SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )
Bally Total Fitness Holding Corporation
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
05873K108
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(CUSIP Number)
William R. Lucas, Jr.
One Riverchase Parkway South
Birmingham, Alabama 35244
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 5, 2007
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(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
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(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 05873K108
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1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Harbinger Capital Partners Master Fund I, Ltd.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570*
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
CO
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group (as defined below).
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Harbinger Capital Partners Offshore Manager, L.L.C.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
CO
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
HMC Investors, L.L.C.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570*
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
CO
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Harbert Management Corporation
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Alabama
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570*
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570*
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
CO
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Philip Falcone
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
IN
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Raymond J. Harbert
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
IN
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Michael D. Luce
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
412,570
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
412,570
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,619,450
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
14. TYPE OF REPORTING PERSON*
IN
* This figure excludes 2,710,042 Shares which are directly owned by Liberation
Investments, L.P., 1,461,838 Shares which are directly owned by Liberation
Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel
Pearlman. The Reporting Persons are deemed to be the beneficial owners of such
Shares as a result of their membership in the Group.
CUSIP No. 05873K108
---------
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Item 1. Security and Issuer.
Bally Total Fitness Holding Corporation (the "Issuer"), Common Stock, $0.01
par value (the "Shares")
The address of the issuer is 8700 West Bryn Mawr Avenue, Chicago, Illinois
60631.
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Item 2. Identity and Background.
(a-c,f) This Schedule 13D is being filed by Harbinger Capital Partners Master
Fund I, Ltd. (the "Master Fund"), Harbinger Capital Partners Offshore Manager,
L.L.C. ("Harbinger Management"), the investment manager of the Master Fund, HMC
Investors, L.L.C., its managing member ("HMC Investors"), Harbert Management
Corporation ("HMC"), the managing member of HMC Investors, Philip Falcone, a
shareholder of HMC and the portfolio manager of the Master Fund, Raymond J.
Harbert , a shareholder of HMC, and Michael D. Luce, a shareholder of HMC (each
of the Master Fund, Harbinger Management, HMC Investors, HMC, Philip Falcone,
Raymond J. Harbert and Michael D. Luce may be referred to herein as a "Reporting
Person" and collectively may be referred to as "Reporting Persons").
The Master Fund is a Cayman Islands corporation with its principal business
address at c/o International Fund Services (Ireland) Limited, Third Floor,
Bishop's Square, Redmond's Hill, Dublin 2, Ireland. Each of Harbinger
Management, HMC Investors is a Delaware limited liability company. HMC is an
Alabama corporation. Each of Philip Falcone, Raymond J. Harbert and Michael D.
Luce is a United States citizen. The principal business address for Philip
Falcone is 555 Madison Avenue, 16th Floor, New York, New York 10022. The
principal business address for each of Harbinger Management, HMC Investors, HMC,
Raymond J. Harbert and Michael D. Luce is One Riverchase Parkway South,
Birmingham, Alabama 35244.
As discussed further in Item 4, the Reporting Persons have formed a group (the
"Group") with Liberation Investments, L.P. ("LILP"), Liberation Investments,
Ltd. ("LILTD"), Liberation Investment Group, LLC ("LIGLLC") and Mr. Emanuel
Pearlman ("Pearlman") for the purpose of (i) opposing the Restructuring
announced by the Issuer on May 31, 2007; and (ii) proposing the Shareholder Plan
(as defined below).
(d) None of Philip Falcone, Raymond J. Harbert or Michael D. Luce has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the Reporting Persons have, during the last five years, been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding were or are subject to a
judgement, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or state securities laws or finding
any violation with respect to such laws.
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Item 3. Source and Amount of Funds or Other Consideration.
The net investment cost of the Shares held in the Master Fund's accounts is
$206,285.00. The source of funds for this consideration was working capital of
the Master Fund. No borrowed funds were used to purchase the Shares, other than
any borrowed funds used for working capital purposes in the ordinary course of
business.
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Item 4. Purpose of Transaction.
On July 5, 2007 the Reporting Persons formed a Group with LILP, LILTD,
LIGLLC and Pearlman for the purpose of (i) opposing the Restructuring announced
by the Issuer on May 31, 2007; and (ii) proposing the Shareholder Plan.
On July 4, 2007, Kasowitz, Benson, Torres and Friedman LLP, counsel to the
Reporting Persons and LILP, LILTD, LIGLLC and Pearlman, sent a letter (the
"Shareholder Plan Letter") (a copy of which is attached hereto as Exhibit C) to
the Board in which LILP, LILTD, the Master Fund and Harbinger Capital Partners
Special Situations Fund L.P. (the "Shareholders") propose a plan of
reorganization (the "Shareholder Plan"). The Shareholder Plan would adopt the
terms of the Restructuring, with the following modifications: (i) existing
shareholders would receive 10% of the reorganized equity of the Issuer and
rights to participate in a rights offering for an additional 10% of the
reorganized equity, (ii) the Master Fund and Harbinger Capital Partners Special
Situations Fund L.P. would backstop the rights offering and own 80% of the
reorganized equity of the Issuer in any event, (iii) holders of Senior
Subordinated Notes would receive $60 million in cash in lieu of reorganized
equity of the Issuer, (iv) holders of claims in Class 6-B-1 (Rejection Claims
Against Bally) would receive payment in full in cash in the allowed amount of
their claims, and (v) holders of claims in Class 7 (Subordinated Claims) would
receive payment in full in cash.
In addition, the Shareholder Plan Letter demands that the Issuer delay the
filing of any bankruptcy proceedings in furtherance of the Restructuring to
enable the Shareholders to complete their due diligence and sign a definitive
agreement with the Shareholders on an expedited basis. The foregoing description
of the Shareholder Plan Letter is a summary only and is qualified in its
entirety by reference to Exhibit C.
In addition to the foregoing, the Group may engage in discussions with the
Issuer's stockholders, management, Board or third parties with respect to the
Restructuring, the matters set forth in the Shareholder Plan Letter, alternative
strategies to maximize stockholder value, the formulation of additional plans or
proposals to refinance or restructure the Issuer's indebtedness, or means to
improve the Issuer's governance.
The Group may also engage in discussions with the Issuer's stockholders
with respect to their investment in the Issuer, the possible formation of a
committee of holders of the Common Stock, measures to actively resist the
implementation of the Restructuring and preserve stockholder value, strategies
to ensure that the Board and the management of the Issuer fully and faithfully
discharge their fiduciary duties to stockholders, and such other actions with
respect to their investment in the Issuer as the Group may determine to be
appropriate.
The Group may determine to attempt to arrange or participate with third
parties in an extraordinary corporate transaction with respect to the Issuer,
such as an acquisition, a sale of all or substantially all of the Issuer's
assets, a reorganization, a recapitalization, liquidation, or a significant debt
or equity investment. The Group may or may not participate in such a
transaction.
