<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THE SPORTS CLUB COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[LOGO]
THE SPORTS CLUB COMPANY, INC.
11100 SANTA MONICA BOULEVARD
SUITE 300
LOS ANGELES, CALIFORNIA 90025
May 20, 1997
Dear Stockholder:
You are cordially invited to attend the Company's 1997 Annual Meeting on
Tuesday, June 24, 1997.
The meeting will begin promptly at 2:00 p.m., Pacific Standard Time, in the
Coliseum Room of The Sports Club/LA, located at 1835 Sepulveda Boulevard, Los
Angeles, California.
The official Notice of Meeting, proxy statement and form of proxy are
included with this letter. The matters listed in the Notice of Meeting are
described in detail in the proxy statement.
The vote of every stockholder is important and we hope you will use this
opportunity to take an active part in the affairs of the Company by voting on
the business to come before the Annual Meeting. In order to ensure maximum
stockholder representation, I urge each of you, whether or not you expect to
attend the meeting in person, to sign your proxy and return it promptly in the
enclosed envelope. Mailing your completed proxy will not prevent you from voting
in person at the meeting if you wish to do so.
Your Board of Directors and management look forward to greeting personally
those stockholders who are able to attend.
Sincerely,
/s/ DAVID MICHAEL TALLA
David Michael Talla
Chairman and
Chief Executive Officer
<PAGE> 3
[LOGO]
THE SPORTS CLUB COMPANY, INC.
11100 SANTA MONICA BOULEVARD
SUITE 300
LOS ANGELES, CALIFORNIA 90025
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, JUNE 24, 1997
TO THE STOCKHOLDERS OF THE SPORTS CLUB COMPANY, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of The
Sports Club Company, Inc. (the "Company") will be held in the Coliseum Room of
The Sports Club/LA, located at 1835 Sepulveda Boulevard, Los Angeles,
California, on June 24, 1997, at 2:00 p.m., Pacific Standard Time, for the
following purposes:
1. To elect two directors of the Company to serve as Class III directors.
2. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
Only stockholders of record at the close of business on April 25, 1997,
will be entitled to notice of and to vote at the Annual Meeting and any
postponements or adjournments thereof. A list of stockholders entitled to vote
at the Annual Meeting will be available at the meeting site for ten (10) days
prior to the Annual Meeting.
YOUR VOTE IS IMPORTANT. TO ENSURE THAT YOUR STOCK IS REPRESENTED, WE URGE
YOU TO VOTE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING. IF YOU RECEIVE
MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES
OR ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED. IF YOU ATTEND
THE ANNUAL MEETING, YOU MAY, IF YOU PREFER, VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
/s/ NANETTE PATTEE FRANCINI
Nanette Pattee Francini
Secretary
Los Angeles, California
May 20, 1997
<PAGE> 4
THE SPORTS CLUB COMPANY, INC.
11100 SANTA MONICA BOULEVARD
SUITE 300
LOS ANGELES, CALIFORNIA 90025
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1997
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being mailed on or about May 23, 1997, in
connection with the solicitation of proxies by the Board of Directors of The
Sports Club Company, Inc., a Delaware corporation (the "Company"). The proxies
are for use at the Annual Meeting of Stockholders to be held at 2:00 p.m.,
Pacific Standard Time, on June 24, 1997, in the Coliseum Room of The Sports
Club/LA, located at 1835 Sepulveda Boulevard, Los Angeles, California, and any
postponements or adjournments thereof (the "Annual Meeting") for the purposes
set forth in the accompanying Notice of Annual Meeting. The record date for the
Annual Meeting is the close of business on April 25, 1997 (the "Record Date").
Only holders of record of the Company's Common Stock, par value $0.01 per share
(the "Common Stock") on the Record Date are entitled to notice of and to vote at
the Annual Meeting. The annual report for the year ended December 31, 1996, is
being mailed to stockholders with this Proxy Statement.
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please date, sign and return the enclosed proxy card as
promptly as possible, in the postage prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any stockholder who returns a
proxy has the power to revoke it at any time prior to its effective use by
filing an instrument revoking it, or a duly executed proxy bearing a later date,
with the Secretary of the Company, or by attending the Annual Meeting and voting
in person. Unless otherwise instructed, any such proxy, if not revoked, will be
voted at the Annual Meeting "FOR" the nominees for election as directors as set
forth in this Proxy Statement, and as recommended by the Board of Directors, in
its discretion, with regard to all other matters which may properly come before
the Annual Meeting. The Company does not currently know of any such other
matters.
At the Record Date, there were outstanding 11,358,000 shares of the
Company's Common Stock, the only class of stock of the Company outstanding as of
the Record Date, and there were 68,587 shares of Common Stock held in treasury.
The presence, either in person or represented by proxy, of persons entitled to
vote a majority of the Company's outstanding Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. Directors will be elected by a plurality of
the votes of the shares of the Company's Common Stock present in person or
represented by proxy and entitled to vote on the election of directors.
Abstentions will be treated as the equivalent of a negative vote for the purpose
of determining whether a proposal has been adopted and will have no effect for
the purpose of determining whether a director has been elected. Broker non-votes
will not be counted as cast. Abstentions and broker non-votes are each included
in the determination of the number of shares present at the Annual Meeting.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company
intends to request banks and brokers to solicit their customers who beneficially
own Common Stock listed of record in names of nominees, and will reimburse such
banks and brokers for their reasonable
1
<PAGE> 5
out-of-pocket expenses for such solicitations. The solicitation of proxies by
mail may be supplemented by telephone, telegram and personal solicitation by
officers, directors and regular employees of the Company, but no additional
compensation will be paid to such individuals.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Pursuant to the Bylaws of the Company, the Board of Directors shall consist
of not less than four nor more than seven members. The specific number of Board
members within this range is determined by the Board of Directors and is
currently set at seven. The Board is divided into three classes which serve
staggered three-year terms. The number of board members in each class is as
follows: two Class I directors, three Class II directors, and two Class III
directors. The terms of the Class III directors expire this year and their
successors are to be elected at the Annual Meeting for a three-year term
expiring in 2000. The terms of the Class I and Class II directors expire in 1998
and 1999, respectively.
