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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
THE SPORTS CLUB COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4479735
(STATE OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
11100 SANTA MONICA BLVD., SUITE 300
LOS ANGELES, CALIFORNIA 90025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF SECURITIES PURSUANT TO
SECTION 12(b) OF THE EXCHANGE ACT AND IS EFFECTIVE PURSUANT TO GENERAL
INSTRUCTION A. (c), PLEASE CHECK THE FOLLOWING BOX. [ ]
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF SECURITIES PURSUANT TO
SECTION 12(g) OF THE EXCHANGE ACT AND IS EFFECTIVE PURSUANT TO GENERAL
INSTRUCTION A. (d), PLEASE CHECK THE FOLLOWING BOX. [X]
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
NONE NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
SERIES A PREFERRED STOCK
PURCHASE RIGHTS
(TITLE OF CLASS)
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Item 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
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.
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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.
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
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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 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.
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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 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.
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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 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 2. EXHIBITS.
The 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 Designations
relating to the Preferred Stock, and as Exhibit 2 thereto the Form of Right
Certificate to be distributed to holders of Rights after the Distribution Date
(as that term is defined in the Rights Agreement).
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE SPORTS CLUB COMPANY, INC.
By: /s/ D. MICHAEL TALLA
Chief Executive Officer
(Principal Executive Officer)
Dated: October 6, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
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.
</TABLE>
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Exhibit 1
RIGHTS AGREEMENT
dated as of October 6, 1998
by and between
THE SPORTS CLUB COMPANY, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Section 1. Certain Definitions...........................................................1
Section 2. Appointment of Rights Agent.................................................. 5
Section 3. Issuance of Right Certificates............................................... 6
Section 4. Form of Right Certificates................................................... 7
Section 5. Countersignature and Registration............................................ 7
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates...................... 8
Section 7. Exercise of Rights........................................................... 9
Section 8. Cancellation and Destruction of Right Certificates......................... 10
Section 9. Reservation and Availability of Capital Stock............................... 11
Section 10. Securities Record Date...................................................... 11
Section 11. Adjustment of Exercise Price, Number of Shares Issuable Upon
Exercise of Rights or Number of Rights...................................... 12
Section 12. Certificate of Adjusted Exercise Price or Number of Shares Issuable
Upon Exercise of Rights..................................................... 17
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power........ 17
Section 14. Fractional Rights and Fractional Shares..................................... 19
Section 15. Rights of Action............................................................ 20
Section 16. Agreement of Right Holders.................................................. 20
Section 17. Right Holder and Right Certificate Holder Not Deemed a Stockholder.......... 21
Section 18. Concerning the Rights Agent................................................. 21
</TABLE>
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<TABLE>
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Page
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Section 19. Merger or Consolidation or Change of Name of Rights Agent................... 21
Section 20. Duties of Rights Agent...................................................... 22
Section 21. Change of Rights Agent...................................................... 23
Section 22. Issuance of New Right Certificates.......................................... 24
Section 23. Redemption of Rights........................................................ 24
Section 24. Exchange of Rights.......................................................... 25
Section 25. Notice of Certain Events.................................................... 26
Section 26. Notices..................................................................... 27
Section 27. Supplements and Amendments.................................................. 27
Section 28. Certain Covenants........................................................... 28
Section 29. Successors.................................................................. 28
Section 30. Benefits of this Agreement.................................................. 28
Section 31. Severability................................................................ 28
Section 32. Governing Law............................................................... 28
Section 33. Counterparts................................................................ 28
Section 34. Descriptive Headings........................................................ 29
</TABLE>
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TABLE OF EXHIBITS
Exhibit 1 - - Certificate of Designations
Exhibit 2 - - Form of Right Certificate
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Defined Page Section
- ------------ ---- -------
<S> <C> <C>
Adjustment Shares 13 11(a)(ii)
Affiliate 1 1 1
Agreement 1 Introduction
Associate 1 1
Beneficial Owner 1 1
Beneficially Own 1 1
Business Day 2 1
Close of Business 2 1
Closing Price 2 1
Common Share 3 1
Common Share Equivalent 3 11(a)(iii)
Company (The Sports Club Company, Inc.) 1 Introduction
Company (following a Section 13(a) Event) 18 13(a)(iii)
Current Market Price 3 1
Declaration Date 1 Introduction
Distribution Date 3 3(a)
Exchange Act 3 1
Exempt Person 3 1
Exercise Price 3 1
Expiration Date 3 7(c)
15% Ownership Date 3 1
15% Stockholder 4 1
NASDAQ 2 1
Person 4 1
Preferred Share 4 1
Preferred Share Equivalent 4 1
Record Date 1 Introduction
Redemption Date 5 Recital
Redemption Price 5 23(a)
Right 1 Introduction
Right Certificate 5 3(b)
Rights Agent 1 Introduction
Rights Expiration Date 5 1
Section 11(a)(ii) Event 5 11(a)(ii)
Section 13(a) Event 5 13(a)
Securities Act 5 1
Subsidiary 5 1
Surviving Person 17 13(a)
Trading Day 5 1
Unavailable Adjustment Shares 13 11(a)(iii)
Unavailable Exchange Shares 26 24(c)
Voting Share 5 1
</TABLE>
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RIGHTS AGREEMENT
This Rights Agreement is made and entered into as of the 6th day of
October, 1998 (the "Agreement") by and between The Sports Club Company, Inc., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent").
WHEREAS, the Board of Directors of the Company on September 29, 1998
(the "Declaration Date") authorized and declared a dividend of one preferred
share purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding on October 6, 1998 (the "Record Date"), each Right
representing the right to purchase one five-hundredth of a Preferred Share (as
hereinafter defined), upon the terms and subject to the conditions set forth
herein, and has further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date or the
Expiration Date (as such terms are hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 promulgated under the Exchange Act, as in effect on
the date hereof.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "Beneficially Own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated under the
Exchange Act, in each case as in effect on the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately, or only after the passage of time, compliance with
regulatory requirements, the fulfillment of a condition or otherwise)
pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights (other than these
Rights), rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own, securities tendered pursuant to a tender offer or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange;
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(iii) which such Person or any such Person's Affiliates or
Associates has the right to vote or give or withhold written consents
with respect thereto, whether alone or in concert with others, pursuant
to any agreement, arrangement or understanding whether or not in
writing; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to Beneficially Own, any security if the
agreement, arrangement or understanding to vote such security or give or
withhold written consents with respect thereto (A) arises solely from a
revocable proxy given to such Person or any of such Person's Affiliates
or Associates in response to a public proxy or consent solicitation made
pursuant to and in accordance with the applicable rules and regulations
promulgated under the Exchange Act, and (B) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable or successor
report);
(iv) which are Beneficially Owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding whether or
not in writing for the purpose of acquiring, holding, voting (other than
voting or giving or withholding consents pursuant to a revocable proxy
as described in the proviso to clause (iii) of this definition of
"Beneficial Owner") or disposing of any securities of the Company; and
(v) which, on any day on or after the Distribution Date, evidence
Rights that prior to such date were represented by certificates for
Common Shares that such Person Beneficially Owns on such day.
Notwithstanding anything to the contrary in this Section l(b), a Person engaged
in business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of, or to Beneficially Own, any securities acquired through
such Person's participation in good faith in a firm commitment underwriting
until the expiration of 40 days after the date of such acquisition.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the States of New York are authorized or
obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 p.m., New York
time, on such date; provided, however, that if such date is not a Business Day,
it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.
"Closing Price" of a stock or other security on any day shall be the
last sale price, regular way, per share of such stock or unit of such other
security on such day or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the American Stock Exchange or,
if such stock or other security is not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
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securities exchange on which such stock or other security is listed or admitted
to trading or, if such stock or other security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other system then in use or, if
on any such date such stock or other security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker that makes a market in such stock or other security
and that is selected by the Board of Directors of the Company.
