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Item 1.01
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Entry into a Material Definitive Agreement.
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Flywheel Acquisition
On January 6,
2020, Town Sports International, LLC (“TSI”), a wholly owned subsidiary of Town Sports International Holdings, Inc.
(the “Company”), entered into an asset purchase agreement (the “Purchase Agreement”) with Flywheel Sports,
Inc., Flywheel Buckhead LLC, Flywheel Astor Place LLC, Flywheel CCDC, LLC, Flywheel Park Avenue LLC, Flywheel Williamsburg LLC,
Flywheel San Francisco, LLC, Flywheel Denver Union Station, LLC and Flywheel 415 Greenwich LLC (collectively, the “Sellers”).
Pursuant to the Purchase Agreement, TSI has agreed to purchase substantially all of the assets of the Flywheel studio business
of the Sellers and assume certain liabilities of the Sellers relating to such studio business (the “Acquisition”).
As consideration for the Acquisition, TSI will issue a promissory note to the Sellers in the principal amount of $25 million (the
“Seller Note”).
The Acquisition
is subject to a number of closing conditions that must be satisfied prior to the closing date of the Acquisition, as detailed
in the Purchase Agreement, which include, among other things, (i) the refinancing of TSI’s existing senior secured credit
facility on terms and condition satisfactory to TSI in its sole discretion and to Kennedy Lewis Investment Management, LLC (“KLIM”),
and (ii) the consummation of the Second Lien Facility (as defined below) with KLIM. In addition, the Purchase Agreement contains
certain termination rights of TSI and of the Sellers, including, among others, TSI’s right to terminate for any reason on
or before the fifteenth business day following TSI’s receipt of all schedules of the Sellers required under the Purchase
Agreement. The Purchase Agreement also contains customary representations, warranties, covenants and indemnifications by the Sellers
and TSI as well as other customary provisions for a transaction of this nature.
The foregoing
description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full
text of the Purchase Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
We have included the Purchase Agreement to provide investors and stockholders with information regarding its terms, but not to
provide any other factual information about the Company, TSI or any of the Sellers. The Purchase Agreement contains representations
and warranties that the parties to the Purchase Agreement made to and solely for the benefit of each other, and the assertions
embodied in such representations and warranties are qualified by information contained in confidential disclosure schedules that
the parties exchanged in connection with signing the Purchase Agreement. Accordingly, investors and stockholders should not rely
on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only
made as of the date of the Purchase Agreement and are modified in important part by the underlying disclosure schedules.
Second Lien Secured Term Loan
Commitment Letter
On January
6, 2020, the Company entered into a commitment letter (the “Commitment Letter”) pursuant to which KLIM has committed
to provide, subject to the terms and conditions set forth in the Commitment Letter, a second lien secured term loan in an aggregate
principal amount of $50 million (the “Second Lien Facility”), $25 million of which will be funded by KLIM in cash
(the “Cash Commitment”) and $25 million of which will be a conversion of the Seller Note. The proceeds of the Cash
Commitment will be used, in part, to repay existing indebtedness of the Company. The Second Lien Facility is subject to the consummation
of the Acquisition and other customary closing conditions.
The foregoing
description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the full
text of the Commitment Letter, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.