In addition to the foregoing, the Group may pursue other alternatives to
maximize the value of their investment in the Issuer. Such alternatives could
include, without limitation, the purchase of additional Common Stock in the open
market, in privately negotiated transactions or otherwise, and the sale of all
or a portion of the Common Stock now owned or hereafter acquired by them in the
open market, in privately negotiated transactions or otherwise. Each member of
the Group may also transfer shares to another member of the Group or one or more
third parties.
The Reporting Persons reserve the right to revise their plans or intentions
at any time and to take any and all actions that they may deem appropriate to
maximize the value of their investment in the Issuer in light of their general
investment policies, market conditions, subsequent developments affecting the
Issuer and the general business and future prospects of the Issuer.
The Reporting Persons have no plans or proposals as of the date of this
filing which, other than as expressly set forth above, relate to, or would
result in, any of the actions enumerated in clauses (a) through (j) of Item 4 of
Schedule 13D.
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Item 5. Interest in Securities of the Issuer.
(a, b) By virtue of its membership in the Group, as of the date hereof, the
Master Fund may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer, based upon 41,257,012 Shares
outstanding as of May 31, 2007.
The Master Fund has the sole power to vote or direct the vote of 0 Shares;
has the shared power to vote or direct the vote of 4,619,450 Shares; has sole
power to dispose or direct the disposition of 0 Shares; and has shared power to
dispose or direct the disposition of 4,619,450 Shares.
(a, b) By virtue of its membership in the Group, as of the date hereof,
Harbinger Management may be deemed to be the beneficial owner of 4,619,450
Shares, constituting 11.2% of the Shares of the Issuer, based upon 41,257,012
Shares outstanding as of May 31, 2007.
Harbinger Management has the sole power to vote or direct the vote of 0
Shares; has the shared power to vote or direct the vote of 4,619,450 Shares; has
sole power to dispose or direct the disposition of 0 Shares; and has shared
power to dispose or direct the disposition of 4,619,450 Shares.
Harbinger Management specifically disclaims beneficial ownership in the Shares
reported herein except to the extent of its pecuniary interest therein.
(a, b) By virtue of its membership in the Group, as of the date hereof, HMC
Investors may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer, based upon 41,257,012 Shares
outstanding as of May 31, 2007.
HMC Investors has the sole power to vote or direct the vote of 0 Shares;
has the shared power to vote or direct the vote of 4,619,450 Shares; has sole
power to dispose or direct the disposition of 0 Shares; and has shared power to
dispose or direct the disposition of 4,619,450 Shares.
HMC Investors specifically disclaims beneficial ownership in the Shares reported
herein except to the extent of its pecuniary interest therein.
(a, b) By virtue of its membership in the Group, as of the date hereof, HMC may
be deemed to be the beneficial owner of 4,619,450 Shares, constituting 11.2% of
the Shares of the Issuer, based upon 41,257,012 Shares outstanding as of May 31,
2007.
HMC has the sole power to vote or direct the vote of 0 Shares; has the
shared power to vote or direct the vote of 4,619,450 Shares; has sole power to
dispose or direct the disposition of 0 Shares; and has shared power to dispose
or direct the disposition of 4,619,450 Shares.
HMC specifically disclaims beneficial ownership in the Shares reported
herein except to the extent of its pecuniary interest therein.
(a, b) By virtue of his membership in the Group, as of the date hereof, Philip
Falcone may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer, based upon 41,257,012 Shares
outstanding as of May 31, 2007.
Mr. Falcone has the sole power to vote or direct the vote of 0 Shares; has
the shared power to vote or direct the vote of 4,619,450 Shares; has sole power
to dispose or direct the disposition of 0 Shares; and has shared power to
dispose or direct the disposition of 4,619,450 Shares.
Mr. Falcone specifically disclaims beneficial ownership in the Shares reported
herein except to the extent of his pecuniary interest therein.
(a, b) By virtue of his membership in the Group, as of the date hereof, Raymond
J. Harbert may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer, based upon 41,257,012 Shares
outstanding as of May 31, 2007.
Mr. Harbert has the sole power to vote or direct the vote of 0 Shares; has
the shared power to vote or direct the vote of 4,619,450 Shares; has sole power
to dispose or direct the disposition of 0 Shares; and has shared power to
dispose or direct the disposition of 4,619,450 Shares.
Mr. Harbert specifically disclaims beneficial ownership in the Shares reported
herein except to the extent of his pecuniary interest therein.
(a, b) By virtue of his membership in the Group, as of the date hereof, Michael
D. Luce may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer, based upon 41,257,012 Shares
outstanding as of May 31, 2007.
Mr. Luce has the sole power to vote or direct the vote of 0 Shares; has the
shared power to vote or direct the vote of 4,619,450 Shares; has sole power to
dispose or direct the disposition of 0 Shares; and has shared power to dispose
or direct the disposition of 4,619,450 Shares.
Mr. Luce specifically disclaims beneficial ownership in the Shares reported
herein except to the extent of his pecuniary interest therein.
LILP directly owns 2,710,042 Shares and, by virtue of its membership in the
Group, may be deemed to be the beneficial owner of 4,619,450 Shares,
constituting 11.2% of the Shares of the Issuer. LILTD directly owns 1,461,838
Shares and, by virtue of its membership in the Group, may be deemed to be the
beneficial owner of 4,619,450 Shares, constituting 11.2% of the Shares of the
Issuer. LIGLLC, the sole general partner of LILP and the sole investment advisor
to LILTD, may, by virtue of its membership in the Group, be deemed to
beneficially own 4,619,450 Shares. Mr. Pearlman, the General Manager, Chairman
and Chief Executive Officer of LIGLLC, directly owns 35,000 Shares and, by
virtue of his membership in the Group, may be deemed to be the beneficial owner
of 4,619,450 Shares, constituting 11.2% of the Shares of the Issuer.
(c) The trading dates, number of Shares purchased and sold and price per share
for all transactions in the Shares in the past 60 days by the Reporting Persons
are set forth in Exhibit B. Each transaction was privately negotiated.
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Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
On July 5, 2007, LILP, LILTD and the Master Fund Harbinger entered into a
Purchase and Sale Agreement (the "Purchase and Sale Agreement") pursuant to
which LILP sold 268,171 shares of Common Stock of the Issuer and LILTD sold
144,399 shares of Common Stock of the Issuer (together, the "Purchased Shares")
to the Master Fund in exchange for (i) a purchase price of $0.50 per share, or
an aggregate purchase price of $206,285.00 (ii) contingent post closing
consideration in the form of a right to receive 10% of any return received by
the Master Fund or its affiliates on its investment in the Issuer in connection
with a reorganization of the Issuer by the Master Fund and sellers which
reorganization is actually consummated within 360 days of the sale under the
Purchase and Sale Agreement (an "Acceptable Reorganization"), after certain
expenses, in excess of the amount required to provide the Master Fund with an
annual internal rate of return of 20% on such investment, and (iii) a right to
receive additional cash compensation based on the increase in value of the
Common Stock of the Issuer from $0.60 per share to the fair market value at the
measurement date in respect of 4,171,880 shares of Common Stock or such other
number of shares equivalent to the number of shares a 10% owner of the Issuer as
of June 30, 2007 would be entitled to receive in an Acceptable Reorganization
(x) upon a disposition by the Master Fund of equity securities of the Issuer as
a result of which the Master Fund will own less than 10% of the total common
stock of the Issuer or (y) upon the second anniversary of the closing of an
investment pursuant to an Acceptable Reorganization.
