-----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, HGeEf+Y16ygBCRwxa5ohoC8OgeqDnd0Xo6WL8Ay67aTiKuf+XAyWKa734jzlPQJl dmCIax2192APzieF8aexdw== 0000950148-01-501236.txt : 20010718 0000950148-01-501236.hdr.sgml : 20010718 ACCESSION NUMBER: 0000950148-01-501236 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010703 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPORTS CLUB CO INC CENTRAL INDEX KEY: 0000924373 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 954479735 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13290 FILM NUMBER: 1682811 BUSINESS ADDRESS: STREET 1: 11100 SANTA MONICA BLVD STREET 2: STE 300 CITY: LOS ANGELEL STATE: CA ZIP: 90025-3384 BUSINESS PHONE: 3104795200 8-K 1 v74183e8-k.txt FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 3, 2001 THE SPORTS CLUB COMPANY, INC. Delaware 1-13290 95-4479735 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Indentification No.) 11100 Santa Monica Boulevard, Suite 300 Los Angeles, California 90025 (address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 479-5200 (Former name or former address, if changed since last report.) Not applicable Index of Exhibits on Page 2 Page 1 of 2 2 ITEM 5. OTHER EVENTS On July 3, 2001, the Company renewed its $15.0 million bank credit agreement with Comerica Bank - California. The new facility matures on May 31, 2002 and bears interest at a variable rate of LIBOR plus 2 1/4 percent or the Bank's prime rate. Outstanding borrowings are secured by all the assets of The Sports Club/Irvine and The Sports Club/Las Vegas, and are guaranteed by the Company's three major shareholders, MDP Venture II LLC, an affiliate of Millennium Entertainment Partners L.P., D. Michael Talla and Rex A. Licklider. The new agreement requires the Company to maintain certain Tangible Net Worth, Total Liabilities to Tangible Net Worth and EBITDA covenants. To secure the guarantee, the Company entered into an Indemnification and Contribution Agreement with the three guarantors. This agreement provides for the payment of a commitment fee equal to one percent of the aggregate amount of the credit facility and for the payment of a usage fee equal to two percent of the average annual outstanding advances under the credit facility. The Company also agreed to hold each guarantor free and harmless from any claims to which any guarantor may be subject to or incur under the guarantee. At the Company's option, fees and indemnification payments required under the Indemnification and Contribution Agreement may be paid either in cash or shares of the Company's common stock. The Company's Board of Directors also approved an amendment to the Company's Stockholder Rights Plan adopted on September 29, 1998 and amended by First Amendment to Rights Agreement dated as of February 18, 1999, by Second Amendment to Rights Agreement dated as of July 2, 1999, and by Third Amendment to Rights Agreement dated as of April 27, 2000. The Amendment provides that the Rights Plan will not be triggered as a result of the acquisition of any shares issued to any guarantor pursuant to the Indemnification and Contribution Agreement. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 1. Third Amendment to Fourth Amended and Restated Loan Agreement entered into as of June 1, 2001 by and among The Sports Club Company, Inc. and various of its subsidiaries and Comerica Bank - California. 2. Indemnification and Contribution Agreement entered into as of July 3, 2001 by and among The Sports Club Company, Inc., Rex A. Licklider, D. Michael Talla and MDP Ventures II LLC. 3. Fourth Amendment to Rights Agreement entered into as of June 27, 2001 between The Sports Club Company, Inc. and American Stock Transfer & Company. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned hereunto duly authorized. THE SPORTS CLUB COMPANY, INC. BY: /s/ TIMOTHY O'BRIEN ------------------------------------- Timothy O'Brien Chief Financial Officer JULY 17, 2001 EX-1 2 v74183ex1.txt EXHIBIT 1 1 EXHIBIT 1 THIRD AMENDMENT TO FOURTH AMENDED AND RESTATED LOAN AGREEMENT THIS THIRD AMENDMENT TO FOURTH AMENDED AND RESTATED LOAN AGREEMENT ("Amendment") is made and entered into as of June 1, 2001 by and among: (a) The Sports Club Company, Inc., a Delaware corporation; Pontius Realty, Inc., a California corporation; The SportsMed Company, Inc., a California corporation; LA/Irvine Sports Clubs, Ltd., a California limited partnership; Talla New York, Inc., a New York corporation; SCC Sports Club, Inc., a Texas corporation; Irvine Sports Club, Inc., a California corporation; SCC Nevada, Inc. f/k/a Green Valley Spectrum Club, Inc.; Sports Club, Inc. of California, a California corporation; SF Sports Club, Inc., a Delaware corporation; Washington D.C. Sports Club, Inc., a Delaware corporation; HFA Services, Inc., a California corporation; and NY Sports Club, Inc., a Delaware corporation (collectively, the "Borrowers"); (b) Comerica Bank-California ("Comerica"), as the Bank; and (c) Comerica Bank-California, as agent (in such capacity, the "Agent") for the banks (the "Banks") that are parties to the Loan Agreement (as defined below), and is made with reference to the following: A. Comerica, the Agent and the Borrowers have entered into that certain Fourth Amended and Restated Loan Agreement, dated as of April 1, 1999, and amended pursuant to that certain First Amendment to Loan Agreement (the "First Amendment"), dated as of December 3, 1999 and that certain Second Amendment to Loan Agreement ("Second Amendment") dated as of August 10, 2000 (as amended, as the same may hereafter be amended, modified, extended and/or restated, from time to time, the "Loan Agreement".) Pursuant to the Loan Agreement, the Bank has made certain Loans to the Borrowers and has committed to make additional Loans in the future upon the satisfaction of certain conditions. B. As a condition precedent to the effectiveness of this Amendment, each of Rex Licklider, ("Licklider"), an individual, Michael Talla ("Talla"), an individual, and MDP Ventures II, LLC, a New York limited liability company ("MDP", each a "Guarantor" and, collectively, the "Guarantors") shall execute a guaranty in the form of Exhibit B attached hereto, respectively, in favor of the Agent for the benefit of the Banks (the "Guaranty"). C. The Borrowers, the Agent and the Bank wish to amend the Loan Agreement as more particularly set forth below. NOW, THEREFORE, in consideration of the premises and the agreements, conditions and covenants contained herein, the parties hereby agree as follows: 1. Defined Terms. (a) "Effective Date" shall mean the date on which each of the conditions precedent set forth in Section 5 of this Amendment is satisfied. 