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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 200549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 1, 1999
THE SPORTS CLUB COMPANY, INC.
Delaware 1-13290 95-4479735
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Indentification No.)
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 479-5200
(Former name or former address, if changed since last report.) Not applicable
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Index of Exhibits on Page 9.
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ITEM 5. OTHER EVENTS.
On April 1, 1999, we completed a private offering of $100,000,000
principal amount of 11 3/8% Senior Secured Notes due in 2006. Concurrently, we
amended our loan agreement with Comerica Bank - California. A summary of the
terms of the Senior Notes and Credit Facility are provided below:
DESCRIPTION OF THE SENIOR SECURED NOTES
The Senior Secured Notes (the "Notes") were initially only offered to
Qualified Institutional Buyers and Accredited Investors permitted by Rule 144A
of the Securities Act of 1933. The Notes were not registered under the
Securities Act and may not be sold in the United States absent registration or
exemption from registration requirements of the Securities Act of 1933. The
description below is a summary of the principle terms of the Notes and is
subject to, and is qualified in its entirety by reference to, the indenture
governing the Notes (the "Indenture") which is attached as Exhibit 4.2.
Maturity Date.................... March 15, 2006
Interest Rate.................... We will pay an annual rate of interest
equal to 11 3/8%.
Interest Payment Dates........... Semi-annually, beginning on September 15,
1999.
Ranking.......................... The Notes rank senior in right of payment
to any of our subordinated indebtedness,
and rank equally with all of our senior
indebtedness, including indebtedness
outstanding under our credit facility.
Security Interest................ We have pledged as collateral, for the
benefit of holders of the Notes, certain
real assets (and related fixtures and
equipment), our ownership interest in
certain of our subsidiaries, and cash in
the disbursement account described below,
subject to customary exceptions for
transactions of this type. The liens on
certain of the collateral are subordinated
to liens on such collateral securing up to
$20.0 million principal amount of other
indebtedness. The collateral does not
include equipment that is subject to
equipment financing.
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Optional Redemption.............. After March 15, 2003, all or some of the
Notes may be redeemable at our option at
the following premiums, plus interest:
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For the period below Percentage
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On or after March 15, 2003...... 105.688%
On or after March 15, 2004...... 102.844%
March 15, 2005 and thereafter... 100.000%
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Prior to March 15, 2002, up to 35% of the
principal amount of the Notes may be
redeemed at our option with the net
proceeds of certain public equity offerings
at 111.375% of the face amount, plus
interest.
Guarantees....................... All of our current wholly-owned
subsidiaries have guaranteed the Notes.
Subject to certain exceptions, if we create
or acquire new wholly-owned subsidiaries,
they will also guarantee the Notes.
Change of Control Offer.......... If we go through a change of control, we
must give holders of the Notes the
opportunity to sell us their Notes at 101%
of their face amount, plus interest.
Asset Sale Proceeds.............. If we do not reinvest cash proceeds from
the sale of assets in our business, we may
have to use such proceeds to offer to buy
back some the Notes at their face amount,
plus interest.
Certain Indenture Provisions..... The Indenture will limit what we may do.
The provisions of the Indenture will limit
our ability to:
o Incure more debt
o pay dividends, redeem stock, or make
other distributions;
o Issue stock of subsidiaries;
o make certain investments;
o create liens;
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o enter into sale/leaseback transactions;
o enter into transactions with affiliates;
o merge or consolidate; and
o transfer or sell assets.
These covenants are subject to a number of
important exceptions.
Registration Rights.............. Registratin Rights Agreement-
We have agreed to attempt to register
similar notes with the Securities and
Exchange Commission (the "SEC") to give
holders of Notes the opportunity to
exchange these Notes for notes that may be
publicly traded (the "Exchange Notes").