Pursuant to the Purchase and Sale Agreement the parties have further
agreed, as soon as practicable after the closing date under the Purchase and
Sale Agreement, to enter into a joint defense agreement pursuant to which the
parties will agree to engage and be represented by the same legal counsel (i) in
connection with any matter concerning the parties joint interests with respect
to the Company's restructuring, and (ii) in connection with any bankruptcy
proceeding.
In addition, pursuant to the Purchase and Sale Agreement the parties agreed
to cooperate and work together in pursuing a restructuring and/or reorganization
of the Company, whether in-court or out-of-court, on mutually-agreeable terms.
The parties further agree to cooperate and work together in undertaking
appropriate due diligence relating to a reorganization, and in negotiating and
drafting, appropriate documentation in relation to such reorganization. The
foregoing description of the Purchase and Sale Agreement is a summary only and
is qualified in its entirety by reference to the Purchase and Sale Agreement,
which is attached hereto as Exhibit D.
--------------------------------------------------------------------------------
Item 7. Material to be Filed as Exhibits.
Exhibit A: Agreement between the Reporting Persons to file jointly
Exhibit B: Schedule of Transactions in the Shares of the Issuer
Exhibit C: Letter sent to the Board on July 4, 2007 by Kasowitz, Benson, Torres
and Friedman LLP.
Exhibit D: Purchase and Sale Agreement dated July 5, 2007 between Harbinger
Capital Partners Master Fund I, Ltd., Liberation Investments, L.P.
and Liberation Investments, Ltd.
Exhibit E: Letter Agreement dated July 5, 2007 between Harbinger Capital
Partners Master Fund I, Ltd., Liberation Investments, L.P. and
Liberation Investments, Ltd.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Harbinger Capital Partners Master Fund I, Ltd.
By: Harbinger Capital Partners Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ William R. Lucas, Jr.
-----------------------------
Harbinger Capital Partners Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ William R. Lucas, Jr.
-----------------------------
HMC Investors, L.L.C.
By: /s/ William R. Lucas, Jr.
-----------------------------
Harbert Management Corporation
By: /s/ William R. Lucas, Jr.
-----------------------------
/s/ Philip Falcone
---------------------
Philip Falcone
/s/ Raymond J. Harbert
----------------------
Raymond J. Harbert
/s/ Michael D. Luce
---------------------
Michael D. Luce
July 5, 2007
Attention. Intentional misstatements or omissions of fact constitute federal
criminal violations (see 18 U.S.C. 1001).
Exhibit A
AGREEMENT
The undersigned agree that this Schedule 13D dated July 5, 2007 relating to the
Common Stock, par value $0.01 per share of Bally Total Fitness Holding
Corporation shall be filed on behalf of the undersigned.
Harbinger Capital Partners Master Fund I, Ltd.
By: Harbinger Capital Partners Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ William R. Lucas, Jr.
-----------------------------
Harbinger Capital Partners Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ William R. Lucas, Jr.
-----------------------------
HMC Investors, L.L.C.
By: /s/ William R. Lucas, Jr.
-----------------------------
Harbert Management Corporation
By: /s/ William R. Lucas, Jr.
-----------------------------
/s/ Philip Falcone
---------------------
Philip Falcone
/s/ Raymond J. Harbert
---------------------
Raymond J. Harbert
/s/ Michael D. Luce
---------------------
Michael D. Luce
Exhibit B
Transactions in the Common Stock, par value $0.01 per share
-----------------------------------------------------------
TRANSACTIONS BY HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
Date of Number of Shares Price per Share
Transaction Purchased/(Sold)
7/5/07 412,570 (1)
(1) Harbinger Capital Partners Master Fund I, Ltd. (the "Purchaser") paid
Liberation Investments, L.P. and Liberation Investments, Ltd.
(collectively, the "Sellers") $206,285.00 (the "Purchase Price"). In
addition, the Purchase Price is subject to certain possible future
adjustments that are set forth in the Purchase and Sale Agreement between
Harbinger Capital Partners Master Fund I, Ltd., Liberation Investments,
L.P. and Liberation Investments, Ltd. attached hereto as Exhibit D.
EXHIBIT C
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
1633 BROADWAY
NEW YORK, NEW YORK 10019-6799
212-509-1700
FACSIMILE: 212-506-1800 July 4, 2007
By Fedex and E-Mail
Board of Directors of Bally Total Fitness Holding Corporation
c/o David S. Heller, Esq.
Latham & Watkins
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Re: Proposed Pre-Packaged Plan of Reorganization
Dear Members of the Board:
We represent Liberation Investments, L.P., Liberation Investments, Ltd.,
Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners
Special Situations Fund L.P. (collectively, the "Shareholders"), which together
own 11% of the common stock issued by Bally Total Fitness Holding Corporation
(`Bally" or the "Company").
The Shareholders are pleased to propose the enclosed term sheet (the "Term
Sheet") embodying the terms of a plan of reorganization (the "Shareholder
Plan"). The Shareholder Plan offers the Company and all of its constituents
significantly more value than that offered by the proposed Joint Prepackaged
Chapter 11 Plan Of Reorganization Of Bally Total Fitness Holding Corporation And
Its Affiliate Debtors (the "Bally Plan"). The Shareholder Plan adopts the Bally
Plan with the following modifications:
o Existing shareholders will receive 10% of the reorganized equity(1)
and rights to participate in a Rights Offering(2) for an additional
10% of the reorganized equity.
o Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital
Partners Special Situations Fund L.P. will backstop the rights
offering and own 80% of the reorganized equity in any event.
o The Shareholder Plan will pay the holders of Senior Subordinated Notes
$60 million in cash in lieu of reorganized equity. The Company will
otherwise receive the same amount of cash contemplated by the Bally
Plan.
o Holders of claims in Class 6-B-1 (Rejection Claims Against Bally) will
receive payment in full in cash in the allowed amount of their claims.
o Holders of claims in Class 7 (Subordinated Claims) will receive
payment in full in cash.
----------
(1) All equity distributions discussed hereunder are subject to dilution by a
management equity plan to be determined.
(2) Capitalized terms not defined herein have the meanings ascribed to them in
the Term Sheet.
In sum, the Shareholder Plan will provide all creditors with distributions
in the allowed amount of their claims under the valuation analysis proffered by
the Debtors' financial advisor, Jefferies & Company ("Jefferies"), as set forth
in the Company's disclosure statement. The Shareholder Plan also offers
shareholders a substantial recovery regardless of whether they participate in
the Rights Offering.
The Shareholder Plan undeniably is superior to the Bally Plan. The
Shareholder Plan will be relatively easy to implement because it incorporates
many of the salient terms of the Bally Plan. It is subject to substantially the
same conditions precedent as the Bally Plan, and the Shareholders have agreed to
satisfy their due diligence requirements no later than July 20, 2007. The
Shareholder Plan also will avert litigation that inevitably will result should
the Company continue to prosecute the Bally Plan.
