIAL. You
recognize and acknowledge the confidential nature of the Evaluation Material
and the damage that could result to the Company if any information contained
therein is disclosed to a third party (other than as contemplated herein). You
hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating and negotiating a Possible
Transaction and for no other purpose, that the Evaluation Material will be kept
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August 24, 2006
confidential and that you and your Representatives will not disclose any of
the Evaluation Material in any manner whatsoever; PROVIDED, HOWEVER, that (i)
you may make any disclosure of the Evaluation Material to which the Company
gives its prior written consent or as otherwise permitted by Section 6 of this
letter agreement, and (ii) any of the Evaluation Material may be disclosed to
your Representatives who need to know such information for the purpose of
evaluating a Possible Transaction (including the Consultant so that it may
prepare the Report), who are made aware of the terms and conditions of this
letter agreement and who agree to keep the Evaluation Material confidential in
accordance with the terms hereof. In any event, you agree (x) to undertake
reasonable precautions to safeguard and protect the confidentiality of the
Evaluation Material, which precautions shall be at least as protective as the
precautions undertaken by you with respect to your confidential and
competitively valuable business information, (y) to accept responsibility for
any breach of this letter agreement by any of your Representatives, and (z) at
your sole expense, to take all reasonable measures to restrain your
Representatives from prohibited or unauthorized disclosure or uses of the
Evaluation Material.
The Company acknowledges that you intend to file a copy of this
letter agreement on an amended Schedule 13D upon its execution and delivery.
Subject to the foregoing, you agree that, without the prior written consent of
the Company, you and your Representatives will not disclose to any other person
the fact that you or your Representatives have received Evaluation Material or
that Evaluation Material has been made available to you or your
Representatives, that investigations, discussions or negotiations are taking
place concerning a Possible Transaction or any of the terms, conditions or
other facts with respect to any Possible Transaction, including the status
thereof and the identity of the parties thereto, or the existence of this
letter agreement (collectively, the "DISCUSSION INFORMATION"). Notwithstanding
the foregoing, nothing herein shall prohibit disclosures by you of Discussion
Information (x) to a third party for the purpose of jointly evaluating and
negotiating a Possible Transaction so long as such third party is provided with
a copy of this letter agreement and agrees to adhere to the terms hereof
(provided that, for the avoidance of doubt, no Evaluation Material shall be
provided to such third party without the Company's prior written consent;
provided further, that you may provide the Report to any such third party who
enters into a letter agreement with the Company on substantially the terms
hereof); and (y) if you reasonably believe, after consultation with outside
legal counsel, that such disclosure is required by law or a regulation of a
governmental entity, securities exchange or similar authority by which you are
bound (e.g., the requirements of Schedule 13D promulgated under the Securities
Exchange Act of 1934, as amended). In connection with any filing on Schedule
13D contemplated by the first sentence of this paragraph or by clause (y) of
the immediately preceding sentence, you shall provide the Company and its
Representatives the opportunity to review and comment upon such amended
Schedule 13D a reasonable period of time prior to filing, and agree to give due
consideration to all reasonable additions, deletions or changes suggested by
the Company and its Representatives in connection therewith. The term "person"
as used in this letter agreement shall be broadly interpreted to include the
media and any corporation, partnership, group, individual or other entity.
In the event that you or any of your Representatives are
requested or required (by oral questions, interrogatories or requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) to disclose any of the Evaluation Material or
Discussion Information ("LEGALLY COMPELLED"), you shall (i) provide the Company
with
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reasonably prompt written notice of any such request or requirement, including
the terms thereof and circumstances surrounding such request or requirement,
so that the Company may in its sole discretion and at its sole expense seek a
protective order or other appropriate remedy to resist or narrow such request
or requirement, (ii) consult with the Company on the advisability of seeking
such protective order or other appropriate remedy and (iii) at the Company's
sole expense, assist the Company to seek such protective order or other
appropriate remedy. The Company may also determine, in its sole discretion, to
waive compliance with the provisions of this letter agreement and permit you
or your Representatives to disclose Evaluation Material or Discussion
Information in response to such request or requirement. If, in the absence of
a protective order or other remedy or the receipt of a waiver by the Company,
you reasonably believe, after consultation with outside legal counsel, that
you or any of your Representatives are nonetheless Legally Compelled to
disclose Evaluation Material or Discussion Information, you or your
Representatives may, without liability hereunder, disclose only that portion
of the Evaluation Material or Discussion Information which you reasonably
believe is so legally required to be disclosed, PROVIDED that you shall use
your commercially reasonable efforts to preserve the confidentiality of the
Evaluation Material and the Discussion Information, including, without
limitation, by cooperating with the Company, at its expense, to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Evaluation Material and the Discussion
Information; and PROVIDED, FURTHER, that you shall promptly notify the Company
of your determination to make such disclosure and the nature, scope, contents
and timing of such disclosure.
