Amendment No. 17 to Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F3impoi1v7MJrEAhsUTlUaPnNJKnFSMiHl2Y7FbUeZYnh3YHDgnJ+MSzPyZcbJlv ndYrFhVHE7wwPaFPIxZB3w== 0001193125-05-248199.txt : 20051223 0001193125-05-248199.hdr.sgml : 20051223 20051223083137 ACCESSION NUMBER: 0001193125-05-248199 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20051223 DATE AS OF CHANGE: 20051223 GROUP MEMBERS: EMANUEL R. PEARLMAN GROUP MEMBERS: LIBERATION INVESTMENTS, L.P. GROUP MEMBERS: LIBERATION INVESTMENTS, LTD. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LIBERATION INVESTMENT GROUP LLC CENTRAL INDEX KEY: 0001259272 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: 11766 WILSHIRE BLVD., STREET 2: SUITE 870 CITY: LOS ANGELES STATE: CA ZIP: 90025 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BALLY TOTAL FITNESS HOLDING CORP CENTRAL INDEX KEY: 0000770944 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 363228107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-47769 FILM NUMBER: 051284027 BUSINESS ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 773-380-3000 MAIL ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 FORMER COMPANY: FORMER CONFORMED NAME: BALLYS HEALTH & TENNIS CORP DATE OF NAME CHANGE: 19940526 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 17 TO SCHEDULE 13D Amendment No. 17 to Schedule 13D

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

Information to be Included in Statements Filed Pursuant to Rule

13d-1(a) and Amendments Thereto Filed Pursuant to Rule 13d-2(a)

Under the Securities Exchange Act of 1934

(Amendment No. 17)*

BALLY TOTAL FITNESS HOLDING CORPORATION

(Name of Issuer)

COMMON STOCK, PAR VALUE $.01 PER SHARE

(Title of Class of Securities)

058 73K 10 8

(CUSIP Number)

KENNETH J. BARONSKY

MILBANK, TWEED, HADLEY & McCLOY LLP

601 S. FIGUEROA STREET, 30^TH FLOOR

LOS ANGELES, CA 90017

TELEPHONE: 213-892-4333

(Name, address and telephone number of person authorized to receive notices and communications)

December 22, 2005

(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 which 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.

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 (“Act”) 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. 058 73K 10 8


(1)	NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Liberation Investments, L.P.
(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
(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 Delaware


NUMBER OF SHARES BENEFICIALLY OWNED BY PERSON WITH		(7) SOLE VOTING POWER 0
		(8) SHARED VOTING POWER 2,662,963
		(9) SOLE DISPOSITIVE POWER 0
		(10) SHARED DISPOSITIVE POWER 2,662,963


(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,662,963
(12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.02%
(14)	TYPE OF REPORTING PERSON PN

Page 2

CUSIP No. 058 73K 10 8


(1)	NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Liberation Investments, Ltd.
(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
(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 PERSON WITH		(7) SOLE VOTING POWER 0
		(8) SHARED VOTING POWER 1,436,487
		(9) SOLE DISPOSITIVE POWER 0
		(10) SHARED DISPOSITIVE POWER 1,436,487


(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,436,487
(12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.79%
(14)	TYPE OF REPORTING PERSON CO

Page 3

CUSIP No. 058 73K 10 8


(1)	NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Liberation Investment Group LLC
(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
(3)	SEC USE ONLY
(4)	SOURCE OF FUNDS N/A
(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 PERSON WITH		(7) SOLE VOTING POWER 0
		(8) SHARED VOTING POWER 4,099,450
		(9) SOLE DISPOSITIVE POWER 0
		(10) SHARED DISPOSITIVE POWER 4,099,450


(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,099,450
(12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.80%
(14)	TYPE OF REPORTING PERSON OO, IA

Page 4

CUSIP No. 058 73K 10 8


(1)	NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Emanuel R. Pearlman
(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ (b) x
(3)	SEC USE ONLY
(4)	SOURCE OF FUNDS N/A
(5)	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨
(6)	CITIZENSHIP OR PLACE OF ORGANIZATION United States


NUMBER OF SHARES BENEFICIALLY OWNED BY PERSON WITH		(7) SOLE VOTING POWER 35,000
		(8) SHARED VOTING POWER 4,099,450
		(9) SOLE DISPOSITIVE POWER 35,000
		(10) SHARED DISPOSITIVE POWER 4,099,450


(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,134,450
(12)	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES	¨
(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.90%
(14)	TYPE OF REPORTING PERSON IN, HC