My clients have made this proposal because representatives of Jefferies
indicated that the Company would be receptive to it. David Heller also informed
me that the Company would not delay the Bally Plan because the Company did not
believe that my clients would be able to raise sufficient capital (but would be
receptive if we could). The Term Sheet should allay these concerns. The
Shareholders are funds with over $8 billion of capital under management and have
the resources and experience with the Company to consummate the Shareholder
Plan.
Accordingly, we demand that the Company delay the filing of any bankruptcy
proceedings in furtherance of the Bally Plan to enable the Shareholders to
complete their due diligence and to sign a definitive agreement with the
Shareholders on an expedited basis . My clients believe that they will finalize
the Shareholder Plan before the Company's July 27, 2007 solicitation deadline
for the Bally Plan. The Shareholders are prepared to meet with the Company's
advisors on an expedited basis to determine how the Shareholder Plan can be
consummated.
We look forward to your prompt response. Nothing herein is a waiver of my
clients' rights and remedies, all of which are hereby reserved.
Very truly yours,
/s/ Andrew K. Glenn
Andrew K. Glenn
Summary of Proposed Principal Terms of Plan of Reorganization for
Bally Total Fitness Holding Corporation, et al., as of July 2, 2007
I. Purpose and Background
This term sheet (the "Term Sheet"), proposed by Harbinger Capital Partners
Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund L.P.,
Liberation Investment Group (collectively, the "Plan Proponents"), describes
certain of the principal terms and conditions of a proposed plan of
reorganization (the "Plan") for Bally Total Fitness Holding Corporation
("Bally") and its proposed affiliated debtors and debtors in possession
(collectively, the "Debtors").
This Term Sheet is subject in its entirety to the provisions of Rule 408 of
the Federal Rules of Evidence and any applicable state or other rule of law.
This Term Sheet is not an offer with respect to any securities and is not
binding and shall not give rise to any binding obligations and no such
obligations shall arise unless and until definitive documentation has been
executed and the Plan has been confirmed and the effective date (the "Effective
Date") of the Plan has occurred.
II. Proposed Treatment of Claims and Equity Interests
For the avoidance of doubt, the proposed treatment of claims and equity
interests set forth below, as well as the willingness of the Plan Proponents to
sponsor a Plan premised upon this Term Sheet, is subject to the satisfaction of
certain conditions, including those listed in Section VII hereof.
Nature of Claim or Interest Proposed Treatment
--------------------------- ------------------
Administrative Expense Claims Except to the extent that
a holder of an Allowed Administrative
Expense Claim agrees to a different
treatment, all Allowed Administrative
Expense Claims shall be paid in full, in
cash.
Priority Tax Claims Each Holder of an Allowed
Priority Tax Claim shall receive, at the
Debtors' option, either (a) Cash in an
amount equal to the amount of such
Claim, (b) such other less favorable
treatment to which such Holder and the
Debtors agree or (c) such other
treatment such that the Claim will not
be impaired.
Class 1 - Non - Priority Tax Claims Unimpaired. Each Holder of an Allowed
Priority Tax Claim shall receive, at the
Debtors' option, either (a) Cash in an
amount equal to the amount of such
Claim, (b) such other less favorable
treatment to which such Holder and the
Debtors agree or (c) such other
treatment such that the Claim will not
be impaired.
Class 2 - Other Secured Claims Unimpaired. Each Holder of an Allowed
Claim in Class 2 shall receive, at the
Debtors' option, either (a) cash in an
amount equal to the amount of such
Claim, (b) such other less favorable
treatment to which such Holder and the
Debtors agree or (c) such other
treatment such that the Claim will not
be impaired.
Class 3 - Unimpaired Unsecured Claims Unimpaired. Each Holder of an Allowed
Claim in Class 3 shall receive, at the
Debtors' option, either (a) cash in an
amount equal to the amount of such
Claim, (b) such other less favorable
treatment to which such Holder and the
Debtors agree or (c) such other
treatment such that the Claim will not
be impaired.
Class 4 - Prepetition Lenders Claims Unimpaired. On the Effective Date, any
and all Class 4 Claims shall be (A) paid
in full in Cash, (B) assumed by the
applicable Reorganized Debtors on terms
and conditions acceptable to the Holders
of such Claims, which terms and
conditions may be evidenced by the New
Credit Agreement or in some other manner
acceptable to such Holders, or (C)
satisfied in such other manner as the
applicable Debtors or Reorganized
Debtors and such Holders shall have
agreed in writing.
Class 5 - Prepetition Senior Impaired. On the Effective Date, the
Notes Claims Holders of the Prepetition Senior Notes
Claims will receive the Prepetition
Senior Notes Indenture Amendment Fee of
$4,700,000 and the New Senior Second
Lien Notes.
Class 6A - Prepetition Senior Impaired. Each Holder of an Allowed
Subordinated Notes Claims Class 6-A Claim will receive their pro
rata share of $60 million plus New
Subordinated Notes with a principal
amount equal to the outstanding
principal balance of the Prepetition
Senior Subordinated Notes Claims plus
accrued and unpaid interest.
Class 6-B - Rejection Claims Impaired. Each Holder of an Allowed
Class 6-B-2 Claim will receive, at the
Debtors' option, either (a) cash in an
amount equal to the amount of such
Claim, or (b) such other less favorable
treatment to which such Holder and the
Debtors agree.
Class 7 - Subordinated Claims Unimpaired. Claims in this Class are
unimpaired. Holders of Subordinated
Claims shall receive payment in full in
cash on account of such Claims.
Class 8 - Old Equity Interests Impaired. Interests in this Class are
in Bally impaired. On the Effective Date, the Old
Equity Interests of B ally will (i)
receive their pro rata share of
approximately 10% of the new common
stock of Reorganized Bally and (ii) be
entitled to participate in the rights
offering, which will entitle each Old
Equity Interest holder to purchase its
pro rata share of an additional
approximately 10% of Reorganized Bally
common stock at 50 cents per share.
Class 9 - Old Equity Interests Impaired. Interests in this Class are
in Affiliate Debtors unimpaired. The Reorganized Debtors
shall retain the Interests they hold in
Affiliate Debtors.
III. New Senior Second Lien Notes
As indicated above, the proposed restructuring contemplated herein provides
for the issuance by the Reorganized Debtors of the New Senior Second Lien Notes.
Set forth below is a summary of certain salient terms of the New Senior Second
Lien Notes:
Item Proposed Term
---- -------------
Principal Amount $247,337,500
Interest Rate 12-3/8%
Maturity 2011
Issuer Bally Total Fitness Holding Corporation
Guarantors All subsidiaries and affiliates.
Collateral Second lien on all assets.
Covenants Similar to form of indenture attached to
disclosure statement for prepackaged
chapter 11 plan.
