<PAGE> 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). SEPTEMBER 29, 1998
THE SPORTS CLUB COMPANY, INC.
<TABLE>
<CAPTION>
Delaware 1-13290 95-4479735
<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification
incorporation) No.)
</TABLE>
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.
Page 1 of 8
<PAGE> 2
Item 1. OTHER EVENTS.
On September 29, 1998, the Board of Directors of The Sports Club
Company, Inc. (the "Company") declared a dividend distribution of one right (a
"Right") for each outstanding share of Common Stock, $.01 par value (each, a
"Common Share"), of the Company to stockholders of record at the close of
business on October 6, 1998. Each Right entitles the registered holder to
purchase from the Company a unit consisting of one five-hundredth of a share of
the Series A Junior Participating Cumulative Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Shares"), or a combination of securities
and assets of equivalent value, at a Purchase Price of $20 per unit, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company.
1. Common Share Certificates Representing Rights
Until the Distribution Date (as defined in Section 2 below), (a)
the Rights shall not be exercisable, (b) the Rights shall be attached to and
trade only together with the Common Shares and (c) the stock certificates
representing Common Shares shall also represent the Rights attached to such
Common Shares. Common Share certificates issued after the Record Date and prior
to the Distribution Date shall contain a notation incorporating the Rights
Agreement by reference.
2. Distribution Date
The "Distribution Date" is the earliest of (a) the tenth business
day following the date of the first public announcement that any person (other
than the Company or certain related entities, and with certain additional
exceptions) has become the beneficial owner of 15% or more of the then
outstanding Common Shares (such person is a "15% Stockholder" and the date of
such public announcement is the "15% Ownership Date"), (b) the tenth business
day (or such later day as shall be designated by the Board of Directors)
following the date of the commencement of, or the announcement of an intention
to make, a tender offer or exchange offer, the consummation of which would cause
any person to become a 15% Stockholder or (c) the first date, on or after the
15% Ownership Date, upon which the Company is acquired in a merger or other
business combination in which the Company is not the surviving corporation or in
which the outstanding Common Shares are changed into or exchanged for stock or
assets of another person, or upon which 50% or more of the Company's
consolidated assets or earning power are sold (other than in transactions in the
ordinary course of business). In calculating the percentage of outstanding
Common Shares that are beneficially owned by any person, such person shall be
deemed to beneficially own any Common Shares issuable upon the exercise,
exchange or conversion of any options, warrants or other securities beneficially
owned by such person; provided, however, that such Common Shares issuable upon
such exercise shall not be deemed outstanding for the purpose of calculating the
percentage of Common Shares that are beneficially owned by any other person.
Upon the close of business of the Distribution Date, the Rights
shall separate from the Common Shares, Right certificates shall be issued, and
the Rights shall become exercisable to purchase Preferred Shares as described in
Section 5 below.
Page 2 of 8
<PAGE> 3
No person who is the beneficial owner of 15% or more of the
outstanding Common Shares as of September 29, 1998, shall be deemed a 15%
Stockholder unless or until such person shall acquire, without the prior
approval of the Board of Directors, Beneficial Ownership of additional Common
Shares and, following such acquisition, is the Beneficial Owner of additional
Common Shares constituting more than 2% of the Voting Shares of the Company then
outstanding. No Person shall be deemed to be a 15% Stockholder by reason of the
preceding sentence solely because of an acquisition of Beneficial Ownership of
Common Shares: (a) by gift; (b) as the result of the death of a Person, pursuant
to a will or the laws of descent, or as the result of the provisions of any
trust or partnership agreement; or (c) upon the exercise of any stock option
granted by the Company to an employee, officer or director.
3. Issuance of Right Certificates
As soon as practicable following the Distribution Date, separate
certificates representing only Rights shall be mailed to the holders of record
of Common Shares as of the close of business on the Distribution Date, and such
separate Right certificates alone shall represent such Rights from and after the
Distribution Date.
4. Expiration of Rights
The Rights shall expire on October 6, 2008, unless earlier
redeemed or exchanged, unless the Distribution Date has previously occurred and
the Rights have separated from the Common Shares, in which case the Rights,
unless earlier redeemed or exchanged, will remain outstanding for ten years
following the Distribution Date.
