EXHIBIT 99.4
PURCHASE OPTION AGREEMENT
Purchase Option Agreement dated as of April 6, 1998, by and among
Maxifit, Ltd., a New Jersey corporation, Xxxxx Xxxxxxxxxx, Xxxxxxx Xxxxxxxxxx
and Xxxxxx Xxxxxxxxxx (collectively, "Sellers") and TSI Old Bridge, Inc., a
Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers desire to grant to Buyer an irrevocable option to
purchase all of the Purchased Assets (as hereinafter defined) or the Shares (as
hereinafter defined), which relate to the business, operations and activities of
the Sellers used in connection with, or arising out of, the use of Sellers'
health club facility located at Browntown Shopping Center, Route 516 & Xxxx
Road, Old Bridge, New Jersey (the "Club"), such option to be on the terms and
conditions hereinafter set forth in this Agreement; and
WHEREAS, from the date hereof until the expiration of the Option
Period (as hereinafter defined), Buyer, in accordance with the Management
Agreement (as hereinafter defined) shall have the exclusive right to supervise,
manage, operate and control the operation of the Club on the terms and
conditions set forth in this Agreement and the Management Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
THE OPTION
1.1 GRANT OF THE OPTION. The Sellers hereby jointly and severally grant to
Buyer the sole, exclusive and irrevocable option to purchase and acquire from
the Sellers in accordance with the terms of this Article 1 (the "Option").
1.2 OPTION PRICE; EXPIRATION DATE. (a) Upon the execution of this
Agreement, Buyer shall pay to Sellers the sum of One Million Dollars
($1,000,000.00) by Certified Check (the "Option Price") for the Option. The
Option Price shall be non-refundable.
(b) Buyer shall exercise the Option at any time on or prior to May 31,
1998, or, if there shall be a Legal Prohibition (as hereafter defined), within
10 days after such Legal Prohibition shall be removed or discharged in a manner
reasonably acceptable to Buyer (the "Expiration Date").
1.3 FORM OF ACQUISITION. Buyer shall acquire the Club on or before the
Expiration Date in accordance with, either, in Buyer's sole and exclusive
discretion (a) the terms of the Asset Purchase
Agreement, dated as of February 27, 1998, by and among Sellers and Buyer,
attached hereto as EXHIBIT A (the "Asset Purchase Agreement") ("Option (a)"), or
(b) the terms and provisions of the draft Stock Purchase Agreement, to be
executed by and among Buyer and Xxxxx Xxxxxxxxxx, Xxxxxxx Xxxxxxxxxx and Xxxxxx
Xxxxxxxxxx, attached hereto as EXHIBIT B (the "Stock Purchase Agreement")
("Option (b)") (the Asset Purchase Agreement and the Stock Purchase Agreement
shall be collectively referred to as the "Club Acquisition Agreements"). Buyer
shall designate whether Buyer wants to Close under Option (a) or Option (b) by
written notice to Sellers on or before the Expiration Date. In either case, the
Option Price shall be fully credited against the Purchase Price to be paid to
Sellers on the Closing Date under the Club Acquisition Agreements, as indicated
in Exhibit A or Exhibit B. In either case, notwithstanding anything to the
contrary contained in the Club Acquisition Agreements, the total additional
Purchase Price due to Sellers on the Closing Date shall be One Million One
Hundred Seventy-Five Thousand Dollars ($1,175,000.00) (the "Balance Purchase
Price") plus interest at the rate of Prime plus two percent (2%) per annum,
compounded daily (the "Interest Rate"), from the date hereof to and including
the Closing Date. Nothing in this Section 1.3 shall be construed to modify or
to be inconsistent with the terms of the TSI Note.
1.4 CLOSING DATE. Buyer shall exercise the Option and complete the
transactions contemplated herein on or before the Expiration Date (such date,
the "Closing Date"). On the Closing Date, Sellers shall deliver the Purchased
Assets, as defined in Exhibit A, or the Shares, as defined in Exhibit B, in
accordance with the terms of the Asset Purchase Agreement or the Stock Purchase
Agreement, as applicable, and Sellers and Buyer shall execute all documents
reasonably necessary to conclude such transaction, including, without
limitation, all documents required to be delivered pursuant to the appropriate
Club Acquisition Agreement.