IV. New Subordinated Notes
As indicated above, the proposed restructuring contemplated herein provides
for the issuance by the Reorganized Debtors of the New Subordinated Notes. Set
forth below is a summary of certain salient terms of the New Senior Subordinated
Notes:
Item Proposed Term
---- -------------
Principal Amount $262 million
Interest Rate 12% (or paid in kind at 13 5/8% in
issuer's sole discretion)
Maturity 2013
Issuer Bally Total Fitness Holding Corporation
Covenants Similar to form of indenture attached to
disclosure statement for prepackaged
chapter 11 plan.
V. Rights Offering
Item Proposed Term
---- -------------
Rights Offering Price Holders of Old Equity in
Bally will be entitled to participate in
the Rights Offering to purchase up to
approximately 10% (up to 41.2 million
shares) of Reorganized Bally common
stock at 50 cents per share.
Backstop Purchaser Harbinger Capital Partners Master Fund
I, Ltd. and Harbinger Capital Partners
Special Situations Fund L.P.
Backstop Purchaser Purchase Price Backstop Purchaser will commit to
purchase up to 90% percent (375 million
shares) of Reorganized Bally common
stock at 40 cents per share.
VI. Other Terms
Matter Proposal
------ --------
Registration Rights The holders of the new common
stock shall receive customary
registration rights. The costs of such
registrations shall be borne by Bally.
Board Composition As of the Effective Date, a
new board of directors of Bally shall be
appointed (the "New Board"). The New
Board will be selected by the Plan
Proponents.
VII. Conditions
The restructuring contemplated by this Term Sheet assumes the following
conditions will be satisfied upon the Effective Date of the Plan. The Plan
Proponents shall use their best efforts to have the following conditions met.
Item Condition
---- ---------
New Exit Facility All definitive documentation associated
with the New Exit Facility, shall have
been executed by the parties thereto,
shall be satisfactory to the Plan
Proponents and shall be in full force
and effect.
Presentation of Business Plan The Debtors' management shall have
presented to the Plan Proponents a
business plan for the Reorganized
Debtors that is satisfactory to the Plan
Proponents.
No Material Adverse Changes No material adverse changes with
respect to the Debtors' business,
assets, financial condition or prospects
from its current performance
expectations for the 2007 calendar year,
or any of the matters relevant to the
effectuation of a Plan premised upon the
terms set forth in this Term Sheet shall
have occurred as of the Effective Date.
Due Diligence/Cooperation The Plan Proponents shall complete due
diligence no later than July 20, 2007.
The Plan Proponents shall have complete
and timely access to the Debtors' books
and records as well as the Debtors'
management and advisors, including
financial advisors, accountants, and
counsel, for the purposes of completing
their due diligence, evaluating the
Debtors' business plan, and
participating in the plan process.
Other Other customary conditions, including no
stay of the confirmation order.
EXHIBIT D
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of July 5, 2007 (this
"Agreement"), is made by each of LIBERATION INVESTMENTS, L.P. and LIBERATION
INVESTMENTS, Ltd. (each, a "Seller" and together, the "Sellers") and HARBINGER
CAPITAL PARTNERS MASTER FUND I, LTD. (the "Purchaser"). Capitalized terms not
otherwise defined herein shall be defined in Schedule I attached hereto.
WHEREAS, the Sellers have heretofore acquired approximately 11% of the
outstanding common stock , par value $0.01 per share (the "Sellers' Shares) of
Bally's Total Fitness Holding Corporation, a Delaware corporation (the
"Company"); and
WHEREAS, Purchaser has agreed to purchase 412,570 shares or 1% of the
shares of outstanding common stock of the Company (the "Purchased Shares") from
the Sellers, and the Sellers have agreed to sell the Purchased Shares for the
Purchase Price (defined below);
WHEREAS, in connection with the purchase of the Purchased Shares, Purchaser
and Sellers have agreed to certain post closing arrangements, including but not
limited to, Sellers' right to receive certain contingent compensation in the
form of a contingent payment and an option right pursuant to the terms set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises, warranties, covenants and
agreements contained herein, the parties, intending to be legally bound, hereby
agree as follows:
1. Purchase and Sale. On the terms and subject to the conditions of this
Agreement, Purchaser shall purchase from Sellers, and Sellers shall indefeasibly
sell, transfer, assign, convey and deliver to the Purchaser, the Purchased
Shares for a price equal to fifty cents ($0.50) per share for an aggregate
purchase price payable to Sellers of $206,285.00 (the "Purchase Price").
2. Conditions Precedent. The parties agree that Purchaser's obligation to
pay the Purchase Price to Sellers to acquire the Purchased Shares shall be
subject to the satisfaction of the following conditions prior to the Closing
Date (as defined below):
(a) Sellers shall cause indefeasible delivery and transfer of the
Purchased Shares to Purchaser pursuant to Purchaser's DTC instructions
specified in Schedule II;
(b) Each of Purchaser and each Seller shall have received a fully
executed copy of this Agreement, and
(c) Each Seller shall have executed and delivered a copy of the
related Big Boy Letter to Purchaser.
3. Settlement. The parties agree that the following shall be the settlement
procedure for the purchase and sale of the Purchased Shares:
(a) Upon Purchaser's indefeasible receipt of (i) the Purchased Shares,
and (ii) a copy of this Agreement and the Big Boy Letter each duly executed
by each Seller, Purchaser shall forward the Purchase Price to Sellers in
immediately available funds pursuant to Sellers' instructions set forth
below. The date on which Sellers receive the Purchase Price shall be the
"Closing Date".
DTC transfer instructions for each Seller and Purchaser (including the
portion of the Purchase Price payable to such Seller) follows:
For each Seller:
Merrill Lynch Global Prime Broker
DTC Account No. 161
Account names: Liberation Investments, L.P./Liberation Investments. Ltd.
For the Purchaser:
Goldman Sachs
Tax ID #: 13-510-8880
GS DTC: 0005
Account Name: Harbinger Capital Partners Master Fund I, Ltd.
GS Institution #: 94052
GS Agent Bank #: 94052
GS Internal A/C #: 002-11098-9
Contact: Young Yu - (212) 357-6592
Euroclear #: 94589- international trades
Euroclear #: 90004- GSCO trades
*Please reference GS Institution #94052, not DTC 0005 on all DTC ID
Confirms
4. Post Closing Seller Compensation. The parties hereby agree that as of
the date that is the earlier of (a) the date Purchaser sells equity securities
in the Company if after giving effect to such sale Purchaser owns less than 10%
of the total common stock of the Company that Purchaser owned as of the
effective date of an Acceptable Reorganization (the " Purchaser Disposition
Date") or (b) the date that is the second anniversary of the closing of an
investment pursuant to an Acceptable Reorganization, (the "Optional Measurement
Date, and together with the Purchaser Disposition Date, each a "Contingent
Payment Date"), Purchaser will pay Sellers additional amounts, if any (the
"Contingent Purchase Price"), equal to ten percent (10%) of the Net Excess
Return that has been received or earned by Purchaser as of the relevant
Contingent Payment Date. In order to calculate the Net Excess Return, the
Purchaser shall determine the Fair Market Value of its aggregate investment in
the Company on the relevant Contingent Payment Date, based on the Market Price
Average of the Purchaser's investment in the Company or, if no Market Price
Average is available, as determined by an opinion of a reputable investment
banking firm that is mutually agreeable to the parties. Both parties acknowledge
and agree that there is no guarantee that (a) Purchaser will ever realize a Net
Excess Return, (b) any Contingent Purchase Price will ever be paid to Sellers,
and/or (c) an Acceptable Reorganization will be consummated within 360 days of
the Closing Date. Each Seller further acknowledges and agrees that Purchaser
makes no warranties or representations as to whether a Net Excess Return and/or
Contingent Purchase Price will be realized. Notwithstanding anything to the
contrary in the foregoing, at any time on or immediately before the Optional
Measurement Date, each Seller may request in writing that Purchaser retain the
Contingent Purchase Price and each Seller shall thereafter receive the
Contingent Purchase Price only upon Purchaser's sale of the equity securities in
the Company if after giving effect to such sale Purchaser owns less than 10% of
the total common stock of the Company that Purchaser owned as of the effective
date of an Acceptable Reorganization and at such time Purchaser shall determine
the Contingent Purchase Price on terms set forth herein. The right to receive
the Contingent Purchase Price is solely personal to the Seller, and under all
circumstances, cannot be transferred, assigned, sold, hypothecated or
encumbered.