Page 5

INTRODUCTORY STATEMENT

This Amendment No. 17 (this “Amendment”) relates to the Schedule 13D filed on behalf of (i) Liberation Investments, L.P., a Delaware limited partnership (“LILP”); (ii) Liberation Investments Ltd. (“LILTD”), a private offshore investment corporation; (iii) Liberation Investment Group, LLC (“LIGLLC”), a Delaware limited liability company and general partner of LILP and discretionary investment advisor to LILTD; and (iv) Emanuel R. Pearlman, as General Manager and majority member of LIGLLC, with the Securities and Exchange Commission on June 8, 2004, as amended by Amendment No. 1 filed on July 13, 2004, Amendment No. 2 filed on August 27, 2004, Amendment No. 3 filed on September 1, 2004, Amendment No. 4 filed on September 10, 2004, Amendment No. 5 filed on December 13, 2004, Amendment No. 6 filed on April 26, 2005, Amendment No. 7 filed on May 6, 2005, Amendment No. 8 filed on July 19, 2005, Amendment No. 9 filed on July 22, 2005, Amendment No. 10 filed on September 19, 2005, Amendment No. 11 filed on October 11, 2005, Amendment No. 12 filed on October 31, 2005, Amendment No. 13 filed on November 14, 2005, Amendment No. 14 filed on November 22, 2005, Amendment No. 15 filed on December 7, 2005 and Amendment No. 16 filed on December 14, 2005 (the “Schedule 13D”), relating to shares of common stock, $.01 par value per share, of Bally Total Fitness Holding Corporation (the “Company”).

Items 4 and 7 of the Schedule 13D are hereby amended and supplemented as follows:

ITEM 4. PURPOSE OF TRANSACTION

On December 22, 2005, LILP and LILTD submitted a letter to the Board of Directors of the Company (the “Board”) (a copy of which is attached hereto as Exhibit 99.26, the “Letter”) in which they, among other things, expressed their concerns about the propriety of recent stock sales by Mr. Paul Toback, Chairman of the Board and Chief Executive Officer of the Company, and certain other members of the Company’s management team. The Letter also requests that the Board (i) immediately take the action necessary to separate the office of the Chief Executive Officer and the Chairman of the Board and (ii) authorize Steven Rogers and Adam Metz, two independent directors appointed to the Board subsequent to the Company’s release on November 30, 2005 of its financial results, to independently investigate the propriety of recent stock sales executed by Mr. Toback and certain members of the Company’s management team and the veracity and timeliness of the Company’s recent public filings.

As a result of the delivery of the Letter to the Company, LILP and LILTD may engage in discussions with the Company’s stockholders, management or Board concerning the matters described in the Letter.

In addition, on December 23, 2005, LILP and LILTD issued a press release (a copy of which is attached hereto as Exhibit 99.27) announcing, among other things, that on December 22, 2005, the United States District Court for the District of Delaware dismissed as moot a motion by the Company for a preliminary injunction proceeding against LILP and LILTD in an action brought by the Company to prevent LILP and LILTD from presenting a shareholder proposal at the Company’s upcoming annual meeting.

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS

The following exhibit is filed with this Amendment:


Exhibit 99.26.		Letter to the Board of Directors of the Company, dated December 21, 2005, submitted by LILP and LILTD.
Exhibit 99.27.		Press Release, dated December 23, 2005.

Page 6

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.

Dated: December 22, 2005


LIBERATION INVESTMENTS, L.P.
By: Liberation Investment Group LLC, general partner

By:		/s/ Emanuel R. Pearlman
		Emanuel R. Pearlman
		General Manager

LIBERATION INVESTMENTS, LTD.

By:		/s/ Emanuel R. Pearlman
		Emanuel R. Pearlman
		Director

LIBERATION INVESTMENT GROUP, LLC

By:		/s/ Emanuel R. Pearlman
		Emanuel R. Pearlman
		General Manager

EMANUEL R. PEARLMAN

/s/ Emanuel R. Pearlman

Page 7

EX-99.26 2 dex9926.htm LETTER TO THE BOARD OF DIRECTORS OF THE COMPANY, DATED DECEMBER 21, 2005 Letter to the Board of Directors of the Company, dated December 21, 2005

Exhibit 99.26

LIBERATION INVESTMENTS, L.P.

11766 Wilshire Blvd, Suite No. 870

Los Angeles, CA 90025

LIBERATION INVESTMENTS, LTD.

11766 Wilshire Blvd, Suite No. 870

Los Angeles, CA 90025

December 22, 2005

The Board of Directors

Bally Total Fitness Holding Corporation

8700 West Bryn Mawr Avenue

Chicago, IL 60631

C/o: Marc D. Bassewitz, Esq.