Nothing herein shall be deemed to limit or restrict you from
disclosing any information in any action or proceeding by you to enforce any
rights that you may have against the Company hereunder; provided that you
shall, to the extent reasonable and not prejudicial to your rights, cooperate
with the Company to protect the confidentiality of such information, whether by
means of a protective order, production under seal or otherwise.
For the avoidance of doubt, it is understood and agreed that,
subject to the confidentiality obligations contained in this letter agreement,
nothing contained herein shall prevent or prohibit you from nominating persons
for election to the Board of Directors of the Company, bringing business before
a meeting of the Company's stockholders or conducting a proxy solicitation in
support of your director nominees or in respect of any other matter. It is also
understood and agreed that, subject to the confidentiality obligations
contained in this letter agreement, nothing herein is intended to limit (i)
your use of the information contained in the Report to the extent it is
disclosed pursuant to Section 6 of this letter agreement or (ii) your
activities as a shareholder of the Company based upon any conclusions,
recommendations or suggestions made by the Consultant in such Report; PROVIDED,
HOWEVER, that you agree that you will not, and will not permit your
Representatives to, publish the Report, or otherwise summarize, quote or make
reference to the conclusions, recommendations or suggestions in the Report.
3. RETURN AND DESTRUCTION OF EVALUATION MATERIAL. In the
event that you decide not to proceed with a Possible Transaction, you will
promptly inform the Company of that decision. In that case, or at any time upon
the request of the Company for any reason, you will promptly destroy or
deliver, at your expense, to the Company all Evaluation Material (and any
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copies thereof) furnished to you or your Representatives by or on behalf of the
Company or its Representatives pursuant hereto. In the event of such a decision
or request, all other Evaluation Material prepared by you or on your behalf
shall be destroyed and no copy thereof shall be retained, and, upon the
Company's written request, you shall provide the Company with prompt written
confirmation of your compliance with this paragraph. Notwithstanding the return
or destruction of the Evaluation Material, you and your Representatives shall
continue to be bound by your obligations of confidentiality and other
obligations and agreements hereunder.
4. NO REPRESENTATIONS OR WARRANTIES. You understand and
acknowledge that, except as set forth in a final definitive transaction
agreement regarding a Possible Transaction, neither the Company nor any of its
Representatives makes any representation or warranty, express or implied, as to
the accuracy or completeness of the Evaluation Material. You agree that, except
as set forth in a definitive transaction agreement regarding a Possible
Transaction, neither the Company nor any of its Representatives shall have any
liability to you or to any of your Representatives relating to or resulting
from the use of the Evaluation Material or any errors therein or omissions
therefrom. Only those representations or warranties which are made in a final
definitive agreement regarding any transactions contemplated hereby, when, as
and if executed and delivered, and subject to such limitations and restrictions
as may be specified therein, will have any legal effect.
5. NO SOLICITATION. In consideration of the Evaluation
Material being furnished to you, you hereby agree that, for a period of
eighteen months from the date hereof, you and your affiliates will not,
directly or indirectly, without the prior written consent of the Company,
solicit to employ or actually employ any of the officers or employees of the
Company with whom your first contact was in connection with your consideration
of a Possible Transaction.
X.X. Xxxxxx Securities Inc. ("XX Xxxxxx") will arrange for
appropriate contacts with officers and employees of the Company for due
diligence purposes and you should submit or direct to XX Xxxxxx all questions
regarding due diligence procedures and requests for due diligence information
and requests for contact with non-management level employees of the Company.
This Section 5 will not restrict you or your affiliates from
conducting any general solicitations for employees (including through the use
of employment agencies) not specifically directed at the Company, its employees
or members, and will not restrict you or your affiliates from hiring any person
who responds to any such general solicitation.
