RLF1 6871876v.1

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE LAUREN GLASSMAN, ) )

Plaintiff/Counterclaim­ ) Defendant, )

) v. ) C.A. No. 7717­VCG )

CROSSFIT, INC. and ) GREG GLASSMAN, ) )

Defendants/Counterclaim­ ) Plaintiffs. )

MOTION FOR A TEMPORARY RESTRAINING ORDER

Defendants/Counterclaim­Plaintiffs CrossFit, Inc. ("CrossFit" or the "Company") and

Greg Glassman ("Mr. Glassman" and, with CrossFit, "Counterclaim­Plaintiffs"), by and through

their undersigned counsel, hereby move the Court for an Order temporarily restraining and

enjoining Plaintiff/Counterclaim­Defendant Lauren Glassman ("Ms. Glassman" or

"Counterclaim­Defendant") and her affiliates, employees, agents and any person acting on her

behalf from consummating any sale of equity in CrossFit to third­party Anthos Capital

("Anthos"). The grounds for this motion are as follows:

INTRODUCTION

1. In June of this year, Ms. Glassman, a director and co­owner of CrossFit,

announced her intention to sell her equity interest in the Company – an equity interest that is

currently held in trust as part of ongoing Arizona divorce proceedings between the Glassmans,

and subject to an injunction issued by the Arizona court that prohibits either party from

transferring their share. She separately commenced this litigation, alleging that Mr. Glassman

and CrossFit had breached their fiduciary duties in undertaking the acquisition of a small aircraft

for corporate use.

EFiled: Aug 31 2012 12:35PM EDT Transaction ID 46205653 Case No. 7717­VCG

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2. Since this suit commenced, Counterclaim­Plaintiffs have learned – from both

Plaintiff's own counsel and counsel for Anthos – that Ms. Glassman's purported sale was made

possible by Ms. Glassman's secret disclosure of confidential Company documents: providing

them to Anthos as "due diligence" materials without the knowledge or permission of the

Company, and with no safeguards to protect the Company from Anthos' further misuse of those

materials.

3. It is well­settled that a fiduciary may not share confidential company materials

with third parties for her own enrichment. Yet that is exactly what Ms. Glassman has done.

4. The sale, if consummated, would cause serious harm both to CrossFit and to Mr.

Glassman. As an initial matter, Anthos would have acquired 50% ownership of the Company

with the benefit of unauthorized access to confidential company information – a significant harm

in itself. Beyond that, Anthos has stated that it intends to make significant changes to the

Company's (highly successful) business model – changes that both CrossFit and Mr. Glassman

believe would be highly detrimental. The sale could also result in CrossFit losing its status as a

subchapter S corporation, which would have significant tax ramifications as well as impose new

administrative burdens upon the company.

5. Nonetheless, Ms. Glassman has proceeded to petition the divorce court in Arizona

to lift its injunction to permit her to consummate her sale to Anthos and prematurely divide the

estate. A hearing on Ms. Glassman's motion is scheduled for September 5, 2012. Counterclaim­

Plaintiffs have every expectation that the Arizona court will not permit the sale to go forward. In

the event that it does, however, Ms. Glassman has indicated that she intends to consummate the

transaction immediately. Counterclaim­Plaintiffs requested that Ms. Glassman agree to delay

any closing until this Court had the opportunity to adjudicate the counterclaims. She refused.

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Accordingly, Counterclaim­Plaintiffs are forced to bring this motion, requesting a temporary

restraining order to halt the sale, protect CrossFit's confidential materials and enforce its rights to

loyalty and care from its directors in the event that the Arizona court permits the sale to proceed.

FACTUAL BACKGROUND1

6. CrossFit is a Delaware corporation that develops fitness programs for use at

affiliated gyms. CrossFit offers a unique fitness and strength program, publishes a fitness

journal, and provides seminars, training, and consultation services regarding its product

throughout the world. (Counterclaims ¶ 15.)

7. CrossFit also partners with other companies in the athletics and fitness market,

including a partnership with Reebok International, to promote its brand through various fitness­

related events and competitions, such as the annual CrossFit Games, which appears on ESPN's

network pursuant to a contract between the two companies. (Counterclaims ¶ 16.)