"Common Share" shall mean one share of the Common Stock, par value $.01
per share, of the Company, unless used with reference to a Person other than the
Company, in which case it shall mean one share of each class of stock of such
Person having the right to vote generally in the election of directors or, if
such Person is a Subsidiary of another Person, one Common Share of the Person
that ultimately controls such Person.
"Common Share Equivalent" shall have the meaning ascribed to it in
Section 11(a)(iii) hereof.
"Current Market Price" per share of a stock or unit of any other
security on any date shall mean the average of the daily Closing Prices of such
stock or other security for the 30 consecutive Trading Days through and
including the Trading Day immediately preceding the date in question; provided,
however, that if any event shall have caused the Closing Price on any Trading
Day during such 30-day period not to be fully comparable with the Closing Price
on the date in question (or, if no Closing Price is available on the date in
question, on the Trading Day immediately preceding the date in question), then
each such non-comparable Closing Price so used shall be appropriately adjusted
by the Board of Directors in order to make the Closing Price on each Trading Day
during the period used for the determination of the Current Market Price fully
comparable with the Closing Price on such date in question (or, if applicable,
the immediately preceding Trading Day). "Current Market Price" per share of any
stock or unit of such other security that is not publicly held or so listed or
traded, and "Current Market Price" of any other property, shall mean the fair
value per share of such stock or unit of such other security, or the fair value
of such other property, respectively, as determined in good faith by the Board
of Directors of the Company based upon such appraisals or valuation reports of
such independent experts as the Board of Directors shall in good faith determine
appropriate, which determination shall be described in a statement filed by the
Company with the Rights Agent.
"Distribution Date" shall have the meaning ascribed to it in Section 3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exempt Person" shall mean the Company, any wholly-owned Subsidiary of
the Company, any employee benefit plan of the Company or of a Subsidiary of the
Company, and any Person holding Voting Shares for or pursuant to the terms of
any such employee benefit plan.
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"Exercise Price" shall have the meaning ascribed to it in Section 7(c)
hereof.
"Expiration Date" shall mean October 6, 2008.
"15% Ownership Date" shall mean the first date of public announcement
(which, for purposes of this definition, shall include, without limitation, a
report filed pursuant to Section 13(d) of the Exchange Act) by the Company or a
15% Stockholder after the date hereof disclosing the facts by virtue of which a
Person has become a 15% Stockholder.
"15% Stockholder" shall mean any Person that Beneficially Owns 15% or
more of the Voting Shares of the Company then outstanding; provided, however,
that the term "15% Stockholder" shall not include: (i) an Exempt Person; (ii)
any Person that would not otherwise be a 15% Stockholder but for a reduction in
the number of outstanding Voting Shares resulting from a stock repurchase
program or other similar plan of the Company or from a self tender offer of the
Company, which plan or tender offer commenced on or after the date hereof;
provided, however, that the term "15% Stockholder" shall include such Person
from and after the first date upon which (A) such Person, since the date of the
commencement of such plan or tender offer, shall have acquired Beneficial
Ownership of, in the aggregate, a number of Voting Shares of the Company equal
to 1% or more of the Voting Shares of the Company then outstanding and (B) such
Person, together with all Affiliates and Associates of such Person, shall
Beneficially Own 15% or more of the Voting Shares of the Company then
outstanding; (iii) any Person that would not otherwise be a 15% Stockholder but
for its Beneficial Ownership of Rights or (iv) any Person that is the Beneficial
Owner of 15% or more of the outstanding Common Shares as of the Declaration Date
unless or until such person shall acquire, without the prior approval of the
Board of Directors, Beneficial Ownership of additional Common Shares equal to 2%
or more of the Voting Shares of the Company then outstanding. No Person shall be
deemed to be a 15% Stockholder by reason of clause (iv) of the preceding
sentence solely because of an acquisition of Beneficial Ownership of Common
Shares: (i) by gift; (ii) 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 (iii) upon the exercise of any stock option granted by
the Company to an employee, officer or director. In calculating the percentage
of the outstanding Voting Shares that are Beneficially Owned by a Person for
purposes of this definition, Voting Shares that are Beneficially Owned by such
Person shall be deemed outstanding, and Voting Shares that are not Beneficially
Owned by such Person and that are subject to issuance upon the exercise or
conversion of outstanding conversion rights, exchange rights, rights, warrants
or options shall not be deemed outstanding. Any determination made by the Board
of Directors of the Company as to whether any Person is or is not a 15%
Stockholder shall be conclusive and binding upon all holders of Rights.
"Person" shall mean any individual, firm, partnership, corporation,
association, group (as such term is used in Rule 13d-5 promulgated under the
Exchange Act as in effect on the date hereof) or other entity, and shall include
any successor (by merger or otherwise) of such entity.
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<PAGE> 10
"Preferred Share" shall mean one share of the Series A Junior
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company, which shall have the rights and preferences set forth in the form of
Certificate of Designations attached as Exhibit 1 hereto.
"Preferred Share Equivalent" shall have the meaning ascribed to it in
Section 11(b) hereof.
"Record Date" shall have the meaning ascribed to it in the recitals
hereto.
"Redemption Date" shall mean the date of the action of the Board of
Directors of the Company authorizing and directing the redemption of the Rights
pursuant to Section 23(a) hereof or the exchange of the Rights pursuant to
Section 24(a) hereof.
"Redemption Price" shall have the meaning ascribed to it in Section
23(a) hereof.
"Right Certificate", as that term is used with respect to any period
prior to the Distribution Date, shall have the meaning ascribed to it in Section
3(b) hereof, and, as that term is used with respect to any period on or after
the Distribution Date, shall have the meaning ascribed to it in Section 3(c)
hereof.
"Rights Expiration Date" shall mean the Expiration Date, except if there
has been a Distribution Date, in which case it shall mean the tenth anniversary
of the Distribution Date.
"Section 11(a)(ii) Event" shall have the meaning ascribed to it in
Section 11(a)(ii) hereof.
"Section 13(a) Event" shall have the meaning ascribed to it in Section
13(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" of any Person shall mean any corporation or other Person of
which equity securities or equity interests representing a majority of the
voting power are owned, directly or indirectly, or which is effectively
controlled, by such Person.
"Trading Day" shall mean, as to any stock or other security, a day on
which the principal national securities exchange on which such stock or other
security is listed or admitted to trading is open for the transaction of
business or, if such stock or other security is not listed or admitted to
trading on any national securities exchange, a Business Day.
"Voting Share" shall mean (i) a Common Share of the Company and (ii) any
other share of capital stock of the Company entitled to vote generally in the
election of directors or entitled to vote together with the Common Shares in
respect of any merger, consolidation, sale of all or substantially all of the
Company's assets, liquidation, dissolution or winding up. References in this
Agreement to a percentage or portion of the outstanding Voting Shares shall be
deemed a reference to the
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<PAGE> 11
percentage or portion of the total votes entitled to be cast by the holders of
the outstanding Voting Shares.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of Rights in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) "Distribution Date" shall mean the date, after the date hereof, that
is the earliest of (i) the tenth Business Day (or such later day as shall be
designated by the Board of Directors of the Company) following the date of the
commencement of, or the first public announcement of the intent of any Person,
other than an Exempt Person, to commence a tender offer or exchange offer, the
consummation of which would cause any Person to become a 15% Stockholder, (ii)
the date of the first Section 11(a)(ii) Event or (iii) the date of the first
Section 13(a) Event.
(b) Until the Distribution Date, (i) the Rights shall be represented by
certificates for Common Shares (all of which certificates for Common Shares
shall be deemed to be Right Certificates) and not by separate Right
Certificates, (ii) the record holder of the Common Shares represented by each of
such certificates shall be the record holder of the Rights represented thereby
and (iii) the Rights shall be transferable only in connection with the transfer
of Common Shares. Until the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, the surrender for transfer of such certificates for
Common Shares shall also constitute the surrender for transfer of the Rights
represented thereby.