6. MATERIAL NON-PUBLIC INFORMATION. You acknowledge and
agree that you are aware (and that your Representatives are aware or, upon
receipt of any Evaluation Material or Discussion Information, will be advised
by you) that (i) the Evaluation Material or Discussion Information being
furnished to you or your Representatives contains or may itself be material,
non-public information regarding the Company and (ii) the United States
securities laws prohibit any persons who have material, nonpublic information
concerning the Company, including the Evaluation Material and Discussion
Information, from purchasing or selling securities of the Company or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such
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August 24, 2006
person is likely to purchase or sell such securities in reliance upon such
information. In furtherance and not in limitation of the foregoing, during the
period beginning on the date hereof and ending three (3) business days after
the Deadline Date (as defined below), neither you nor any of your affiliates
will, directly or indirectly, purchase or sell, or enter into any agreements to
purchase or sell, or otherwise transact in any way in, any securities (or
beneficial ownership thereof) of the Company, or rights or options to acquire
any securities (or beneficial ownership thereof) of the Company, including
derivative securities representing the right to vote or economic benefits of
any such securities.
On the earliest to occur of (i) 1:00 p.m. (Eastern time) on
October 16, 2006, (ii) the date of the execution by the Company of any letter
of intent, an agreement entering into exclusive negotiations with a third party
or definitive documentation, in each case with respect to a strategic
transaction involving the Company or any of its subsidiaries, including a
merger, recapitalization, debt refinancing, restructuring, or purchase or sale
of material assets or securities or any other similar transaction or agreement,
whether or not effected as a result of that certain exploration of strategic
alternatives to enhance stockholder value previously announced by the Company
(a "STRATEGIC TRANSACTION"), (iii) the date on which the Company makes public
disclosure that it is no longer pursuing any Strategic Transaction, (iv) the
date on which the Company mails notice of, provides notice of, or makes a
public disclosure of any meeting of stockholders of the Company, and (v) the
later of (x) the date that is thirty (30) days after the date hereof and (y)
the date that is two (2) business days after the date on which you inform the
Company in writing that you have determined not to pursue a transaction with
the Company, the Company shall promptly on the date of the first to occur of
clauses (i) through (v) above disclose, or provide an appropriate and adequate
summary of, all of the material non-public information included in the
Evaluation Material that has been provided to you or your Representatives, on
Form 8-K or other periodic report permitted to be filed under the Exchange Act
with the Securities and Exchange Commission (the date such filing is required
to be made by the Company, the "DEADLINE DATE"), and the Company shall certify
to you in writing on such date that all such material non-public information
has been appropriately and adequately disclosed; PROVIDED, HOWEVER, that the
Company shall not be required to disclose (or summarize) information included
in such Evaluation Material if such information constitutes Certain Evaluation
Material.
In the event you advise the Company in writing that you do not
believe that all of the material non-public information included in the
Evaluation Material that is not Certain Evaluation Material has been disclosed
by the Company in accordance with the terms of this Section 6, the Company
shall, within one trading day refer such dispute, at your option, to the
Strategic Alternatives Committee of the Board of Directors ("SAC") or the Board
of Directors, which shall within one trading day after such referral, advise
you of what additional disclosures, if any, will be made, and which items it
disputes as to disclosure, and the reasons therefore, including a further
certification to you in writing that such undisclosed information does not
constitute material non-public information. Notwithstanding anything herein to
the contrary, if the Company breaches its obligations under this Section 6 by
failing to disclose material non-public information at the time or times
required hereby or otherwise fails to comply with the dispute resolution
mechanisms herein, and such breach is not cured within two trading days of
written notice by you to the Company thereof, then you may disclose such
undisclosed information to the extent you reasonably and in good faith
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August 24, 2006
believe, after consultation with outside legal counsel, it constitutes
material non-public information concerning the Company; PROVIDED, HOWEVER,
that you will not publish the Report, or otherwise summarize, quote or make
reference to the conclusions, recommendations or suggestions in the Report.
7. NO AGREEMENT. You understand and agree that no contract
or agreement providing for any Possible Transaction shall be deemed to exist
between you and the Company unless and until a final definitive agreement has
been executed and delivered. You also agree that unless and until a final
definitive agreement regarding a Possible Transaction has been executed and
delivered, neither the Company nor you will be under any legal obligation of
any kind whatsoever with respect to such a Possible Transaction by virtue of
this letter agreement except for the matters specifically agreed to herein. You
further acknowledge and agree that the Company has reserved the right, in its
sole discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a Possible Transaction, to determine not to
engage in discussions or negotiations and to terminate discussions and
negotiations with you at any time, and to conduct, directly or through any of
its Representatives, any process for any transaction involving the Company or
any of its subsidiaries, if and as they in their sole discretion shall
determine (including, without limitation, negotiating with any other interested
parties and entering into a definitive agreement without prior notice to you or
any other person).
