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EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
By and Among
DAVID W. PICKERING, INC.,
HEALTH FITNESS CORPORATION
and
HEALTHY LIFESTYLE NETWORK INTERNATIONAL, LLC
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AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "AGREEMENT") made effective as
of the 1ST day of January, 2001 ("Effective Date"), by and among HEALTH FITNESS
CORPORATION, a Minnesota corporation ("SELLER"), HEALTHY LIFESTYLE NETWORK
INTERNATIONAL, LLC, a Rhode Island limited liability company ("BUYER"), DAVID W.
PICKERING, INC., a Rhode Island corporation (the "COMPANY"), and David W.
Pickering, individually ("PICKERING").
WITNESSETH:
WHEREAS, the Company is engaged in the business of operating the
"International Fitness Club Network", consisting of organizing and maintaining a
network of fitness and health clubs and marketing to employers and insurance
companies memberships in such clubs (the "IFCN BUSINESS") as formerly conducted
by the International Health and Racquet Sports Association ("IHRSA"); and
WHEREAS, the Company purchased all of the assets of the IFCN Business
from IHRSA pursuant to an agreement dated March 1, 1998 (the "IHRSA PURCHASE
AGREEMENT"); and
WHEREAS, Seller is the holder of 100 shares of Common Stock of the
Company, which shares constitute all of the issued and outstanding shares of
capital stock of the Company (all such shares of Company Common Stock held by
the Seller being hereinafter referred to as the "SHARES"); and
WHEREAS, Seller, the Company and International Fitness & Wellness
Corporation ("IFWC") entered into a Management Agreement dated as of June 4,
1998, pursuant to which IFWC was engaged to manage the IFCN Business; and
WHEREAS, Pickering is sole owner of IFWC and is one of the principal
shareholders of Buyer;
WHEREAS, Buyer, Pickering, and IFWC desire to terminate the Management
Agreement with Seller and the Company and to have Buyer acquire from Seller all
of the Shares, and Seller desires to sell all of the Shares to Buyer, on the
terms and subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and intending to be legally
bound, the parties hereto hereby agree as follows:
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ARTICLE 1
PURCHASE AND SALE OF THE SHARES
1.1. Purchase and Sale of the Shares. As of the Effective Date, subject to the
terms and conditions of this Agreement and on the basis of the
representations, warranties, covenants and agreements herein contained,
Seller hereby sells, assigns and conveys to Buyer, and Buyer hereby
purchases, acquires and accepts from Seller, all of the Shares.
ARTICLE 2
PURCHASE PRICE
2.1. Purchase Price. The aggregate purchase price (the "PURCHASE PRICE") for
the Shares shall be Four Hundred Twenty Five Thousand Dollars ($425,000).
2.2. Purchase Price Payment. The Purchase Price shall be paid by Buyer to
Seller on the Closing Date in the form of a wire transfer to: Southern
Pacific Bank, Torrance, California, ABA# 3222-8647-6, Coast Business
Credit, Acct. 148175018, Attn. J. Leaver, Re. Health Fitness Corporation.
ARTICLE 3
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SELLER
The Seller hereby represents and warrants to, and covenants and agrees
with, Buyer, as of the date hereof and as of the date of the Closing, that:
3.1. Organization and Qualification. The Company is duly organized, validly
existing and in good standing under the laws of the State of Rhode Island
and has full corporate power and authority to own its properties and to
conduct the businesses in which it is now engaged. The Company is duly
qualified as a foreign corporation and in good standing in each other
jurisdiction where such qualification is required by virtue of the
Company's property or the operations of the IFCN Business and where
failure to qualify would not have a material adverse effect on the IFCN
Business; SCHEDULE 3.1 sets forth the jurisdictions in which the Company
is required to be qualified as a foreign corporation. The Company has no
subsidiaries, owns no capital stock and to Seller's knowledge, has no
other proprietary interest, directly or indirectly, in any other
corporation, association, trust, partnership, joint venture or other
entity nor has any agreement with any person, firm or corporation to
acquire any such capital stock or other proprietary interest. The Company
has full power, authority and legal right and, to Seller's knowledge, all
necessary approvals, permits, licenses and authorizations to own its
properties, to conduct the IFCN Business and to enter into and consummate
the transactions contemplated under this Agreement. The copies of the
articles of incorporation and bylaws of the Company that have been
delivered to Buyer are complete and correct.