5. Seller Purchase Option. (a) For a period of three trading days after
Sellers receive notice from Purchaser of the occurrence of a Purchaser
Disposition Date or of a pending Optional Measurement Date, then Seller shall
have the right to exercise its option to purchase the Option Shares from the
Purchaser (the "Option") at a price of sixty cents ($0.60) per share (the
"Option Price"). In the event the Company's Shares are cancelled as a result of
any bankruptcy proceeding or other reorganization and Purchaser receives at
least ten percent (10%) of the new common stock of the Company as part of an
Acceptable Reorganization, Seller shall be entitled to instead purchase from
Purchaser at a price that is equivalent to sixty cents ($0.60) per share for the
shares issued prior to any bankruptcy proceeding or reorganization involving the
Company, the number of shares of the new common stock of the Company or its
successor that is equivalent to the number of shares a ten percent (10%) owner
of the Company as of June 30, 2007 (the "Record Date") would have received or
retained in the newly reorganized Company or its successor as part of the
Acceptable Reorganization; provided however, that such number of shares the
Seller shall be entitled to purchase shall be determined by excluding any rights
or shares that a ten percent (10%) owner would be entitled to after the Record
Date. For the avoidance of doubt, Sellers rights as set forth in this Section
5(a) shall not be applicable or otherwise relate to any common stock of the
Company purchased by the Purchaser after a reorganization by the Company.
(b) The Option shall be a one-time, all-or-nothing right, exercisable by
Seller as a "cashless" exercise by Seller, pursuant to the terms set forth in
Section 5(a). The cash amount to be delivered to Seller in connection with the
exercise of the Option, for the purposes of this Agreement, shall be equal to
the Current Market Price of the common stock of the Company minus the Option
Price, times the number of Option Shares. The Option is solely personal to the
Seller, and under all circumstances, cannot be transferred, assigned, sold,
hypothecated or encumbered.
6. Purchaser Conditions for Contingent Payment and Option Exercise . The
Purchaser and each Seller hereby agrees that each Seller's right to (i) receive
the Contingent Purchase Price and (ii) exercise the Option, pursuant to the
terms set forth in Sections 4 and 5 above, shall not apply if (x) Purchaser does
not make an investment in the Company other than Purchaser's purchase of the
Purchased Shares, (y) Sellers fail to satisfy their obligations to cooperate
with Purchaser as set forth in Sections 7 and 8 below, and/or (z) an Acceptable
Reorganization is not consummated within 360 days of the Closing Date.
7. Joint Defense in Bankruptcy Proceeding. (a) The parties hereby agree
that in the event the Company and/or any of its affiliates or subsidiaries is
subject to a bankruptcy, liquidation, reorganization, insolvency or
restructuring proceeding, under Chapter 11, Chapter 7, state law or any other
similar or related proceeding (the "Bankruptcy Proceeding"), the parties have a
common interest in preparing for and conducting a common defense; the parties
therefore agree to engage the same counsel to represent the parties' interests
in connection with any Bankruptcy Proceeding and as soon as practicable after
the Closing Date, the parties shall duly execute and enter into a joint defense
agreement which further details the terms with respect to the parties' common
defense.
(b) Notwithstanding anything to the contrary set forth in the foregoing,
the parties further agree that without regard to whether the Company is subject
to a Bankruptcy Proceeding, any joint/common defense agreement shall include the
parties' obligation to cooperate and use the same counsel in connection with any
matter concerning the parties' joint interests with respect to the Company.
8. Cooperation. (a) The parties agree to cooperate and work together in
pursuing a restructuring and/or reorganization of the Company, whether in-court
or out-of-court, on mutually-agreeable terms. The parties further agree to
cooperate and work together in undertaking appropriate due diligence relating to
an Acceptable Reorganization, and in negotiating, and then drafting, appropriate
documentation in relation to an Acceptable Reorganization. The parties
acknowledge that such cooperation will require that they each potentially
receive restrictive, material and/or non-public information in relation to the
Company. The parties further acknowledge and agree that in order to maximize the
value of the investment contemplated under this Agreement, including but not
limited to maximizing the value of the Contingent Purchase Price and the Option,
the time period for such cooperation described in this section and/or section 7
above, shall commence at the Closing Date and continue after any reorganization
and operational turnaround by the Company and through the Optional Measurement
Date. From and after the Closing Date any expenses incurred by the parties in
connection with the obligations set forth in this section and/or section 7
above, including legal and financial advisory fees (the "Transaction Expenses")
shall be the sole responsibility of the Purchaser and each of the Sellers shall
not incur any Transaction Expenses without Purchaser's prior written consent.
Any Transaction Expenses incurred by Seller without Purchaser's prior written
consent shall be the sole responsibility of Seller.
(b) Notwithstanding anything to the contrary set forth in subsection (a)
above, Purchaser shall not be obligated to pay any Transaction Expenses for any
period after which Purchaser has notified Seller in writing that Purchaser has
terminated its efforts to effectuate an Acceptable Reorganization.
Notwithstanding the terms and agreements contained in Section 7 and this
Section 8, Purchaser and each Seller further agree that at any time after
Purchaser completes it cash investment in connection with (i) the reorganization
of the Company, as a sponsor of a plan in the relevant bankruptcy proceeding or
otherwise or (ii) a rights offering by the Company, each Seller shall be
entitled at any time in its sole discretion to sell or otherwise dispose of, in
whole or in part, any securities of the Company or its successors held by such
Seller and no such sale or disposition shall be deemed to be a failure to
cooperate or other breach of any of the terms contained in Section 7 and this
Section 8; provided however, that any sale of the Company's securities by such
Seller shall not include such Seller's right to receive the Contingent Purchase
Price and/or exercise the Option pursuant to the terms set forth in Sections 4
and 5 above. Each Seller further acknowledges and agrees that its obligations
under Section 7 and this Section 8 shall remain in full force and effect without
regard to any sale by such Seller.