2 (b) All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. 2. Amendments to Loan Agreement. Effective as of the Effective Date, the Loan Agreement is hereby amended in the following respects: 2.1 The following new definitions of "Effective Tangible Net Worth," "Reebok Sports Club," "The Sports Club/61st St. Manhattan,", "The Sports Club/Boston,", "The Sports Club/L.A.," "The Sports Club/Rockefeller Center," "The Sports Club/San Francisco" and "The Sports Club/Washington D.C." are added to Section 1.1 of the Loan Agreement: "Effective Tangible Net Worth" of the Borrowers and their Subsidiaries means, as of any applicable date of determination, the sum of (a) the consolidated Tangible Net Worth of the Borrowers and their Subsidiaries and (b) the consolidated Subordinated Indebtedness of the Borrowers and their Subsidiaries. "Reebok Sports Club" means the athletic club owned by Talla New York, Inc., a New York corporation, located at 160 Columbus Street, New York, New York. "The Sports Club/61st St. Manhattan" means the athletic club owned by Pontius Realty, Inc., a California corporation, located at 328 E. 61st Street, New York, New York. "The Sports Club/Boston" means the athletic club owned by Washington D.C. Sports Club, Inc., a Delaware corporation, located at 2 Avery Street, Boston, Massachusetts. "The Sports Club/L.A." means the athletic club owned by L.A./Irvine Sports Club, Ltd., a California Limited Partnership, located at 1835 Sepulveda Boulevard, Los Angeles, California. "The Sports Club/Rockefeller Center" means the athletic club owned by Pontius Realty, Inc., a California corporation, located at 45 Rockefeller Plaza, New York, New York. "The Sports Club/San Francisco" means the athletic club owned by SF Sports Club, Inc., a Delaware corporation, located at 747 Market Street, San Francisco, California 3 2.2 Amendment to Effective Tangible Net Worth Covenant. (a) Section 6.13 of the Loan Agreement is hereby amended and restated to read in full as follows: "6.13 Effective Tangible Net Worth. Permit Effective Tangible Net Worth to be less than the amount specified below as of the indicated fiscal quarter-end date of the Borrowers and their Subsidiaries: (i) on June 30, 2001, not less than $51,000,000 (ii) on September 30, 2001, not less than $45,000,000, (iii) on December 31, 2001, not less than $39,000,0000, and (iv) on March 31, 2002 and as of the end of each fiscal quarter of the Borrowers and their Subsidiaries thereafter, not less than $35,800,000." 2.3 Amendment to Ratio of Total Unsubordinated Liabilities to Effective Tangible Net Worth Covenant. Section 6.14 of the Loan Agreement is hereby amended and restated to read in full as follows: "6.14 Ratio of Total Unsubordinated Liabilities to Effective Tangible Net Worth. Permit the Ratio of Total Unsubordinated Liabilities to Effective Tangible Net Worth to be greater than the amount specified below as of the indicated fiscal quarter -- end date of the Borrowers and their Subsidiaries: (i) on June 30, 2001, 3.00:1.00; (ii) on September 30, 2001, 3.50:1.00, (iii) on December 31, 2001, 3.75:1.00 and (iv) on March 31, 2002 and as of the end of each fiscal quarter of the Borrowers and their Subsidiaries thereafter, 4.00:1.00." 2.4 Extension of Maturity Date. The definition of "Maturity Date" is amended and restated to read in full as follows: "Maturity Date" means May 31, 2002, subject to the option of all Banks, in their sole and absolute discretions, following the written request of Borrowers, to be received by Agent no later than sixty (60) days prior to each anniversary of the date of this Agreement, and subject to such terms and conditions as all Banks may require, to extend the Maturity Date for an additional period of one year." 2.5 Deletion of Minimum Interest Coverage Ratio Covenant. Section 6.15 of the Loan Agreement is deleted in its entirety. 2.6 Deletion of Current Ratio Covenant. Section 6.21 of the Loan Agreement is deleted in its entirety. 4 2.7 Minimum EBITDA Covenant. The following new covenant is hereby added at the end of Section 6 of the Loan Agreement: "Section 6.21 Minimum EBITDA. Permit EBITDA to be less than the amount specified below as of the indicated fiscal quarter-end date: (a) for The Sports Club/L.A., The Sports Club/Irvine and Reebok Sports Club/NY on a collective basis, as of the end of the Borrowers' fiscal quarters commencing as of June 30, 2001 through the Maturity Date, $4,675,000; (b) for The Sports Club/Rockefeller Center, The Sports Club/61st St. Manhattan, The Sports Club/Washington D.C., The Sports Club/ San Francisco and The Sports Club/Boston on a collective basis, (i) on June 30, 2001, $-2,500,000 provided that for purposes of this item (i) such amount shall not include EBITDA for each of The Sports Club/Boston and The Sports Club/San Francisco, for the applicable period of determination (ii) on September 30, 2001, $-2,500,000 provided that for purposes of this item (ii) such amount shall not include EBITDA for The Sports Club/San Francisco, for the applicable period of determination (iii) on December 31, 2001, $-3,350,000 and (iv) on March 31, 2002 and as of the end of each fiscal quarter thereafter, not less than $-1,350,000." For purposes of this Section 6.21, as of the applicable period of determination, EBITDA for each Person set forth in item (a) above shall be the arithmetic average of such Person's EBITDA. The applicable period of determination will be the four (4) full fiscal quarters immediately preceding the date of determination. 