We have agreed to file a registration
statement for the Exchange Notes with the
SEC within 60 days of the issue date of
these Notes and to use our best efforts to
cause that registration statement to be
declared effective within 120 days of the
issue date of these Notes. In addition, in
certain circumstances, we have agreed to
file a "shelf registration statement" that
would allow some or all of these Notes to
be offered to the public. The Exchange
Notes (if we do issue them) will have terms
substantially identical to the Notes we are
offering now.
Liquidated Damages-
We will have to pay liquidated damages with
respect to these Notes if:
o we do not file the required registration
statements on time;
o the SEC does not declare the required
registration statements effective on
time; or
o we do not complete the offer to exchange
these Notes for the Exchange Notes
within 150 days from the issue date of
these Notes.
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If we must pay liquidated damages, we will
pay it to holders of Notes in cash on the
same dates that we make interest payments
on the Notes, until we correct the
registration default.
Disbursement Account............. Approximately $54.4 million of the net
proceeds of the offering of the Notes were
deposited in a disbursement account and,
subject to the terms of a disbursement
agreement, will be used to pay the
development costs of two Sports Clubs in
New York City and Sports Clubs in
Washington, D.C. and Boston.
DESCRIPTION OF THE CREDIT FACILITY
Concurrently with the offering of the Notes, we amended and restated our
existing credit facility with Comerica Bank-California. The description below is
a summary of the principal terms of our credit facility and is subject to, and
qualified in its entirety by reference to, the definitive credit facility which
is attached as Exhibit 10.2.
Our credit facility provides for the issuance by the lender of revolving
loans and letters of credit aggregating $20.0 million. $4.0 million of letters
of credit are outstanding under our credit facility and an additional $8.5
million is currently available thereunder. The balance of the commitment will
become available following the satisfaction of certain conditions relating to
certain of the collateral. Our credit facility has a scheduled maturity date of
May 31, 2001 and does not require a reduction in the outstanding principle
balance prior to such date. Advances under our credit facility bear interest at
a variable rate not expected to exceed LIBOR plus 2 1/2% or the agent's prime
rate.
Our credit facility is secured by a first priority lien on substantially
all of the real and personal property assets of The Sports Club/Irvine, The
Sports Club/Las Vegas, the Spectrum Club - Canoga Park and the Spectrum Club -
Agoura Hills, and we have pledged to the lender the outstanding capital stock of
our subsidiaries which own these Clubs.
Our credit facility contains covenants that, among other things,
restrict our ability to dispose of assets, incur additional indebtedness, incur
guarantee obligations, repay or amend the terms of outstanding indebtedness, pay
dividends, create liens on assets, make investments, make acquisitions, engage
in mergers or consolidations, make capital expenditures, or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict our
operations. In addition, our credit facility requires us to comply with certain
financial ratios and maintenance tests.
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DESCRIPTION OF INTERCREDITOR AGREEMENT
Concurrently with the offering of the Notes, we entered into an
Intercreditor and Subordination Agreement (the "Intercreditor Agreement") with
the trustee (the "Trustee") under the Indenture which sets forth the terms of
the Notes, and the Agent (as defined in our credit facility). The description
below is a summary of the principal terms of the Intercreditor Agreement and is
subject to, and qualified in its entirety by reference to, the definitive
Intercreditor Agreement which is attached as Exhibit 10.3.
The Intercreditor Agreement, among other things, provides that the liens
of the Trustee on the Shared Assets (as defined in the Intercreditor Agreement)
are subordinated to the liens securing up to $20.0 million principal amount of
indebtedness outstanding under our credit facility and related interest, fees,
costs and expenses. Subject to certain exceptions, following delivery to the
Trustee of a Notice of a Default or an Event of Default (as defined in our
credit facility), the Intercreditor Agreement prohibits all payments or
distributions of Shared Assets or the proceeds thereof to or for the benefit of
the Trustee or holders of the Notes on account of the obligations under the
Indenture. In addition, certain payments made to the Trustee or holders of the
Notes in violation of the terms of the Intercreditor Agreement may have to be
repaid to, or held in trust for the benefit of, the Agent for application to
payment in full of the obligations under our credit facility. The Intercreditor
Agreement also provides that, subject to certain exceptions, the Agent will be
assigned and entitled to vote all claims of the Trustee and the holders of the
Notes in any Reorganization (as defined in the Intercreditor Agreement) and
certain other proceedings involving the Designated Guarantors (as defined in the
Indenture).