(c) As soon as practicable after the Distribution Date, and after
notification by the Company, the Rights Agent shall send by first-class,
postage-prepaid mail to each record holder of Common Shares, as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate substantially in the form of Exhibit
2 hereto representing one Right for each Common Share so held. From and after
the Distribution Date, the Rights shall be represented solely by such Right
Certificates and may only be transferred by the transfer of such Right
Certificates, and the holders of such Right Certificates, as listed in the
records of the Company or any transfer agent or registrar for such Rights, shall
be the record holders of such Rights.
(d) Certificates for Common Shares issued at any time after the Record
Date and prior to the earliest of the Distribution Date, the Redemption Date or
the Expiration Date, shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of October 6,
1998 by and between The Sports Club Company, Inc. (the "Company") and
American Stock Transfer & Trust
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<PAGE> 12
Company, as Rights Agent (the "Rights Agreement"), as amended to date,
the terms and conditions of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive
offices of the Company. Under certain circumstances specified in the
Rights Agreement, such Rights will be represented by separate
certificates and will no longer be represented by this certificate.
Under certain circumstances specified in the Rights Agreement, Rights
beneficially owned by certain persons may become null and void. American
Stock Transfer & Trust Company will mail to the record holder of this
certificate a copy of the Rights Agreement without charge promptly
following receipt of a written request therefor. As described in the
Rights Agreement, Rights issued to any Person who becomes an Acquiring
Person (as defined in the Rights Agreement) shall become null and void.
(e) Certificates for Common Shares issued at any time on or after the
Distribution Date and prior to the earlier of the Redemption Date or the
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate does not represent any Right issued pursuant to the
terms of a Rights Agreement dated as of October 6, 1998 by and between
The Sports Club Company, Inc. and American Stock Transfer & Trust
Company, as Rights Agent.
(f) In the event that at any time on or after the earlier of the date of
the first Section 11(a)(ii) Event or the date of the first Section 13(a) Event
and prior to the earlier of the Redemption Date or the Expiration Date, the
Company shall issue any Common Shares pursuant to the exercise of conversion
rights, exchange rights, rights (other than Rights), warrants or options that
shall have been issued or granted prior to the earlier of the date of the first
Section 11(a)(ii) Event or the date of the first Section 13(a) Event, then,
unless the Board of Directors of the Company shall have provided otherwise at
the time of the issuance or grant of such conversion rights, exchange rights,
rights (other than Rights), warrants or options, the Rights Agent shall, as soon
as practicable after the date of such event, send by first-class,
postage-prepaid mail to the record holder of such Common Shares, at the address
of such holder as shown on the records of the Company, a Right Certificate
substantially in the form of Exhibit 2 hereto representing one Right for each
Common Share so issued.
(g) Notwithstanding the foregoing provisions of this Section 3, the
Rights Agent shall not send any Right Certificate to any 15% Stockholder or any
of its Affiliates or Associates or to any Person if the Rights held by such
Person are Beneficially Owned by a 15% Stockholder or any of its Affiliates or
Associates. Any determination made by the Board of Directors of the Company as
to whether any Common Shares are or were Beneficially Owned at any time by a 15%
Stockholder or an Affiliate or Associate of a 15% Stockholder shall be
conclusive and binding upon all holders of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates and the
form of assignment, including certificate, and the form of election to purchase,
including certificate, printed on the
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<PAGE> 13
reverse thereof, when, as and if issued, shall be substantially the same as
Exhibit 2 hereto, and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange upon which the Rights or the securities of the Company issuable upon
exercise of the Rights may from time to time be listed, or to conform to usage.
Subject to Section 22 hereof, Right Certificates, whenever issued, that are
issued in respect of Common Shares that were issued and outstanding as of the
Close of Business on the Distribution Date, shall be dated as of the
Distribution Date.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, its President or any
Vice President, either manually or by facsimile signature, and may have affixed
thereto the Company's seal or a facsimile thereof attested by its Secretary or
any Assistant Secretary, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates may nevertheless
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any person who at the
actual date of such execution shall be a proper officer of the Company to sign
such Right Certificate, even though such person was not such an officer at the
date of the execution of this Agreement.
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept at its principal offices books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of Right Certificates, the number of Rights
represented on its face by each Right Certificate and the date of each Right
Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to the provisions of Sections 6(c), 7(d) and 14 hereof, at
any time after the Close of Business on the Distribution Date, and so long as
the Rights represented thereby remain outstanding, any one or more Right
Certificates may be transferred, split-up, combined or exchanged for one or more
Right Certificates representing the same aggregate number of Rights as the Right
Certificates surrendered. Any registered holder desiring to transfer, split up,
combine or exchange one or more Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificates to be transferred, split up, combined or exchanged at the office
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<PAGE> 14
of the Rights Agent with the form of assignment, including certificate, on the
reverse side thereof completed and duly executed, with signature guaranteed.
Thereupon, the Rights Agent shall countersign and deliver to the person entitled
thereto one or more Right Certificates, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
such Right Certificate if mutilated, the Company shall issue and deliver to the
Rights Agent for delivery to the record holder of such Right Certificate a new
Right Certificate of like tenor in lieu of such lost, stolen, destroyed or
mutilated Right Certificate.
(c) Notwithstanding anything to the contrary in this Section 6, the
Rights Agent shall not countersign and deliver a Right Certificate to any Person
if such Right Certificate represents, or would represent when held by such
Person, Rights that had become or would become null and void pursuant to Section
7(d) hereof.
SECTION 7. EXERCISE OF RIGHTS.
(a) Until the Distribution Date, no Right may be exercised.
(b) Subject to Section 7(d) and (g) hereof and the other provisions of
this Agreement, at any time after the Close of Business on the Distribution Date
and prior to the Close of Business on the earlier of the Redemption Date or the
Rights Expiration Date, the registered holder of any Right Certificate may
exercise the Rights represented thereby in whole or in part upon surrender of
such Right Certificate, with the form of election to purchase, including
certificate, on the reverse side thereof completed and duly executed, with
signature guaranteed, to the Rights Agent at the office of the Rights Agent at
the principal office of the Rights Agent designated for such purpose, together
with payment of the Exercise Price for each Right exercised. Upon the exercise
of an exercisable Right and payment of the Exercise Price in accordance with the
provisions of this Agreement, the holder of such Right shall be entitled to
receive, subject to adjustment as provided herein, one five-hundredth of a
Preferred Share (or, following the occurrence of a Section 11(a)(ii) Event or a
Section 13(a) Event, Common Shares and/or other securities).
(c) The "Exercise Price" for the exercise of each Right shall initially
be $20 and shall be payable in lawful money of the United States of America in
accordance with Section 7(f) hereof. The Exercise Price and the number of
Preferred Shares (or, following the occurrence of a Section 11(a)(ii) Event or a
Section 13(a) Event, Common Shares and/or other securities) to be acquired
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<PAGE> 15
upon exercise of a Right shall be subject to adjustment from time to time as
provided in Sections 7(e), 11 and 13 hereof and the other provisions of this
Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, from and
after the earlier of the date of the first Section 11(a)(ii) Event or the date
of the first Section 13(a) Event, any Rights that are or were Beneficially Owned
by a 15% Stockholder or any Affiliate or Associate of a 15% Stockholder at any
time on or after the Distribution Date shall be null and void, and for all
purposes of this Agreement such Rights shall thereafter be deemed not to be
outstanding, and any holder of such Rights (whether or not such holder is a 15%
Stockholder or an Affiliate or Associate of a 15% Stockholder) shall thereafter
have no right to exercise such Rights.
(e) Prior to the Distribution Date, if the Board of Directors of the
Company shall have determined that such action adequately protects the interests
of the holders of Rights, the Company may, in its discretion, substitute for all
or any portion of the Preferred Shares that would otherwise be issuable (after
the Close of Business on the Distribution Date) upon the exercise of each Right
and payment of the Exercise Price (i) cash, (ii) other equity securities of the
Company, (iii) debt securities of the Company, (iv) other property or (v) any
combination of the foregoing, in each case having an aggregate Current Market
Price equal to the aggregate Current Market Price of the Preferred Shares for
which substitution is made. Subject to Section 7(d) hereof, in the event that
the Company takes any action pursuant to this Section 7(e), such action shall
apply uniformly to all outstanding Rights.