The Board of Directors is proposing David Michael Talla and Rex A.
Licklider, who both now serve as Class III directors, for election as Class III
directors at the Annual Meeting.
To the Company's knowledge, each nominee is and will be available to serve,
but if any of them should decline or be unable to act as a director, the proxy
holders will vote for the election of another person or persons as the Board of
Directors recommends.
PRINCIPAL OCCUPATION DURING THE LAST 5 YEARS, OTHER BUSINESS
The nominees have supplied the following background information to the
Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE EXPERIENCE AND DIRECTORSHIPS SINCE
- -------------------- ---- ------------------------------------------------------ --------
<S> <C> <C> <C>
David Michael Talla 50 Currently serves as Chairman of the Board and Chief 1994
Executive Officer of the Company. In 1977, Mr. Talla
co-founded the Company.
Rex A. Licklider 54 Currently serves as Vice Chairman of the Board and as 1994
a consultant to the Company. Mr. Licklider serves as a
director for Deckers Outdoor Corporation, Golden Tel,
Inc. and Associated Travel Services, Inc.
</TABLE>
BOARD COMMITTEES
The Board has a standing Audit Committee (the "Audit Committee") that
reviews the audit and control functions of the Company, the Company's accounting
principals, policies and practices and financial reporting, the scope of the
audit conducted by the Company's auditors and the independent auditor's opinion
and letter of comment to management and management's response thereto. The Audit
Committee did not meet during 1996. The Audit Committee is currently comprised
of Messrs. Turner and Veru.
The Board has a Compensation Committee (the "Compensation Committee") that
is authorized to review and make recommendations to the Board with respect to
the salaries and bonuses of the Company's executive officers, and to administer
the Company's 1994 Stock Incentive Plan. The Compensation Committee is currently
comprised of Messrs. Turner and Veru.
Prior to August 1996, Mr. Licklider served on both the Audit and
Compensation Committees.
The Compensation Committee met once during 1996, and that meeting was
attended by Messrs. Licklider, Turner and Veru.
The Board does not have a nominating committee, or a committee performing
similar functions.
2
<PAGE> 6
DIRECTOR ATTENDANCE
In 1996, the Company held three meetings of the Board of Directors. Each
incumbent director attended all meetings of the Board of Directors and all
meetings of the committees of the Board of which they were members.
DIRECTOR COMPENSATION
Effective February 1995, non-employee directors are entitled to receive an
annual fee of $10,000 and a fee of $500 for each meeting attended. Non-employee
directors who are members of the Audit Committee or Compensation Committee are
entitled to receive $500 for each meeting they attend. In addition, non-employee
directors receive 1,000 shares of the Company's Common Stock each year pursuant
to the Company's 1994 Stock Compensation Plan. Messrs. Licklider, Turner and
Veru currently serve on the Board as non-employee directors. The Company
provides Mr. Licklider with health insurance under its group insurance plan. All
directors receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board. Amounts paid to directors were $36,000
during 1995 and $37,026 during 1996. Under the Stock Compensation Plan an
aggregate of 8,000 shares of Common Stock were issued to non-employee directors
through December 31, 1996.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NOMINEES
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of the directors and executive officers of the Company, as well
as their respective ages as of May 15, 1997, and positions with the Company, are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ---------------------------------------------
<S> <C> <C>
D. Michael Talla 50 Chairman of the Board and Chief Executive
Officer
Rex A. Licklider 54 Vice Chairman of the Board
John M. Gibbons 48 President, Chief Operating Officer and
Director
Nanette Pattee Francini 48 Executive Vice President, Secretary and
Director
Mark S. Spino 42 Vice President -- Director of Development
Philip J. Swain 39 Vice President -- Director of Operations
Timothy M. O'Brien 45 Chief Financial Officer and Assistant
Secretary
Andrew L. Turner 50 Director
Dennison Veru 36 Director
</TABLE>
D. MICHAEL TALLA co-founded the Company in 1977, has served as the Chief
Executive Officer since that time and has served as Chairman of the Board of
Directors since February 1994. Mr. Talla has been in the sports and fitness
industry for more than 20 years and has developed or participated in the
development of more than 20 clubs in the United States, including all Clubs
owned by the Company. Mr. Talla holds a Bachelor of Arts Degree in Business
Administration from the University of Arizona.
REX A. LICKLIDER has served as a director of the Company since February
1994 and was named Vice Chairman of the Board in May 1994. Prior to his
involvement with the Company, Mr. Licklider served as Chairman, President and
Chief Executive Officer of Com Systems, Inc., an AMEX-listed long-distance
telecommunications company which he founded in 1975. Mr. Licklider is a director
of Deckers Outdoor Corporation, Golden Tel, Inc., and Associated Travel
Services, Inc. He also serves on the Board of Directors of the Children's Bureau
of Southern California and Los Angeles Youth Programs, Inc. Mr. Licklider holds
a Bachelor of Arts Degree in Business Administration from the University of
Arizona and a Masters in Business Administration from the University of
California at Los Angeles.
3
<PAGE> 7
JOHN M. GIBBONS was engaged by the Company to serve as Chief Financial
Officer in May 1994 and became Executive Vice President in February 1995 and
President and Chief Operating Officer on July 1, 1995. Mr. Gibbons was elected
to the Board of Directors effective August 14, 1995. From September 1993 until
May 1994, Mr. Gibbons was a financial and business consultant whose clients
included the Company. From February 1990 until September 1993, Mr. Gibbons was
employed as a Vice President by Com Systems, Inc., an AMEX-listed long-distance
telecommunications company located in Westlake Village, California, serving as
General Manager and Senior Vice President from December 1992 to September 1993,
and as Chief Financial Officer from August 1991 through December 1992. From
January 1988 through February 1990, Mr. Gibbons was employed as Chief Financial
Officer of TMC Communications, a long-distance telecommunications company
located in Santa Barbara, California, which was acquired by Com Systems, Inc. in
February 1990. Mr. Gibbons has a Bachelors of Business Administration from Notre
Dame and a Masters of Business Administration from the University of Southern
California, and is a Certified Public Accountant.