3.2. Authority. The execution and delivery of this Agreement by the Company and
the Seller, the performance by the Company and the Seller of its covenants
and agreements hereunder and the consummation by the Company and the
Seller of the transactions contemplated hereby have been duly authorized
by all necessary corporate action. This Agreement
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constitutes the valid and legally binding obligation of the Company and
Seller, enforceable against the Company and Seller in accordance with its
terms.
3.3. Ownership of the Shares. Seller owns all of the Shares in the amounts set
forth in SCHEDULE 3.3, which Shares represent all of the issued and
outstanding shares of stock of the Company, free and clear of any lien,
encumbrance, charge, security interest or claim whatsoever, and the Seller
has the right to transfer the Shares to Buyer, and upon transfer of the
Shares to Buyer hereunder, Buyer will acquire good and marketable title to
the Shares, free and clear of any lien, encumbrance, charge, security
interest or claim whatsoever.
3.4. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the articles of incorporation or bylaws of the
Company or the Seller or any statute, ordinance, regulation, order,
judgment or decree of any court or governmental agency or board, or
conflicts with or will result in any breach of any of the terms of or
constitute a default under or result in the termination of or the creation
of any lien pursuant to the terms of any contract or agreement to which
the Company or the Seller is a party or by which the Company or the Seller
or any of the assets of the Company or the Seller is bound.
3.5. Capitalization. The authorized capital stock of the Company consists of
Eight Thousand (8,000) shares of Common Stock, of which One Hundred (100)
shares are issued and outstanding and owned by Seller as set forth in
SCHEDULE 3.5. All of the issued and outstanding shares of Company Common
Stock have been duly and validly authorized and issued and are fully paid
and non-assessable and are owned beneficially and of record by the Seller.
There are no outstanding subscriptions, warrants, options, calls,
commitments or other rights or agreements to which the Company or the
Seller are bound relating to the issuance, sale or redemption of the
Shares or other securities of the Company (except this Agreement) and no
person other than the Seller has any interest in the Shares.
3.6. Financial Statements; No Undisclosed Liabilities. The Company and the
Seller have delivered to Buyer the financial statements regarding the
Company attached hereto as SCHEDULE 3.6, including the Effective Date
Company Balance Sheet (the "FINANCIAL STATEMENTS"). The Financial
Statements include a balance sheet prepared by Seller as of the Effective
Date (the "Effective Date Company Balance Sheet"). The Company and Seller
represent and warrant that the Financial Statements accurately reflect the
financial condition of the Company as of the dates thereof in all material
respects; provided that neither Company nor Seller shall bear any
responsibility for errors or omissions in the Financial Statements
resulting from information supplied (or omitted to be supplied) by David
W. Pickering, Bridget Zech, or Ann Driscoll. The parties acknowledge that
none of such Financial Statements (including the Effective Date Company
Balance Sheet) includes any amount for unpaid reimbursement claims from
David W. Pickering, Bridget Zech, or Ann Driscol, and Buyer shall be
solely responsible for any and all such reimbursement claims, whenever and
however the same may have arisen.
3.7. No Dividends. Seller has not caused the Company to declare or pay any
dividends or to make any other distribution in respect of the Company's
capital stock, or, directly or
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indirectly, to purchase, redeem or otherwise acquire or dispose of any
shares of the Company's capital stock, except for such transactions as do
not violate the corporate laws applicable to the Company.
3.8. Indebtedness. To Seller's knowledge, the Company is not subject to any
indebtedness except as reflected on the Effective Date Balance Sheet.
Neither Company nor Seller shall bear any responsibility for errors or
omissions in the disclosure of Indebtedness on the Effective Date Balance
Sheet resulting from information supplied (or omitted to be supplied) by
David W. Pickering and/or personnel who report to him.
3.9. Real Property Owned or Leased. To Seller's knowledge, Seller does not own
or lease any real property other than as set forth in SCHEDULE 3.9 Except
as forth in SCHEDULE 3.9, to Seller's knowledge all such leased real
property is held subject to written leases or other agreements which are
valid and effective in accordance with their respective terms, and to
Seller's knowledge there are no existing defaults or events of default, or
events which with notice or lapse of time or both would constitute
defaults, thereunder on the part of the Company.
3.10. Title to Shares. Seller has good and valid title to the Shares, free from
any liens, charges, encumbrances or security interests.