The Intercreditor Agreement provides that our credit facility may be
amended without the consent of the Trustee or the holders of the Notes;
provided, that such amendment may not permit the incurrence of indebtedness in
an aggregate principal amount in excess of $20.0 million. In addition, if we
replace our credit facility and incur additional indebtedness in accordance with
the Indenture, the Trustee will be permitted to enter into an intercreditor
agreement substantially in the form of the Intercreditor Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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Exhibit No. Exhibit
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4.2 Indenture by and among the Registrant, U.S. Bank Trust
National Association and the Subsidiary Guarantors referred
to therein, dated as of April 1, 1999.
4.3 Registration Rights Agreement by and among the Registrant,
Jefferies & Company, Inc. and CIBC Oppenheimer Corp., dated
as of April 1, 1999.
10.1 Purchase Agreement by and among the
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Exhibit No. Exhibit
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Registrant, Jefferies & Company, Inc. and CIBC Oppenheimer
Corp., dated March 29, 1999.
10.2 Fourth Amended and Restated Loan Agreement by and among the
Registrant, certain of its subsidiaries and Comerica
Bank-California, dated April 1, 1999.
10.3 Intercreditor Agreement by and among the Registrant, certain
of its subsidiaries, Comerica Bank-California and U.S. Bank
Trust National Association, dated April 1, 1999.
10.4 Disbursement Agreement between U.S. Bank Trust National
Association and The Registrant and certain of its
subsidiaries dated as of April 1, 1999.
99.1 Press Release dated April 5, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned hereunto
duly authorized.
THE SPORTS CLUB COMPANY, INC.
By: /s/ Timothy O'Brien
-----------------------------------
Timothy O'Brien
Chief Financial Officer
April 14, 1999
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EXHIBIT INDEX
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ITEM DESCRIPTION
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4.2 Indenture by and among the Registrant, U.S. Bank Trust
National Association and the Subsidiary Guarantors referred
to therein, dated as of April 1, 1999.
4.3 Registration Rights Agreement by and among the Registrant,
Jefferies & Company, Inc. and CIBC Oppenheimer Corp., dated
as of April 1, 1999.
10.1 Purchase Agreement by and among the Registrant, Jefferies &
Company, Inc. and CIBC Oppenheimer Corp., dated March 29,
1999.
10.2 Fourth Amended and Restated Loan Agreement by and among the
Registrant, certain of its subsidiaries and Comerica
Bank-California, dated April 1, 1999.
10.3 Intercreditor Agreement by and among the Registrant, certain
of its subsidiaries, Comerica Bank-California and U.S. Bank
Trust National Association, dated April 1, 1999.
10.4 Disbursement Agreement between U.S. Bank Trust National
Association and the Registrant and certain of its
subsidiaries dated as of April 1, 1999.
99.1 Press Release dated April 5, 1999.
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EXHIBIT 4.2
THE SPORTS CLUB COMPANY, INC.