1.5 MANAGEMENT AGREEMENT. The parties acknowledge that they are entering into
a Management Agreement, dated as of the date hereof and attached hereto as
EXHIBIT C (the "Management Agreement"), which provides for Buyer's full,
complete and exclusive right to supervise, manage, operate and control all
aspects of the Club including making all business, financial and other
decisions, from the date hereof through the Closing Date.
1.6 SELLERS OBLIGATIONS. The Sellers represent and warrant that as of the date
hereof Sellers have complied with all of the provisions of Article 8
("Conditions to Obligations of Buyer") of the Asset Purchase Agreement and
Article 6 ("Conditions Precedent to Buyer") of the Stock Purchase Agreement.
The parties also acknowledge that, in accordance with the terms of the
Management Agreement, Buyer shall have physical and constructive control of the
Club from the date hereof to the Closing Date. Recognizing that Buyer is in
control of the Club, Sellers hereby represent and warrant to Buyer that they
shall take no action or omit to take any action which (i) could have a material
adverse effect on the Purchased Assets, in the case of the Asset Purchase
Agreement, or the Shares, in the case of the Stock Purchase Agreement, or that
would otherwise cloud or adversely affect title to the any of the
Purchased Assets or the Shares or (ii) are inconsistent with the terms and
conditions of this Agreement, the Management Agreement and/or the Club
Acquisition Agreements. Sellers also agree, upon request from Buyer, that they
shall take all actions reasonably necessary to assist with the completion of the
transactions contemplated by the Club Acquisition Agreements.
1.7 REPRESENTATIONS AND WARRANTIES OF SELLER AS OF THE DATE HEREOF.
a. Asset Purchase Agreement
(i) Sellers represent that all representations and warranties specified in
the Agreement in Sections 5(a), 5(b), 5(c), 5(d), 5(e), 5(f), the third sentence
of 5(g), 5(g)(iv), 5(g)(vi), 5(g)(viii), 5(g)(ix), 5(g)(x), 5(h), 5(i), 5(j),
5(k), 5(l), 5(m), 5(n), 5(o), the second sentence of 5(q), 5(r), 5(s), 5(t),
5(u) and 5(v), are true and correct in all material respects, in each case as if
each representation or warranty were made as of the date hereof.
(ii) Buyer represents and warrants that as of the date hereof, all of Buyer
representations and warranties are true and correct. In all material respects,
in each case as if each representation or warranty were made as of the date
hereof.
b. Stock Purchase Agreement
Sellers represent and warrant that as of the date hereof, all of
Sellers' representations and warranties in the Stock Purchase Agreement are true
and correct.
1.8 REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE.
As of the Closing Date, Sellers and Buyer shall, each represent and warrant
that each of their statements in Section 1.7(a) or (b), as the case may be,
shall be true and correct as of the Closing Date.
1.9 SUPERSEDING TERMS.
Except as expressly provided to the contrary herein, upon the closing of
the Asset Purchase Agreement or the Stock Purchase Agreement on the Closing
Date, the terms of the applicable Club Acquisition Agreement shall supersede the
terms and replace the terms and provisions of this Agreement and the Management
Agreement.
1.10 LEGAL PROHIBITIONS.
Notwithstanding anything to the contrary herein or in the Club Acquisition
Agreements, in the case that there exists an injunction, restraining order or
other legal prohibition or restraint ("Legal Prohibition") restricting,
prohibiting or limiting Buyer's ability to complete the transactions
contemplated by this Agreement on the Expiration Date, the Expiration Date
shall be extended until such time as the Legal Prohibition is no longer in
effect. Buyer and Sellers agree that they shall each use best efforts, and
cooperate with each other, to prosecute, defend, settle, remove or otherwise
deal with respect to such Legal Prohibition, including any attempt by Landlord
or any third party to seek such Legal Prohibition. Buyer and Sellers agree that
they shall each pay one-half (1/2) of the total expenses incurred to prosecute,
defend, settle, remove or otherwise deal with respect to such Legal
Prohibitions, or any attempt to obtain the Legal Prohibitions, including
reasonable legal fees and expenses.