3.11. Taxes. Based upon information furnished by David W. Pickering and/or
personnel who report to him, the Seller has filed or caused to be filed on
a timely basis all consolidated tax returns, reports or declarations that
are required to include the Company, and has paid or adequately reserved
for all taxes, including, but not limited to, income, excise, franchise,
sales, use, property, unemployment, withholding, social security and
workers' compensation taxes and estimated income and franchise tax
payments, and penalties, fines and interest due and payable as the same
are reflected on such returns, reports or declarations or pursuant to any
assessment received by it in connection with such returns, reports or
declarations. All such consolidated returns, reports and declarations
filed by or on behalf of the Company or the Seller are true, complete and
correct reflections, in all respects, of information furnished by David W.
Pickering and/or personnel who report to him. No deficiency in payment of
any taxes for any period has been asserted by any taxing authority which
remains unsettled at the date hereof, no written inquiries have been
received by the Seller from any taxing authority with respect to possible
claims for taxes or assessments, and there is no basis for any additional
claims or assessments for taxes. Seller has no knowledge that the Company
or Seller has incurred any tax liability other than in the ordinary course
of business. No tax returns of the Seller have ever been audited insofar
as the same involve the Company, and no written inquiries have been
received by the Seller from a taxing authority with respect to possible
claim for taxes or assessments involving the Company or Seller. The Seller
has not agreed to the extension of the statute of limitations with respect
to any tax return. There are no assessments relating to the Seller's tax
returns pending or threatened that involve the Company or Seller.
3.12. Compliance with Applicable Law. To Seller's knowledge, the Company has
complied with all, statutes, ordinances, regulations, orders, judgments
and decrees of any court or governmental entity or agency, governing the
Company and the operations thereof.
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Without limiting the foregoing, the Seller has not received any
notification of any asserted failure to comply with any of the foregoing
which has not been satisfactorily responded to in the time period required
thereunder.
3.13. Permits. To Seller's knowledge, Seller has all necessary permits, the
absence of which would have a material adverse effect on the IFCN
Business.
3.14. Licenses. To Seller's knowledge, the Company does not produce or
distribute any product, or perform any service under a license granted by
another entity and has not licensed its rights in any current or planned
products, designs or services to any other entities.
3.15. Contracts. Seller makes the following representations and warranties
regarding contracts.
(a) To Seller's knowledge, SCHEDULE 3.15 identifies all material contracts
between the Company and its clients and customers, copies of which have
been forwarded to Buyer.
(b) To Seller's Knowledge, except for such contracts as may have been
entered into by David W. Pickering and/or personnel who report to him,
the Company is not party to or bound by:
(i) any contract for the purchase or sale of real property;
(ii) any contract for the purchase, licensing or development of customized
software which Seller reasonably determines to have involved the payment
of more than $50,000 in 2000 or which is not terminable by any party
thereto until after December 31, 2001;
(iii) any consignment, distributor, dealer, manufacturers representative,
sales agency, advertising representative or advertising or public
relations contract which Seller reasonably determines to have involved
the payment of more than $50,000 in 2000 or which is not terminable by
any party thereto until after December 31, 2001;
(iv) any guarantee of the obligations of customers, suppliers, officers,
directors, employees, stockholders, members, or others;
(v) any agreement which provides for, or relates to, the incurrence of debt
for borrowed money (including any interest rate or foreign currency
swap, cap, collar, hedge or insurance agreements, or options or forwards
on such agreements, or other similar agreements for the purpose of
managing the interest rate and/or foreign exchange risk associated with
its financing);
(vi) any contracts or agreements having covenants not to compete that
materially impair the ability of Company to conduct the business as
currently conducted; or
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(vii) any other contract, agreement, commitment, understanding or instrument
which Seller reasonably determines to have involved the payment of more
than $100,000 in 2000 or which is not terminable by any party thereto
until after December 31, 2001.
3.16. Employee Benefit Plans and Related Agreements
(a) SCHEDULE 3.16(A) sets forth a list of each "employee pension benefit
plan" (as such term is defined in Section 3(2) of ERISA) and each
"employee welfare benefit plan" (as such term is defined in Section 3(1)
of ERISA) covering any employee or former employee of Company
(collectively, "Company's ERISA Plans"). Company is not required to
contribute to any "multiemployer plan" (as such term is defined in
Section 3(37) of ERISA).
(b) Company has made available to Buyer, with respect to each Company's
ERISA Plan correct and complete copies, where applicable, of (i) all
plan documents and amendments, trust agreements and insurance and
annuity contracts and policies, (ii) the most recent IRS determination
letter, (iii) the Annual Reports (Form 5500 Series) and accompanying
schedules and actuarial reports, as filed, for the most recently
completed three plan years, (iv) the summary plan description currently
in use and, (v) copies of correspondence from the IRS, the Department of
Labor or the Pension Benefit Guaranty Corporation regarding any plan
audit or investigation or any intent to conduct a plan audit.