8. CrossFit has grown exponentially over the past decade and now has over 4400

affiliates worldwide. That growth is a result of both the benefits of the CrossFit system and also

CrossFit's unique culture, which offers an alternative to conventional gym membership or

individual workout regimens. (Counterclaims ¶ 17.)

9. Mr. and Ms. Glassman jointly own 100 percent of the shares of CrossFit as

community property. (Counterclaims ¶ 18.)

10. Mr. and Ms. Glassman commenced divorce proceedings on March 25, 2010.

(Counterclaims ¶ 22.)

11. A Preliminary Injunction entered as part of the divorce proceedings has enjoined

the "transferring, encumbering, concealing, selling, or otherwise disposing of" the Glassmans'

1 The background to this motion is set forth more fully in the Verified Counterclaims filed on August 8, 2012.

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community property – including their sole ownership of CrossFit – without written consent of

the parties or the permission of the court. See Ex. 1 (Preliminary Injunction), at 2. That

Preliminary Injunction is still in force. As a result, neither of the Glassmans can sell any portion

of the CrossFit shares without the other's consent or a court order. (Counterclaims ¶ 28.)

12. However, Ms. Glassman now seeks to lift this injunction and dispose of her entire

stake to Anthos, a California­based private investment firm interested in making an equity

investment in CrossFit. (Counterclaims ¶ 30.)

Anthos Seeks to Acquire Equity in CrossFit

13. CrossFit's dealings with Anthos go back to August 2010, when Anthos sought an

introduction to CrossFit management. Anthos spoke with lower­ and mid­level management, but

discussions did not proceed beyond that level at that time. (Counterclaims ¶ 30.)

14. Anthos renewed its interest with vigor in April 2011, making contact with Mr.

Glassman and other senior CrossFit management. Over the next several months, Anthos

employees – particularly Bryan Kelly ("Kelly"), a managing partner, and Chris Jacobson

("Jacobson") an associate – met with Mr. Glassman and other members of CrossFit's

management to discuss both the Company's operations and Anthos' view of how the Company

should be managed and its revenue maximized. (Counterclaims ¶ 31.)

15. Anthos' aim in acquiring equity in CrossFit was not merely to act as a passive

investor. Rather, Anthos expressed a desire to change CrossFit's core approach to its business.

Rather than encouraging affiliates to focus on a simple, back­to­basics approach to fitness,

Anthos expressed an interest in turning the 4000­plus CrossFit­affiliated gyms into points­of­sale

for t­shirts, nutrition supplements, exercise videos, and the like. Likewise, Anthos continuously

voiced its intention to "help" CrossFit "get out" of its agreements with certain commercial

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partners, and repeatedly requested confidential information from the Company in order to do so.

Not coincidentally, Anthos has relationships with competitors of one or more of CrossFit's

current commercial partners. (Counterclaims ¶ 34.)

16. CrossFit management viewed Anthos' proposed changes to the Company's

business model as entirely antithetical to the Company's philosophy and brand identity. CrossFit

management believes that, if implemented, the Anthos approach would alienate CrossFit's

clientele and affiliates, and severely devalue the Company. Accordingly, CrossFit management

rejected Anthos' offers. (Counterclaims ¶ 35.)

17. Brian Mulvaney, a CrossFit representative, further explained in an email to Kelly

that "CrossFit, Inc. is self funding for all of the initiatives we care about. Adding other people's

money to the equation represents more threat than opportunity." (Counterclaims ¶ 35.)

Ms. Glassman's Transaction With Anthos

18. During the Spring of 2012, Mr. Glassman had extensive discussions with Ms.

Glassman about a sale of her 50% interest in the Company. Mr. Glassman made an initial offer

to be paid out over five years, in order for the Company to reacquire her shares. Ms. Glassman

countered with an offer sheet that had different options and buyouts, the shortest one being over

fifteen years, which actually resulted in a lower net present value than what the Company had

proposed. The Company nonetheless proposed a tiered deal at a higher price over the same five

year period. It appeared that the parties had reached an agreement in principle on price terms

and the discussions had reduced to terms regarding life insurance beneficiaries and other smaller

issues – thus ensuring that the Company could maintain its existing, and highly successful,

business model and culture free from outside interference. (Counterclaims ¶ 67.)