(f) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase, including certificate, completed and duly
executed, with signature guaranteed, accompanied by payment of the Exercise
Price for each Right to be exercised and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof by certified check or cashier's check payable
to the order of the Company, the Rights Agent shall thereupon promptly (i)
requisition from the transfer agent of the Preferred Shares (or, following the
occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event, Common Shares
and/or securities) certificates for the number of Preferred Shares (or such
other securities) to be purchased, and the Company hereby irrevocably authorizes
such transfer agent to comply with all such requests, and/or, as provided in
Section 14 hereof, requisition from the depositary agent described therein
depositary receipts representing such number of five-hundredths of a Preferred
Share (or such other securities) as are to be purchased (in which case
certificates for the Preferred Shares (or such other securities) represented by
such receipts shall be deposited by the transfer agent with such depositary
agent) and the Company hereby directs such depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional Preferred Shares (or such other
securities) in accordance with Section 14 hereof, (iii) after receipt of such
certificates, depositary receipts or cash, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Right Certificate.
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<PAGE> 16
(g) Notwithstanding the foregoing provisions of this Section 7, the
exercisability of the Rights shall be suspended for such period as shall
reasonably be necessary for the Company to register and qualify under the
Securities Act and any applicable securities law of any jurisdiction the
Preferred Shares to be issued pursuant to the exercise of the Rights; provided,
however, that nothing contained in this Section 7 shall relieve the Company of
its obligations under Section 9(c) hereof.
(h) In case the registered holder of any Right Certificate shall
exercise less than all of the Rights represented thereby, a new Right
Certificate representing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder's duly authorized assigns, subject to the
provisions of Section 14 hereof.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
this Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any other Right
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Right Certificates
to the Company or shall, at the written request of the Company, destroy such
canceled Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) Subject to Sections 7(e) and 9(f) hereof, the Company shall cause to
be reserved and kept available out of its authorized and unissued equity
securities (or out of its authorized and issued equity securities held in its
treasury), the number of such equity securities that will from time to time be
sufficient to permit the exercise in full of all outstanding Rights.
(b) In the event that any securities issuable upon exercise of the
Rights are listed on any national securities exchange, the Company shall use its
best efforts, from and after such time as the Rights become exercisable, to
cause all such securities issued or reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) If necessary to permit the issuance of securities upon exercise of
the Rights, the Company shall use its best efforts, from and after the
Distribution Date, to register and qualify such securities under the Securities
Act, the Exchange Act and any other applicable securities laws and to keep such
registration effective until the earlier of the Redemption Date or the
Expiration Date.
(d) The Company shall take all such action as may be necessary to ensure
that all securities delivered upon exercise of the Rights shall, at the time of
delivery of the certificates for such securities (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable securities.
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(e) The Company shall pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the issuance
or delivery of the Right Certificates or of any securities upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax that
may be payable in respect of any transfer or delivery of a Right Certificate to
a Person other than, or the issuance or delivery of a certificate for securities
in respect of a name other than that of, the registered holder of the Right
Certificate representing Rights surrendered for exercise, or to issue or deliver
any certificate for securities upon the exercise of any Right until any such tax
shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
(f) With respect to the Common Shares and/or other securities issuable
pursuant to Section 11(a)(ii) and (iii) hereof, the foregoing covenants shall be
applicable only upon and following the occurrence of a Section 11(a)(ii) Event.
SECTION 10. SECURITIES RECORD DATE. Each Person in whose name any
certificate for securities of the Company is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
securities represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate representing such Rights was duly surrendered
and payment of the Exercise Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the securities transfer books of the Company are closed, such person shall
be deemed to have become the record holder of such securities on, and such
certificate shall be dated, the next succeeding Business Day on which the
securities transfer books of the Company are open.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES ISSUABLE UPON
EXERCISE OF RIGHTS OR NUMBER OF RIGHTS. The Exercise Price, the number and kind
of securities that may be purchased upon exercise of a Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
(a)(i) In the event that the Company shall at any time after the Close
of Business on the Record Date and prior to the Close of Business on the
earlier of the Redemption Date or the Expiration Date (A) declare or pay
any dividend on the Preferred Shares payable in Preferred Shares or
Voting Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue Preferred Shares or other securities of
the Company (other than those for which an adjustment is required under
Section 11(b) hereof) in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving
corporation) or in a reorganization of the Company, then, and upon each
such event, the number and kind of Preferred Shares or other securities
issuable upon the exercise of a Right on the date of such event shall be
proportionately adjusted so that the holder of any Right exercised on or
after such date shall be entitled to receive, upon the exercise thereof
and payment of the Exercise Price, the aggregate number and kind of
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<PAGE> 18
Preferred Shares or other securities or other property, as the case may
be, that, if such Right had been exercised immediately prior to such
date and at a time when such Right was exercisable and the transfer
books of the Company were open, such holder would have owned upon such
exercise and would have been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event
occurs that would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that a 15% Ownership Date shall have occurred
and neither the Redemption Date nor the Expiration Date shall have
occurred prior to the tenth Business Day following such 15% Ownership
Date (a "Section 11(a)(ii) Event"), then, and upon each such Section
11(a)(ii) Event, proper provision shall be made so that, except as
provided in Section 7(d) hereof, each holder of a Right shall thereafter
have the right to receive, upon the exercise thereof in accordance with
the terms of this Agreement and payment of the then current Exercise
Price, such number of Common Shares of the Company as shall equal the
result obtained by (A) multiplying the then current Exercise Price by
the then number of five-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to such Section 11(a)(ii) Event
(or, if the Distribution Date shall not have occurred prior to the date
of such Section 11(a)(ii) Event, the number of five-hundredths of a
Preferred Share for which a Right would have been exercisable if the
Distribution Date had occurred on the Business Day immediately preceding
the date of such Section 11(a)(ii) Event), and (B) dividing that product
by 50% of the Current Market Price of a Common Share on the date of
occurrence of the relevant Section 11(a)(ii) Event (such number of
shares being hereinafter referred to as the "Adjustment Shares").
Successive adjustments shall be made pursuant to this paragraph each
time a Section 11(a)(ii) Event occurs.
(iii) In the event that on the date of a Section 11(a)(ii) Event
the aggregate number of Common Shares that are authorized by the
Company's Certificate of Incorporation, as amended from time to time,
but not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights is less than the aggregate number of
Adjustment Shares thereafter issuable upon the exercise in full of the
Rights in accordance with Section 11(a)(ii) hereof (the excess of such
number of Adjustment Shares over and above such number of Common Shares
being hereinafter referred to as the "Unavailable Adjustment Shares"),
then, and upon each such event, the Company shall substitute for the pro
rata portion of the Unavailable Adjustment Shares that would otherwise
be issuable thereafter upon the exercise of each Right and payment of
the Exercise Price (A) cash, (B) other equity securities of the Company
(including, without limitation, shares of preferred stock of the Company
or units of such shares having the same Current Market Price as one
Common Share (a "Common Share Equivalent")), (C) debt securities of the
Company, (D) other property or (E) any combination of the foregoing, in
each case having an aggregate Current Market Price equal to the
aggregate Current Market Price of the Unavailable Adjustment Shares for
which substitution is made. Subject to Section 7(d) hereof, in the event
that the Company takes any
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<PAGE> 19
action pursuant to this Section 11(a)(iii), such action shall apply
uniformly to all outstanding Rights.