(c) Each of Company's ERISA Plan which is intended to qualify under Section
401(a) of the Code in fact is so qualified under the Code. To Seller's
knowledge, nothing has occurred to cause any of the Company's ERISA
Plans to cease to be qualified under the Code.
(d) Each Company's ERISA Plan complies, and has been administered to comply,
with all Requirements of Law, and there has been no notice issued by any
Governmental Body questioning or challenging such compliance, and there
are no actions, suits or claims (other than routine claims for benefits)
pending or, to Seller's knowledge, threatened involving any such Plan or
the assets of any such Plan.
(e) Company does not have any obligations under any of Company's Non-ERISA
Plans or Company's ERISA Plans or otherwise to provide health or death
benefits to or in respect of former employees of Company, except as
specifically required by the continuation requirements of Part 6 of
Title I of ERISA, Section 4980B of the Code or applicable state law.
(f) Company does not have any liability of any kind whatsoever, whether
direct, indirect, contingent or otherwise, on account of (i) any
violation of the health care requirements of Part 6 of Title I of ERISA
or Section 4980B of the Code, (ii) under Section 502(i) or Section
502(l) of ERISA or Section 4975 of the Code, (iii) under Section 302 of
ERISA or Section 412 of the Code or (iv) under Title IV of ERISA.
Assuming that each of Company's ERISA Plans which is subject to Title IV
of ERISA were terminated as of the Closing Date, Company would have no
liability under Title IV of ERISA as a result of such termination.
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3.17. Equipment. To Seller's knowledge, and except for equipment subject to
capitalized leases, the Company has good and marketable right, title and
interest in and to all its equipment reflected in the Effective Date
Balance Sheet and valid leasehold interests in and to all leased equipment
used by the Company in the conduct of its business. To Company's knowledge
all such leasehold interests are enforceable in accordance with their
respective terms and conditions and there does not exist any violation,
breach or default under any such leasehold interest. SCHEDULE 3.17 lists
the equipment valued over $500 in the possession of the Company as of the
Effective Date.
3.18. Disputes. To Seller's knowledge there are no claims, disputes, actions,
suits, investigations or proceedings pending or threatened against or
affecting the Company, the IFCN Business, or any of the properties or
assets of the Company, which, if determined adversely, would have a
material adverse effect on the IFCN Business.
3.19. Disclaimer of Certain Warranties. Except as expressly set forth herein,
Seller makes no representation or warranty of any kind whatsoever, express
or implied, with regard to the Shares, the Company, the IFCN Business, or
the Company's assets, liabilities, prospects, or financial condition.
3.20. Definition of "To Seller's Knowledge". The phrase "To Seller's knowledge"
means the actual knowledge of Seller's employees as well as information
Seller's employees reasonably should have known. "To Seller's knowledge"
does not include "constructive" knowledge or any knowledge or information
of David W. Pickering or any individuals who report to him or who are
under his control.
3.21. Conduct of Business. Neither the Company nor the Seller is restricted from
conducting the IFCN Business in any location by agreement or court decree.
ARTICLE 4
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF BUYER
Buyer hereby represents and warrants to, and covenants and agrees with,
the Company and the Seller, as of the date hereof and as of the date of the
Closing, that:
4.1. Organization. Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Rhode Island;
has full power and authority to conduct the businesses in which it is now
engaged; and is in good standing in each jurisdiction where it is
presently conducting business and where the failure to be in good standing
would have a material adverse effect on Buyer.
4.2. Authority. The execution and delivery of this Agreement by Buyer, the
performance by Buyer of its covenants and agreements hereunder and the
consummation by Buyer of the transactions contemplated hereby have been
duly authorized by all necessary limited liability company action, and
this Agreement constitutes a valid and legally binding obligation of
Buyer, enforceable against Buyer in accordance with its terms.
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4.3. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the articles of organization of Buyer or any
statute, ordinance, regulation, order, judgment or decree of any court or
governmental agency, or conflicts with or will result in any breach of any
of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which Buyer is a party or by which Buyer or any of its assets
is bound.