1.11 DEFENSE FUND.
(a) In the event that Buyer and/or Seller shall engage in any litigation
with Landlord (hereafter defined), whether prior or subsequent to the Closing
Date, arising out of or with respect to the Lease and/or the Demised Premises,
other than litigation resulting from Buyer's failure to make required payments
under the Lease, including any litigation contemplated by this Agreement Buyer
and Sellers agree that they shall each be responsible for one-half (1/2) of the
total reasonable legal fees and related expenses, including, but not limited to,
court costs, expert witnesses, studies, reports, investigators, stenographers,
etc.
1.12 DEEMED AMENDMENT TO ASSET PURCHASE AGREEMENT.
(a) This Agreement shall be deemed to amend and modify the Asset Purchase
Agreement. In the event of any conflict or inconsistency between the terms and
conditions of this Agreement and the Asset Purchase Agreement, the terms,
covenants and conditions of this Agreement shall govern and control. Except as
expressly modified by this Agreement, the Asset Purchase Agreement shall
continue in full force and effect and shall be unmodified.
(b) Upon Buyer's election to close pursuant to the Stock Purchase
Agreement, as set forth in this Agreement, the Asset Purchase Agreement shall be
terminated, and shall be of no further force and effect, and immediately
thereupon the relationship between the parties hereto shall be governed by the
Stock Purchase Agreement and this Agreement, which shall survive the termination
of the Asset Purchase Agreement. Further, if Buyer shall elect to close
pursuant to the Asset Purchase Agreement, in accordance with this Agreement, the
Stock Purchase Agreement shall be null and void AB INITIO, and the relationship
between the parties hereto shall thereafter be governed by the Asset Purchase
Agreement and this Purchase Option Agreement, without giving effect to the Stock
Purchase Agreement.
(c) The TSI Note annexed hereto as EXHIBIT D shall be the TSI Note
referred to in the Purchase Agreements (as such term is defined in the TSI
Note), and the TSI Note shall replace and supersede the draft of the TSI Note
annexed to each of the Purchase Agreements.
1.13 LEASE; RENEWAL TERM. (a) The parties hereto acknowledge and agree
that Maxifit, Ltd. and Xxxx Xxxxxx (or any successor
landlord, hereinafter, "Landlord") are parties to a certain Lease Agreement
dated August 9, 1993 with respect to the Demised Premises occupied by Maxifit,
Ltd. in the Browntown Shopping Center, Route 516 and Xxxx Road, Old Bridge, New
Jersey (the "Premises") (the "Lease"). The original expiration date of the
Lease is November 30, 2003 (the "Lease Expiration Date"). In addition, the
Lease contains one (1) five-year renewal term commencing immediately following
the expiration of the original Lease Term (the "Renewal Term"). The existing
term of the Lease, as extended by the Renewal Term, shall be deemed to
constitute the "Extended Term". Maxifit, Ltd. has heretofore exercised its
option to extend the Lease for the Renewal Term, and that Landlord has objected
in writing to Maxifit, Ltd.'s extension of the Lease for the Renewal Term.
(b) Subject to the further terms and conditions of this Agreement, Buyer
shall exercise reasonable efforts, and diligently pursue such efforts, to cause
Landlord to unequivocally agree in writing, whether pursuant to a written Lease
amendment or otherwise, that Maxifit, Ltd. has validly extended the Lease for
the Renewal Term. In connection therewith, Buyer may, but shall not be
obligated to, commence litigation against Landlord, either before or after the
Closing Date, to seek a declaratory judgement or other similar injunctive order
that the renewal option has been duly exercised by Maxifit, Ltd., and that the
Lease has been extended for the Renewal Term. Such litigation shall be
prosecuted by Buyer, in Buyer's sole and absolute discretion, using attorneys
selected by Buyer. Sellers agree to cooperate with Buyer in connection
therewith, to the extent Seller's cooperation shall reasonably be necessary.