Gentlemen:

As you know, Liberation Investments, L.P., Liberation Investments, Ltd. and their affiliates (collectively, “Liberation”) own approximately 10.9% of the outstanding common stock of Bally Total Fitness Holding Corporation (“Bally” or the “Company”), making Liberation Bally’s second largest shareholder. We write to express our grave concern about the propriety of recent stock sales by Mr. Paul Toback, Chairman and Chief Executive Officer of Bally, and certain members of the Company’s management. We are also persuaded that Toback’s recent stock sales evidence his lack of faith in his ability to maximize the value of Bally’s stock, sending a toxic message to the capital markets that further erodes confidence in his leadership at the very moment the Company faces critical strategic challenges.

After the markets closed on November 30, 2005, the Company restated its financial results for the period from 2000 through 2004. The Company also released partial financial results for 2005 for the first time on November 30, 2005. In addition, Bally claimed in its November 30 regulatory filings that cash collections of membership revenue during the three months ended September 30, 2005 had significantly increased over the same period during 2004. Toback trumpeted these results and his confidence in the Company’s future. In an accompanying press release, Toback underscored the importance of membership sales strategies, claiming that Bally’s “results reflect the initial impact of our growth initiatives — including new membership sales strategies such as our Build Your Own Membership Plan…”

On the same evening, Bally announced that its Board of Directors had retained J.P. Morgan Securities Inc. to “explore a range of strategic alternatives to enhance shareholder value” including “the sale or merger of Bally Total Fitness with another entity or strategic partner.”

At approximately 10 A.M. (E.S.T.) on December 1, 2005—the very next day—during a carefully scripted Bally conference call to discuss the Company’s financial results, Toback continued the steady drumbeat of encouraging reports, commenting, “I believe strongly that the company has a really positive ability to grow…” During the same earnings call, Toback responded to the comment of a caller by apparently seeking to burnish his and management’s credentials as allies of the stockholders, remarking, “And believe me, we are shareholders. I own two percent of the Company; management owns seven percent of the Company.”

The net effect of Bally’s meticulously choreographed campaign of upbeat pronouncements was predictable. On December 1, 2005, the markets reacted favorably, with Bally’s stock surging in value by approximately 10% on the New York Stock Exchange.

On December 2 and December 5, members of Bally’s senior management team sold approximately 1,200,000 shares that they had previously received as equity compensation, representing approximately 3.15% of the Company’s issued and outstanding stock as of that date and nearly half of the management-held stake Toback had boasted about the preceding day. In excess of 400,000 of these shares were sold by Toback himself, representing the bulk of his stake in Bally, only hours after he had ballyhooed his stock ownership on the earnings call. Moreover, Bally has reported that Toback was entitled to generous tax gross-up benefits from the Company in connection with the vesting of his restricted stock grants, so he should not be heard to argue that he had a compelling tax motivation to sell his shares. The December 2 management sell-off coincided with a reduction in the value of Bally’s stock of approximately 12.4% as compared to its closing price the prior day. Between December 6 and December 16, Bally insiders disposed of an additional approximately 145,000 shares, which reduced management’s stake to about half of the 7% position Toback announced on the December 1 earnings call. As Chief Executive Officer and Chairman of the Board, Toback signaled his approval of this massive sell-off by disposing of the great majority of his shares.

Are these the actions of a Chief Executive Officer with confidence in his ability to, in his words, realize “growth opportunities” at Bally? Why should shareholders have confidence in Toback’s leadership if he doesn’t have confidence in his own ability to maximize the value of Bally’s stock?

While the Company’s November 30 10-K filing does contain a reference buried deep in the document to the effect that some members of management were expected to sell their shares in the near term, the disclosure was hardly prominent and came amid literally hundreds of pages of disclosure issued by Bally after the markets closed on that day. In any event, we believe that Toback’s claims the following morning during the earnings call concerning his and management’s stock ownership failed to give investors the impression that an enormous management sell-off was in the works. Moreover, in our view, the fact that Toback sold his stock at all during this critical period served to undermine the confidence of the capital markets in the leadership of Bally.

On December 20, once the majority of management’s stake in Bally’s stock had been sold, Bally amended its quarterly report for the quarter ended September 30, 2005, which was originally filed on November 30, to correct a misstatement concerning cash collections of membership revenue during the three months ended September 30, 2005. Instead of the previously reported increase of $8.9 million (3.9%) in cash collections of membership revenue during the three months ended September 30, 2005, which Bally had touted in its quarterly report as “the result of more members choosing the pay-as-you-go membership plan”, the Company confessed that such revenue collections had actually dipped by $1.6 million (0.8%) to $204.6 million. Since December 20, the market has responded to this revelation by trimming another approximately 5.5% off the value of Bally’s stock. Millions of shares of Bally stock changed hands between the initial filing of the quarterly report on November 30 and Bally’s corrective disclosure on December 20, especially by way of sales by Company insiders. In fact, substantial sales of Bally stock by Company insiders occurred as late as December 16, a mere two business days prior to the December 20 filing of corrective disclosure.