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19. The parties went forward with this plan and were down to the minutiae of the

divorce settlement when Ms. Glassman's attorneys announced that the offers were withdrawn

and the deal was rejected. In fact, unbeknowst to Counterclaim­Plaintiffs, Ms. Glassman was

negotiating with Anthos about selling her interest in the Company to Anthos. (Counterclaims ¶

68.) At no point did she give either Mr. Glassman ­ her husband ­ or the Company an

opportunity to match or counter the Anthos proposal.

20. Additional facts related to this agreement have now come to light. It appears that,

on June 13, 2012, Ms. Glassman entered into a so­called Non­Disclosure Agreement ("NDA")

with Anthos so that she could share "proprietary and confidential information" with Anthos to

further a potential sale to Anthos of her interest in the Company. See Ex. 2 (NDA)

21. Anthos has admitted that it received "due diligence" materials from Ms.

Glassman. Ex. 3 (Letter from A. Dunning dated August 6, 2012).

22. Following this admission, Ms. Glassman provided Counterclaim­Plaintiffs with

copies of the materials that she gave to Anthos. Ex. 4 (Cover letter from G. Park). These "due

diligence" materials included extensive confidential information, including: CrossFit payroll

information (including salary information for individual employees), confidential CrossFit

contracts (including those related to sponsorship arrangements and key marketing efforts),

internal board documents, and non­public financial statements.

23. Ms. Glassman entered into the NDA and provided the "due diligence" materials to

Anthos without any prior notice to, or permission from, the Company or the Board of Directors.

CrossFit was neither a party to the NDA nor was it identified as a third­party beneficiary.

(Counterclaims ¶ 71.) Accordingly, CrossFit was granted no ability under the NDA to enforce a

remedy for a breach of its terms should Anthos misuse the confidential Company information

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provided to it by Ms. Glassman. See Ex. 2. Ms. Glassman and Anthos clearly understood the

consequences of a breach of the NDA – noting that it would "cause irreparable harm" and

granting her the right to enjoin a breach or threatened breach – but no such safeguards were

provided to the Company. Id.

24. The NDA is less than two pages long and contains woefully inadequate

protections. If the Company had been advised of the NDA or of Ms. Glassman's desire to

disclose "proprietary and confidential information" to Anthos, it would have objected.

(Counterclaims ¶ 72.)

25. Ms. Glassman knew that the Company would object to her disclosure of

"proprietary and confidential information" to a third party. She intentionally concealed these

activities from the Company and the Board of Directors. In doing so, she breached her duties to

the Company and put her personal financial interests before the interests of the Company and its

shareholders. (Counterclaims ¶ 73.)

26. On June 20, 2012, shortly after Ms. Glassman entered into the NDA with Anthos

and without prior warning to the Company (as the Company had no knowledge of the NDA or

Ms. Glassman's negotiations with Anthos), Kelly informed Mr. Glassman that Anthos had

"entered into a definitive agreement to purchase [Counterclaim­Defendant's] 50% interest share."

Ms. Glassman has subsequently produced a "Purchase and Sale Agreement" which purports to be

a final sale contract. (Counterclaims ¶ 74.)

27. This Agreement is contingent on, among other things, the "separation" of Ms.

Glassman's interest in CrossFit from that of her husband, either by his consent or by court order.

Ex. 5 (Purchase and Sale Agreement) §§ 5.1, 6.1. The sale is also predicated on the condition

that there be no "action, suit, claim [etc.] pending or threatened against Seller or Purchaser…

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which, if adversely determined, would be reasonably likely to question the validity of… the

transaction contemplated by this Agreement." Id. § 5.5. Anthos, however, may waive this latter

condition. Id. § 5.

28. On July 26,2012, Plaintiff filed a motion in the divorce proceedings in Arizona

Superior Court to lift the preliminary injunction in order to permit her proposed sale to Anthos to

go forward. A hearing on that motion is presently scheduled for September 5, 2012.