as issuer
and the Subsidiary Guarantors referred to herein
11 3/8% Senior Secured Notes due 2006
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INDENTURE
Dated as of April 1, 1999
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U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.................................................... 1
Section 1.2 Other Definitions.............................................. 13
Section 1.3 Incorporation by Reference of Trust Indenture Act.............. 14
Section 1.4 Rules of Construction.......................................... 15
ARTICLE II
THE NOTES
Section 2.1 Form and Dating................................................ 15
Section 2.2 Execution and Authentication................................... 15
Section 2.3 Registrar, Paying Agent and Depository......................... 16
Section 2.4 Paying Agent to Hold Money in Trust............................ 16
Section 2.5 Holder Lists................................................... 17
Section 2.6 Transfer and Exchange.......................................... 17
Section 2.7 Replacement Notes.............................................. 20
Section 2.8 Outstanding Notes.............................................. 20
Section 2.9 Treasury Notes................................................. 21
Section 2.10 Temporary Notes................................................ 21
Section 2.11 Cancellation................................................... 21
Section 2.12 Defaulted Interest............................................. 21
Section 2.13 Legends........................................................ 22
Section 2.14 Deposit of Moneys.............................................. 22
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee............................................. 23
Section 3.2 Selection of Notes to Be Redeemed.............................. 23
Section 3.3 Notice of Redemption........................................... 23
Section 3.4 Effect of Notice of Redemption................................. 24
Section 3.5 Deposit of Redemption Price.................................... 24
Section 3.6 Notes Redeemed in Part......................................... 24
Section 3.7 Optional Redemption............................................ 24
Section 3.8 Required Regulatory Redemption................................. 25
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes............................................... 25
Section 4.2 Maintenance of Office or Agency................................ 25
Section 4.3 Reports........................................................ 26
Section 4.4 Compliance Certificate......................................... 27
Section 4.5 Taxes.......................................................... 27
Section 4.6 Stay, Extension and Usury Laws................................. 27
Section 4.7 Limitation on Restricted Payments.............................. 28
Section 4.8 Limitation on Restrictions on Subsidiary Dividends............. 30
Section 4.9 Limitation on Incurrence of Indebtedness....................... 30
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Section 4.10 Limitation on Asset Sales...................................... 32
Section 4.11 Limitation on Transactions With Affiliates..................... 34
Section 4.12 Limitation on Liens............................................ 34
Section 4.13 Corporate Existence............................................ 35
Section 4.14 Repurchase Upon a Change of Control............................ 35
Section 4.15 Maintenance of Properties...................................... 36
Section 4.16 Maintenance of Insurance....................................... 37
Section 4.17 Restrictions on Sale and Issuance of Subsidiary Stock.......... 37
Section 4.18 Limitation on Lines of Business................................ 37
ARTICLE V
SUCCESSORS
Section 5.1 When the Company May Merge, etc................................ 37
Section 5.2 Successor Substituted.......................................... 38
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.............................................. 38
Section 6.2 Acceleration................................................... 40
Section 6.3 Other Remedies................................................. 40
Section 6.4 Waiver of Past Defaults........................................ 41
Section 6.5 Control by Majority............................................ 41
Section 6.6 Limitation on Suits............................................ 41
Section 6.7 Rights of Holders to Receive Payment........................... 41
Section 6.8 Collection Suit by Trustee..................................... 42
Section 6.9 Trustee May File Proofs of Claim............................... 42
Section 6.10 Priorities..................................................... 42
Section 6.11 Undertaking for Costs.......................................... 43
ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee.............................................. 43
Section 7.2 Rights of Trustee.............................................. 44
Section 7.3 Individual Rights of Trustee................................... 44
Section 7.4 Trustee's Disclaimer........................................... 45
Section 7.5 Notice of Defaults............................................. 45
Section 7.6 Reports by Trustee to Holders.................................. 45
Section 7.7 Compensation and Indemnity..................................... 45
Section 7.8 Replacement of Trustee......................................... 46
Section 7.9 Successor Trustee by Merger, etc............................... 47
Section 7.10 Eligibility; Disqualification.................................. 47
Section 7.11 Preferential Collection of Claims Against Company.............. 47
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Discharge; Option to Effect Legal or Covenant Defeasance....... 47
Section 8.2 Legal Defeasance and Discharge................................. 48
Section 8.3 Covenant Defeasance............................................ 48