NANETTE PATTEE FRANCINI, Executive Vice President, co-founded the Company
in 1977, has been principally responsible for overseeing all marketing for the
Company since 1978 and has served as a director of the Company since February
1994. Ms. Pattee Francini has been in the sports and fitness industry for more
than 20 years and has developed or participated in the development of more than
20 sports and fitness clubs, including all Clubs owned by the Company. Ms.
Pattee Francini holds a Bachelor of Arts Degree from the University of Arizona.
MARK S. SPINO has served as Director of Development of the Company from
1980 to the present and as a Vice President since 1984. Mr. Spino has been in
the sports and fitness industry for more than 15 years and has developed or
participated in the development of more than 15 sports and fitness clubs in the
United States, including many of the Clubs owned by the Company. From July 1979
to June 1980, Mr. Spino was Assistant Manager, and later Manager, of the
Mid-Valley Athletic Club in Reseda, California. Mr. Spino holds Bachelor of Arts
and Master of Arts Degrees in Physical Education from the University of Southern
California.
PHILIP J. SWAIN has been employed by the Company since 1982 and has served
as Vice President-Director of Operations since 1988. Mr. Swain has been in the
sports and fitness industry for more than 20 years and has developed or
participated in the development of more than 15 clubs in the United States,
including many of the Clubs owned by the Company. Mr. Swain served as Regional
General Manager from 1986 until 1988. From December 1979 to November 1982, Mr.
Swain was the Director of Marketing and Membership at the Mid-Valley Athletic
Club in Reseda, California. From February 1975 to December 1979, Mr. Swain was
employed by Health & Tennis Corporation of America, managing different
facilities in Detroit and Los Angeles.
TIMOTHY M. O'BRIEN has been employed by the Company since February 1995 as
Chief Financial Officer. From July 1993 until February 1995, Mr. O'Brien was
employed as Vice President/Controller of WCT Communications, Inc., a publicly
traded long-distance telecommunications company located in Santa Barbara,
California. From May 1989 until July 1993, Mr. O'Brien was Controller for Com
Systems, Inc., an AMEX-listed long-distance telecommunications company located
in Westlake Village, California. Mr. O'Brien has a Bachelors of Business
Administration degree from the University of Wisconsin - Madison and is a
Certified Public Accountant.
ANDREW L. TURNER has been a director of the Company since September 1994
and has been Chairman of the Board of Directors, President and Chief Executive
Officer of Sun Healthcare Group, Inc. since its formation in 1989. Sun
Healthcare Group, Inc., of which Mr. Turner was a founder, is a long-term health
care services provider. Mr. Turner was also founder and previously served as
Chief Operating Officer of Horizon Healthcare Corporation, a health care
services provider, from 1986 to 1989. Prior to 1986, Mr. Turner served as a
Senior Vice President of Operations of The Hillhaven Corporation.
DENNISON VERU has been President of Awad & Associates, a money management
division of Raymond James Financial since November 1992. From February 1990 to
November 1992 he served as Executive Vice President, Investments of Smith
Barney, Inc. specializing in small and medium capitalization stocks. Prior to
that, Mr. Veru was Vice President of Broad Street Investment Management and an
Assistant Vice President
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<PAGE> 8
at Drexel Burnham Lambert. Mr. Veru serves as a director for Lois USA, Inc. a
publicly held company. Mr. Veru is a graduate of Franklin and Marshall college.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company to the
Chief Executive Officer and to the five other most highly compensated executive
officers for the years ended December 31, 1994, 1995 and 1996, for services
rendered. Current salaries of the Company's executives are described below under
"Employment Agreements."
1994, 1995 AND 1996 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND --------------------- AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS (SHARES) COMPENSATION
- -------------------------------- ---- --------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
D. Michael Talla................ 1996 $ 218,000(2) -- -- --
Chairman of the Board and 1995 205,250(2) -- -- --
Chief Executive Officer 1994 31,154(2) -- -- --
Nanette Pattee Francini......... 1996 124,175 -- 15,000 --
Executive Vice President, 1995 122,200 -- -- --
Secretary and Director 1994 104,400 -- -- --
John M. Gibbons................. 1996 232,800(3) $25,000 225,000(4) --
President, Chief Operating 1995 218,933(3) -- 450,000(4) --
Officer and Director 1994 26,586 -- -- $133,396(5)
Mark S. Spino................... 1996 116,795 -- 15,000 --
Vice President and 1995 111,855 -- -- --
Director of Development 1994 81,535 -- -- --
Philip J. Swain................. 1996 131,375 -- 25,000 --
Vice President and 1995 127,000 -- -- --
Director of Operations 1994 105,450 20,000 -- --
Timothy M. O'Brien.............. 1996 122,175 5,000 20,000 --
Chief Financial Officer 1995 100,087 -- 25,000 --
and Assistant Secretary 1994 -- -- -- --
</TABLE>
- ---------------
(1) Includes automobile allowance.
(2) Until October 21, 1994, Mr. Talla received income from the Predecessors in
his capacity as a partner, and did not receive a salary. Mr. Talla also
receives, on an annual basis, 49.9% of the first $300,000 of The Sports
Club/LA's net cash flow. See "Certain Relationships." This amount is not
included in Mr. Talla's compensation.
(3) Includes an allowance for living expenses paid to Mr. Gibbons under the
terms of his employment agreement.
(4) Options to purchase 225,000 shares at the exercise price of $9.00 per share
issued on February 27, 1995, were canceled in connection with the issuance
on July 5, 1995, of options to purchase 225,000 shares at the exercise price
of $5.00 per share. Effective April 24, 1996, the Compensation Committee of
the Board of Directors lowered the exercise price to $3.00 per share.
Pursuant to the rules of the Securities and Exchange Commission, the
cancellation and regrant of the option, and the repricing of the option, are
each deemed to constitute a separate award.
(5) Prior to joining the Company, Mr. Gibbons was retained as an outside
consultant and received consulting fees for such services.