(b) In the event that the Company shall, at any time after the Close of
Business on the Record Date and prior to the Close of Business on the earlier of
the Redemption Date or the Expiration Date, fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
initially to subscribe for or purchase Preferred Shares (or shares having the
same rights, privileges and preferences as the Preferred Shares ("Preferred
Share Equivalents")) or securities convertible into Preferred Shares or
Preferred Share Equivalents, at a price per Preferred Share or Preferred Share
Equivalent (or having a conversion price per share, if a security convertible
into Preferred Shares or Preferred Share Equivalents) less than the Current
Market Price per Preferred Share on such record date, then, and upon each such
event, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be equal to the sum of
the number of Preferred Shares outstanding on such record date plus the number
of Preferred Shares that the aggregate offering price of the total number of
Preferred Shares and/or Preferred Share Equivalents to be so offered (and/or the
aggregate initial conversion price of the convertible securities to be so
offered) would purchase at such Current Market Price, and the denominator of
which shall be equal to the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or Preferred
Share Equivalents to be offered for subscription or purchase (or into which the
convertible securities to be so offered are initially convertible); provided,
however, that if such rights, options or warrants are not exercisable
immediately upon issuance but become exercisable only upon the occurrence of a
specified event or the passage of a specified period of time, then the
adjustment to the Exercise Price shall be made and become effective only upon
the occurrence of such event or such passage of time, and such adjustment shall
be made as if the record date for the issuance of such rights, options or
warrants had been the business day immediately preceding the date upon which
such rights, options or warrants became exercisable. Preferred Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment to the Exercise Price shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Exercise Price shall be adjusted
to be the Exercise Price that would then be in effect if such record date had
not been fixed.
(c) In the event that the Company shall, at any time after the Close of
Business on the Record Date and prior to the Close of Business on the earlier of
the Redemption Date or the Expiration Date, fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the surviving corporation) of assets (other than a distribution for
which an adjustment is required under Section 11(a)(i) or (b) hereof or a
regular quarterly cash dividend), then the Exercise Price to be in effect after
such record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be equal to the excess of the Current Market Price per Preferred Share on
such record date over and above the fair market value of the portion of the
securities or assets to be so distributed with
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<PAGE> 20
respect to one Preferred Share, and the denominator of which shall be equal to
such Current Market Price per Preferred Share. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such a
distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price that would then be in effect if such record date had not been
fixed.
(d) For the purpose of any computation under this Section 11, if the
Preferred Shares are not publicly held or traded, the "Current Market Price" per
Preferred Share shall be conclusively deemed to be the Current Market Price per
Common Share multiplied by 500.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the then
current Exercise Price; provided, however, that any adjustments that by reason
of this Section 11(e) are not required to be made shall be cumulated and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one thousandth of a
Common Share or other share or one-millionth of a Preferred Share, as the case
may be.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right shall, upon exercise thereof, be entitled to
receive any securities of the Company other than Preferred Shares, and if an
event occurs in respect of such securities that, if it were to occur in respect
of Preferred Shares, would require an adjustment under this Section 11 in
respect of Preferred Shares, then the number of such other securities so
receivable upon exercise of any Right shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Preferred Shares contained in this Section 11, and
the other provisions of this Agreement with respect to Preferred Shares shall
apply on like terms to any such other securities.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall represent the right to
purchase, at the adjusted Exercise Price, the number of five-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) below, upon each adjustment of the Exercise Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter represent
the right to purchase, at the adjusted Exercise Price, that number of
five-hundredths of a Preferred Share (calculated to the nearest one-millionth of
a Preferred Share) obtained by multiplying (i) the number of five-hundredths of
a Preferred Share purchasable upon the exercise of one Right immediately prior
to such adjustment of the Exercise Price by (ii) the Exercise Price in effect
immediately prior to such adjustment, and dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment.
(i) The Company may elect, on or after the date of any adjustment of the
Exercise Price, to adjust the number of Rights instead of making any adjustment
in the number of Preferred Shares
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<PAGE> 21
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
five-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one one-thousandth of a Right) obtained by dividing
the Exercise Price in effect immediately prior to the adjustment of the Exercise
Price by the Exercise Price in effect immediately after such adjustment of the
Exercise Price. The Company shall make a public announcement of its election to
adjust the number of Rights pursuant to this Section 11(i), indicating the
record date for the adjustment and, if known at the time, the amount of the
adjustment to be made. Such record date may be the date on which the Exercise
Price is adjusted or any day thereafter, but, if separate Right Certificates
have been issued, it shall be at least 10 days after the date of such public
announcement. If separate Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates representing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment or, at the option of the Company,
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
such adjustment, and upon surrender thereof if required by the Company, new
Right Certificates representing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates to be so distributed shall be
issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of five-hundredths of a Preferred Share issuable upon the exercise of
one Right, the Right Certificates theretofore and thereafter issued may continue
to express the Exercise Price per one five-hundredth of a Preferred Share and
the number of Preferred Shares issuable upon the exercise of one Right that were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Exercise Price below one five-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action that may, in the advice or opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable one five-hundredths of a Preferred Share at such adjusted Exercise
Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, the issuance to the holder of any Right exercised after such record date
of the number of five-hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of five- hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
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the Company shall deliver to such holder a due bill or other appropriate
instrument representing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such further adjustments in the number of
five-hundredths of a Preferred Share that may be purchased upon exercise of one
Right, and such further adjustments in the Exercise Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that the
Company in its sole discretion shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly
for cash of any Preferred Shares at less than the Current Market Price thereof,
(iii) issuance wholly for cash of Preferred Shares or securities that by their
terms are convertible into or exchangeable for Preferred Shares, (iv) dividends
on Preferred Shares payable in Preferred Shares or (v) issuance of rights,
options or warrants referred to in Section 11(b) hereof, hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) In the event that the Company shall, at any time after the Close of
Business on the Record Date and prior to the Close of Business on the earliest
of the date of the first Section 11(a)(ii) Event, the date of the first Section
13(a) Event, the Redemption Date or the Expiration Date, (i) pay any dividend on
the Common Shares payable in Common Shares, (ii) subdivide the outstanding
Common Shares, (iii) combine the outstanding Common Shares into a smaller number
of Common Shares or (iv) issue Common Shares in a reclassification of the Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
then, and upon each such event, the Exercise Price to be in effect after such
event shall be determined by multiplying the Exercise Price in effect
immediately prior to such event by a fraction, the numerator of which shall be
equal to the number of Common Shares outstanding immediately prior to such event
and the denominator of which shall be equal to the number of Common Shares
outstanding immediately after such event. Successive adjustments shall be made
pursuant to this Section 11(n) each time such a dividend is paid or such a
subdivision, combination or reclassification is effected. If an event occurs
that would require an adjustment under both this Section 11(n) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(n) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
SECTION 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES
ISSUABLE UPON EXERCISE OF RIGHTS. Whenever an adjustment is made as provided in
Section 11 hereof, the Company shall promptly (a) prepare a certificate setting
forth such adjustment and a brief statement of the facts giving rise to such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
securities issuable upon exercise of the Rights a copy of such certificate and
(c) mail a brief summary thereof to each holder of Rights in accordance with
Section 25 hereof. Notwithstanding the foregoing sentence, the failure of the
Company to make such certification or to give such notice shall not affect the
validity or the force and effect of such adjustment. Any adjustment to be made
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<PAGE> 23
pursuant to Sections 11 or 13 hereof shall be effective as of the date of the
event giving rise to such adjustment.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event (a "Section 13(a) Event") that, at any time on or after
the 15% Ownership Date and prior to the earlier of the Redemption Date or the
Expiration Date, (1) the Company shall, directly or indirectly, consolidate with
or merge with and into any other Person and the Company shall not be the
continuing or surviving corporation in such consolidation or merger, (2) any
Person shall, directly or indirectly, consolidate with or merge with and into
the Company and the Company shall be the continuing or surviving corporation in
such merger and, in connection with such merger, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities of any
Person or cash or any other property, or (3) the Company and/or any one or more
of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer,
in one or more transactions (other than transactions in the ordinary course of
business), assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons other than the Company or one or more of its wholly-owned
Subsidiaries (such Persons, together with the Persons described in clauses (1)
and (2) above shall be collectively referred to in this Section as the
"Surviving Person"), then, and in each such case, proper provision shall be made
so that:
(i) except as provided in Section 7(d) hereof, each holder of a
Right shall thereafter have the right to receive, upon the exercise
thereof in accordance with the terms of this Agreement and payment of
the then current Exercise Price, in lieu of the securities or other
property otherwise purchasable upon such exercise, such number of
validly authorized and issued, fully paid and nonassessable Common
Shares of the Surviving Person (and if such Surviving Person has more
than one class or series of Common Shares, such number of validly
authorized and issued, fully paid and nonassessable Common Shares of
each series or class) as shall be equal to a fraction, the numerator of
which is the product of the then current Exercise Price multiplied by
the number of five-hundredths of a Preferred Share purchasable upon the
exercise of one Right immediately prior to the first Section 13(a) Event
(or, if the Distribution Date shall not have occurred prior to the date
of such Section 13(a) Event, the number of five-hundredths of a
Preferred Share that would have been so purchasable if the Distribution
Date had occurred on the Business Day immediately preceding the date of
such Section 13(a) Event, or, if a Section 11(a)(ii) Event has occurred
prior to such Section 13(a) Event, the product of the number of
five-hundredths of a Preferred Share purchasable upon the exercise of a
Right (or, if the Distribution Date shall not have occurred prior to the
date of such Section 11(a)(ii) Event, the number of five-hundredths of a
Preferred Share that would have been so purchasable if the Distribution
Date had occurred on the Business Day immediately preceding the date of
such Section 11(a)(ii) Event) immediately prior to such Section
11(a)(ii) Event, multiplied by the Exercise Price in effect immediately
prior to such Section 11(a)(ii) Event), and the denominator of
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<PAGE> 24
which is 50% of the Current Market Price per Common Share of the
Surviving Person on the date of consummation of such Section 13(a)
Event;
(ii) the Surviving Person shall thereafter be liable for and
shall assume, by virtue of such consolidation, merger, sale or transfer,
all the obligations and duties of the Company pursuant to this
Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to
the Surviving Person; and
(iv) the Surviving Person shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common
Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to ensure that the provisions hereof
shall thereafter be applicable to its Common Shares thereafter
deliverable upon the exercise of Rights.