Section 8.4 Conditions to Legal or Covenant Defeasance..................... 48
Section 8.5 Deposits to be Held in Trust; Other Miscellaneous Provisions... 50
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Section 8.6 Repayment to the Company....................................... 50
Section 8.7 Reinstatement.................................................. 50
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ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders..................................... 51
Section 9.2 With Consent of Holders........................................ 51
Section 9.3 Compliance with Trust Indenture Act............................ 52
Section 9.4 Revocation and Effect of Consents.............................. 52
Section 9.5 Notation on or Exchange of Notes............................... 53
Section 9.6 Trustee to Sign Amendments, etc................................ 53
ARTICLE X
SUBSIDIARY GUARANTIES
Section 10.1 Subsidiary Guaranty............................................ 53
Section 10.2 Execution and Delivery of the Subsidiary Guaranties............ 55
Section 10.3 Limitation on Subsidiary Guarantor's Liability................. 55
Section 10.4 Rights under the Subsidiary Guaranties......................... 55
Section 10.5 Primary Obligations............................................ 56
Section 10.6 Guarantee by Future Subsidiaries............................... 56
Section 10.7 Release of Subsidiary Guarantors............................... 56
ARTICLE XI
SECURITY INTEREST
Section 11.1 Assignment of Security Interest................................ 57
Section 11.2 Suits to Protect the Collateral................................ 58
Section 11.3 Further Assurances and Security................................ 58
Section 11.4 Release of Collateral.......................................... 58
Section 11.5 Reliance on Opinion of Counsel................................. 59
Section 11.6 Purchaser May Rely............................................. 59
Section 11.7 Payment of Expenses............................................ 59
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls................................... 59
Section 12.2 Notices........................................................ 60
Section 12.3 Communication by Holders with Other Holders.................... 60
Section 12.4 Certificate and Opinion as to Conditions Precedent............. 61
Section 12.5 Statements Required in Certificate or Opinion.................. 61
Section 12.6 Rules by Trustee and Agents.................................... 61
Section 12.7 Legal Holidays................................................. 61
Section 12.8 No Recourse Against Others..................................... 61
Section 12.9 Governing Law.................................................. 62
Section 12.10 No Adverse Interpretation of Other Agreements.................. 62
Section 12.11 Successors..................................................... 62
Section 12.12 Severability................................................... 62
Section 12.13 Counterpart Originals.......................................... 62
Section 12.14 Table of Contents, Headings, etc............................... 63
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This Indenture, dated as of April 1, 1999, is entered into by and among
The Sports Club Company, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors (as defined below) and U.S. Bank Trust National
Association, a national banking association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders (as defined below) of
the Company's 11% Senior Secured Notes due 2006.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Acquired Debt" means Indebtedness of a Person existing at the time such
Person is merged with or into the Company or a Restricted Subsidiary or becomes
a Restricted Subsidiary, other than Indebtedness incurred in connection with, or
in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary; provided, that
Indebtedness of such acquired Person that is redeemed, defeased, retired or
otherwise repaid at the time of or immediately upon consummation of the
transactions by which such acquired Person merges with or into or becomes a
Restricted Subsidiary shall not be Acquired Debt.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting power of the Voting Stock of such Person.
Notwithstanding the foregoing, (i) neither the Initial Purchasers nor any of
their Affiliates will be deemed to be Affiliates of the Company and (ii) a
Person beneficially owning 10% or more of the voting power of the Voting Stock
of the Company on any date will not be deemed to control the Company on such
date solely by reason of clause (b) above if (A) the common stock of the Company
is then registered pursuant to Section 12(b) or 12(g) of the Exchange Act, (B)
such Person is not, and has not been, required to file a statement on Schedule
13D with respect to its interest in the Company, and (C) such Person is not then
an Affiliate of Millennium Entertainment Partners L.P. or D. Michael Talla.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any (a) direct or indirect sale, assignment,
transfer, lease, conveyance, or other disposition (including, without
limitation, by way of merger or consolidation) (collectively, a "transfer"),
other than in the ordinary course of business, of any assets of the Company or
any Restricted Subsidiary; (b) direct or indirect issuance or sale of any
Capital Stock of any Restricted Subsidiary, in each case to any Person (other
than the Company or a Restricted Subsidiary); or (c) Event of Loss. For purposes
of this definition, (i) any series of transactions that are part of a common
plan shall be deemed a single Asset Sale and (ii) the term "Asset Sale" shall
not include (1) any series of transactions that have a fair market value (or
result in gross proceeds) of less than $2,000,000 or (2) any disposition of all
or substantially all of the assets of the Company that is governed under and
complies with the terms of Article V.