2.8 Amendments to Pricing Grid. (a) Deletion of Applicable Pricing Levels. The definition of "Applicable Pricing Levels" in Section 1.1 of the Loan Agreement is hereby eliminated in its entirety. (b) Amendment of Definition of "Eurodollar Rate Spread". The definition of "Eurodollar Rate Spread" is amended and restated to read in full as follows: "Eurodollar Rate Spread" means the additional component of interest, expressed as a percentage per annum, to be added to the Eurodollar Rate in determining the applicable rate of interest for Eurodollar Loans. The Eurodollar Rate Spread is two and one-quarter percent (2.25%) per annum. (c) Amendment to Compliance Certificates. Section 7.2 of the Loan Agreement is hereby amended to read in full as follows: "7.2 Compliance Certificates. So long as any Loan remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitment remains outstanding, Borrowers shall, unless the 5 Requisite Banks otherwise consent in writing, deliver to Agent, at Borrowers' sole expense, not later than 45 days after the end of each fiscal quarter of Borrower, a Certificate of a Responsible Official of a Borrower (a) setting forth computations showing, in detail satisfactory to the Requisite Banks, whether Borrowers and their Subsidiaries were in compliance with their obligations pursuant to Sections 6.8 through 6.17, inclusive; (b) stating that a review of the activities of Borrowers and their Subsidiaries during such fiscal period has been made under supervision of the certifying Responsible Official with a view to determining whether during such fiscal period Borrowers and their Subsidiaries performed and observed all their respective Obligations under the Loan Documents, and either (i) stating that, to the best knowledge of the certifying Responsible Official, during such fiscal period, Borrowers and their Subsidiaries performed and observed each covenant and condition of the Loan Documents applicable to them, or (ii) if Borrowers and their Subsidiaries have not performed and observed such covenants and conditions, specifying all such Defaults and their nature and status; (c) stating that the Properties of Borrowers and their Subsidiaries are being maintained and are in reasonable working order and condition, ordinary replacement wear and tear excepted; and (d) stating that (i) the real property assets of Borrowers are free and clear of all Liens other than the Liens of Agent for the ratable benefit of Banks and the Senior Note Liens, (ii) no real property assets of Borrowers have been sold, assigned, exchanged, transferred, leased or otherwise conveyed or disposed of to any Person, and (iii) no Borrower has entered into any agreement to do any of the foregoing." 2.9 Guarantor Information. Each Borrower will cause to be furnished, and each Guarantor shall deliver, to the Agent and each Bank: (a) as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of each Guarantor, an unaudited balance sheet of each Guarantor as of the end of each such fiscal quarter; (b) as soon as available and in any event within 60 days after the end of each fiscal year of each of Licklider and Talla, a personal balance sheet of each such Guarantor as of the end of such fiscal year; (c) as soon as available and in any event within 120 days after the end of each fiscal year of MDP, an audited balance sheet of MDP as of the end of such fiscal year and the related income statements and cash flow statements of MDP for such fiscal year, setting forth in comparative form the corresponding figures for its previous fiscal year, all in reasonable detail. Such balance sheets and statements shall be prepared in accordance with generally accepted accounting principles, consistently applied, and such balance sheet and statements shall be accompanied by a report and unqualified opinion of independent public accountants of recognized standing selected by MDP and reasonably satisfactory to the Requisite Banks (Ernst & Young, LLP being hereby approved by the Requisite Banks as satisfactory), which report and opinion shall be prepared in accordance with generally accepted auditing principles as at such date, and 6 shall be subject only to such qualifications and exceptions as are acceptable to the Requisite Banks in the exercise of their reasonable discretion; and (d) as soon as available and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of the U.S. federal income tax returns of each Guarantor. 2.10 Guarantors Liquidity Requirement. So long as any Loan remains unpaid or any Obligation remains unpaid or unperformed, any indebtedness owning in connection therewith remains unpaid or any portion of the Commitment remains outstanding, (a) Guarantors, as a group, shall maintain not less than SIX MILLION DOLLARS ($6,000,000) in aggregate cash, Cash Equivalents, and marketable securities and bonds (excluding any securities and bonds issued by the Borrowers or their Affiliates) . Each Borrower and Guarantor acknowledges and agrees that a breach of this Section 2.9 by Guarantors shall constitute an Event of Default under the Loan Agreement and each Guaranty permitting the Agent and the Bank to exercise all available remedies under Section 9.2 of the Loan Agreement and under the Guaranties. 3. General Amendment. Effective as of the Effective Date, the Loan Agreement and all other Loan Documents are hereby amended to the further extent required to give effect to the terms and conditions of the amendments to the Loan Agreement effected pursuant to Section 2 above. 4. Full Force and Effect. Effective as of the Effective Date, each of the Loan Documents is hereby amended such that all references to the Loan Agreement contained in any such documents shall be deemed to be references to the Loan Agreement, as amended by this Amendment. Except as amended hereby, the Loan Agreement and the other Loan Documents shall remain unaltered and in full force and effect. 5. Conditions Precedent. The satisfaction of the following shall be conditions precedent for the benefit of the Agent and the Banks to the effectiveness of this Amendment: 5.1 Reaffirmation of Intercreditor Agreement. The Agent shall have received a Reaffirmation of Intercreditor Agreement in the form of Exhibit "A" to this Amendment duly executed by each of the parties to the same. 5.2 Corporate Documents. The Agent shall have received (a) a certificate of an officer of each Borrower to the effect that such Borrower is in compliance in all material respects with all material requirements of applicable law; (b) a certificate of the chief financial officer of each Borrower stating that, after giving effect to the modifications to the Loan Agreement effected herein, as of the Effective Date no Default or Event of Default shall have occurred and be continuing on the Effective Date; and (c) such additional approvals, documents and other information, in form and substance satisfactory to the Agent, as the Agent may reasonably request. 