9. Representations and Warranties of each Seller. Each Seller represents
and warrants to, and covenants with, the Purchaser as of the date hereof, and as
of the date the purchase and sale of the Purchased Shares is completed, that:
(a) Such Seller is an entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has the requisite
right, power and authority, and has taken all actions necessary to execute,
deliver and perform its obligations under this Agreement. This Agreement has
been duly executed and delivered by such Seller and (assuming the due
authorization, execution and delivery hereof by Purchaser) is a valid and
binding obligation of such Seller, enforceable against it in accordance with its
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The
execution and delivery of this Agreement, the compliance by such Seller with all
the provisions of, and the performance by such Seller of its obligations under,
this Agreement and the consummation of the transactions contemplated in this
Agreement will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, (i) the constitutive
documents of such Seller, (ii) any material instrument, contract or other
agreement to which such Seller or by which such Seller or any of its material
properties or assets or the Purchased Shares may be bound or subject, in each
case, the breach or violation of which or default under which would be
reasonably expected to have a material adverse effect on the ability of such
Seller to comply with its obligations hereunder, or (iii) any law, statute or
any order, rule, regulation, order, writ, injunction, determination, award,
judgment or decree of any court or governmental agency or body having
jurisdiction over such Seller or the applicable Purchased Shares, or any stock
exchange authority or self-regulatory organization (each, a "Governmental
Authority"); and no consent, approval, authorization, order, registration,
clearance, or qualification or notification is required for the sale and
delivery of the Purchased Shares by such Seller under this Agreement;
(b) The offer and sale of the Purchased Shares by such Seller hereunder is
exempt from the registration requirements of any applicable state or federal
securities laws and the Purchased Shares were purchased by the Seller in one or
more public sale transactions;
(c) Such Seller has and will indefeasibly transfer to Purchaser valid and
marketable title to the Purchased Shares, free and clear of any liens, claims or
encumbrances of any kind (unless created by Purchaser) (together, the "Lien").
Other than as contemplated by this Agreement, such Seller shall not sell,
assign, or otherwise transfer all or any portion of its right, title and
interest in and to the Purchased Shares, or create, incur, assume or permit to
exist any Lien on the Purchased Shares;
(d) Such Seller (i) is a sophisticated seller with respect to the sale of
the Purchased Shares, (ii) has adequate information concerning the business and
financial condition of the Company to make an informed decision regarding the
sale of the Purchased Shares, and (iii) has independently and without reliance
upon Purchaser, and based on such information as such Seller has deemed
appropriate, made its own analysis and decision to enter into this Agreement and
sell the Purchased Shares;
(e) Such Seller is not an "affiliate" of the Company (as such term is
defined in Rule 144 of the Securities Act; and
(f) Such Seller acknowledges that neither the Purchaser nor any of their
respective members, officers, directors, employees, agents or affiliates has
made any representation or warranty, express or implied, regarding the Company
or the Purchased Shares, other than the representations and warranties set forth
herein.
10. Representations and Warranties of Purchaser. Purchaser represents and
warrants to, and covenants with, the Sellers as of the date hereof, and as of
the date the purchase and sale of the Purchased Shares is completed, that:
(a) Purchaser is an entity duly organized, validly existing and in good
standing under the laws of its state of organization, has the requisite right,
power and authority, and has taken all actions necessary to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly
executed and delivered by Purchaser and (assuming the due authorization,
execution and delivery hereof by the Sellers) is a valid and binding obligation
of Purchaser, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution and delivery
of this Agreement by Purchaser, the compliance by Purchaser with all the
provisions of, and the performance by Purchaser of its obligations under, this
Agreement and the consummation of the transactions contemplated in this
Agreement will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, (i) the constitutive
documents of Purchaser, (ii) any material instrument, contract or other
agreement to which Purchaser is a party or by which Purchaser or any of its
material properties or assets may be bound or subject, in each case, the breach
or violation of which or default under which would be reasonably expected to
have a material adverse effect on the ability of Purchaser to comply with its
obligations hereunder, or (iii) any law, statute or any order, rule, regulation
order, writ, injunction, determination, award, judgment or decree of any
Governmental Authority; no consent, approval, authorization, order,
registration, clearance or qualification or notification is required for the
purchase of the Purchased Shares by Purchaser under this Agreement;
(b) Purchaser is an "accredited investor" within the meaning of Rule 501(a)
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act");
(c) Purchaser (i) is a sophisticated investor with respect to the purchase
of the Purchased Shares, (ii) can bear the economic risk of its investment in
the Purchased Shares and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment of the Purchased Shares, (iii) has adequate information concerning
the business and financial condition of the Company to make an informed decision
regarding the purchase of the Purchased Shares, and (iv) has independently and
without reliance upon Sellers, and based on such information as Purchaser has
deemed appropriate, made its own analysis and decision to enter into this
Agreement and purchase the Purchased Shares;
(d) Purchaser acknowledges that neither Sellers nor any of their respective
members, officers, directors, employees, agents or affiliates has made any
representation or warranty, express or implied, regarding the Company or the
Purchased Shares, other than the representations and warranties set forth
herein.
11. Acts and Decisions. Until such time as Purchaser receives the Purchased
Shares, if for any reason any Seller is entitled to exercise any voting and/or
other rights and remedies with respect to the Purchased Shares, such Seller
shall take (or refrain from taking) any action with respect to the Purchased
Shares in accordance with the prior written instructions of Purchaser, except as
prohibited under applicable law, rule or order.
12. Confidentiality. No party will, without the prior written consent of
the other party hereto, directly or indirectly, make any disclosure with respect
to this Agreement except as may be required by applicable law or any order, rule
or regulation of any Governmental Authority, or its accountants, attorneys,
administrators, brokers, representatives and/or other service providers as may
be necessary in the ordinary course of its business.
13. Further Assurances. The parties to this Agreement agree to execute,
acknowledge and deliver such further instruments and to do all such other acts,
as may be necessary or appropriate in order to perfect title of Purchaser and
its successors and assigns to the Purchased Shares or otherwise to carry out the
purposes and intent of this Agreement.
14. Assignment. This Agreement shall not be assigned by any Seller or
Purchaser without the other party's prior written consent.
15. Costs and Expenses. Each party to this Agreement shall be responsible
for such party's own expenses in connection with this Agreement.
16. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York without giving effect to the conflicts of laws
principles thereof.
17. Counterparts, Entire Agreement, No Oral Modification. This Agreement
may be executed by any party hereto by facsimile or electronic transmission in
any number of counterparts, each of which shall be deemed to be an original, but
all such respective counterparts shall together constitute one and the same
instrument and, together with the Big Boy Letter, represents the complete
understanding of the parties hereto with respect to the subject matter hereof
and may be amended or modified only in writing signed by the parties hereto.
18. Survival. All representations, warranties, covenants and agreements
contained in or made pursuant to this Agreement shall survive the transfer and
payment for the Purchased Shares and the consummation of the transactions
contemplated hereunder.