"Attributable Indebtedness" means, with respect to a Sale-Leaseback
Transaction, the present value (discounted at the interest rate borne by the
Notes, compounded annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale-Leaseback
Transaction (including any period for which such lease has been extended).
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"Bankruptcy Law" means title 11, U.S. Code, or any similar federal,
state or foreign law for the relief of debtors.
"beneficial owner" has the meaning attributed to it in Rules 13d-3 and
13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means the board of directors or any duly
constituted committee thereof of any corporation or of a corporate general
partner of a partnership and any similar body empowered to direct the affairs of
any other entity.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means, (a) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, and (b) with respect to any
other Person, any and all partnership or other equity interests of such Person.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (b) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500,000,000 and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition; and (c) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (a) and (b) above.
"Change of Control" means the occurrence of any of the following events:
(a) any merger or consolidation of the Company with or into any
Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company, on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate
of the Voting Stock of the transferee(s) or surviving entity or
entities,
(b) any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate
of the Voting Stock of the Company; provided, that the Voting Stock of
the Company owned by Millennium Entertainment Partners L.P. and D.
Michael Talla shall not be aggregated together for purposes of
calculating the voting power of any such group so long as (i) at least
25% of the Capital Stock of the Company is beneficially owned by Persons
who are not Affiliates of the Company or any member of such group,
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and (ii) a class of Voting Stock of the Company is registered pursuant
to Section 12(b) or 12(g) of the Exchange Act, or
(c) the Company adopts a plan of liquidation.
"Collateral" means, collectively, the Collateral, the Intellectual
Property Collateral, the Pledged Collateral and the Trust Estate, each as
defined in the Security Agreements.
"Collateral Proceeds" means any Net Proceeds received or receivable by
the Company or any Restricted Subsidiary as a result of an Asset Sale involving
any of the Collateral, and all interest or other earnings on amounts on deposit
in the Disbursement Account.
"Commission" means the United States Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Exchange Act, the Securities
Act or the TIA, as the case may be, then the body performing such duties at such
time.
"Company" means the party named as such above, until a successor
replaces such Person in accordance with the terms of this Indenture, and
thereafter means such successor.
"Company Order" means a written request or order signed in the name of
the Company by its Chairman of the Board, President, Chief Executive Officer or
Senior or Executive Vice President, and by its Chairman of the Board, President,
Chief Executive Officer, Senior or Executive Vice President Treasurer, Secretary
or an Assistant Treasurer or an Assistant Secretary and delivered to the
Trustee.
"Consolidated EBITDA" means, with respect to any Person (the referent
Person) for any period, (without duplication),
(1) consolidated income (loss) from operations of such Person
and its subsidiaries for such period, determined in accordance with
GAAP, plus
(2) to the extent such amounts are deducted in calculating such
income (loss) from operations of such Person for such period, (i)
amortization, depreciation, other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees and other
intangibles but excluding (x) non-cash charges incurred after the Issue
Date that require an accrual of or a reserve for cash charges for any
future period and (y) normally recurring accruals such as reserves
against accounts receivables), and (ii) Pre-Opening Expenses, plus
(3) the equity interest in net income of unconsolidated
subsidiaries of the referent Person, but only to the extent of the
amount of dividends or distributions paid to the referent Person or a
Wholly Owned Subsidiary of the referent Person, minus
(4) all expense attributable to minority interest;
provided, that (i) the income from operations of any Person that is not
a Restricted Subsidiary will be included, but only to the extent of the
amount of dividends or distributions paid to the referent Person or a
Wholly Owned Subsidiary of the referent Person, (ii) the income from
operations of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition will be excluded,
and (iii) the income from operations of any Restricted Subsidiary will
not be included to the extent that declarations of dividends or similar
distributions by that Restricted Subsidiary are not at the time
permitted, directly or indirectly, by operation of the terms of its
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<PAGE> 9
organization documents or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization of
original issue discount, noncash interest payment, and the interest component of
Capital Lease Obligations), to the extent such expense was deducted in computing
Consolidated Net Income of such Person for such period.
