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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 200549
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) APRIL 1, 1999
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
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Index of Exhibits on Page 9.
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ITEM 5. OTHER EVENTS.
On April 1, 1999, we completed a private offering of $100,000,000
principal amount of 11 3/8% Senior Secured Notes due in 2006. Concurrently, we
amended our loan agreement with Comerica Bank - California. A summary of the
terms of the Senior Notes and Credit Facility are provided below:
DESCRIPTION OF THE SENIOR SECURED NOTES
The Senior Secured Notes (the "Notes") were initially only offered to
Qualified Institutional Buyers and Accredited Investors permitted by Rule 144A
of the Securities Act of 1933. The Notes were not registered under the
Securities Act and may not be sold in the United States absent registration or
exemption from registration requirements of the Securities Act of 1933. The
description below is a summary of the principle terms of the Notes and is
subject to, and is qualified in its entirety by reference to, the indenture
governing the Notes (the "Indenture") which is attached as Exhibit 4.2.
Maturity Date.................... March 15, 2006
Interest Rate.................... We will pay an annual rate of interest
equal to 11 3/8%.
Interest Payment Dates........... Semi-annually, beginning on September 15,
1999.
Ranking.......................... The Notes rank senior in right of payment
to any of our subordinated indebtedness,
and rank equally with all of our senior
indebtedness, including indebtedness
outstanding under our credit facility.
Security Interest................ We have pledged as collateral, for the
benefit of holders of the Notes, certain
real assets (and related fixtures and
equipment), our ownership interest in
certain of our subsidiaries, and cash in
the disbursement account described below,
subject to customary exceptions for
transactions of this type. The liens on
certain of the collateral are subordinated
to liens on such collateral securing up to
$20.0 million principal amount of other
indebtedness. The collateral does not
include equipment that is subject to
equipment financing.
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Optional Redemption.............. After March 15, 2003, all or some of the
Notes may be redeemable at our option at
the following premiums, plus interest:
For the period below Percentage
On or after March 15, 2003...... 105.688%
On or after March 15, 2004...... 102.844%
March 15, 2005 and thereafter... 100.000%
Prior to March 15, 2002, up to 35% of the
principal amount of the Notes may be
redeemed at our option with the net
proceeds of certain public equity offerings
at 111.375% of the face amount, plus
interest.
Guarantees....................... All of our current wholly-owned
subsidiaries have guaranteed the Notes.
Subject to certain exceptions, if we create
or acquire new wholly-owned subsidiaries,
they will also guarantee the Notes.
Change of Control Offer.......... If we go through a change of control, we
must give holders of the Notes the
opportunity to sell us their Notes at 101%
of their face amount, plus interest.
Asset Sale Proceeds.............. If we do not reinvest cash proceeds from
the sale of assets in our business, we may
have to use such proceeds to offer to buy
back some the Notes at their face amount,
plus interest.
Certain Indenture Provisions..... The Indenture will limit what we may do.
The provisions of the Indenture will limit
our ability to:
o Incure more debt
o pay dividends, redeem stock, or make
other distributions;
o Issue stock of subsidiaries;
o make certain investments;
o create liens;
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o enter into sale/leaseback transactions;
o enter into transactions with affiliates;
o merge or consolidate; and
o transfer or sell assets.
These covenants are subject to a number of
important exceptions.
Registration Rights.............. Registratin Rights Agreement-
We have agreed to attempt to register
similar notes with the Securities and
Exchange Commission (the "SEC") to give
holders of Notes the opportunity to
exchange these Notes for notes that may be
publicly traded (the "Exchange Notes").
We have agreed to file a registration
statement for the Exchange Notes with the
SEC within 60 days of the issue date of
these Notes and to use our best efforts to
cause that registration statement to be
declared effective within 120 days of the
issue date of these Notes. In addition, in
certain circumstances, we have agreed to
file a "shelf registration statement" that
would allow some or all of these Notes to
be offered to the public. The Exchange
Notes (if we do issue them) will have terms
substantially identical to the Notes we are
offering now.
Liquidated Damages-
We will have to pay liquidated damages with
respect to these Notes if:
o we do not file the required registration
statements on time;
o the SEC does not declare the required
registration statements effective on
time; or
o we do not complete the offer to exchange
these Notes for the Exchange Notes
within 150 days from the issue date of
these Notes.
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If we must pay liquidated damages, we will
pay it to holders of Notes in cash on the
same dates that we make interest payments
on the Notes, until we correct the
registration default.
Disbursement Account............. Approximately $54.4 million of the net
proceeds of the offering of the Notes were
deposited in a disbursement account and,
subject to the terms of a disbursement
agreement, will be used to pay the
development costs of two Sports Clubs in
New York City and Sports Clubs in
Washington, D.C. and Boston.
DESCRIPTION OF THE CREDIT FACILITY
Concurrently with the offering of the Notes, we amended and restated our
existing credit facility with Comerica Bank-California. The description below is
a summary of the principal terms of our credit facility and is subject to, and
qualified in its entirety by reference to, the definitive credit facility which
is attached as Exhibit 10.2.