The cost of such litigation shall be allocated between Sellers and Buyer
pursuant to Section 1.11 of this Agreement.
(c) The date which is the EARLIEST of the following dates shall be deemed
to be the Lease Renewal Resolution Date:
(i) the date upon which Buyer shall enter into an unequivocal
written agreement with Landlord, in a form acceptable to Buyer and Buyer's
counsel, which acknowledges that the Lease has been extended for the Renewal
Term;
(ii) the date upon which Landlord and Buyer shall enter into a duly
effective written agreement pursuant to which the Lease shall be extended for a
term which shall be equal to, or greater than, the Extended Term;
(iii) the date upon which Buyer shall receive a final and
unappealable judgement from a Court of competent jurisdiction which clearly and
unequivocally states that the Lease has been extended for the Extended Term, and
which duly binds Landlord with respect thereto;
(iv) the date which is the first (1st) anniversary date of the
Lease Expiration Date, provided, and upon the express condition, that (A)
Landlord shall have accepted the payment and performance of Tenant's obligations
under the Lease by Buyer for the period between the Lease Expiration Date and
the first (1st)
anniversary of the Lease Expiration Date and (B) Landlord and Buyer shall not
then be in litigation arising out of or with respect to, or which disputes the
due and valid extension of the Lease for the Extended Term, including any
holdover litigation; or
(v) if (A) the Lease Renewal Resolution Date shall not have occurred
prior to the first (1st) anniversary date of the Lease Expiration Date and (B)
the conditions of subparagraphs (iv)(A) and (iv)(B) above have not been
satisfied, then the Lease Renewal Resolution Date shall be the date upon which
(1) Buyer shall receive a final and unappealable judgement from a Court of
competent jurisdiction which clearly and unequivocally states that the Lease has
been extended for the Extended Term, and which duly binds Landlord with respect
thereto or (2) the expiration date of the Extended Term, provided that Buyer
shall continue to occupy the Premises, in accordance with the terms and
conditions of the Lease for the entire Extended Term (unless Buyer shall
voluntarily and wilfully terminate the Lease prior to the expiration date of the
Extended Term).
(d) Except as expressly provided to the contrary in this Agreement and/or
by the express terms of the TSI Note, the TSI Note shall become due and payable,
in accordance with its terms, upon the LATER to occur of (i) the Maturity Date
of the TSI Note or (ii) the Lease Renewal Resolution Date.
1.14 CONTRIBUTION TO LANDLORD.
(a) If at any time prior to the Lease Renewal Resolution Date, Buyer
shall agree in writing with Landlord to modify the Lease in a manner pursuant to
which Landlord acknowledges the validity of the extension of the Lease for the
Extended Term, and in connection therewith, Buyer, in Buyer's sole and absolute
discretion, shall agree in writing to pay to Landlord, over the balance of the
Extended Term, a sum (including any increased rent payments) having a net
present value, discounted at the then current Interest Rate (the "Discount
Rate"), which shall be greater than the net present value, discounted at the
Discount Rate, of the sum of $25,000.00 per annum to be paid to Landlord from
the Transition Date through the last day of the Extended Term, then Sellers
shall pay to Buyer fifty percent (50%) of such difference. By way of example,
if Buyer agrees to pay Landlord the sum of fifty thousand dollars ($50,000.00)
per annum from the Transition Date through the expiration date of the Extended
Term, then, upon the consummation of such agreement, Sellers shall pay to Buyer
fifty percent (50%) of the difference between (i) the net present value of fifty
thousand dollars ($50,000.00) per annum, payable from the Transition Date
through the expiration date of the Extended Term, discounted at the Discount
Rate, and (ii) the net present value of twenty five thousand dollars
($25,000.00) per annum, payable from the Transition Date through the expiration
date of the Extended Term, discounted at the Discount Rate.