5. Exercise of Rights
Unless the Rights have expired or been redeemed or exchanged,
they may be exercised, at the option of the holders, pursuant to paragraphs (a),
(b) or (c) below. No Right may be exercised more than once or pursuant to more
than one of such paragraphs. From and after the first event of the type
described in paragraphs (b) or (c) below, each Right that is beneficially owned
by a 15% Stockholder or that was attached to a Common Share that is subject to
an option beneficially owned by a 15% Stockholder shall be void.
(a) Right to Purchase Preferred Shares. From and after the close
of business on the Distribution Date, each Right (other than a Right that has
become void) shall be exercisable to purchase one five-hundredth of a share of
Series A Junior Participating Cumulative Preferred Stock, par value $0.01 per
share, of the Company (the "Preferred Shares"), at an exercise price of Twenty
Dollars ($20.00) (the "Exercise Price"). Prior to the Distribution Date, the
Company may substitute for all or any portion of the Preferred Shares that would
otherwise be issuable upon exercise of the Rights, cash, assets or other
securities having the same aggregate value as such Preferred Shares. The
Preferred Shares are nonredeemable and, unless otherwise provided in connection
with the creation of a subsequent series of preferred stock, are subordinate to
any other series of the Company's preferred stock whether issued before or after
the issuance of the Preferred Shares. The Preferred Shares may not be issued
except upon exercise of Rights. The holder of a Preferred Share is entitled
Page 3 of 8
<PAGE> 4
to receive when, as and if declared, the greater of (i) cash and non-cash
dividends in an amount equal to 500 times the dividends declared on each Common
Share or (ii) a preferential annual dividend of $1.00 per Preferred Share ($.002
per one five-hundredth of a Preferred Share). In the event of liquidation, the
holders of Preferred Shares shall be entitled to receive a liquidation payment
in an amount equal to the greater of (1) $1.00 per Preferred Share ($.002 per
one five-hundredth of a Preferred Share), plus all accrued and unpaid dividends
and distributions on the Preferred Shares, or (2) an amount equal to 500 times
the aggregate amount to be distributed per Common Share. Each Preferred Share
has 500 votes per share, voting together with the Common Shares. In the event of
any merger, consolidation or other transaction in which Common Shares are
exchanged, the holder of a Preferred Share shall be entitled to receive 500
times the amount received per Common Share. The rights of the Preferred Shares
as to dividends, voting and liquidation preferences are protected by
antidilution provisions. It is anticipated that the value of one five-hundredth
of a Preferred Share should approximate the value of one Common Share.
(b) Right to Purchase Common Shares of the Company. From and
after the close of business on the tenth business day following the 15%
Ownership Date, each Right (other than a Right that has become void) shall be
exercisable to purchase, at the Exercise Price (initially $20.00), Common Shares
with a market value equal to two times the Exercise Price. If the Company does
not have sufficient Common Shares available for all Rights to be exercised, the
Company shall substitute for all or any portion of the Common Shares that would
otherwise be issuable upon the exercise of the Rights, cash, assets or other
securities having the same aggregate value as such Common Shares.
(c) Right to Purchase Common Stock of a Successor Corporation.
If, on or after the 15% Ownership Date, (i) the Company is acquired in a merger
or other business combination in which the Company is not the surviving
corporation, (ii) the Company is the surviving corporation in a merger or other
business combination in which all or part of the outstanding Common Shares are
changed into or exchanged for stock or assets of another person or (iii) 50% or
more of the Company's consolidated assets or earning power are sold (other than
in transactions in the ordinary course of business), then each Right (other than
a Right that has become void) shall thereafter be exercisable to purchase, at
the Exercise Price (initially $20.00), shares of common stock of the surviving
corporation or purchaser, respectively, with an aggregate market value equal to
two times the Exercise Price.
6. Adjustments to Prevent Dilution
The Exercise Price, the number of outstanding Rights and the
number of Preferred Shares or Common Shares issuable upon exercise of the Rights
are subject to adjustment from time to time as set forth in the Rights Agreement
in order to prevent dilution. With certain exceptions, no adjustment in the
Exercise Price shall be required until cumulative adjustments require an
adjustment of at least 1%.
Page 4 of 8
<PAGE> 5
7. Cash Paid Instead of Issuing Fractional Securities
No fractional securities shall be issued upon exercise of a Right
(other than fractions of Preferred Shares that are integral multiples of one
five-hundredth of a Preferred Share and that may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment
in cash shall be made based on the market price of such securities on the last
trading date prior to the date of exercise.