5
<PAGE> 9
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table provides information concerning stock options granted
by the Company to the Named Executive Officers during the year ended December
31, 1996.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL STOCK
OPTIONS PRICE APPRECIATION
NUMBER OF GRANTED TO FOR
SHARES EMPLOYEES OPTION TERM
UNDERLYING IN EXERCISE (1)
OPTIONS FISCAL OR BASE EXPIRATION -------------------
NAME GRANTED(2) YEAR PRICE DATE 5% 10%
- -------------------------- ---------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nanette Pattee Francini... 15,000 6.8% 2.6875 2/8/2006 $29,933 $68,730
Mark S. Spino............. 15,000 6.8 2.6875 2/8/2006 29,933 68,730
Philip J. Swain........... 25,000 11.3 2.6875 2/8/2006 49,889 114,550
Timothy M. O'Brien........ 15,000 6.8 2.6875 2/8/2006 29,933 68,730
Timothy M. O'Brien........ 5,000 2.3 2.7500 10/31/2006 9,665 23,535
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% annual rates of stock appreciation prescribed by the Securities
and Exchange Commission and are not intended to forecast possible future
appreciation, if any, of the Company's stock price. No gain to the optionee
is possible without an increase in the price of the Company's stock which
will benefit all stockholders commensurately.
(2) All of such options are governed by the Company's 1994 Stock Incentive Plan.
The following table provides information with respect to unexercised stock
options as of December 31, 1996. None of the Named Executive Officers exercised
stock options during the last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF ALL
NUMBER OF UNEXERCISED UNEXERCISED
OPTIONS UNDER IN-THE-MONEY OPTIONS
THE OPTION PLAN AT FY-END(2)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE(1) UNEXERCISABLE
-------------------------------------- --------------------- --------------------
<S> <C> <C>
John M. Gibbons....................... 162,508/62,492 $0/$0
Nanette Pattee Francini............... 0/15,000 $0/$2,812
Mark S. Spino......................... 0/15,000 $0/$2,812
Philip J. Swain....................... 0/25,000 $0/$4,688
Timothy M. O'Brien.................... 8,333/36,667 $0/$3,438
</TABLE>
- ---------------
(1) All such options are governed by the Company's 1994 Stock Incentive Plan.
(2) An in-the-money option is an option which has an exercise price for the
Common Stock which is lower than the fair market value of the Common Stock
on a specified date. The fair market value of the Common Stock on December
31, 1996, was $2.875, which was the closing price per share on the American
Stock Exchange on such date.
6
<PAGE> 10
REPORT OF OPTION REPRICING
The Compensation Committee canceled and reissued options to purchase
225,000 shares of Common Stock to Mr. Gibbons, the Company's President, on July
5, 1995. The exercise price of the reissued options was $5.00 per share, the
fair market value of the Common Stock on the date of reissue, while the exercise
price for the canceled options was $9.00 per share. The Committee felt that the
cancellation and the reissuance of options to Mr. Gibbons was appropriate in
light of the fact that the potential appreciation in value of his options was a
material component of the overall compensation package negotiated with Mr.
Gibbons, and the Committee determined that it would be in the best interests of
the Company to provide Mr. Gibbons options which have the potential to
appreciate in value to the extent the market value of the Common Stock increases
over $5.00 per share. For the same reasons, the exercise price of the options
granted to Mr. Gibbons on July 5, 1995, was reduced to $3.00 per share on April
24, 1996. In exchange Mr. Gibbons waived 50% of the $100,000 bonus that was to
have been paid to him in 1996 pursuant to the terms of his employment agreement.
The Compensation Committee believes that the repricing of such options will
cause such options to, once again, provide Mr. Gibbons with an opportunity for
increased equity ownership and a meaningful incentive to remain in the
employment of the Company for the long term.
Compensation Committee
Andrew L. Turner
Dennison Veru
The following table provides information with respect to stock options
which have been repriced for any executive officer since the Company's initial
public offering, in October 1994.
TEN-YEAR OPTION/SAR REPRICING
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE OF EXERCISE PRICE REMAINING AT
OPTIONS/SARS STOCK AT TIME OF AT TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- --------------------------- ------- ------------ ---------------- -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
John M. Gibbons 7/5/95 225,000(1) $ 5.00 $ 9.00 $ 5.00 9.67 years
President & Chief
Operating Officer
John M. Gibbons 4/24/96 225,000(1) $ 3.00 $ 5.00 $ 3.00 8.13 years
President & Chief
Operating Officer
</TABLE>
- ---------------
(1) Options to purchase 225,000 shares at an exercise price of $9.00 issued on
February 27, 1995, were canceled in connection with the issuance on July 5,
1995, of options to purchase 225,000 shares at the exercise price of $5.00
per share. Effective April 24, 1996, the exercise price was lowered to $3.00
per share. At no time has Mr. Gibbons possessed options to purchase in
excess of 225,000 shares. (See "Employment Agreements").
EMPLOYMENT AGREEMENTS
Effective August 10, 1994, the Company entered into Employment Agreements
with D. Michael Talla, as Chief Executive Officer, and Nanette Pattee Francini,
as Executive Vice President, each of which expire on December 31, 2000. Certain
terms of Mr. Talla's employment agreement were amended by the Board of Directors
as of February 27, 1995. The Agreements provide for annual compensation of
$200,000 payable to Mr. Talla, and $120,000 payable to Ms. Pattee Francini,
subject to upward adjustment at the discretion of the Board of Directors. The
Company may terminate either Employment Agreement without penalty for cause or
upon the disability of the affected employee.