7 5.3 Bank Expenses. All legal fees, costs and other expenses which the Agent and the Bank have incurred in connection with this Amendment as of the Effective Date but which have not previously been reimbursed by Borrowers shall have been so reimbursed by Borrowers. 5.4 Guaranty. The Agent shall have received a Guaranty in the form of Exhibit B to this Amendment duly executed by each of Licklider, Talla and MDP. 6. Representations and Warranties. Each Borrower hereby represents and warrants to the Agent and the Banks that, except as set forth in this Section 6, each representation and warranty made by it in Article IV of the Loan Agreement and each representation and warranty made by it in each other Loan Document, in each case as updated in connection with the First Amendment and Second Amendment, is true and correct on and as of the Effective Date as though made as of the Effective Date, except to the extent such representations and warranties relate solely to an earlier date. Notwithstanding the foregoing: (a) In lieu of reaffirming the representations and warranties contained in Section 4.6 of the Loan Agreement, Borrowers hereby represent, warrant and covenant that Borrowers and their Subsidiaries do not have any material liability or material contingent liability not reflected in the financial statements contained in the Form 10-Q of The Sports Club Company, Inc. filed with the SEC for the fiscal quarter ended March 31, 2001 (the "March 31, 2001 10-Q") and that there has been no material adverse change in the business, operations or condition (financial or otherwise) of Borrowers and their Subsidiaries, taken as a whole, since March 31, 2001. (b) In lieu of reaffirming the representations and warranties contained in Section 4.10 of the Loan Agreement, Borrowers represent, warrant and covenant that, except for (i) the matters set forth in Schedule 4.10 to the Loan Agreement, (ii) any matter fully covered as to subject matter and amount (subject to applicable deductibles and retentions) by insurance for which the insurance carrier has not asserted lack of subject matter coverage or reserved its right to do so, or (iii) any matter, or series of related matters, involving a threatened claim against Borrowers of less than $100,000, there are no actions, suits or proceedings pending or, to the best knowledge of Borrowers, threatened against or affecting Borrowers or any of their Subsidiaries or any Property of any of them in any court of Law or before any Governmental Agency not reflected in the March 31, 2001 10-Q. (c) In lieu of reaffirming the representations and warranties contained in Section 4.12 of the Loan Agreement, Borrowers represent, warrant and covenant that no event has occurred and is continuing that is a Default, other than the Default waived pursuant to Section 7 below. (d) In lieu of reaffirming the representations and warranties contained in Section 4.17 of the Loan Agreement, Borrowers represent, warrant and covenant that the financial projections dated April, 2001, heretofore delivered to the 8 Agent are based on facts known to Borrowers and on assumptions that are reasonable and consistent with such facts. To the best knowledge of Borrowers, no material fact or assumption is omitted as a basis for such projections, and such projections are reasonably based on such facts and assumptions. Nothing is this Section (d) shall be construed as a representation that such projections in fact will be achieved. 7. Waiver of Minimum Interest Coverage Ratio. Effective as of the Effective Date, the Agent and the Banks hereby waive the requirement that the Borrowers comply with Section 6.15 of the Loan Agreement with respect to the fiscal quarters ended September 30, 2000, December 31, 2000 and March 31, 2001. This waiver is strictly limited as provided above and shall not extend to any fiscal quarter other than that ended September 30, 2000, December 31, 2000 and March 31, 2001 or to any other matter or transaction, other than the express waiver reflected in the immediately preceding sentence. Except for the matter waived in that sentence or as otherwise amended by this Amendment, all terms an conditions set forth in the Loan Agreement and the other Loan Documents are unchanged and remain in full force and effect. Each of the Agent and the Bank reserve all of its powers, rights, remedies, claims, causes of action, defenses and privileges under or in respect of the Loan Agreement and the other Loan Documents. Each of the Borrowers acknowledges that neither the consent reflected in this Section 7 nor the Agent's or the Bank's present awareness of the existence of any Default or Event of Default: (a) imposes any obligation on the Agent or any Bank to defer the enforcement of its powers, rights, remedies, claims, causes of action, defenses or privileges under the Loan Agreement or any of the Loan Documents, such enforcement action to be taken in the sole discretion of the Agent and/or the Banks, as the case may be, when it or they determine that is appropriate to do so; or (b) shall affect or diminish any Borrower's obligation to comply with any other term or provision of the Loan Agreement or any of the Loan Documents. 8. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall constitute an original and all of which, taken together, shall constitute but one and the same instrument. 9. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of California. [Remainder of page intentionally left blank; signatures follow] 9 IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their respective duly authorized officers as of the date first above written. BORROWERS: THE SPORTS CLUB COMPANY, INC. a Delaware corporation By: /s/ Rex A. Licklider ------------------------------- Rex A. Licklider Its: Co-Chief Executive Officer PONTIUS REALTY, INC. LA/IRVINE SPORTS CLUBS, LTD. a California corporation a California limited partnership By: Sports Club, Inc. of California, general partner By: /s/ Lois Barberio ------------------------------- Lois Barberio Its: Secretary By /s/ Rex A. Licklider -------------------------------- Rex A. Licklider Its: Chief Executive Officer and President SPORTS CLUB, INC. OF CALIFORNIA TALLA NEW YORK, INC., a California corporation a New York corporation By: /s/ Rex A. Licklider By: /s/ Rex A. Licklider ------------------------------- -------------------------------- Rex A. Licklider Rex A. Licklider Its: Chief Executive Officer Its: President And President IRVINE SPORTS CLUB, INC. SCC NEVADA, INC., a California corporation a Nevada corporation, By: /s/ Rex A. Licklider By: /s/ Rex A. Licklider ------------------------------- -------------------------------- Rex A. Licklider Rex A. Licklider Its: Chief Executive Officer and Its: President President 10 THE SPORTSMED COMPANY, INC., a California corporation By: /s/ Rex A. Licklider ----------------------------------- Rex A. Licklider Its: Chief Executive Officer and President SCC SPORTS CLUB, INC., a Texas corporation By: /s/ Rex A. Licklider ----------------------------------- Rex A. Licklider Its: President HFA SERVICES, INC. a California corporation, By: /s/ Rex A. Licklider ----------------------------------- Rex A. Licklider Its: Chief Executive Officer and President NY SPORTS CLUB, INC. a Delaware corporation By: /s/ Lois Barberio ----------------------------------- Lois Barberio Its: Secretary SF SPORTS CLUB, INC., a Delaware corporation, By: /s/ Lois Barberio ----------------------------------- Lois Barberio Its: Secretary 11 WASHINGTON D.C. SPORTS CLUB, INC. a Delaware corporation, By: /s/ Lois Barberio ----------------------------------- Lois Barberio Its: Secretary AGENT: COMERICA BANK-CALIFORNIA, a California banking corporation, as Agent By: /s/ William Phillips ----------------------------------- William Phillips Vice President COMERICA BANK-CALIFORNIA a California banking corporation By: /s/ William Phillips ----------------------------------- William Phillips Vice President 12 AGREED AND ACCEPTED WITH RESPECT TO SECTIONS 2.9 AND 2.10 OF THIS AMENDMENT: GUARANTORS /s/ Rex Licklider - --------------------------------------- Rex Licklider /s/ Michael Talla - --------------------------------------- Michael Talla MDP VENTURES, II, LLC, a New York limited liability company By: /S/ Brian J. Collins ---------------------------------- Its: Vice President ---------------------------------- EX-2 3 v74183ex2.txt EXHIBIT 2 1 EXHIBIT 2 INDEMNIFICATION AND CONTRIBUTION AGREEMENT This Indemnification and Contribution Agreement is entered into as of this 3rd day of July, 2001 (the "AGREEMENT"), by and among The Sports Club Company, Inc., a Delaware corporation (the "COMPANY"), Rex A. Licklider ("LICKLIDER"), D. Michael Talla ("TALLA"), and MDP Ventures II LLC, a New York limited liability company ("MILLENNIUM"); each of Licklider, Talla and Millennium is individually referred to as a "GUARANTOR" and collectively as the "GUARANTORS." R E C I T A L S A. Millennium (together with its affiliates), Talla and Licklider are principal shareholders of the Company; in addition, Talla and Licklider (along with a representative of Millennium) serve as directors and are also co-chief executive officers. B. The Company has been negotiating with Comercia Bank-California (the "BANK") with respect to the renewal and amendment of an existing $15 million credit facility which the Company has with the Bank and which expired on May 31, 2001 (the "CREDIT FACILITY"). C. As a condition of, and inducement to, the Bank's renewing and amending the Credit Facility with the Company (the "RENEWED CREDIT AGREEMENT"), the Bank is requiring that each Guarantor execute and deliver in favor of the Bank the form of Guaranty attached hereto as Exhibit "A" under which each Guarantor's maximum liability is $5,000,000 (the "GUARANTY"), and each Guarantor is willing to execute and deliver the Guaranty in favor of the Bank, subject to and upon the terms and conditions set forth herein. A G R E E M E N T In consideration of the recitals, and the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Representations, Warranties and Covenants; Providing Guaranties. Each Guarantor (a) represents and warrants (i) that it has reviewed the terms and conditions of the Guaranty and understands the legal significance of such terms and conditions, (ii) that such Guarantor has the legal right, power and authority to execute and deliver the Guaranty and this Agreement, and to perform all obligations required of such Guarantor hereunder and thereunder, and (iii) that the Guaranty and this Agreement are valid and binding agreements, enforceable against such Guarantor in accordance with their respective terms and (b) covenants and agrees to execute and deliver, in favor of the Bank, the Guaranty and, until all indebtedness owed by the Company to the Bank under the Renewed Credit Agreement is paid in full (including, without limitation, cancellation or repayment of all letters of credit posted by the Bank for the Company's benefit), shall not take any action, or refrain from taking any action, that will have the effect of 2 nullifying, limiting or otherwise affecting his or its obligations under the Guaranty. The Company hereby represents and warrants that (c) it has the legal right, power and authority (i) to execute and deliver this Agreement and (ii) to perform all obligations required of it hereunder and (d) this Agreement is a valid and binding agreement, enforceable against it in accordance with its terms. 