8. Redemption
At any time prior to the earlier of (a) the tenth business day
(or such later day as shall be designated by the Board of Directors) following
the date of the commencement of, or the announcement of an intention to make, a
tender offer or exchange offer, the consummation of which would cause any person
to become a 15% Stockholder, (b) the tenth business day after the 15% Ownership
Date or (c) the first event of the type giving rise to exercise rights under
Section 5(c) above, the Board of Directors may, at its option, direct the
Company to redeem the Rights in whole, but not in part, at a price of $.001 per
Right (the "Redemption Price"), and the Company shall so redeem the Rights.
Immediately upon such action by the Board of Directors (the date of such action
is the "Redemption Date"), the right of the holders of Rights thereafter shall
be to receive the Redemption Price.
9. Exchange
At any time during the period of 180 days after the 15% Ownership
Date, the Board of Directors of the Company may, at its option, authorize and
direct the exchange of all, but not less than all, of the then outstanding
Rights for Common Shares, one five-hundredths of Preferred Shares, debt
securities of the Company, other property, or any combination of the foregoing,
which, as of the date of the Board of Directors' action, has a current market
price equal to the difference between the Exercise Price and the current market
price of the shares that would otherwise be issuable upon exercise of a Right on
such date (the "Exchange Ratio"), and the Company shall so exchange the Rights.
Immediately upon such action by the Board of Directors, the right to exercise
Rights shall terminate and the only right of the holders of Rights thereafter
shall be to receive a number of Common Shares equal to the Exchange Ratio.
10. No Stockholder Rights Prior to Exercise
Until a Right is exercised, the holder thereof, as such, shall
have no rights as a stockholder of the Company (other than rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
11. Amendment of Rights Agreement
The Board of Directors may, from time to time, without the
approval of any holder of Rights, direct the Company and the Rights Agent to
supplement or amend any provision of the Rights Agreement in any manner, whether
or not such supplement or amendment is adverse to any holder
Page 5 of 8
<PAGE> 6
The Board of Directors may, from time to time, without the
approval of any holder of Rights, direct the Company and the Rights Agent to
supplement or amend any provision of the Rights Agreement in any manner, whether
or not such supplement or amendment is adverse to any holder of Rights, and the
Company and the Rights Agent shall so supplement or amend such provision;
provided, however, that from and after the earliest of (a) the tenth business
day (or such later day as shall be designated by the Board of Directors)
following the date of the commencement of, or the announcement of an intention
to make, a tender offer or exchange offer, the consummation of which would cause
any person to become a 15% Stockholder, (b) the 15% Ownership Date, (c) the
first event of the type giving rise to the exercise of rights under Section 5(c)
above, or (d) the Redemption Date, the Rights Agreement shall not be
supplemented or amended in any manner that would materially and adversely affect
any holder of outstanding Rights other than a 15% Stockholder.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
EXHIBIT NO. EXHIBIT
4.1 Rights Agreement, dated as of October 6,
1998, between The Sports Club Company, Inc.
and American Stock Transfer & Trust Company,
as Rights Agent, which includes, as Exhibit
1 thereto, the Certificate of Determinations
of Rights, Preferences and Privileges with
respect to Series A Junior Participating
Cumulative Preferred Stock, and as Exhibit 2
thereto, the form of Right Certificate
(Incorporated by Reference to Registrant's
Form 8-A filed on October 6, 1998).
20.1 Summary of Rights to be Distributed to
Stockholders
99.1 Press Release dated October 1, 1998.
Page 6 of 8
<PAGE> 7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE SPORTS CLUB COMPANY, INC.
BY: /s/ D. Michael Talla
D. Michael Talla
Chief Executive Officer
(Principal Executive Officer)
Dated: October 6, 1998
Page 7 of 8
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
20.1 Summary of Rights to be Distributed to Stockholders.
99.1 Press Release dated October 1, 1998.
</TABLE>
Page 8 of 8
<PAGE> 1
Exhibit 20.1
SUMMARY OF THE RIGHTS
On September 29, 1998, the Board of Directors of The Sports Club
Company, Inc. (the "Company") authorized and declared a dividend of one
preferred stock purchase right (a "Right") for each share of common stock, par
value $.01 per share, of the Company (the "Common Shares"). The dividend is
payable on October 6, 1998 (the "Record Date") to the holders of record of
Common Shares as of the close of business on such date.