(b) Notwithstanding the foregoing, if the Section 13(a) Event is the
sale or transfer in one or more transactions of assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole), but less than 100% thereof, then each Person
acquiring all or a portion thereof shall assume the obligations of the Company
as to a fraction of each of the Rights equal to the fraction of the assets of
the Company and its Subsidiaries (taken as a whole) acquired by such Person, and
the obligations of the Company as to the remaining fraction of each of the
Rights shall continue to be the obligations of the Company.
(c) The Company shall not consummate a Section 13(a) Event unless prior
thereto the Company and the Surviving Person shall have executed and delivered
to the Rights Agent a supplemental agreement confirming that such Surviving
Person shall, upon consummation of such Section 13(a) Event, assume this
Agreement in accordance with Section 13 hereof, that all rights of first refusal
or preemptive rights in respect of the issuance of Common Shares of such
Surviving Person upon exercise of outstanding Rights have been waived and that
such Section 13(a) Event shall not result in a default by such Surviving Person
under this Agreement, and further providing that, as soon as practicable after
the date of consummation of such Section 13(a) Event, such Surviving Person
shall:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts
to cause such registration statement to become effective as soon as
practicable after such filing, use its best efforts to cause such
registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the
Expiration Date, and similarly comply with all applicable state
securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the Common Shares of the Surviving Person purchasable
upon exercise of the Rights on a
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national securities exchange, or use its best efforts to cause the
Rights and such Common Shares to meet the eligibility requirements for
quotation on NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for such Surviving Person that comply in all respects with
the requirements for registration on Form 10 (or any successor form)
under the Exchange Act.
(d) In the event that at any time after the occurrence of a Section
11(a)(ii) Event some or all of the Rights shall not have been exercised pursuant
to Section 11 hereof prior to the date of a Section 13(a) Event, such Rights
shall thereafter be exercisable only in the manner described in Section 13(a)
hereof. In the event that a Section 11(a)(ii) Event occurs on or after the date
of a Section 13(a) Event, Rights shall not be exercisable pursuant to Section 11
hereof but shall instead be exercisable pursuant to, and only pursuant to, this
Section 13.
(e) The provisions of this Section 13 shall apply to each successive
merger, consolidation, sale or other transfer constituting a Section 13(a)
Event.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates that represent fractional Rights. If the Company
shall determine not to issue such fractional Rights, the Company shall pay to
the registered holders of the Right Certificates with respect to which such
fractional Rights would otherwise be issuable, at the time such fractional
Rights would otherwise have been issued as provided herein, an amount in cash
equal to the same fraction of the Current Market Price of a whole Right on the
Business Day immediately prior to the date upon which such fractional Rights
would otherwise have been issuable.
(b) The Company shall not be required to issue fractions of Common
Shares or Preferred Shares (other than fractions that are integral multiples of
one five-hundredth of a Preferred Share) upon exercise of Rights, or to
distribute certificates that represent fractional Common Shares or Preferred
Shares (other than fractions that are integral multiples of one five-hundredth
of a Preferred Share). Fractions of Preferred Shares in integral multiples of
one five-hundredth of a Preferred Share may, at the election of the Company, be
represented by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
Preferred Shares. If the Company shall determine not to issue fractional Common
Shares or Preferred Shares (or depositary receipts in lieu of Preferred Shares),
the Company shall pay to the registered holders of Right Certificates with
respect to which such fractional Common Shares or Preferred Shares would
otherwise be issuable, at the time such Rights are exercised as provided herein,
an amount in cash equal to the same fraction of the Current Market Price of a
whole Common Share or Preferred Share, as the case may be. For purposes of this
Section 14(b), the Current Market Price of a whole
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Common Share or Preferred Share shall be the Closing Price per share for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of such Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
Common Shares or Preferred Shares upon exercise of such Right, except as
permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except the rights of action given to the Rights Agent under Section
18 hereof, are vested in the respective registered holders of the Right
Certificates and certificates for Common Shares representing Rights, and any
registered holder of any Right Certificate or of such certificate for Common
Shares, without the consent of the Rights Agent or of the holder of any other
Right Certificate or any other certificate for Common Shares may, in such
holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder's right to exercise the
Rights represented by such Right Certificate or by such certificate for Common
Shares in the manner provided in such Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance, and injunctive relief against actual or threatened violations, of
the obligations of any Person under this Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be represented by
certificates for Common Shares registered in the name of the holders of such
Common Shares (which certificates for Common Shares shall also constitute Right
Certificates), and each such Right shall be transferable only in connection with
the transfer of such Common Shares;
(b) after the Distribution Date, the Right Certificates shall only be
transferable on the registry books of the Rights Agent if surrendered at the
principal office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate is registered as the absolute owner thereof and
of the Rights represented thereby (notwithstanding any notations of ownership or
writing on the Right Certificate by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary.
SECTION 17. RIGHT HOLDER AND RIGHT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Right or Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the securities of the Company that may at any time be issuable upon the exercise
of the Rights represented thereby, nor shall anything contained herein or in any
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Right Certificate be construed to confer upon the holder of any Right or Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, to give or withhold consent to any
corporate action, to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, in each case until such Right or the
Rights represented by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent as compensation for
all services rendered by it hereunder reasonable and customary fees and
expenses. The Company also agrees to indemnify the Rights Agent for, and to hold
it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate for Preferred Shares or Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of its counsel as set forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. If, at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and if at that time any of the Right Certificates
shall not have been countersigned, any successor Rights Agent may countersign
such Right Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in such Right Certificate and in
this Agreement.