29. The announcement of this sale has caused considerable dissatisfaction among

CrossFit's affiliate base – the thousands of gyms across the world that license the CrossFit brand

and approach. Affiliates have contacted CrossFit to voice their concern that Anthos' acquisition

would diminish their autonomy and harm the brand. Affidavit of Dale Saran, ¶ 11. CrossFit

management anticipates a significant risk of affiliates leaving CrossFit if the transaction is

completed. See id.

30. A further concern raised by the potential acquisition is the risk that the sale to

Anthos would require the Company to convert from an S­Corporation (permitting single­taxation

of proceeds) to a C­Corporation, imposing double­taxation (once as corporate earnings and a

second time to shareholders) and other negative tax consequences to its shareholders, including

Mr. Glassman. Affidavit of Ken Smith ¶ 7(1).

31. Counterclaim­Plaintiffs further contend that Ms. Glassman's subsequent conduct

in opposing the acquisition of the aircraft – a purchase that she discussed with CrossFit

management as early as March, 2012 – has been purely tactical and in furtherance of her breach

of duty. That is, her opposition to the aircraft purchase, and this entire litigation, is motivated

not by any reasonable concern about the Company's fiscal health, but by a desire to create

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gridlock in the Company's operations to force management to agree to the sale of her interest.

(Counterclaims ¶¶ 75­83.)

32. Plaintiff was fully aware of the Company's pending acquisition of the airplane for

months and raised no objection. Plaintiff had access to the Company's financial statements

disclosing that purchase in her capacity as a director. Plaintiff also received those documents

pursuant to her requests as a shareholder. Ms. Glassman emailed Ken Smith of CrossFit,

inquiring about the purchase and asking follow­up questions in March, 2012.

33. However, it was not until over three months later – after reaching her agreement

with Anthos, by which she would sell her entire equity position in the Company, that she

commenced this action and sought to halt the purchase of the aircraft.

34. At no point during this three­month period did Ms. Glassman seek to halt the

purchase or convene a board meeting to address the transaction.

35. This delay, followed by Ms. Glassman's immediate resort to litigation, is strong

evidence that Counterclaim­Defendant was motivated not by her fiduciary duties to, or the

financial well­being of, the Company, but rather by a desire to pressure Counterclaim­Plaintiffs

to acquiesce in her sale to Anthos rather than face constant inquiries about routine business

functions.

ARGUMENT

Counterclaim­Plaintiffs Meet the Standard for Issuance of a Temporary Restraining Order.

36. Counterclaim­Plaintiffs meet the straightforward test for a temporary restraining

order. "To obtain such an order, a party must demonstrate three things: '(i) the existence of a

colorable claim, (ii) the irreparable harm that will be suffered if relief is not granted, and (iii) a

balancing of hardships favoring the moving party.'" Arkema Inc. v. Dow Chem. Co., 2010 WL

2334386, at *3 (Del. Ch. May 25, 2010) (citations omitted); see also True N. Commc'ns Inc. v.

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Publicis S.A., 1997 WL 33173290, at *1 (Del. Ch. Dec. 16, 1997). Because a temporary

restraining order is designed to prevent irreparable injury on an emergency basis, the risk of

irreparable injury is the paramount consideration in the analysis. See, e.g., Cottle v. Carr, 1988

WL 10415, at *3 (Del. Ch. Feb. 9, 1988). Thus, if a movant shows that he will suffer or is

suffering immediate irreparable harm, a temporary restraining order should issue unless the

Court is persuaded that the claim is "frivolous or not truly litigable" or "that the risk of harm in

granting the remedy is greater than the risk to plaintiff of denying it." Id.

Counterclaim­Plaintiffs Have Alleged a Colorable Claim that Counterclaim­Defendant Breached her Fiduciary Duties in Disclosing Confidential Materials to Anthos

37. Counterclaim­Plaintiffs easily establish the first requirement for a temporary

restraining order because their claims on the merits are more than colorable. To establish a

colorable claim, a plaintiff need only show that its claims are "non­frivolous and litigable." Id. at

*4. That is, "the analysis of whether the claims asserted are meritorious requires nothing more

than a showing 'that a colorable claim has been made out if the facts alleged are true.'" Topspin

P'rs, L.P. v. RockSolid Sys., Inc., 2009 WL 154387, at *2 (Del. Ch. Jan. 21, 2009) (citation

omitted).