4.4. Buyer's Knowledge and Experience. David W. Pickering, who is a principal
member of Buyer, has thorough and extensive knowledge and experience
concerning the IFCN Business, including its assets, liabilities,
prospects, and financial condition, and is fully apprised of the risks
associated with the IFCN Business. Buyer acknowledges that Buyer is not
relying in its acquisition of the Shares upon any representations or
warranties concerning the Company, or the IFCN Business, or the Company's
assets, liabilities, prospects, or financial condition, except for the
specific representations and warranties set forth in this Agreement.
ARTICLE 5
CLOSING
5.1. Time and Place of Closing. By execution of this Agreement, the parties
acknowledge that the transactions contemplated herein have closed as of
the Effective Date.
5.2. Delivery of Shares. Buyer acknowledges receipt as of the Effective Date of
the Shares in the form of one or more certificates representing the
Shares, duly endorsed for transfer to Buyer.
ARTICLE 6
INDEMNIFICATION
6.1. Indemnification by Seller. Seller shall indemnify and hold harmless Buyer
and the Company from and against all losses, claims, assessments, demands,
damages, liabilities, obligations, taxes, interest and penalties, costs
and/or expenses, including, without limitation, reasonable fees and
disbursements of counsel (hereinafter referred to collectively as
"DAMAGES") sustained or incurred by Buyer or the Company by reason of the
breach (or any third party claim which, if true, would constitute a
breach) of any of the obligations, covenants or provisions of, or the
inaccuracy of any of the representations or warranties made by the Seller
herein; provided that:
(a) Seller's liability for such Damages shall not exceed $150,000;
(b) Seller shall have no responsibility to make indemnity for any matter of
which David W. Pickering, Bridget Zech and Ann Driscoll had knowledge on
or prior to the Effective Date, or for any Damages to the extent such
Damages are a result of information supplied (or omitted to be supplied)
by David W. Pickering, Bridget Zech, or Ann Driscoll.
6.2. Indemnification by Buyer. David W. Pickering and Buyer shall jointly and
severally indemnify and hold harmless the Seller from and against any and
all Damages sustained or
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incurred by the Seller by reason of (i) the breach (or any third party
claim which, if true, would constitute a breach) of any of the
obligations, covenants or provisions of, or the inaccuracy of any of the
representations or warranties made by, Buyer herein, (ii) any acts or
omissions by David W. Pickering, Bridget Zech, or Ann Driscoll, or (iii)
any liabilities, obligations or undertakings of the Company of any kind or
nature whatsoever entered into by or under the authority of David W.
Pickering, Bridget Zech, or Ann Driscoll, whether fixed or contingent,
known or unknown, determined or determinable, due or not yet due;
provided, however, that this Section 6.2 shall not apply to actions,
undertakings, liabilities, obligations or omissions about which Seller had
knowledge prior to the Effective Date. The parties acknowledge that the
employees of the Company on and as of the Effective Date are identified in
SCHEDULE 6.2 hereto and that Buyer shall have sole responsibility for such
employees immediately after giving effect to the transactions herein on
the Effective Date.
6.3. Procedure for Indemnification. In the event that any party hereto shall
incur any Damages in respect of which indemnity may be sought by such
party pursuant to this ARTICLE 6, the party from whom such indemnity may
be sought (the "INDEMNIFYING PARTY") shall be given written notice thereof
by the party seeking such indemnity (the "INDEMNIFIED PARTY"), which
notice shall specify the amount and nature of such Damages and include the
request of the Indemnified Party for indemnification of such amount. The
Indemnifying Party shall within thirty (30) days pay to the Indemnified
Party the amount of the Damages so specified.
6.4. Survival of Representations Warranties and Agreements. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing and remain in full force and effect
for a period of one year after the Effective Date, except that the
representations in Paragraph 3.11 (Taxes) shall survive until any
applicable statute of limitations has expired.