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(b) If at any time the name of the Rights Agent shall be changed, and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and if at that time any of the
Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in such Right Certificate and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance of the Rights, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such advice
or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Vice Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer, the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement, or in the Right
Certificates (except its countersignature thereof), or be required to verify the
same, and all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due authorization, execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including any Rights becoming null and void pursuant to Section 7(d)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Sections 7, 11, 13 and 23 hereof,
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or the ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights represented by
Right Certificates after actual notice that such change or adjustment is
required); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares or other securities to be issued pursuant to
this Agreement or any Right Certificate, or as to whether any Preferred Shares
or Common Shares or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Vice Chairman, the Chief Executive
Officer, the President, any Vice President, the Secretary, any Assistant
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting as such, the Company shall appoint a
successor to the
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<PAGE> 30
Rights Agent. If the Company shall fail to make such appointment within a period
of 30 days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit such holder's Right Certificate for inspection by the Company),
then the Company shall become the Rights Agent and the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the States of New York or
California (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the States
of New York or California), in good standing, having a principal office in New
York or California, that is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and that has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50,000,000. After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose of this Agreement and so that the successor Rights Agent may
appropriately act as Rights Agent hereunder. Not later than the effective date
of any such appointment, the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent of the Common Shares and
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Right Certificates to the contrary,
the Company may, at its option, issue new Right Certificates in such form as may
be approved by the Board of Directors in order to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable upon exercise of the Rights in accordance
with the provisions of this Agreement.
SECTION 23. REDEMPTION OF RIGHTS.
(a) Until the earliest of (i) the date of the first Section 11(a)(ii)
Event, (ii) the date of the first Section 13(a) Event or (iii) the Expiration
Date, the Board of Directors of the Company may, at its option, authorize and
direct the redemption of all, but not less than all, of the then outstanding
Rights at a redemption price of $.001 per Right, as such redemption price shall
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (the "Redemption Price"), and the
Company shall so redeem the Rights.
25
<PAGE> 31
(b) Immediately upon the action of the Board of Directors of the Company
authorizing and directing the redemption of the Rights pursuant to subsection
(a) of this Section 23, or at such time and date thereafter as it may specify,
and without any further action and without any notice, the right to exercise
Rights shall terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. Within ten (10) Business Days after
the date of such action, the Company shall give notice of such redemption to the
holders of Rights by mailing such notice to all holders of Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, if
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice that is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives such notice, but neither the
failure to give any such notice nor any defect therein shall affect the legality
or validity of such redemption. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may, directly or indirectly,
redeem, acquire or purchase for value any Rights in any manner other than that
specifically set forth in Section 24 hereof or in this Section 23, or in
connection with the purchase of Common Shares prior to the earlier of the date
of the first Section 11(a)(ii) Event or the date of the first Section 13(a)
Event.
(c) The Company may, at its option, pay the Redemption Price in cash,
Common Shares, Preferred Shares, other equity securities of the Company, debt
securities of the Company, other property or any combination of the foregoing,
in each case having an aggregate Current Market Price on the Redemption Date
equal to the Redemption Price.
SECTION 24. EXCHANGE OF RIGHTS.
(a) At any time during the period of 180 days after a Section 11(a)(ii)
Event, 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,
in each case having an aggregate Current Market Price equal to the result
obtained by (i) multiplying the Current Market Price per Common Share on the
record date for such exchange by the number of Common Shares for which a Right
is exercisable on such record date or (ii) subtracting from such product the
Exercise Price on such Record Date (the "Exchange Ratio"), and the Company shall
so exchange the Rights.
(b) Immediately upon the action of the Board of Directors of the Company
authorizing and directing the exchange of the Rights pursuant to subsection (a)
of this Section 24, or at such time and date thereafter as it may specify, and
without any further action and without any notice, the right to exercise Rights
shall terminate and the only right thereafter of the holders of Rights shall be
to receive a number of Common Shares or other securities in accordance with the
Exchange Ratio. Within ten (10) Business Days after the date of such action, the
Company shall give notice of such exchange to the holders of Rights by mailing
such notice to all holders of Rights at their last addresses as they appear upon
the registry books of the Rights Agent or, if prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares. Any notice that
is mailed
26
<PAGE> 32
in the manner herein provided shall be deemed given, whether or not the holder
receives such notice, but neither the failure to give any such notice nor any
defect therein shall affect the legality or validity of such exchange. Each such
notice of exchange shall state the method by which the Rights will be exchanged
for Common Shares.
(c) Notwithstanding the foregoing, in the event that the aggregate
number of Common Shares that are authorized by the Company's Certificate of
Incorporation, as amended from time to time, but not outstanding or reserved for
issuance for purposes other than upon exercise or exchange of the Rights is less
than the aggregate number of Common Shares issuable upon the exchange of the
Rights in accordance with this Section 24 (the excess of such number of
authorized Common Shares over and above such number of issuable Common Shares
being hereinafter referred to as the "Unavailable Exchange Shares"), then the
Company shall substitute for the pro rata portion of the Unavailable Exchange
Shares that would otherwise be issuable upon the exchange of the Rights in
accordance with this Section 24 (i) cash, (ii) other equity securities of the
Company (including, without limitation, Common Share Equivalents), (iii) debt
securities of the Company, (iv) other property or (v) any combination of the
foregoing, in each case having an aggregate Current Market Price equal to the
aggregate Current Market Price of the Unavailable Exchange Shares for which
substitution is made. Subject to Section 7(d) hereof, in the event that the
Company takes any action pursuant to this Section 24, such action shall apply
uniformly to all outstanding Rights.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In the event that the Company shall propose (i) to declare or pay
any dividend on or make any distribution with respect to its Common Shares or
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Common Shares or Preferred Shares options, rights or
warrants to subscribe for or to purchase any additional shares thereof or shares
of stock of any class or any other securities, rights or options, (iii) to
effect any reclassification of its Common Shares or Preferred Shares (other than
a reclassification involving only the subdivision of outstanding shares), (iv)
to effect any consolidation or merger with or into, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one or more transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, or (v) to effect the liquidation, dissolution or
winding up of the Company, then and in each such case, the Company shall give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action that shall specify the record date for the
purpose of such dividend or distribution, or the date upon which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of record of the Common Shares or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 20 days prior to the record date
for determining holders of the Common Shares or Preferred Shares for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares or Preferred Shares, whichever date
shall be the earlier. The failure to give the notice required by this Section 25
or any
27
<PAGE> 33
defect therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
(b) Upon the occurrence of each Section 11(a)(ii) Event and each Section
13(a) Event, the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, specifying the event and the consequences of the
event to holders of Rights under Sections 11 and 13 hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
The Sports Club Company, Inc.
11100 Santa Monica Blvd., Suite 300
Los Angeles, CA 90025
Attention: Lois Barberio
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) to the principal office of the Rights
Agent as follows:
American Stock Transfer & Trust Company
6201 15th Avenue, 1st Floor
Brooklyn, New York 11219
Attn: Isaac Kagan,
phone: (718) 921-8293
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS.
(a) The Board of Directors of the Company may, from time to time,
without the approval of any holders of Rights, supplement or amend any provision
of this Agreement in any manner, whether or not such supplement or amendment is
adverse to any holder of Rights, and direct the Rights Agent so to supplement or
amend such provision, and the Rights Agent shall so supplement or amend such
provision; provided, however, that from and after the earliest of (i) the date
of the first Section 11(a)(ii) Event, (ii) the date of the first Section 13(a)
Event, (iii) the Redemption Date or (iv)
28
<PAGE> 34
the Expiration Date, this 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 or a Surviving Person.
(b) From and after the earlier of the date of the first Section
11(a)(ii) Event or the date of the first Section 13(a) Event and prior to the
Rights Expiration Date, the Company shall not effect any amendment to the
Certificate of Designations for the Preferred Shares that would materially and
adversely affect the rights, privileges or preferences of the Preferred Shares
without the prior approval of the holders of two-thirds or more of the then
outstanding Rights.