The Employment Agreements with Mr. Talla and Ms. Pattee Francini summarized
above entitle each employee to annual performance bonuses in the discretion of
the Board of Directors, to be paid within
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<PAGE> 11
120 days for Mr. Talla and 150 days for Ms. Pattee Francini following the end of
each fiscal year. The Employment Agreements also include severance provisions
which entitle each executive officer to severance pay if his or her employment
is terminated by the Company without cause; if the employee dies or is disabled;
or if the employee terminates the Agreement as a result of a material breach by
the Company of its obligations thereunder (six months' pay for Ms. Pattee
Francini and twelve months' pay for Mr. Talla). In addition, the Employment
Agreements provide Mr. Talla and Ms. Pattee Francini with additional severance
benefits upon the occurrence of any one of the following events without the
approval of a majority of the Board of Directors: (i) the consolidation or
merger of the Company with any other corporation or other entity; (ii) the sale
or other transfer of all or substantially all of the assets of the Company;
(iii) the approval by the stockholders of the Company of a plan of liquidation
or dissolution of the Company; (iv) any person becomes the beneficial owner
directly or indirectly of 25% or more of the Company's outstanding Common Stock;
or (v) a change occurs in the composition of a majority of the Board of
Directors of the Company (unless approved by two-thirds of the Board of
Directors of the Company). If at any time within two years after the occurrence
of any one of the foregoing events Mr. Talla's or Ms. Pattee Francini's
employment is terminated (other than for cause, incapacity or death), or Mr.
Talla or Ms. Pattee Francini elects to terminate his or her employment for "good
reason" (as that term is defined in the Agreements), he or she is entitled to
receive severance compensation equal to the lesser of: (i) the maximum amount
which does not constitute a "parachute payment" as defined in Section 280G of
the Internal Revenue Code of 1986, as amended; or (ii) an amount equal to three
times the aggregate of (A) his or her base annual salary then in effect, (B) the
car allowance, club memberships and dues, and insurance benefits paid for the
employee during the one-year period immediately prior to termination, and (C)
bonuses accrued but unpaid through the date of termination of employment. Under
the Agreements, "good reason" means the assignment of any duties inconsistent
with the employee's position or any other action which diminishes the employee's
position, authority or duties, which determination shall be made in good faith
by the employee. If the employment of Mr. Talla or Ms. Pattee Francini were
terminated within such period as a result of the occurrence of any of the
foregoing events (assuming that neither would be entitled to any performance
bonus), the aggregate approximate amounts payable to Mr. Talla and Ms. Francini
would be $679,035 and $393,834, respectively.
Effective as of July 1, 1995, the Company entered into an Employment
Agreement with John M. Gibbons, which expires June 30, 1998. The Employment
Agreement provides for annual base compensation of $200,000, subject to annual
review and upward adjustment at the discretion of the Board of Directors. In
addition to his base salary Mr. Gibbons is entitled to participate in any
management bonus program the Board of Directors may implement from time to time.
The Employment Agreement also includes a severance provision which entitles Mr.
Gibbons to receive payments equal to his base compensation until the earlier of
12 months following the date of his termination date or the expiration of the
Agreement, if his employment is terminated prior to the expiration date other
than for cause or by Mr. Gibbons himself. Mr. Gibbons will be paid $25,000 each
year through March 1997 for living expenses and $7,800 each year as an auto
allowance payable in equal semi-monthly installments. Pursuant to the terms of
the Employment Agreement, the Compensation Committee of the Board of Directors,
effective July 1, 1995, granted Mr. Gibbons an option to purchase 225,000 shares
of the Company's Common Stock at an exercise price of $5.00 per share ("Option
Shares"). One-third of the Option Shares became immediately vested upon the
grant with the remaining two-thirds vesting in 24 equal monthly installments
commencing October 21, 1995. Concurrent with the grant of the Option Shares,
options for the purchase of 225,000 shares of Common Stock which were granted to
Mr. Gibbons on February 27, 1995, at a price of $9.00 per share were canceled.
In April 1996, the Compensation Committee of the Board of Directors amended Mr.
Gibbons' Employment Agreement to adjust the exercise price of the Option Shares
from $5.00 to $3.00 per share, the fair market price of a share of the Company's
Common Stock, as evidenced by the closing price on the American Stock Exchange
on April 24, 1996. In exchange, Mr. Gibbons waived 50% of the $100,000 bonus
which was to have been paid to him in 1996. In addition, payment of the 50% of
the remaining bonus was deferred until the second quarter of 1997. Upon any
merger, acquisition or other reorganization in which the Company is not the
surviving corporation, or upon a change in control of the Company, the Option
Shares will be fully exercisable.
The Company does not have written employment agreements with Messrs. Spino,
Swain, and O'Brien who currently receive annual base salaries of $114,000,
$125,250, and $122,200 respectively.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
INTRODUCTION
The Company's Compensation Committee (the "Committee") is comprised
entirely of non-employee members of the Company's Board of Directors. Currently,
Messrs. Turner and Veru serve on the Committee. The Committee reviews and
approves each of the elements of the executive compensation program of the
Company and assesses both the competitiveness and effectiveness of the program.
In addition, the Committee administers the 1994 Stock Incentive Plan.
COMPENSATION PHILOSOPHY
The Company's overall executive compensation philosophy seeks to achieve
the following three goals:
- To reward the achievement of the Company's strategic goals and the
creation of stockholder value
- To maintain a close relationship between compensation and shareholder
value
- To secure, develop, motivate and retain a high quality management team
This philosophy is used not only in determining executive compensation, but
is also evident in the Company's overall salary structure.
The Committee is aware of the limitations imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended, on the deductibility of compensation
paid to certain senior executives to the extent it exceeds $1 million per
executive. The Company currently intends to recommend compensation amounts and
plans which will meet the requirements of deductibility in that no executive
will exceed the million dollar threshold of Section 162(m) of the Internal
Revenue Code.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
Base Salaries
Base salary levels for all executive officers are reviewed annually. As
part of this review, the Company takes into account the compensation packages
offered by other companies. The Company also gives consideration to the
experience, responsibilities, management and leadership abilities of its
individual executive officers and their actual performance on behalf of the
Company, as well as compensation policies prevailing generally within the
industry and particularly within the Peer Group described under "Stockholder
Return Performance Presentation."
Incentive Compensation
The Committee also supplements base compensation through discretionary
performance-based bonuses. In 1996 Mr. O'Brien received a bonus of $5,000 in
recognition of his performance in connection with the successful refinancing of
The Sports Club/LA. Pursuant to the terms of his employment agreement Mr.