The following is a brief description of the Rights. It is
intended to provide a general description only and is subject to the detailed
terms and conditions of a Rights Agreement (the "Rights Agreement") dated as of
October 6, 1998, by and between the Company and American Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent).
1. COMMON SHARE CERTIFICATES REPRESENTING RIGHTS
Until the Distribution Date (as defined in Section 2 below), (a)
the Rights shall not be exercisable, (b) the Rights shall be attached to and
trade only together with the Common Shares and (c) the stock certificates
representing Common Shares shall also represent the Rights attached to such
Common Shares. Common Share certificates issued after the Record Date and prior
to the Distribution Date shall contain a notation incorporating the Rights
Agreement by reference.
2. DISTRIBUTION DATE
The "Distribution Date" is the earliest of (a) the tenth business
day following the date of the first public announcement that any person (other
than the Company or certain related entities, and with certain additional
exceptions) has become the beneficial owner of 15% or more of the then
outstanding Common Shares (such person is a "15% Stockholder" and the date of
such public announcement is the "15% Ownership Date"), (b) the tenth business
day (or such later day as shall be designated by the Board of Directors)
following the date of the commencement of, or the announcement of an intention
to make, a tender offer or exchange offer, the consummation of which would cause
any person to become a 15% Stockholder or (c) the first date, on or after the
15% Ownership Date, upon which the Company is acquired in a merger or other
business combination in which the Company is not the surviving corporation or in
which the outstanding Common Shares are changed into or exchanged for stock or
assets of another person, or upon which 50% or more of the Company's
consolidated assets or earning power are sold (other than in transactions in the
ordinary course of business). In calculating the percentage of outstanding
Common Shares that are beneficially owned by any person, such person shall be
deemed to beneficially own any Common Shares issuable upon the exercise,
exchange or conversion of any options, warrants or other securities beneficially
owned by such person. However, Common Shares issuable upon such exercise shall
not be deemed outstanding for the purpose of calculating the percentage of
Common Shares that are beneficially owned by any other person.
Upon the close of business on the Distribution Date, the Rights
shall separate from the
- 1 -
<PAGE> 2
Common Shares, separate Right certificates shall be issued and the Rights shall
become exercisable to purchase Preferred Shares as described in Section 5 below.
No person who is the beneficial owner of 15% or more of the
outstanding Common Shares as of September 29, 1998 shall be deemed a 15%
Stockholder unless or until such person shall acquire, without the prior
approval of the Board of Directors, additional Common Shares which would cause
the percentage of the outstanding shares so owned to increase by more than 2%
over the number of Common Shares so beneficially owned on the Record Date.
3. ISSUANCE OF RIGHT CERTIFICATES
As soon as practicable following the Distribution Date, separate
certificates representing only Rights shall be mailed to the holders of record
of Common Shares as of the close of business on the Distribution Date, and such
separate Right certificates alone shall represent such Rights from and after the
Distribution Date.
4. EXPIRATION OF RIGHTS
The Rights shall expire on October 6, 2008, unless earlier
redeemed or exchanged, unless the Distribution Date has previously occurred and
the Rights have separated from the Common Shares, in which case the Rights will
remain outstanding for 10 years following the Distribution Date.
5. EXERCISE OF RIGHTS
Unless the Rights have expired or been redeemed or exchanged,
they may be exercised, at the option of the holders, pursuant to paragraphs (a),
(b) or (c) below. No Right may be exercised more than once or pursuant to more
than one of such paragraphs. From and after the first event of the type
described in paragraphs (b) or (c) below, each Right that is beneficially owned
by a 15% Stockholder or that was attached to a Common Share that is subject to
an option beneficially owned by a 15% Stockholder shall be void.