2. Guarantor's Fees; Interest Accrual. (a) In consideration of each Guarantor's executing the Guaranty in favor of the Bank in connection with the Renewed Credit Agreement, the Company shall pay to each Guarantor a fee (the "COMMITMENT FEE") equal to one percent (1%) of such Guarantor's pro rata portion of the maximum permitted borrowings under the Credit Facility for each Loan Year (as hereinafter defined), or partial Loan Year, during which the Credit Facility is in effect, whether or not any amounts are actually borrowed by the Company thereunder. The Commitment Fee shall be payable to each Guarantor on the Loan Commencement Date (as hereinafter defined) and on each anniversary thereof until the earlier of (i) the Bank's release of the Guarantors under the Guaranty (the "GUARANTOR RELEASE"), and (ii) the date (A) the Company's obligations under the Credit Facility are terminated, (B) all amounts borrowed by the Company under the Renewed Credit Agreement (including accrued interest and the face amount of all letters of credit issued by the Bank for the benefit of the Company) have been repaid, and (C) the Company provides a certificate of its Chief Financial Officer confirming the Company's compliance with subparts (A) and (B) hereof (such date being referred to as the "CREDIT TERMINATION"). If the Guarantor Release or Credit Termination occurs at any time prior to the last date of a Loan Year, the Fees for such partial Loan Year shall be paid not more than 30 days after the applicable event. The date the Renewed Credit Agreement is executed is defined as the "LOAN COMMENCEMENT DATE," and each period of 12 consecutive months following the Loan Commencement Date is referred to herein as a "LOAN YEAR." As used in this Agreement, the Commitment Fee and Usage Fee (as hereinafter defined) shall be referred to collectively as the "FEES," and pro rata portion shall mean 33-1/3% of the total amount in question. (b) In addition to the Commitment Fee, the Company shall pay to each Guarantor a fee ("USAGE FEE") equal to two percent (2%) of such Guarantor's pro rata portion of any amounts advanced by the Bank to the Company under the Credit Facility (including the face amount of any and all letters of credit posted by the Bank for the Company's benefit) for each Loan Year, or partial Loan Year, during which advances (including such letters of credit) are outstanding ("COMPANY DEBT"). If Company Debt is only outstanding for a portion of any such Loan Year, then the Usage Fee payable to the Guarantors for that Loan Year will be prorated based on a 365-day year and the actual number of days that shall have elapsed. As of the date of this Agreement, the Bank has posted $6,000,000 worth of letters of credit for the benefit of the Company; therefore, if such amount (and only such amount) remains outstanding for one Loan Year, then, at the end of such Loan Year, the Usage Fee payable to each Guarantor would be $40,000. (c) At the Company's option, the Fees may be paid in cash, restricted shares of the Company's Common Stock, $.01 par value (the "COMMON STOCK"), or a 3 combination thereof. The Company shall accrue the Usage Fees for each Loan Year during which any Company Debt is outstanding. Within 30 days following the end of each Loan Year during which Company Debt is (or was) outstanding, the Company shall calculate (such date being referred to herein as the "CALCULATION DATE") that number of shares of Common Stock issuable to each Guarantor in respect of the Fees payable to such Guarantor for such Loan Year (the "FEE SHARES"). For purposes of calculating the number of Fee Shares issuable to each Guarantor in respect of his or its portion of the Fees, the value of the Common Stock shall be the closing price of the Common Stock on the American Stock Exchange ("AMEX") on the Loan Commencement Date. The Fee Shares will not be registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or under state securities (or Blue Sky) laws, but will be issued to each Guarantor in reliance on the non-public offering exemptions under Section 4(2) of the Securities Act and Regulation D promulgated thereunder. As a condition to the issuance of the Fee Shares for any Loan Year, each Guarantor shall execute and deliver to the Company an investment representation agreement substantially in the form of Exhibit "B" attached hereto. In calculating the number of Fee Shares issuable to each Guarantor, fractional shares will be disregarded, and the number of such Shares will be rounded down to the next lowest whole number. The Company shall reserve out of its authorized but unissued Common Stock a sufficient number of shares to enable it to fulfill its obligations under this Agreement. Notwithstanding the foregoing, if the Common Stock ceases to be listed on AMEX or on any other national securities exchange (or included in the NASDAQ Stock Market), then the Company shall be obligated to pay the Fees in cash. (d) Any and all amounts paid by the Guarantors to the Bank under the Guaranty (as well as other amounts to which Guarantors are entitled as a result of the indemnification provisions of Section 4(a) hereof) shall accrue interest at the lesser of (i) 12% per annum and (ii) the maximum rate then permitted by applicable law (subject to the qualifications set forth in Section 3(b) hereof), commencing on the date of such payment and continuing until the 60th day following such payment (the "INDEMNITY REIMBURSEMENT DATE"); thereafter, default interest shall accrue on such amounts at the rate of 18% per annum until such payment is made. 3. Contribution. (a) If the Bank makes demand on any Guarantor to make any payment pursuant to the Guaranty (a "BANK DEMAND"), such Guarantor shall notify all other Guarantors of such Bank Demand, which notice shall include a copy thereof. Within the earlier of (a) five business days of the date of such notice, or (b) the last date on which payment is due under the Bank Demand (a "PAYMENT DATE"), each Guarantor shall pay to the Bank, by certified or bank cashier's check or wire transfer of same-day funds, such Guarantor's pro rata share of the amount set forth in the Bank Demand, subject to the limitations set forth in this Section 3(a). If any Guarantor (a "DEFAULTING GUARANTOR") fails to pay to the Bank his or its pro rata share of such amount by such Payment Date (the "DEFAULTED AMOUNT"), then the other Guarantor(s) shall pay the Defaulted Amount to the Bank on behalf of the Defaulting Guarantor (or Guarantors). If more than one Guarantor is required to make such payment on behalf of the Defaulting Guarantor (that 4 is, there is only one Defaulting Guarantor with