Gibbons was awarded a bonus of $100,000, of which he waived $50,000. The
remaining $50,000 was paid to Mr. Gibbons in two equal installments of $25,000;
the first in 1996 and the second in April of 1997.
In February 1996, as part of its annual review of salaries the Committee
adopted a program under which bonuses are to be awarded based on operational
earnings increases. For a bonus to be awarded under this program, operational
earnings for each year must be increased by at least 7% over those achieved in
the prior year. The Committee retains discretionary authority to award
additional bonuses based on individual performance.
STOCK OPTIONS
The Committee believes that long-term incentive compensation in the form of
stock options motivates officers and key employees to improve the long-term
performance of the Common Stock on the market and thus directly increase
shareholder value. Stock options may also be used to attract new executives. The
Company's stock plans provide a means by which executive officers and other key
employees can build an
9
<PAGE> 13
investment in the Company which will align such employee's economic interests
with the interests of the stockholders. Such options are granted at the
prevailing market price of the Common Stock and will only have value if the
stock price increases. Generally, stock options vest over a period of time from
date of grant, and the optionee must be associated with the Company at the time
of vesting in order to exercise the option. In addition to providing performance
incentives to employees, stock options provide the Company with a form of
non-cash compensation which allow it to provide benefits to employees without
making cash expenditures. Accordingly, the Committee views the grant of options
as an effective component of its over-all executive compensation program.
In determining an option grant the Committee also takes into account the
outstanding options held by each individual executive officer and the projected
value of the options based on historical and assumed appreciation rates for the
Company's Common Stock.
As of December 31, 1996, options for 492,500 shares of the Common Stock of
the Company were outstanding. Of this total amount, Mr. Gibbons holds an option
for 225,000 shares; four executive officers hold options for an aggregate of
100,000 shares; and the remaining 167,500 shares are held by 24 key employees.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee is responsible for recommending the compensation to be
awarded to the Chief Executive Officer and bases such recommendation upon the
same factors as those employed by the Committee for executive officers
generally. In determining Mr. Talla's salary the Committee focuses on the
achievement of the above described goals.
Mr. Talla received a base salary of $200,000 in 1996 in accordance with the
terms of his employment agreement with the Company. No bonus or stock options
were awarded during the last fiscal year. Future compensation for Mr. Talla may
include performance bonuses and stock option grants. The Committee may in the
future establish specific quantitative and/or qualitative goals, the
accomplishment of which will be considered in fixing Mr. Talla's compensation,
In addition, the Committee will take into account amounts received by Mr. Talla
in respect of his interest in The Sports Club/LA's net cash flow (See "Certain
Relationships").
Compensation Committee
Andrew L. Turner
Dennison Veru
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The executive compensation for the Company is administered by the
Compensation Committee of the Board, whose members are currently Messrs. Turner
and Veru. None of these individuals has ever been an officer or employee of the
Company. Prior to entering into a consulting agreement with the Company in
August 1996, Mr. Licklider also served as a member of the Compensation
Committee.
10
<PAGE> 14
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The chart below sets forth line graphs comparing the performance of the
Company's Common Stock against the American Stock Exchange (the "AMEX") market
index and two peer groups of companies. Previously the Company compared itself
with a set of companies consisting of Callaway Golf Company, Carnival Corp, Ben
& Jerry's Homemade, Inc., Sports & Recreation, Inc., Golf Enterprises, Inc.,
Supercuts, Inc., Bally's Entertainment Corporation, Professional Sports Care
Management, and Baby Superstore, Inc. all of which were engaged in the sports
and leisure business. As of March 31, 1997, only three members of this group,
Callaway Golf Company, Carnival Corp and Ben & Jerry's Homemade, Inc.
(collectively, the "Old Peer Group") remain publicly traded companies and
therefore, a new comparison group of eight peer companies has been created
consisting of Callaway Golf Company, Carnival Corp, Ben & Jerry's Homemade,
Inc., Bally Total Fitness Holding Corporation, Cedar Fair LP, Family Golf
Centers Inc., National Golf Properties, Inc., and U.S. Physical Therapy, Inc.
(collectively, the "New Peer Group"). The Company believes the New Peer Group,
in contrast to the Old Peer Group, is a more accurate representation of entities
engaged in the sports and fitness business. The graph compares the cumulative
total shareholder return on the Company's Common Stock against the cumulative
total return for all AMEX listed companies and both peer groups for the period
since the date of the Company's initial public offering (October 13, 1994).
These indices are included for comparative purposes only and do not necessarily
reflect management's opinion that such indices are an appropriate measure of the
relative performance of the stock involved, and are not intended to forecast or
be indicative of possible future performance of the Company's Common Stock.
COMPARISON OF 29 MONTH CUMULATIVE TOTAL RETURN*
AMONG THE SPORTS CLUB COMPANY, INC., THE AMEX MARKET VALUE INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SPORTS CLUB AMEX MARKET
(FISCAL YEAR COVERED) INC. NEW PEER GROUP OLD PEER GROUP VALUE
<S> <C> <C> <C> <C>
10/13/94 100 100 100 100
12/94 75 94 93 95
3/95 71 99 98 101
6/95 57 100 99 109
9/95 58 105 103 119
12/95 35 115 112 119
3/96 36 131 128 125
6/96 30 141 140 126
9/96 30 150 149 125
12/96 32 153 150 127
3/97 51 165 166 126
</TABLE>
* $100 invested on 10/13/94 in stock or on 9/30/94 in Index -- including
reinvestment of dividends, fiscal year ending December 31.
- ---------------
NOTES
(1) The lines represent index levels derived from closing stock prices.
(2) If the last day of the period was not a trading day, the preceding trading
day was used.
(3) The index level for all series was set to 100.00 on October 13, 1994.