ARTICLE 7
POST-CLOSING OBLIGATIONS
7.1. Seller's Non-competition Covenant. Subsequent to the Effective Date and
until three (3) years after the Effective Date, Seller agrees not (i) to
enter into any business that is competitive with the IFCN Business (as
defined in the Preamble to this Agreement), whether directly or
indirectly, whether as principal, agent, investor, distributor,
representative, stockholder, employee, consultant, volunteer or otherwise,
or (ii) to solicit or entice or endeavor to solicit or entice away from
the Buyer, the Company or any entity that is a subsidiary or otherwise
affiliated with the Buyer or the Company (the "BUYER GROUP") any person
who was a director, officer, employee, agent or consultant of such member
of the Buyer Group at any time within one year prior to such solicitation,
either on the Seller's own account or for any person, firm, corporation or
other organization, whether or not such person would commit any breach of
his contract of employment by reason of leaving the service of such member
of the Buyer Group, or (iii) to employ, directly or indirectly, any person
who was a director, officer or employee of the Buyer Group at any time
within one year prior to such employment or who by reason of such position
at any time is or may be likely to be in possession of any confidential
information
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or trade secrets relating to the IFCN Business, or (iv) to provide or to
seek to provide services of any kind, including but not limited to
communications services, computer software or hardware products or
services, or web-based interactive communication services, to any entity
that is a customer or client of Company as of the Effective Date as set
forth on SCHEDULE 7.1 without the prior written consent of Buyer. This
paragraph is subject to the following exceptions:
(a) Seller may continue to market the services of the IFCN Business to its
current and future clients, and Buyer agrees that the Company shall
provide such services as provided in Section 7.3 herein.
(b) Seller may employ or otherwise retain the services of Ricardo Johnson
and John Cavannah (and Cavannah may also work for Company) after the
Effective Date.
(c) Seller may provide or seek to provide services to those customers or
clients of Company that are also customers or clients of Seller as of
the Effective Date, specifically including Glaxo and Federal Express.
7.2. Buyer's Non-competition Covenant. Subsequent to the Effective Date and
until three (3) years after the Effective Date, neither Buyer nor any
entity included within the definition of Buyer Group set forth in Section
7.1, shall (i) enter into any business that is competitive with the
Seller's current business, whether directly or indirectly, whether as
principal, agent, investor, distributor, representative, stockholder,
employee, consultant, volunteer or otherwise, or (ii) solicit or entice or
endeavor to solicit or entice away from the Seller or any entity that is a
subsidiary or otherwise affiliated with the Seller (the "SELLER GROUP")
any person who was a director, officer, employee, agent or consultant of
such member of the Seller Group at any time within one year prior to such
solicitation, either on the Buyer's own account or for any person, firm,
corporation or other organization, whether or not such person would commit
any breach of his contract of employment by reason of leaving the service
of such member of the Seller Group, or (iii) employ, directly or
indirectly, any person who was a director, officer or employee of the
Seller Group at any time within one year prior to such employment, or who
by reason of such position at any time is or may be likely to be in
possession of any confidential information or trade secrets relating to
the business of any member of the Seller Group, or (iv) provide or to seek
to provide services of any kind, including but not limited to
communications services, computer software or hardware products or
services, or web-based interactive communication services, to any entity
that is a customer or client of Seller as of the Effective Date as set
forth on SCHEDULE 7.2 without the prior written consent of Seller.
However, nothing in the preceding clause (iv) shall prohibit Company from
providing or seeking to provide services to those customers or clients of
Seller that are also customers or clients of Company as of the Effective
Date, specifically including Glaxo and Federal Express.
7.3. Seller's IFCN Commissions. For a period of three (3) years after the
Effective Date, IFCN shall pay Seller a commission of 25% on the gross
annual charges by the Company or the Buyer Group to any of Seller's
current or future clients for the first year of any services provided to
such clients which do not have a written contract with the Company as of
the
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Effective Date. During such three-year period, the Company and/or the
Buyer Group shall offer services of the IFCN Business to Seller's present
and future clients upon terms equivalent to terms offered to equivalently
situated clients of the Company and the Buyer Group. This Paragraph shall
not apply to commissions from the Federal Express or Charles Schwab
accounts.
7.4. Payment of Obligations. Buyer will pay all obligations of the Business in
the ordinary course of business in accordance with their terms (including
compensation and benefits to employees arising both before and after the
Effective Date) and shall indemnify Seller in accordance with Article 6
for all Damages resulting from Buyer's failure to do so. Without limiting
the generality of the foregoing, Buyer shall be responsible for all
employees of the Business and all decisions regarding continued employment
of such persons from and after the Effective Date; provided that the
parties acknowledge that Ricardo Johnson and John Cavannah (Cavannah may
also be employed by Buyer) will be employed by the Seller from and after
the Effective Date, and Seller shall be solely responsible for all
compensation, benefits and other obligations to such persons arising
before and after the Effective Date. This clause is intended solely for
the benefit of the parties hereto and shall not be deemed to create
third-party beneficiary rights on behalf of any person.