38. Here, Ms. Glassman breached her fiduciary duties in sending confidential

company materials outside of the company for her own benefit, without even advising, let alone

obtaining permission from, the Company or its board of directors.

39. Delaware law provides that "it is inequitable to permit [a] fiduciary to profit from

using confidential corporate information." Kahn v. Kolberg Kravis Roberts & Co., L.P., 23 A.3d

831, 838 (Del. 2011); see also Brophy v. Cities Service Co., 70 A.2d 5, 7­8 (Del. Ch. 1949) ("A

fiduciary is subject to a duty to the beneficiary not to use on his own account information

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confidentially given him by the beneficiary or acquired by him during the course of or on

account of the fiduciary relation." (internal citations omitted)).

40. The corporation itself need not show any loss for a claim for breach of fiduciary

duty to lie. Id.; see also Guth v. Loft, Inc., 5 A.2d 503, 510 ("If an officer or director of a

corporation, in violation of his duty as such, acquires gain or advantage for himself, the law

charges the interest so acquired with a trust for the benefit of the corporation, at its election,

while it denies to the betrayer all benefit and profit.")

41. The facts of this case fit squarely within this Court's decision in Hollinger

International. Inc. v. Black. 844 A.2d 1022 (Del. Ch. 2004). In that case, Conrad Black, a

controlling shareholder of plaintiff Hollinger, entered into secret negotiations with a third­party

(the Barclays brothers) to sell his equity interest in a deal that would benefit Black at Hollinger's

expense. See id. at 1046. To make this transaction possible, Black shared Hollinger's

confidential, proprietary information with the Barclays, including internal valuations and other

proprietary data. See id. ("Stated simply, Black used confidential advice given to him in his

official capacity at International to negotiate behind International's back with the Barclays").

42. Hollinger, through its independent directors, brought suit to enjoin the

Black/Barclays transaction and preserve the company's economic viability. The Court found

that Black had violated his fiduciary duties of care and loyalty in using the company's internal

information for his benefit, to the detriment of the company itself:

Black violated his fiduciary duty of loyalty by, among other acts, … misleading his fellow directors about his conduct and failing to disclose his dealings with the Barclays, under circumstances in which full disclosure was obviously expected; [and] improperly using confidential information belonging to International to advance his own personal interests and not those of International, without authorization from his fellow directors."

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Id. at 1061­62. The Court granted the injunction sought by Hollinger halting the self­interested

transaction between Black and the Barclays, and subsequently granted summary judgment to the

company as to liability and damages. See Black v. Hollinger Int'l, 872 A.2d 559, 561 n.1 (Del.

2005).

43. The facts here largely mirror those in Hollinger, and reflect the broader principle

that a fiduciary may not disseminate confidential information or use that information for his or

her own profit. Ms. Glassman's deal with Anthos was plainly undertaken for her own benefit.

In the process, she provided confidential internal information, including contracts, payroll and

budget information and board documents to Anthos. She did not inform CrossFit of this

disclosure, and gave CrossFit no recourse under her NDA in the event that Anthos misused

CrossFit's documents. This disclosure of internal CrossFit documents to make her own deal with

Anthos possible is a violation of her obligations. Accordingly, Counterclaim­Plaintiffs have

stated a colorable claim.

There Is a Substantial Risk of Immediate, Irreparable Harm if a Temporary Restraining Order is Not Granted

44. Counterclaim­Plaintiffs face irreparable harm if Counterclaim­Defendant is

allowed to consummate her transaction with Anthos.

45. First, as noted above, Delaware law provides that the misuse of confidential

corporate information by a fiduciary is, in and of itself, an injury even without a showing of

economic loss. See, e.g., Brophy, 70 A.2d at 8. Here, the violation of Ms. Glassman's duty in

providing confidential materials to Anthos is itself actionable in equity. Counterclaim­Plaintiffs

seek only to halt further injury by enjoining the completion of the sale.