regard to such Bank Demand), then the portion of the Defaulted Amount required to be paid by each paying Guarantor shall be in the ratio that the remaining liability under his or its portion of the Guaranty bears to the aggregate remaining liability of both paying Guarantors under their portion of the Guaranty, without giving effect to the payment for which such calculation is required. For example, assume Guarantor A has paid $3,000,000 on his Guaranty, Guarantors B and C have each paid $2,000,000 on his/its Guaranty, and the Bank Demand is $1,000,000. Assume further that Guarantor C fails to pay its portion of the Bank Demand. Under these circumstances, since Guarantor A's remaining liability would be $2,000,000, and Guarantor B's remaining liability is $3,000,000, Guarantor A would pay 40% (or $400,000) of the Bank Demand, and Guarantor B would pay 60% (or $600,000) thereof. Anything herein to the contrary notwithstanding, no paying Guarantor shall be obligated to make any payment to the Bank pursuant to a Bank Demand or otherwise if, after giving effect to such payment, such paying Guarantor shall have paid more than $5,000,000 to the Bank. (b) A Defaulting Guarantor shall repay each paying Guarantor the portion of the Defaulted Amount paid by such paying Guarantor to the Bank within seven (7) days following the applicable Payment Date (the "DEFAULTED AMOUNT REIMBURSEMENT DATE"). Interest shall accrue on the Defaulted Amount from the Payment Date through the Defaulted Amount Reimbursement Date at the lesser of (i) 12% per annum, or (ii) the maximum rate then permitted by applicable law; thereafter, default interest shall accrue on such Defaulted Amount at the rate of 18% per annum, until such payment is made. If more than the maximum permissible interest is collected by any Guarantor hereunder, then that portion of such interest that exceeds the maximum permissible interest shall be deemed to be treated as partial payment of the Defaulted Amount and the balance as interest, and the recipient Guarantor(s) shall refund to the paying Guarantor such excess payment actually received as soon as reasonably practicable thereafter. All payments hereunder shall be made by certified or bank cashier's check, or by wire transfer of same-day funds to the applicable Guarantor. 4. Indemnification. (a) The Company shall indemnify, and shall hold each Guarantor, and each Guarantor's heirs, successors, assigns and legal representatives (each, a "GUARANTOR INDEMNITEE"), free and harmless, from and against any and all claims, demands, causes of action, losses, expenses, damages and other liabilities (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) to which any Guarantor Indemnitee may be subject, or which any such Guarantor Indemnitee may incur, relating to or arising out of such Guarantor's duties or obligations owing to the Bank under the Guaranty (including, without limitation, the payment of any amounts owing to the Bank pursuant to any Bank Demands). The foregoing indemnification shall run in favor of each Guarantor Indemnitee even after the Company shall have paid all indebtedness due and owing to the Bank under the Renewed Credit Agreement, or after termination of the Guaranties. To the extent the Company is obligated to indemnify any Guarantor Indemnitee hereunder, such payment (i) shall accrue interest at the applicable rate set forth in Section 2(d) hereof (depending on whether the indemnification payment is made 5 on or after the Indemnity Reimbursement Date) and (ii) may be paid in shares of Common Stock, at the Company's option, pursuant to the terms and conditions set forth in Section 2(c) hereof. (b) Each Guarantor acknowledges and agrees (i) that it understands that its rights to indemnification hereunder may be restricted, limited or rendered ineffective depending on the manner in which the Bank chooses to foreclose on its security interest and lien in any real and/or personal property collateral of the Company pursuant to the Renewed Credit Agreement, in which event each Guarantor may not have any legal recourse against the Company for reimbursement of any amounts paid by him under the Guaranty, and (ii) that if such Guarantor is required to reimburse the Bank for any losses, damages or expenses related to the existence, remediation or clean-up of any hazardous or toxic substances on or about any real property collateral in which the Bank has a security interest, the amount of such reimbursement may be significant such that the Company would be unable to reimburse such Guarantor for such losses, damages or expenses; provided that, in no event would any Guarantor's several liability under the Guaranty (even for any such remediation or clean-up of any hazardous or toxic substances) exceed $5,000,000. 5. Miscellaneous. (a) All notices, demands, approvals or other communications required or permitted hereunder shall be in writing and shall be deemed given on the date of actual receipt (if sent by prepaid air courier, commercial messenger or other method of hand delivery), or on the date of transmission (if sent by facsimile or electronic mail, provided "hard" copy of such transmission is sent by overnight mail to the recipient in accordance with the terms hereof), to the following addresses: If to the Company, Rex or Mike: c/o The Sports Club Company, Inc. 11100 Santa Monica Boulevard, Suite 300 Los Angeles, California 90025 Attention: Lois Barberio, Vice President-Administration Facsimile number: 310-479-5740 With a copy to: Ronald K. Fujikawa, Esq. Greenberg Glusker Fields Claman Machtinger & Kinsella LLP 1900 Avenue of the Stars, 21st Floor Los Angeles, California 90067 Facsimile number: 310-553-0687 If to Millennium: 6 c/o Millennium Partners 1995 Broadway, 3rd Floor New York, New York 10023 Attention: Chief Financial Officer Facsimile number: 212-595-1831 With a copy to: Eric Landau, Esq. Paul Hastings Janofsky & Walker, LLP 75 East 55th Street New York, New York 10022 Facsimile number: 212-230-7655 Any party may change its address and/or facsimile number by giving notice to the others in accordance with this Paragraph 5(a). (b) This Agreement (i) shall be binding on, and shall inure to the benefit of and be enforceable