7.5. Confidentiality. Buyer and members of the Buyer Group will hold in strict
confidence, and will not use any data and information obtained from Seller
in connection with the transactions contemplated herein except as
necessary and appropriate to operate the IFCN Business after the Effective
Date.
7.6. Relationship with Loren Brink. To the best of Buyer's knowledge, Buyer
acknowledges that Loren Brink is a former director and employee of Seller
who is subject to a covenant of noncompetition to expire on July 24, 2002
that prohibits Mr. Brink from serving directly or indirectly as a partner,
officer, director, employee, agent, or shareholder of the Company or Buyer
only to the extent, and pursuant to, the terms of that agreement. Neither
Buyer nor any entities included in the Buyer Group will solicit or engage
Mr. Brink to serve in any such capacities that would cause him to violate
his covenant of noncompetition or that would violate Buyer's
Non-competition Covenant pursuant to Paragraph 7.2 of this Agreement.
7.7. Enforcement. Seller and Buyer agree that if, in any proceedings, a court
or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended
and modified in keeping with the intention of the parties to the maximum
extent permitted by law.
7.8. Assignment of Contracts. Seller will, at Buyer's request, make all
reasonable efforts necessary to obtain any consents required to assign
contracts between the Company and its clients and customers. Seller shall
not be required to pay any sum associated with obtaining a consent unless
Buyer provides such sum in advance to Seller.
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7.9. Books and Records. Seller will provide to Buyer a copy of the corporate
books and records pertaining to the operation of the Company.
ARTICLE 8
OTHER OBLIGATIONS
8.1. Seller's Obligations. Neither Buyer nor the Company shall have any
obligation to pay any fee or other compensation to any person, firm or
corporation dealt with by the Company or the Seller in connection with
this Agreement and the transactions contemplated hereby, and the Seller
hereby agrees to indemnify and save the Buyer and the Company harmless
from any liability, damage, cost or expense arising from any claim for any
such fee or other compensation. Seller further acknowledges its obligation
to Brink as set forth in Section 8.3 below.
8.2. Buyer's Obligations. Neither the Company nor the Seller shall have any
obligation to pay any fee or other compensation to any person, firm or
corporation dealt with by Buyer in connection with this Agreement and the
transactions contemplated hereby, and Buyer hereby agrees to indemnify and
save the Company and the Seller harmless from any liability, damage, cost
or expense arising from any claim for any such fee or other compensation.
8.3. Brink Fee. Notwithstanding the provisions of Sections 8.1 and 8.2 herein,
the parties acknowledge that Seller shall pay Loren Brink a fee of $25,000
following consummation of the transactions contemplated herein.
8.4. Management Agreement. The parties and IFWC acknowledge that the Management
Agreement is terminated as of the Effective Date without any obligation by
any party thereto to any other party thereto; provided that the indemnity
obligations of IFWC set forth in Section 6(c) therein shall continue in
full force and effect.
ARTICLE 9
MISCELLANEOUS
9.1. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered personally, sent by registered or certified mail,
postage prepaid, or sent via facsimile (with confirmation of transmission)
as follows:
If to the Buyer or, after the Closing, the Company:
Healthy Lifestyle Network International, LLC
Attn: David W. Pickering
1515 Hospital Trust Tower
Providence, RI 02903
Phone: (401) 453-1232
Fax: (401) 453-1238
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With a copy to:
Stuart Lazar, Esq.
Edwards & Angell, LLP
2800 Hospital Trust Tower
Providence, RI 02903
Phone: (401) 276-6613
Fax: (401) 276-6611
If to the Seller or, prior to the Closing, the Company:
Health Fitness Corporation
Attention: J. Noyce
3500 West 80th Street, Suite 130
Bloomington, MN 55431
Phone: (612) 897-5195
Fax: (612) 831-7264
With a copy to:
John Satorius
Fredrikson & Byron, P.A.
900 Second Avenue South
Minneapolis, Minnesota 55402
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or sent via facsimile, and two business days after the date of
mailing, if mailed.
9.2. Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby, and no modification hereof shall be
effective unless in writing and signed by the party against which it is
sought to be enforced.
9.3. Further Assurances. Each of the parties hereto shall use such party's
reasonable efforts to take such actions as may be necessary or reasonably
requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement.
9.4. Expenses. Each of the parties hereto shall bear such party's own expenses
in connection with this Agreement and the transactions contemplated
hereby. The Seller shall pay the expense of preparing any tax returns
required to be filed by the Seller or the Company prior to the Closing
Date (without regard to any extensions allowable by law).