8. NO WAIVER OF RIGHTS. It is understood and agreed that
no failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
9. REMEDIES. It is understood and agreed that money
damages would not be a sufficient remedy for any breach of this letter
agreement by either party hereto or any of its Representatives and that the
non-breaching party shall be entitled to equitable relief, including, without
limitation, injunction and specific performance, as a remedy for any such
breach. Such remedies shall not be deemed to be the exclusive remedies for a
breach of this letter agreement but shall be in addition to all other remedies
available at law or equity to the non-breaching party. Each party hereto
further agrees not to raise as a defense or objection to the request or
granting of such relief that any breach of this letter agreement is or would be
compensable by an award of money damages, and each party hereto agrees to waive
any requirements for the securing or posting of any bond in connection with
such remedy.
10. GOVERNING LAW. This letter agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within the State of
New York, without regard to the conflict of law provisions thereof. Each party
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case, located in New York City in the State of New
York, for any actions, suits or proceedings arising out of or relating to this
letter agreement and the transactions contemplated hereby (and each party
hereto agrees not to commence any action, suit or proceeding relating thereto
except in such courts, and further agree that service of any process, summons,
notice or document by U.S. registered mail to such party's address set forth
above shall be effective service of process for any action, suit or proceeding
brought against such party in any such court). Each party hereto hereby
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irrevocably and unconditionally waives any objection which such party may now
or hereafter have to the laying of venue of any action, suit or proceeding
arising out of this letter agreement or the transactions contemplated hereby in
the courts of the State of New York or the United States of America, in each
case, located in New York City in the State of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
11. ENTIRE AGREEMENT. This letter agreement contains the
entire agreement between you and the Company regarding its subject matter and
supersedes all prior agreements, understandings, arrangements and discussions
between you and the Company regarding such subject matter.
12. NO MODIFICATION. No provision in this letter agreement
can be waived, modified or amended except by written consent of you and the
Company, which consent shall specifically refer to the provision to be waived,
modified or amended and shall explicitly make such waiver, modification or
amendment.
13. COUNTERPARTS. This letter agreement may be signed by
facsimile and in one or more counterparts, each of which shall be deemed an
original but all of which shall be deemed to constitute a single instrument.
14. SEVERABILITY. If any provision of this letter agreement
is found to violate any statute, regulation, rule, order or decree of any
governmental authority, court, agency or exchange, such invalidity shall not be
deemed to affect any other provision hereof or the validity of the remainder of
this letter agreement, and such invalid provision shall be deemed deleted
herefrom to the minimum extent necessary to cure such violation.
15. SUCCESSORS. This letter agreement shall inure to the
benefit of, and be enforceable by, the Company and its successors and assigns.
16. THIRD PARTY BENEFICIARIES. This Agreement is not
intended, and will not be construed, to create any rights in any parties other
than the Company and you and no person may assert any rights as third-party
beneficiary hereunder.
17. NO LICENSE. Nothing herein shall be deemed to grant a
license, whether directly or by implication, estoppel or otherwise, to any
Evaluation Material disclosed pursuant to this letter agreement.
18. TERM. This letter agreement will terminate on the
earlier to occur of (a) the date on which the parties enter into a definitive
agreement with respect to the Proposed Transaction and (b) the date which is
two years from the date hereof, whereupon this letter agreement shall terminate
and be of not further force or effect; PROVIDED, HOWEVER, that upon the
termination of this letter agreement, none of the parties shall have any
further additional obligations hereunder, except for such obligations under the
provisions relating to Sections 6 through 18.
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Please confirm your agreement with the foregoing by having a
duly authorized officer of your organization sign and return one copy of this
letter agreement to the undersigned, whereupon this letter agreement shall
become a binding agreement among you and the Company.
Very truly yours,
BALLY TOTAL FITNESS HOLDING CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Senior Vice President,
Secretary and General Counsel
CONFIRMED AND AGREED
as of the date written above:
PARDUS EUROPEAN SPECIAL OPPORTUNITIES
MASTER FUND L.P.
By: Pardus Capital Management L.P.,
its Investment Manager
By: Pardus Capital Management LLC,
its general partner
By: /s/ Xxxxx Xxxxx
---------------------------
Name: Xxxxx Xxxxx
Title: Sole Member
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