11
<PAGE> 15
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of May 15, 1997,
regarding the beneficial ownership of the Company's Common Stock, by (i) each
person known by the Company to be the beneficial owner of more than five percent
of its Common Stock; (ii) each director; (iii) each executive officer listed in
the Summary Compensation Table; and (iv) all directors and executive officers as
a group. Unless otherwise indicated, each of the following stockholders has sole
voting and investment power with respect to the shares beneficially owned,
except to the extent that such authority is shared by spouses under applicable
law.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
NAME OF BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER(1) OWNED SHARES(8)
------------------------------------------------------- ------------ -----------
<S> <C> <C>
D. Michael Talla(2)(3)(4).............................. 4,827,238 42.43%
The Licklider Living Trust dated May 2, 1986........... 1,285,562 11.32%
Mona Talla(2)(3)(4).................................... 4,827,238 42.43%
Nanette Pattee Francini(2)(3)(4)....................... 4,827,238 42.43%
Mark S. Spino(2)(3)(4)................................. 4,827,238 42.43%
Phil Swain(2)(3)(4).................................... 4,827,238 42.43%
The Jared R. Talla Irrevocable Trust dated January 4,
1993(2)(3)(4)........................................ 4,827,238 42.43%
The Brett M. Talla Irrevocable Trust dated January 4,
1993(2)(3)(4)........................................ 4,827,238 42.43%
John M. Gibbons(5)..................................... 246,753 2.13%
Dennison Veru.......................................... 11,000 ***
Timothy M. O'Brien(6).................................. 21,667 ***
Andrew Turner.......................................... 53,000 ***
All directors and executive officers as a group (9
persons)(7).......................................... 6,445,220 55.54%
</TABLE>
- ---------------
Notes
*** Less than one percent.
(1) The address of each of the foregoing persons is 11100 Santa Monica
Boulevard, Suite 300, Los Angeles, California 90025.
(2) Includes shares with respect to which the named beneficial owner shares
voting power pursuant to a voting agreement which requires each party to
vote their shares in the manner determined by a majority of all holders. The
agreement is effective until October 20, 2004, or until terminated by
persons holding 66 2/3% of the Common Stock held by all persons subject to
the agreement. Mr. Talla, Mona Talla, The Jared R. Talla Irrevocable Trust
dated January 4, 1993, The Brett M. Talla Irrevocable Trust dated January 4,
1993, Ms. Pattee Francini, Mr. Spino and Mr. Swain are record owners of
3,956,487, 30,953, 70,362, 70,362, 261,107, 237,969, and 181,664 shares of
the Company's Common Stock, respectively. Mr. Talla (including members of
his immediate family and trusts for their benefit) is the record owner of
4,128,164 shares.
(3) Includes 18,334 shares of Common Stock issuable within 60 days upon the
exercise of options granted to Ms. Pattee Francini, Mr. Spino and Mr. Swain
under the Company's 1994 Stock Incentive Plan. Ms. Pattee Francini and Mr.
Spino each hold options exercisable for 5,000 shares and Mr. Swain holds
options exercisable for 8,334 shares.
(4) Under the Stock Repurchase Plan approved by the Board of Directors on
January 28, 1997, the Company on March 26, 1997, at a price of $4.6875 per
share, purchased 25,000 shares from Ms. Pattee Francini and 20,000 shares
from Mr. Swain. (See "Certain Relationships").
(5) Includes 35,500 shares owned by Mr. Gibbons, 5,000 shares owned by Mr.
Gibbons' spouse and 206,253 shares of Common Stock issuable within 60 days
upon the exercise of options granted under the Company's 1994 Stock
Incentive Plan.
12
<PAGE> 16
(6) Includes 21,667 shares of Common Stock issuable within 60 days upon the
exercise of options granted under the Company's 1994 Stock Incentive Plan.
(7) Includes 246,254 shares of Common Stock issuable within 60 days upon the
exercise of options granted under the Company's 1994 Stock Incentive Plan.
(8) All shares not currently outstanding that are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed to be
outstanding for the purpose of computing the "Percent of Outstanding Shares"
held by the holder thereof, but are not deemed to be outstanding for the
purpose of computing the "Percent of Outstanding Shares" held by any other
shareholder, pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act
of 1934, as amended.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than ten percent
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of such reports. Based on the Company's
review of copies of those reports and written representations which it has
received, the Company believes that all such filings required to be made from
January 1, 1996, through March 31, 1997, were made.
CERTAIN RELATIONSHIPS
The Company possesses a 50.1% interest in the partnership which owns The
Sports Club/LA; Mr. Talla owns the remaining 49.9% interest. The partnership
agreement provides that, on an annual basis, the partners will share in the
first $300,000 of The Sports Club/LA's net cash flow in proportion to their
percentage interests. The next $35.0 million of net cash flow will be
distributed to the Company (the "Priority Distribution"). All distributions of
net cash flow thereafter, if any, will be made to the partners in proportion to
their percentage interests. In addition, the partnership agreement provides the
Company with an option to purchase Mr. Talla's interest for an amount equal to
the product of four times the amount of distributions received by Mr. Talla in
the year immediately preceding the year in which the option is exercised.
The property on which the Sports Connection/West Hollywood is located is
leased from a partnership in which Mr. Talla and his affiliates hold a
controlling interest. The lease expires in August 2022, provides for monthly
rental payments of $48,228, provides for increases in rent based upon increases
in the CPI, and requires the lessee to pay all taxes, utilities, insurance and
maintenance. In November 1996, the Company sold its interest in the Sports
Connection/West Hollywood and the purchaser of the Club assumed the lease
payable to Mr. Talla.
As of December 31, 1996, Mr. Talla is either the guarantor of, or the named
debtor with respect to, approximately $245,000 in debts of the Company. The
Company has agreed with Mr. Talla to make all payments due with respect to all
such debts, and to indemnify him with respect to all costs incurred in
connection therewith. These debts have been reflected in the Company's financial
statements.
On April 3, 1997, the Company renewed the loan to Mr. Talla in the amount
of $600,000. The loan is secured by 300,000 shares of the Company's Common
Stock, and becomes due and payable in April 1998.
Effective August 1, 1996, Mr. Licklider entered into a consulting agreement
with the Company pursuant to which Mr. Licklider will receive $10,000 per month
plus reimbursement for reasonable and necessary expenses. The agreement has a
one year term and expires July 31, 1997. Under the terms of the agreement, Mr.