9.5. Injunctive Relief. Notwithstanding the provisions of SECTION 9.6 hereof,
in the event of a breach or threatened breach by Seller or Buyer of the
provisions of ARTICLE 7 of this Agreement, each of such parties hereby
consents and agrees that the other party shall be
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entitled to an injunction or similar equitable relief restraining such
party from committing or continuing any such breach or threatened breach
or granting specific performance of any act required to be performed by
such party under any such provision, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy
and without the necessity of posting any bond or other security. The
parties hereto agree that the availability of arbitration in SECTION 9.6
hereof shall not be used by any party as grounds for the dismissal of any
injunctive actions instituted pursuant to this SECTION 9.5. Nothing herein
shall be construed as prohibiting either party from pursuing any other
remedies at law or in equity which it may have.
9.6. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, shall, except as provided in SECTION 9.6
hereof, be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Any arbitration proceeding shall be held in the
Minneapolis, Minnesota area. Notwithstanding the provisions of SECTION 9.4
HEREOF, the arbitration award shall include attorneys' fees and costs (to
the extent provided in such rules) to the prevailing party.
9.7. Invalidity. Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and
treated as though originally set forth in this Agreement. The parties
further agree that any such court or arbitration panel is expressly
authorized to modify any such unenforceable provision of this Agreement in
lieu of severing such unenforceable provision from this Agreement in its
entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this
Agreement, or by making such other modifications as it deems warranted to
carry out the intent and agreement of the parties as embodied herein to
the maximum extent permitted by law. The parties expressly agree that this
Agreement as modified by the arbitration panel shall be binding upon and
enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and if such
provision or provisions are not modified as provided above, this Agreement
shall be construed as if such invalid, illegal or unenforceable provisions
had never been set forth herein.
9.8. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Seller, the Company and
the Buyer, respectively, and the legal representatives and heirs of the
Buyer. Without limiting the generality of the foregoing, Buyer
acknowledges that Buyer's covenants in Articles 6 and 7 herein shall be
binding upon any successors or assigns of the Company or the IFCN
Business, including any member of a Buyer Group (except as set forth
below) that may now or hereafter exist. Buyer agrees not to transfer any
interest in the IFCN Business (whether by transfer of shares or assets of
the Company or otherwise) to any third party unless such third party first
executes an agreement in favor of Seller under which such third party
affirms its
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obligation to comply with the provisions of Articles 6 and 7. Buyer agrees
that any such conveyance in violation of this prohibition shall be null
and void ab initio and that Seller shall be entitled to enforce such
provision pursuant to Section 9.5 herein. Buyer agrees to execute and
deliver, and cause the members of any Buyer Group to execute and deliver,
any additional documents, agreements and instruments reasonably necessary
and appropriate to carry out the intent of this Section 9.8. In addition,
Pickering agrees that for two years from the Effective Date he will own
greater than fifty percent (50%) of the Company; Seller agrees that so
long as Pickering owns greater than fifty percent (50%) of the Company,
the covenants contained in Articles 6 and 7 shall not apply to future
investors in the limited liability company.
9.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota exclusive of the rules
relating to the conflict of laws.
9.10. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement of Purchase and Sale has been duly
executed by the parties hereto effective as of the date first above written.
DAVID W. PICKERING, INC.
By: /s/ Jerry Noyce
---------------------------------
Title:
HEALTH FITNESS CORPORATION HEALTHY LIFESTYLE NETWORK
INTERNATIONAL, LLC
By: /s/ Jerry Noyce By: /s/ David W. Pickering
--------------------------------- ---------------------------------
Title: Title: President/CEO
/s/ David W.Pickering INTERNATIONAL FITNESS &
- ----------------------------------- WELLNESS CORPORATION
David W. Pickering
By: /s/ David W. Pickering
---------------------------------
Title: President/CEO
(as to Paragraph 8.4)
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The following schedules are not filed herewith. The registrant agrees to furnish
supplementally a copy of any omitted schedules to the Commission upon request.
Schedules:
3.1 -- Schedule of jurisdictions qualified to do business
3.3 -- Shares owned by Seller
3.5 -- Common Stock
3.6 -- Effective Date Company Balance Sheet
3.9 -- Real Property Owned or Leased
3.15 -- Contracts
3.16(A) -- Employee Benefit Plans and Related Agreements
3.17 Equipment
6.2 -- Employees of Company
7.1 Company's Customers as of Effective Date
7.2 Seller's Customers as of Effective Date