In light of the sequence of events described above, we are concerned that the colossal management sell-off of Company stock led by Toback may have violated the securities laws. We believe that Toback’s enthusiastic remarks about management stock ownership and membership sales strategies had the effect of ensuring market confidence during the period in which he and certain members of management disposed of substantial positions in the stock. At the very least, it seems clear to us that Toback’s flaunting of his Bally stock ownership during the earnings call the day before selling a substantial portion of his stake misled the capital markets. It is also worth noting that Bally’s stock stunningly shed approximately 22.2% of its value between its closing price on December 1 and its closing price today. Moreover, whether Bally’s misstatement of cash collections of membership revenue in its quarterly report was the result of a simple failure to understand how such revenue collections were to be reported or otherwise, we believe that the Company’s recent public filings must be closely scrutinized.

It is now abundantly clear to us that the office of the Chief Executive Officer and the Chairman of the Board must be separated, and we request that the Board take the action necessary to effect this separation immediately. In addition, we request that Steven Rogers and Adam Metz, the two independent directors appointed subsequent to Bally’s release on November 30 of its financial results, be given a mandate by the Board to independently investigate the propriety of stock sales executed by Toback and certain members of Bally’s management team after November 30 and the veracity and timeliness of Bally’s recent public filings. In the face of continued actions by Toback that we believe evidence his lack of faith in his ability to maximize the value of Bally’s stock and may run afoul of the securities laws, it is imperative that the Board act decisively to restore the confidence of the capital markets in the leadership of the Company.

We anticipate your prompt response to the concerns identified above. Please note that we reserve the right to take the necessary action to protect the interests of shareholders, and, if the facts warrant, will seek to hold Toback and directors personally liable for any losses that have befallen or may befall the Company or its shareholders as a result of the failure of Toback or the Board to observe their respective fiduciary duties.

Sincerely,

/s/ Emanuel R. Pearlman

Emanuel R. Pearlman

Chairman and Chief Executive Officer

EX-99.27 3 dex9927.htm PRESS RELEASE, DATED DECEMBER 23, 2005 Press Release, dated December 23, 2005

Exhibit 99.27

FOR IMMEDIATE RELEASE

LIBERATION INVESTMENT GROUP, LLC

11766 Wilshire Boulevard, Suite 870

Los Angeles, CA 90025

Contact: Emanuel Pearlman

Tel: 310.479.3434

Fax: 310.479.3363

FEDERAL DISTRICT COURT SIDES WITH LIBERATION INVESTMENTS:

COURT DISMISSES BALLY’S REQUEST FOR A PRELIMINARY

INJUNCTION PROCEEDING

LOS ANGELES, CA – December 23, 2005 – Investment funds Liberation Investments, L.P. and Liberation Investments Ltd. (the “Liberation Funds”) announced today that on December 22, 2005, the United States District Court for the District of Delaware (the “Court”) dismissed as moot a motion by Bally Total Fitness Holding Corporation (“Bally”) for a preliminary injunction proceeding against the Liberation Funds in an action brought by Bally to prevent the Liberation Funds from presenting a shareholder proposal at Bally’s upcoming annual meeting.

The Court also denied Bally’s motion to take expedited discovery against the Liberation Funds in connection with the action.

Bally purportedly brought the underlying complaint against the Liberation Funds under the federal securities laws, alleging that the Liberation Funds’ proxy statement in support of its shareholder proposal to remove Mr. Paul Toback as Chief Executive Officer and President of Bally failed to disclose material information. The Liberation Funds amended their proxy statement to address and respond to Bally’s claims and then moved to dismiss the preliminary injunction proceeding as moot.

Bally opposed the Liberation Funds’ motion, urging the Court not to dismiss the proceeding and demanding that the Court grant it expedited discovery against the Liberation Funds. The Court rejected Bally on both scores, concluding that “[Bally] cannot make a showing of irreparable harm and the preliminary injunction proceeding is, therefore, moot.”

Emanuel Pearlman, majority member and general manager of Liberation Investment Group LLC, commented, “We believe that this case should never have been brought to court in the first place. We are pleased that the Court dismissed the preliminary injunction proceeding, which empowers Bally’s shareholders to focus on what we think is the real issue: Should Mr. Toback continue to run Bally?”

Liberation Investments, L.P. and Liberation Investments Ltd. are private investment funds managed by Liberation Investment Group LLC. Emanuel R. Pearlman is the majority member and general manager of Liberation Investment Group LLC, and as such may be deemed to be the beneficial owner of the shares of Bally owned by the Liberation Funds.

-----END PRIVACY-ENHANCED MESSAGE-----