Licklider must provide the Company with a minimum of 60 hours of service per
month outside the normal scope of his duties as a director. Effective with the
commencement of the consulting agreement, Mr. Licklider resigned from the Audit
and Compensation Committees of the Board of Directors.
Effective January 28, 1997, the Board of Directors gave final authorization
for the use of up to $3.0 million to repurchase shares of the Company's Common
Stock. The repurchase of shares is being funded by the proceeds of the sale of
the Company's interest in the Sports Connection clubs. As of March 31, 1997,
13
<PAGE> 17
the Company has repurchased a total of 79,500 shares at prices per share ranging
from a low of $3.50 on February 12, 1997, to a high of $4.6875 on March 27,
1997, with an average price per share of $4.59. On March 26, 1997, the Company
agreed to purchase from Ms. Pattee Francini, Executive Vice President and
Secretary of the Company, and Mr. Philip Swain, Vice President of Operations of
the Company, 25,000 shares and 20,000 shares respectively, at a price of
$4.6875, the closing price on the American Stock Exchange on March 25, 1997. The
Company paid in full for the stock on March 27, 1997.
The Company has entered into agreements with its directors and officers
providing for the indemnification of such directors and officers by the Company
to the maximum extent permitted under Delaware law, in the event such persons
are the subject of lawsuits or otherwise suffer losses as a result of their
activities on behalf of the Company. These agreements include, among other
things, indemnity for judgments and settlements in derivative actions, prompt
payment of legal expenses in advance of indemnification and equitable
contribution by the Company in certain instances in the event a director or
officer is not entitled to full indemnification. In addition, the
indemnification agreements between the Company and Messrs. Talla and Licklider
provide that the Company shall indemnify them against any losses incurred as a
result of guarantees extended for the benefit of the Company or any of the
Clubs. Currently, Mr. Licklider does not guarantee any indebtedness.
The Company believes that each of the foregoing transactions has been on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All transactions between the Company and any of its
directors or officers are subject to the approval of the disinterested
directors.
INDEPENDENT PUBLIC ACCOUNTANTS
For the 1996 fiscal year, KPMG Peat Marwick LLP provided audit services
which included examination of the Company's annual consolidated financial
statements. Upon the recommendation of the Audit Committee, the Board has
approved a resolution retaining KPMG Peat Marwick LLP as its independent
auditors for fiscal 1997. A representative of KPMG Peat Marwick LLP is expected
to attend the Annual Meeting to make any statements he or she may desire and to
respond to appropriate questions.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present for action at the
Company's 1998 Annual Meeting of Stockholders and which such stockholder wishes
to have included in the Company's proxy materials for such meeting must comply
with the provisions of Rule 14a-8 promulgated under the Exchange Act. Proposals
must be received by the Secretary of the Company at its principal office (11100
Santa Monica Boulevard, Suite 300, Los Angeles, California 90025) no later than
January 23, 1998. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
GENERAL
The Board of Directors knows of no matters other than those matters
described above which are likely to be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting the
proxies confer discretionary authority with respect to acting thereon. The
proxies holders will vote the proxies thereon in accordance with their best
judgment, provided that, to the extent the Company becomes aware a reasonable
time before the Annual Meeting of any matter to come before such meeting, the
Company will provide stockholders an opportunity to vote by proxy directly on
such matter. Upon receipt of such proxies in time for voting, the shares
represented thereby will be voted as indicated thereon and as described in this
Proxy Statement.
Financial Statements for the fiscal year ended December 31, 1996, are not
made a part of this Proxy Statement. However, financial statements are included
in the annual report for the year ended December 31, 1996, enclosed with this
Proxy Statement. The annual report is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation is made.
14
<PAGE> 18
Each stockholder is urged to complete, date, sign and promptly return the
enclosed proxy card.
Any questions should be directed to the Company, care of Lois Barberio,
Investor Relations, 11100 Santa Monica Boulevard, Suite 300, Los Angeles,
California 90025, telephone (310) 479-5200.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ NANETTE PATTEE FRANCINI
Nanette Pattee Francini
Secretary
Los Angeles, California
May 20, 1997
15
<PAGE> 19
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE SPORTS CLUB COMPANY, INC.
I/We hereby appoint John M. Gibbons, Timothy O'Brien, Lois Barberio,
or any one of them acting in the absence of the others, as proxyholders, each
with the power to appoint his or her substitute, and hereby authorize them to
represent and to vote, as designated on the reverse side, all the shares of
common stock of The Sports Club Company, Inc. held of record by me/us on
April 25, 1997, at the Annual Meeting of Stockholders to be held on June 24,
1997, or any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed on the reverse side. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE NOMINEES LISTED ON THE REVERSE SIDE. This proxy will be voted
in the discretion of the proxyholders, upon such other business as may properly
come before the Annual Meeting of Stockholders or any adjournment thereof.
(PLEASE VOTE AND SIGN ON THE OTHER SIDE)
--- Please mark your
A X votes as in this
--- example.
The Board of Directors recommends a vote "FOR" the following:
FOR WITHHOLD AUTHORITY
1. Election of --- ---
Class III
Directors --- ---
NOMINEES: David Michael Talla and Rex A. Licklider
(INSTRUCTION: To withhold authority to vote for
any individual, write that nominee's name on the
line provided:)
- ------------------------------------------------
The undersigned hereby acknowledges receipt of the Proxy
Statement dated May 20, 1997 and hereby revokes any proxy
or proxies heretofore given to vote shares at said meeting
or any adjournment thereof.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PAID ENVELOPE.
Signature Date
------------------------------------- -----------------------
Please sign exactly as name appears hereon
Date
- ---------------------------------------------- -----------------------
Signature if held jointly
NOTE: Both should sign if shares held in joint tenancy. If signing as attorney,
executor, administrator, trustee or guardian, give full title; if corporation,
sign full corporate name by President or authorized officer. If partnership,
sign partnership name by authorized person.