by, the parties hereto and their respective heirs, successors and legal representatives; (ii) may not be amended or modified, and no term hereof may be waived, unless such amendment, modification or waiver is in writing and signed by the party (or parties) sought to be bound thereby; (iii) together with all Exhibits attached hereto (which are incorporated herein by this reference) represents the entire agreement and understanding between the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous written and oral negotiations, understandings and agreements between the parties with respect to such subject matter; (iv) may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement; and (v) shall be governed by, and construed and enforced in accordance with, the laws of the State of California applicable to contracts executed and to be wholly performed therein. Nothing contained in this Agreement is intended to benefit any third party or entitle any third party to assert or enforce any right or remedy hereunder. (c)The use of the masculine pronoun shall include the feminine and neuter. (d) If any party institutes any action or proceeding to enforce or interpret any term or provision hereof, the party prevailing in such action or proceeding shall be entitled to its reasonable attorneys' fees and out-of-pocket disbursements from the non-prevailing party (or parties). [Balance of Page Intentionally Left Blank; Signature Page Follows] 7 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date first set forth above. THE SPORTS CLUB COMPANY, INC. By: /s/ Lois Barberio -------------------------------------- Authorized Officer /s/ D. Michael Talla ------------------------------------------- D. Michael Talla /s/ Rex A. Licklider ------------------------------------------- Rex A. Licklider MDP VENTURES II LLC By: /s/ Brian J. Collins -------------------------------------- Brian J. Collins Vice President [Balance of Page Intentionally Left Blank; Signature Page Follows] EX-3 4 v74183ex3.txt EXHIBIT 3 1 EXHIBIT 3 FOURTH AMENDMENT TO RIGHTS AGREEMENT This Fourth Amendment to Rights Agreement is made and entered into as of the 27th day of June, 2001 (the "AMENDMENT"), and amends that certain agreement entered into by and between The Sports Club Company, Inc., a Delaware corporation (the "COMPANY"), and American Stock Transfer & Company, a New York corporation (the "RIGHTS AGENT"), dated as of October 6, 1998, as amended by the First Amendment to Rights Agreement dated as of February 18, 1999, the Second Amendment to Rights Agreement dated as of July 2, 1999 and the Third Amendment to Rights Agreement dated as of April 27, 2000 (as so amended, the "RIGHTS AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Rights Agreement. R E C I T A L S WHEREAS, the Board of Directors of the Company (the "BOARD") on September 29, 1998 authorized and declared a dividend of one preferred share purchase right for each Common Share of the Company outstanding on October 6, 1998, each Right representing the right to purchase one five-hundredth of a Preferred Share upon the terms and subject to the conditions set forth in the Rights Agreement, and further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date; WHEREAS, the Company and the Rights Agent entered into the Rights Agreement as of October 6, 1998; WHEREAS, the Rights Agreement was amended by the First Amendment to Rights Agreement as of February 18, 1999, the Second Amendment to Rights Agreement as of July 2, 1999, and the Third Amendment to Rights Agreement dated as of April 27, 2000; WHEREAS, it has been proposed that the Company amend the Rights Agreement as set forth in this Amendment, and the Board has determined that it is in the best interests of the Company and its stockholders to amend the Rights Agreement, subject to the terms and conditions of this Amendment. A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree to amend the Rights Agreement as follows: 2 1. The definition of "Excluded Shares" set forth in Section 1 of the Rights Agreement is hereby deleted and replaced in its entirety with the following: ""Excluded Shares" shall mean the following Voting Shares: (i) with respect to all Stockholders, Common Shares acquired: (A) by a bona fide gift; (B) as the result of the death of a Person, pursuant to a will or the laws of descent; or (C) upon the exercise of any stock option granted by the Company to an employee, officer or director of the Company; (ii) with respect to Talla, up to $2,000,000 of Common Shares purchased after April 27, 2000; and (iii) with respect to Millennium: (A) all Common Shares pledged to Millennium pursuant to the Loan and Stock Pledge Agreements; (B) all Common Shares acquired by Millennium pursuant to the Loan and Stock Pledge Agreements or upon exercise of any remedies available under the Loan and Stock Pledge Agreements, or by exercise of statutory rights; (C) up to $2,000,000 of Common Shares purchased after April 27, 2000; and (iv) with respect to Talla, Licklider and Millennium, all Common Shares which are issued to them, or to any of their respective Affiliates, Associates, directors or officers, pursuant to the Indemnification and Contribution Agreement." 2. There are hereby added to Section 1 the following definitions: "Indemnification and Contribution Agreement" shall mean that certain Indemnification and Contribution Agreement dated as of June ___, 2001, by and among the Company, Rex A. Licklider, D. Michael Talla and MDP Ventures II LLC, and any amendments or supplements thereof or thereto. "Licklider" shall mean Rex A. Licklider. 3 3. Except as amended hereby, the Rights Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. THE SPORTS CLUB COMPANY, INC. Attest: By: /s/ Losi Barberio By: /s/ D. Michael Talla ------------------------------ --------------------------------- Name. Lois Barberio Name: D. Michael Talla Title: Secretary Title: Co-Chief Executive Officer AMERICAN STOCK TRANSFER & TRUST COMPANY Attest: By: /s/ Susan Silber By: /s/ Herbert J. Lemmer ------------------------------ --------------------------------- Name. Susan Silber Name: Herbert J. Lemmer Title: Assistant Secretary Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----