(a) Right to Purchase Preferred Shares. From and after the close
of business on the Distribution Date, each Right (other than a Right that has
become void) shall be exercisable to purchase one five-hundredth of a share of
Series A Junior Participating Cumulative Preferred Stock, par value $0.01 per
share, of the Company (the "Preferred Shares"), at an exercise price of $20
dollars (the "Exercise Price"). Prior to the Distribution Date, the Company may
substitute for all or any portion of the Preferred Shares that would otherwise
be issuable upon exercise of the Rights, cash, assets or other securities having
the same aggregate value as such Preferred Shares. The Preferred Shares are
nonredeemable and, unless otherwise provided in connection with the creation of
a subsequent series of preferred stock, are subordinate to any other series of
the Company's preferred stock whether issued before or after the issuance of the
Preferred Shares. The Preferred Shares will not be issued except upon exercise
of Rights. The holder of a Preferred Share is entitled to receive when, as and
if declared, the greater of (i) cash and non-cash dividends in an amount equal
to 500 times the dividends declared on each Common Share or (ii) a preferential
annual dividend of $1.00 per Preferred Share ($.002 per one five-hundredth of a
Preferred Share). In the event of liquidation,
- 2 -
<PAGE> 3
the holders of Preferred Shares shall be entitled to receive a liquidation
payment in an amount equal to the greater of (1) $1.00 per Preferred Share
($.002 per one five-hundredth of a Preferred Share), plus all accrued and unpaid
dividends and distributions on the Preferred Shares, or (2) an amount equal to
500 times the aggregate amount to be distributed per Common Share. Each
Preferred Share has 500 votes per share, voting together with the Common Shares.
In the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, the holder of a Preferred Share shall be entitled to
receive 500 times the amount received per Common Share. The rights of the
Preferred Shares as to dividends, voting and liquidation preferences are
protected by antidilution provisions. It is anticipated that the value of one
five-hundredth of a Preferred Share should approximate the value of one Common
Share.
(b) Right to Purchase Common Shares of the Company. From and
after the close of business on the tenth business day following the 15%
Ownership Date, each Right (other than a Right that has become void) shall be
exercisable to purchase, at the Exercise Price (initially $20), Common Shares
with a market value equal to two times the Exercise Price. If the Company does
not have sufficient Common Shares available for all Rights to be exercised, the
Company shall substitute for all or any portion of the Common Shares that would
otherwise be issuable upon the exercise of the Rights, cash, assets or other
securities (including the Preferred Shares) having the same aggregate value as
such Common Shares.
(c) Right to Purchase Common Stock of a Successor Corporation.
If, on or after the 15% Ownership Date, (i) the Company is acquired in a merger
or other business combination in which the Company is not the surviving
corporation, (ii) the Company is the surviving corporation in a merger or other
business combination in which all or part of the outstanding Common Shares are
changed into or exchanged for stock or assets of another person or (iii) 50% or
more of the Company's consolidated assets or earning power are sold (other than
in transactions in the ordinary course of business), then each Right (other than
a Right that has become void) shall thereafter be exercisable to purchase, at
the Exercise Price (initially $20), shares of common stock of the surviving
corporation or purchaser, respectively, with an aggregate market value equal to
two times the Exercise Price.
6. ADJUSTMENTS TO PREVENT DILUTION
The Exercise Price, the number of outstanding Rights and the
number of Preferred Shares or Common Shares issuable upon exercise of the Rights
are subject to adjustment from time to time as set forth in the Rights Agreement
in order to prevent dilution. With certain exceptions, no adjustment in the
Exercise Price shall be required until cumulative adjustments require an
adjustment of at least 1%.
7. CASH PAID INSTEAD OF ISSUING FRACTIONAL SECURITIES
No fractional securities shall be issued upon exercise of a Right
(other than fractions of Preferred Shares that are integral multiples of one
five-hundredth of a Preferred Share and that may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment
in cash shall be made based on the market price of such securities on the last
trading date
- 3 -
<PAGE> 4
prior to the date of exercise.
8. REDEMPTION
At any time prior to the earlier of (a) the tenth business day
(or such later day as shall be designated by the Board of Directors) following
the date of the commencement of, or the announcement of an intention to make, a
tender offer or exchange offer, the consummation of which would cause any person
to become a 15% Stockholder, (b) the tenth business day after the 15% Ownership
Date or (c) the first event of the type giving rise to exercise rights under
Section 5(c) above, the Board of Directors may, at its option, direct the
Company to redeem the Rights in whole, but not in part, at a price of $.001 per
Right (the "Redemption Price"), and the Company shall so redeem the Rights.