(b) Upon such an agreement being entered into between Buyer and
Landlord, the Lease Renewal Resolution Date shall be deemed to have occurred
under the TSI Note.
1.15 SELLER'S CAP.
(a) Notwithstanding anything to the contrary contained herein, the
aggregate amount of the payments required to be made by Sellers pursuant to
Sections 1.10, 1.11, 1.13(b) and 1.14 of this Agreement shall not exceed the sum
of $125,000.00.
(b) The amounts required to be paid by Sellers pursuant to Sections 1.10,
1.11, 1.13(b) and 1.14, limited as set forth in Subparagraph 1.15(a) above,
shall be offset by Buyer, when due, against the amounts due and payable under
the TSI Note.
1.16 SURVIVAL. Notwithstanding anything to the contrary herein or in the Asset
Purchase Agreement or the Stock Purchase Agreement, Section 3(d), 3(c), 3(f),
3(g) of the Asset Purchase Agreement shall be deemed in effect from the date of
this Agreement forward, and shall remain in effect regardless of which of the
Club Acquisition Agreements is terminated.
1.17 REMEDIES. (a) If Seller shall willfully default under this Agreement,
Buyer shall have all of Buyer's remedies in equity or at law, including specific
performance of this Agreement, and the Management Agreement shall continue in
full force and effect.
(b) If Buyer shall willfully default under this Agreement, Sellers shall
have all of Sellers' remedies in equity or at law, including the right to
terminate this Agreement, the Asset Purchase Agreement and the Management
Agreement. In the case of Buyer's willful default, Sellers shall have the right
to retain the Option Price.
2. MISCELLANEOUS
2.1 NOTICES. Any notice, consent or other communications
required or permitted under this Agreement shall be in writing and delivered by
personal delivery, certified mail, return receipt requested or by a recognized
overnight courier, addressed as follows:
To Sellers:
Xxxxx Xxxxxxxxxx
00 Xxxxxxxx Xxx
Xxxxxxxx, Xxx Xxxxxx 00000
Fax: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxxxxx, Esq.
00 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
To Buyer:
TSI Old Bridge, Inc.
c/o Town Sports International, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxxxxxxxxxx, Esq.
with a copy to:
Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Notices shall be deemed given (i) when received, if delivered by personal
delivery, (ii) three business days after being deposited in the United States
mail, if delivered by certified mail, and (iii) the next business day, if
delivered by overnight courier.
2.2 BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of Sellers and Buyer and their respective successors and
assignees.
2.3 ENTIRE AGREEMENT. This Agreement, together with the
exhibits, schedules, Acquisition Agreements and other writings referred to in
this Agreement, embodies or reflects the entire agreement among the parties
relating to the subject matter of this Agreement.
2.4 AMENDMENT AND WAIVER. This Agreement may not be amended,
modified or waived in whole or in part at any time, except in a writing signed
by Seller's and Buyer.
2.5 GOVERNING LAW. (i) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
(ii) Any dispute, claim or controversy arising out of or relating
to this Agreement or the Acquisition Agreements, including, but not limited to
Buyer's and TSI's right of offset in Section 10(e) hereof, shall be settled by
arbitration in Monmouth County, New Jersey in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, or any successor
thereof. The decision and award of the arbitration shall be final and
conclusive on the parties, and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
IN WITNESS WHEREOF, this Purchase Option Agreement has been executed
and delivered by the parties as of the date first above written.
MAXIFIT, INC. d/b/a
Ovox Fitness & Sports Center of Old Bridge
By: Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxxxxxx
President
Xxxxx Xxxxxxxxxx
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XXXXX XXXXXXXXXX
Xxxxxxx Xxxxxxxxxx
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XXXXXXX XXXXXXXXXX
Xxxxxx Xxxxxxxxxx
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XXXXXX XXXXXXXXXX
TSI OLD BRIDGE, INC.
By: Xxxxxxxxx Xxxxxxxxxxxxx
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Xxxxxxxxx Xxxxxxxxxxxxx
Executive Vice President