46. Again, the Hollinger case is instructive here. The Court in that matter held that

the plaintiff had established a likelihood of irreparable harm arising from the disruption of its

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strategic plan caused by Black's unlawful sale of equity to a third­party and his misuse of insider

information. See Hollinger, 844 A.2d at 1090. The Court further noted that the sale, once

completed, could not be undone. See id. ("Without an injunction, it will be practically

impossible to rescind the Barclays Transaction… and [plaintiff] will lose the unique

opportunities the [strategic plan] may develop.")

47. Similarly, the proposed sale to Anthos places CrossFit's business strategy at risk.

Anthos has affirmatively stated that it does not share CrossFit's strategy for growth, and seeks to

recreate CrossFit as, essentially, a merchandising platform for other products. As a result,

Counterclaim­Defendant's purported sale to Anthos, made possible by on her misuse of internal

information, constitutes not just actionable injury in itself, but also a risk to the long­term value

of CrossFit.

48. As described above, CrossFit and Mr. Glassman also face additional risk, such as

loss of affiliates and adverse tax consequences upon conversion of CrossFit from an S­

Corporation to a C­Corporation if the transaction is allowed to proceed. These harms further

weigh in favor of an injunction in this case.

The Balance of Hardships Tips Decidedly in Favor of Counterclaim­Plaintiffs

49. A final consideration in the TRO analysis is whether the balance of hardships

weighs in favor of granting relief. See Arkema Inc. v. Dow Chem. Co., 2010 WL 2334386, at *5

(Del. Ch. May 25, 2010) (granting TRO because the "balance of the hardships is either in

equipoise or tips somewhat in favor of [plaintiff].").

50. On the current facts, the threat of imminent, irreparable harm to the Counterclaim­

Plaintiffs dramatically outweighs any potential inconvenience that might result from barring the

immediate sale of Ms. Glassman's interest in CrossFit.

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51. Simply put, Counterclaim­Defendant does not face any real risk of injury. There

is no urgency in her proposed sale to Anthos. Counterclaim­Plaintiffs believe that the sale to

Anthos should never occur given Ms. Glassman's misuse of confidential information, but if the

Court disagrees, the sale could be consummated at a later date. At this time, Counterclaim­

Plaintiffs are merely seeking to preserve the status quo to give them and the Court the

opportunity to adjudicate their claims. Moreover, if the Arizona court allows it, Counterclaim­

Defendant can enter into a different transaction with another buyer (without the misuse of

confidential data) should she wish to sell – including the prospect of selling her equity back to

CrossFit – or retain her equity and continue to receive shareholder distributions and the other

benefits of ownership.

52. Counterclaim­Plaintiffs, by contrast, face the risk of irreparable harm as set forth

above. The misuse of CrossFit's corporate information and the negative consequences that

proceed from an Anthos acquisition, weigh in favor of halting the sale. Otherwise, the Anthos

acquisition will erode shareholder value for the remaining shareholder – Greg Glassman – while

allowing Ms. Glassman to lock in her ill­gotten proceeds.

CONCLUSION

53. For the foregoing reasons, as well as those presented in the Verified Complaint,

Counterclaim­Plaintiffs respectfully request that the Court grant their motion for a temporary

restraining order, enter an order in the form attached hereto, and grant any such other relief as

just and appropriate under the circumstances.

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/s/ Raymond J. DiCamillo Raymond J. DiCamillo (#3188) Kevin M. Gallagher (#5337) Richards, Layton & Finger, P.A. 920 North King Street Wilmington, Delaware 19801 (302) 651­7700

Attorneys for Defendants CrossFit, Inc. and Greg Glassman

Dated: August 31, 2012

EXHIBIT 1

EFiled: Aug 31 2012 12:35PM EDT Transaction ID 46205653 Case No. 7717­VCG

EXHIBIT 2

EXHIBIT 3

EXHIBIT 4

EXHIBIT 5

EFiled: Aug 31 2012 12:35PM EDT Transaction ID 46205653 Case No. 7717­VCG

EFiled: Aug 31 2012 12:35PM EDT Transaction ID 46205653 Case No. 7717­VCG