SECTION 28. CERTAIN COVENANTS. Subject to Section 27 hereof and the
other provisions of this Agreement, from and after the earlier of the date of
the first Section 11(a)(ii) Event or the date of the first Section 13(a) Event
and prior to the earlier of the Redemption Date or the Expiration Date, the
Company shall not (a) issue or sell, or permit any Subsidiary to issue or sell,
to a 15% Stockholder or a Surviving Person, or any Affiliate or Associate of a
15% Stockholder or a Surviving Person, or any Person holding Voting Shares of
the Company that are Beneficially Owned by a 15% Stockholder or a Surviving
Person, (i) any rights, options, warrants or convertible securities on terms
similar to, or that materially adversely affect the value of, the Rights or (ii)
Preferred Shares, Common Shares or shares of any other class of capital stock,
if such sale is intended to or would materially adversely affect the value of
the Rights, or (b) take any other action that is intended to or would materially
adversely affect the value of the Rights.
SECTION 29. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (other than those representing
Rights that have become null and void) and the certificates for Common Shares
representing Rights (other than those Rights that have become null and void) any
legal or equitable right, remedy or claim under this Agreement, and this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and such registered holders of Right Certificates and certificates for
Common Shares representing Rights.
SECTION 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts made and
performed entirely within such state.
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<PAGE> 35
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all purposes be deemed to be
an original and all such counterparts shall together constitute but one and the
same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE SPORTS CLUB COMPANY, INC.
Attest:
By _____________________________ By _____________________________
Name: Name:
Title: Title:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest:
By _____________________________ By _____________________________
Name: Name:
Title: Title:
30
<PAGE> 36
EXHIBIT 1
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
THE SPORTS CLUB COMPANY, INC.
(Pursuant to Section 151 of the Delaware General Corporation Law)
The Sports Club Company, Inc., a Delaware corporation (the "Company"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Company as required by Section 151 of the General Corporation
Law at a meeting duly called and held on September 29, 1998.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company (the "Board of Directors" or the "Board") in
accordance with the provisions of the Certificate of Incorporation, the Board of
Directors hereby creates a series of preferred stock of the Company and hereby
states the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof as follows:
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be two hundred thousand. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Company convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to
<PAGE> 37
dividends, the holders of shares of Series A Preferred Stock , in preference to
the holders of shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $.25 per share ($1.00 per
annum) or (ii) subject to the provision for adjustment hereinafter set forth,
500 times the aggregate per share amount of all cash dividends, and 500 times
the aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common Stock or
a subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such event the amount to which the holder of each share of
Series A Preferred Stock was entitled immediately prior to such event under
clause (ii) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event, and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) The Company shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (a) of this Section 2 immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $.25 per share ($1.00
per annum) on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which event dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but
shall not bear interest. Dividends
2
<PAGE> 38
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by- share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to five
hundred (500) votes on all matters submitted to a vote of the stockholders of
the Company.
(b) Except as otherwise provided herein, in the Certificate of
Incorporation, in any other Certificate of Designations creating a series of
preferred stock or any similar stock or by law, the holders of shares of Series
A Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Company having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the Company.
(c) Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
(d) In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such event the number of votes to which each holder of a share of Series
A Preferred Stock was entitled immediately prior to such event under Section
3(a) shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event, and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Company shall not, directly or indirectly:
3
<PAGE> 39
(i) declare or pay dividends on, or make any other distributions
with respect to any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions
with respect to any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Company may at any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Company ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration, directly or indirectly, any
shares of stock of the Company unless the Company could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation, in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made to: (i)
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
4
<PAGE> 40
received the greater of (A) $1.00 per share ($.002 per one five-hundredth of a
share), plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, or (B) an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 500 times the aggregate amount to be distributed per share
to holders of shares of Common Stock; or (ii) the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
In the event the Company shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such event the aggregate amount to which each holder of a share of Series A
Preferred Stock was entitled immediately prior to such event under the proviso
in clause (i) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event, and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger or Other. In the event the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then in any
such event each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Company shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such event the amount set forth in the preceding sentence with respect
to the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event, and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the
5
<PAGE> 41
Company's preferred stock whether issued before or after the issuance of the
Series A Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Company
shall not be amended in any manner that would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock without
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Company by the President of the Company this 30th day of
September, 1998.
----------------------------------------
D. Michael Talla, Chief Executive Officer
6
<PAGE> 42
EXHIBIT 2
THE SPORTS CLUB COMPANY, INC.
RIGHT CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER OCTOBER 6, 2008 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID AND
NON-TRANSFERABLE.
This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of October 6, 1998 (the "Rights Agreement") between The
Sports Club Company, Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"), unless the
rights evidenced hereby shall have been previously redeemed by the Company, to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 p.m. New York time on
October 6, 2008, at the principal office or offices of the Rights Agent
designated for such purpose, or at the office of its successor as Rights Agent
or its successors as Rights Agent, one five-hundredth (1/500th) of a fully paid
and non-assessable share of Series A Junior Participating Cumulative Preferred
Stock, par value $0.0l per share (the "Preferred Stock") of the Company, at a
cash purchase price of $20 per one five-hundredth (1/500th) of a share of
Preferred Stock, as the same may from time to time be adjusted in accordance
with the Rights Agreement (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the form of election to purchase and
the related certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of fractional shares of Preferred Stock which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of October 6, 1998 based
on the shares of Preferred Stock as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Preferred Stock which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events, and in
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certain circumstances may be exercised to purchase securities other than shares
of Preferred Stock or securities of issuers other than the Company.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and the
Rights Agent and are available free of charge upon written request mailed to the
Company at:
The Sports Club Company, Inc.
11100 Santa Monica Blvd., Suite 300
Los Angeles, CA 90025
Attention: Shareholder Relations Officer
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, The Rights evidenced
by this Right Certificate may be redeemed by the Board of Directors at a
redemption price of $.001 per Right (payable in cash or other consideration)
appropriately adjusted as provided in the Rights Agreement at any time prior to
the earlier to occur of (i) a Section 11(a)(ii) Event (as defined in the Rights
Agreement, (ii) a Section 13(a) Event (as defined in the Rights Agreement), and
(iii) the Final Expiration Date.
No fractional shares of Preferred Stock (other than internal multiples
of one five-hundredths (1/500ths) of a share, which may, at the election of the
Company, be evidenced by depositary
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receipts) will be issued upon the exercise of any Right or Rights evidenced
hereby, but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of _________________ THE SPORTS CLUB COMPANY, INC.
_________________________________ ____________________________________________
Lois Barberio, Secretary D. Michael Talla, Chief Executive Officer
Countersigned:
American Stock Transfer & Trust Company
________________________________
as Rights Agent
By ___________________________
Authorized Officer
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[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To: THE SPORTS CLUB COMPANY, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate to purchase one five-hundredth (1/500th)
of a share of Preferred Stock issuable upon the exercise of each Right (or such
other securities of the Company or of any other Person which may be issuable
upon the exercise of the Rights) and requests that certificates for such
securities be issued in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ________________________, ___
_________________________________________
Signature
Signature Guaranteed:
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Certification
The undersigned hereby certifies by checking the appropriate boxes that:
1. The rights evidenced by this Right Certificate____are____are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
2. After due inquiry and to the best knowledge of the undersigned, it
___ did ___did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ____________, ___ ________________________________
Signature
Signature Guaranteed:
Notice
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED ______________________________________hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Right Certificate on the books of The Sports
Club Company, Inc. with full power of substitution.
Dated:__________________, _____
____________________________________
Signature
Signature Guaranteed:
Certification
The undersigned hereby certifies by checking the appropriate boxes that:
1. The Rights evidenced by this Right Certificate __ are __ are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined in the Rights Agreement);
2. After due inquiry and to the best knowledge of the undersigned, it
____did ___did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________, ___ ________________________________
Signature
Signature Guaranteed:
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Notice
The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
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