Immediately upon such action by the Board of Directors (the date of such action
is the "Redemption Date"), the right of the holders of Rights thereafter shall
be to receive the Redemption Price.
9. EXCHANGE
At any time during the period of 180 days after the 15% Ownership
Date and prior to the first date thereafter upon which a 15% Stockholder shall
be the beneficial owner of 15% or more of the outstanding Common Shares, the
Board of Directors may, at its option, direct the Company to exchange all, but
not less than all, of the then outstanding Rights for Common Shares at an
exchange ratio per Right equal to that number of Common Shares which, as of the
date of the Board of Directors' action, has a current market price equal to the
difference between the Exercise Price and the current market price of the shares
that would otherwise be issuable upon exercise of a Right on such date (the
"Exchange Ratio"), and the Company shall so exchange the Rights. Immediately
upon such action by the Board of Directors, the right to exercise Rights shall
terminate and the only right of the holders of Rights thereafter shall be to
receive a number of Common Shares equal to the Exchange Ratio.
10. NO STOCKHOLDER RIGHTS PRIOR TO EXERCISE
Until a Right is exercised, the holder thereof, as such, shall
have no rights as a stockholder of the Company (other than rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
11. AMENDMENT OF RIGHTS AGREEMENT
The Board of Directors may, from time to time, without the
approval of any holder of Rights, direct the Company and the Rights Agent to
supplement or amend any provision of the Rights Agreement in any manner, whether
or not such supplement or amendment is adverse to any holder of Rights, and the
Company and the Rights Agent shall so supplement or amend such provision;
provided, however, that from and after the earliest of (a) the 15% Ownership
Date, (b) the first event of the type giving rise to the exercise of rights
under Section 5(c) above, or (c) the Redemption Date, the Rights Agreement shall
not be supplemented or amended in any manner that would materially and adversely
affect any holder of outstanding Rights other than a 15% Stockholder.
- 4 -
<PAGE> 1
Exhibit 99.1
THE SPORTS CLUB COMPANY, INC.
[logo]
News Release
For Immediate Release
Contact: D. Michael Talla
Chief Executive Officer
The Sports Club Company, Inc.
(310) 479-5200
THE SPORTS CLUB COMPANY, INC.
ADOPTS STOCKHOLDER RIGHTS PLAN
LOS ANGELES, CA (October 1, 1998) - The Sports Club Company, Inc. (AMEX: SCY)
today announced that its Board of Directors has adopted a Stockholder Rights
Plan designed to assure that all stockholders would receive fair treatment in
any takeover of the Company. The Plan provides for the distribution of one Right
for each share of the Company's Common Stock outstanding on October 6, 1998.
In making the announcement, D. Michael Talla, the Company's Chairman and Chief
Executive Officer, stated: "The Rights are designed to enable the Board of
Directors to act effectively on behalf of stockholders in response to any
takeover bid. The Plan is not intended to prevent or discourage an offer for the
Company that is commensurate with its value and is presented in a manner
permitting full review and negotiation." Mr. Talla also noted that "the Company
has not received any unsolicited acquisition proposal at this time."
The Rights Plan provides that in the event any person becomes (or commences a
tender offer which would result in such person becoming) the beneficial owner of
15% or more of the Company's Common Stock, each Right (other than a Right held
by the 15% stockholder) will be exercisable, on and after the close of business
on the tenth business day following such event, to purchase shares of the
Company having a market value equal to two times the then current exercise price
(initially $20). Existing stockholders holding more than 15% of the outstanding
Common Stock would not trigger the Rights unless such stockholders acquire
beneficial ownership of additional shares. The Agreement further provides that
if, on or after the occurrence of such event, the Company is merged into any
other corporation or 50% or more of the Company's assets or earning power are
sold, each Right (other than a Right held by the 15% stockholder) will be
exercisable to purchase common stock of the acquiring corporation having a
market value equal to two times the then current exercise price.
- 1 -
<PAGE> 2
The Rights expire on October 6, 2008 (unless previously triggered), and are
subject to redemption by the Board of Directors at $.001 per Right at any time
prior to the first date upon which they become exercisable.
The Company will provide stockholders with further details of the Rights Plan in
a letter to be mailed in the next several weeks.
The Sports Club Company, Inc. operates upscale health and fitness clubs under
the Sports Club and Spectrum Club names.
# # # #
- 2 -