19. Severability. If any one or more of the provisions contained in this
Agreement, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
(signatures on following page)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
By: Harbinger Capital Partners
Offshore Manager, LLC,
its Investment Manager
By: /s/ William R. Lucas, Jr.
-------------------------------------------
Name: William R. Lucas, Jr.
Title: Executive Vice President
LIBERATION INVESTMENTS, L.P.
By: /s/ Emanuel Pearlman
-------------------------------------------
Name: Emanuel Pearlman
Title: General Partner
LIBERATION INVESTMENTS, LTD.
By: /s/ Emanuel Pearlman
-------------------------------------------
Name: Emanuel Pearlman
Title: Director
Schedule I
Definitions
-----------
Acceptable Reorganization means a reorganization or restructuring of the
Company and its assets and liabilities supported by Purchaser and Seller which
reorganization or restructuring is actually consummated within 360 days of the
Closing Date.
Big Boy Letter means that certain letter dated as of the date hereof
between the Purchaser and the Seller attached hereto as Exhibit 1.
Current Market Price means the closing price of the Company's or its
successors common stock as of the date Seller provides Purchaser with written
notice of its election to exercise the Option.
Market Price Average means the average of the closing price of the
securities for each of the 30 trading days prior to the relevant Contingent
Payment Date; provided however, that in respect of any sale, in whole or in
part, by Purchaser of shares of Common Stock of the Company, "Market Price
Average" in respect of such shares sold shall be deemed to be the purchase price
Purchaser receives in any such sale.
Net Excess Return equals the portion of the Return on Investment Amount in
excess of the amount required to provide the Purchaser with an annual rate of
return of twenty percent (20%) on the Original Investment, net of any third
party fees, expenses and related costs but excluding any interest expenses
incurred by the Purchaser on its own behalf and not in connection with the
Company reorganization, as measured from the date of the Original Investment
through the relevant Contingent Payment Date
Option Shares means 4,171,880 shares of common stock of the Company issued
prior to the Closing Date.
Original Investment means the cash investment by Purchaser or its
affiliates in the Company in connection with an Acceptable Reorganization.
Return on Investment Amount means (a) in the event Purchaser sells its
shares of common stock of the Company, then the amount in cash received by
Purchaser as a result of such sale, and (b) in the event Purchaser does not sell
its shares of common stock of the Company, the amount equal to the excess of the
Fair Market Value as determined by the Purchaser on a relevant Contingent
Payment Date, in each case plus all amounts received by Purchaser or its
affiliates in respect of Purchaser's equity interest in the Company by way of a
dividend, distribution, or other payment or compensation, and in each case minus
the Original Investment, but in each case shall exclude any amount attributable
to common stock of the Company purchased by Purchaser after a reorganization of
the Company.
Schedule II
Purchaser DTC Instructions
DTC:
[TO BE PROVIDED]
EXHIBIT E
HARBINGER CAPITAL PARTNERS
MASTER FUND I, LTD.
ONE RIVERCHASE PARKWAY SOUTH
BIRMINGHAM, ALABAMA 35244
July 5, 2007
Liberation Investments, L.P.
Liberation Investments, Ltd.
c/o Liberation Investment Group
330 Madison Ave., 6th Floor
New York, NY 10017
Ladies and Gentlemen:
Reference is made to the sale by each of Liberation Investments, L.P. and
Liberation Investments, Ltd. (together, the "Seller") of 268,171 and 144,399
shares respectively, of common stock (the "Seller Shares") $.01 par value, of
Bally's Total Fitness Holding Corporation (the "Company"), such Seller's Shares
to represent 1% of the total outstanding common stock to the Company, to
Harbinger Capital Partners Master Fund I, Ltd. (the "Buyer")
1. In connection with its purchase of the Seller's Shares, Buyer has
informed Seller that:
(i) Buyer and the Company have engaged in one or more prior
transactions which resulted in Buyer and the Company entering
into a legally binding Confidentiality Agreement; accordingly
Buyer may have or later come into possession of non-public
information related to the Company that may not be known to
Seller, and will not be disclosed to Seller, which information,
in each case may be material to the Company and/or the value of
the Shares (collectively "Seller Excluded Information");
2. In connection with its sale of the Seller Shares to Buyer and its
affiliates, Seller, on behalf of itself and its affiliates, hereby represents
and warrants that:
(i) it has decided to sell the Seller Shares, based on its own
independent investigation, notwithstanding its lack of knowledge
concerning the Seller Excluded Information;
(ii) Buyer shall have no liability to Seller or its affiliates, and
Seller, on behalf of itself and its affiliates, waives any and
all claims it might have against Buyer or any of Buyer's
officers, directors, agents, affiliates, partners, managers or
members (the "Buyer Releasees"), whether under applicable
securities laws or otherwise, with respect to the non-disclosure
of the Seller Excluded Information; neither Seller nor its
affiliates shall sue or assert or maintain, any claim, suit or
other proceeding, known or unknown, which the Seller or its
affiliates may now or in the future have against any Buyer
Releasees, based upon or relating to the Seller Excluded
Information and Seller agrees to indemnify and holder Buyer
harmless from any breach of the foregoing;
(iii) it has not requested and does not want to receive the Seller
Excluded Information; and
(iv) it has had the opportunity to, and did in fact, consult with
counsel concerning the sale of the Seller Shares and the
implications for the purchase of the matters set forth in this
letter.
3. This Agreement and the related Purchase and Sale Agreement constitutes
the entire agreement and understanding of the parties in respect of the subject
matter hereof and supersedes all prior understandings, agreements or
representations by or among the parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
4. The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, as applied to any party or to any circumstance, is judicially
determined not to be enforceable in accordance with its terms, the parties agree
that the court making such determination may modify the provision in a manner
consistent with its objectives, and/or to delete specific words or phrases, so
that in its modified form such provision will then be enforceable and will be
enforced.
5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to the
conflicts of laws principles thereof that would require the application of the
laws of any other jurisdictions.
6. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE
SALE OF THE SELLER SHARES SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES LOCATED IN NEW YORK COUNTY, NEW YORK.
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO
IRREVOCABLY AGREES TO THE EXCLUSIVE JURISDICTION OF THOSE COURTS AND WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH COURTS IN RESPECT OF THIS AGREEMENT
OR THE SALE OF THE SHARES.
7. This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. The transmission by telecopier of a signed counterpart of this
Agreement shall be deemed due and sufficient delivery thereof.
Sincerely yours,
HARBINGER CAPITAL PARTNERS MASTER
FUND I, LTD.
By: Harbinger Capital Partners Offshore
Manager LLC, its Investment Manager
By: /s/ William R. Lucas, Jr.
-----------------------------------
Name: William R. Lucas, Jr.
Title: Senior Vice President
ACCEPTED AND AGREED:
Liberation Investments, L.P.
By: /s/ Emanuel Pearlman
-------------------------------------------
Name: Emanuel Pearlman
Title: General Partner
Liberation Investments, Ltd.
By: /s/ Emanuel Pearlman
-------------------------------------------
Name: Emanuel Pearlman
Title: Director
SK 03773 0001 788307