Our credit facility provides for the issuance by the lender of revolving
loans and letters of credit aggregating $20.0 million. $4.0 million of letters
of credit are outstanding under our credit facility and an additional $8.5
million is currently available thereunder. The balance of the commitment will
become available following the satisfaction of certain conditions relating to
certain of the collateral. Our credit facility has a scheduled maturity date of
May 31, 2001 and does not require a reduction in the outstanding principle
balance prior to such date. Advances under our credit facility bear interest at
a variable rate not expected to exceed LIBOR plus 2 1/2% or the agent's prime
rate.
Our credit facility is secured by a first priority lien on substantially
all of the real and personal property assets of The Sports Club/Irvine, The
Sports Club/Las Vegas, the Spectrum Club - Canoga Park and the Spectrum Club -
Agoura Hills, and we have pledged to the lender the outstanding capital stock of
our subsidiaries which own these Clubs.
Our credit facility contains covenants that, among other things,
restrict our ability to dispose of assets, incur additional indebtedness, incur
guarantee obligations, repay or amend the terms of outstanding indebtedness, pay
dividends, create liens on assets, make investments, make acquisitions, engage
in mergers or consolidations, make capital expenditures, or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict our
operations. In addition, our credit facility requires us to comply with certain
financial ratios and maintenance tests.
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DESCRIPTION OF INTERCREDITOR AGREEMENT
Concurrently with the offering of the Notes, we entered into an
Intercreditor and Subordination Agreement (the "Intercreditor Agreement") with
the trustee (the "Trustee") under the Indenture which sets forth the terms of
the Notes, and the Agent (as defined in our credit facility). The description
below is a summary of the principal terms of the Intercreditor Agreement and is
subject to, and qualified in its entirety by reference to, the definitive
Intercreditor Agreement which is attached as Exhibit 10.3.
The Intercreditor Agreement, among other things, provides that the liens
of the Trustee on the Shared Assets (as defined in the Intercreditor Agreement)
are subordinated to the liens securing up to $20.0 million principal amount of
indebtedness outstanding under our credit facility and related interest, fees,
costs and expenses. Subject to certain exceptions, following delivery to the
Trustee of a Notice of a Default or an Event of Default (as defined in our
credit facility), the Intercreditor Agreement prohibits all payments or
distributions of Shared Assets or the proceeds thereof to or for the benefit of
the Trustee or holders of the Notes on account of the obligations under the
Indenture. In addition, certain payments made to the Trustee or holders of the
Notes in violation of the terms of the Intercreditor Agreement may have to be
repaid to, or held in trust for the benefit of, the Agent for application to
payment in full of the obligations under our credit facility. The Intercreditor
Agreement also provides that, subject to certain exceptions, the Agent will be
assigned and entitled to vote all claims of the Trustee and the holders of the
Notes in any Reorganization (as defined in the Intercreditor Agreement) and
certain other proceedings involving the Designated Guarantors (as defined in the
Indenture).
The Intercreditor Agreement provides that our credit facility may be
amended without the consent of the Trustee or the holders of the Notes;
provided, that such amendment may not permit the incurrence of indebtedness in
an aggregate principal amount in excess of $20.0 million. In addition, if we
replace our credit facility and incur additional indebtedness in accordance with
the Indenture, the Trustee will be permitted to enter into an intercreditor
agreement substantially in the form of the Intercreditor Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Exhibit
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4.2 Indenture by and among the Registrant, U.S. Bank Trust
National Association and the Subsidiary Guarantors referred
to therein, dated as of April 1, 1999.
4.3 Registration Rights Agreement by and among the Registrant,
Jefferies & Company, Inc. and CIBC Oppenheimer Corp., dated
as of April 1, 1999.
10.1 Purchase Agreement by and among the
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Exhibit No. Exhibit
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Registrant, Jefferies & Company, Inc. and CIBC Oppenheimer
Corp., dated March 29, 1999.
10.2 Fourth Amended and Restated Loan Agreement by and among the
Registrant, certain of its subsidiaries and Comerica
Bank-California, dated April 1, 1999.
10.3 Intercreditor Agreement by and among the Registrant, certain
of its subsidiaries, Comerica Bank-California and U.S. Bank
Trust National Association, dated April 1, 1999.
10.4 Disbursement Agreement between U.S. Bank Trust National
Association and The Registrant and certain of its
subsidiaries dated as of April 1, 1999.
99.1 Press Release dated April 5, 1999.
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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
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Timothy O'Brien
Chief Financial Officer
April 14, 1999
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EXHIBIT INDEX
ITEM DESCRIPTION
- ---- -----------
4.2 Indenture by and among the Registrant, U.S. Bank Trust
National Association and the Subsidiary Guarantors referred
to therein, dated as of April 1, 1999.
4.3 Registration Rights Agreement by and among the Registrant,
Jefferies & Company, Inc. and CIBC Oppenheimer Corp., dated
as of April 1, 1999.
10.1 Purchase Agreement by and among the Registrant, Jefferies &
Company, Inc. and CIBC Oppenheimer Corp., dated March 29,
1999.
10.2 Fourth Amended and Restated Loan Agreement by and among the
Registrant, certain of its subsidiaries and Comerica
Bank-California, dated April 1, 1999.
10.3 Intercreditor Agreement by and among the Registrant, certain
of its subsidiaries, Comerica Bank-California and U.S. Bank
Trust National Association, dated April 1, 1999.
10.4 Disbursement Agreement between U.S. Bank Trust National
Association and the Registrant and certain of its
subsidiaries dated as of April 1, 1999.
99.1 Press Release dated April 5, 1999.
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