"Consolidated Net Income" means, with respect to any Person (the
referent Person) for any period, the aggregate of the Net Income of such Person
and its subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided, that (a) the Net Income of any Person relating
to any portion of such period that such Person (i) is not a Restricted
Subsidiary or (ii) is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or distributions paid to
the referent Person or a Wholly Owned Subsidiary of the referent Person during
such portion of such period, (b) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition will be excluded, and (c) the Net Income of any Restricted
Subsidiary will not be included to the extent that declarations of dividends or
similar distributions by that Restricted Subsidiary are not at the time
permitted, directly or indirectly, by operation of the terms of its organization
documents or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' equity of such Person determined on a consolidated basis in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity), (i) the amount of any such stockholders' equity attributable to
Disqualified Stock or treasury stock of such Person and its consolidated
subsidiaries, (ii) all upward revaluations and other write-ups in the book value
of any asset of such Person or a consolidated subsidiary of such Person
subsequent to the Issue Date, and (iii) all Investments in subsidiaries of such
Person that are not consolidated subsidiaries and in Persons that are not
subsidiaries of such Person.
"Consolidated Rent Expense" means, with respect to any Person for any
period, the consolidated rent expense of such Person and its subsidiaries for
such period, whether paid or accrued, to the extent such expense was deducted in
computing Consolidated Net Income of such Person for such period.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 12.2 or such other address as the Trustee may specify by
notice to the Company.
"Credit Facility" means the Fourth Amended and Restated Loan Agreement,
dated as of the Issue Date, by and among the Company and various of its
subsidiaries and Comerica Bank-California, as sole current lender and as agent,
as may be amended, modified or supplemented from time to time or any refinancing
or replacement thereof.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is, or after notice or the passage of
time or both would be, an Event of Default.
"Depository" means the Person specified in Section 2.3 as the Depository
with respect to the Notes issuable in global form, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
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<PAGE> 10
"Designated Guarantors" means any Subsidiary Guarantor that, at or prior
to the time of determination, shall have been designated by the Board of
Directors of the Company as a Designated Guarantor; provided, that (i) such
Subsidiary does not hold any Indebtedness (other than intercompany receivables
pursuant to Section 4.9(b)(v)) or Capital Stock of, or any Lien on any assets
of, the Company or any other Restricted Subsidiary, (ii) no Default or Event of
Default would be in existence following such designation and (iii) the only
assets owned by such Designated Guarantor on the date of such designation are
assets reasonably related to the operation of The Sports Club/Las Vegas, The
Sports Club/Irvine, or the Agoura Hills or Canoga Park Spectrum Clubs. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complies with the foregoing conditions. On the Issue Date, the
Designated Guarantors shall be Irvine Sports Club, Inc., Green Valley Spectrum
Club, Inc. and Agoura Canoga Spectrum Club, Inc., as to which all of the
foregoing conditions have been met.
"Disbursement Account" has the meaning provided in the Disbursement
Agreement.
"Disbursement Agreement" means the Disbursement Agreement, dated as of
the date hereof, by and among the Trustee, as Disbursement Agent, and the
Company.
"Disqualified Stock" means any Equity Interest that (a) either by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable) is or upon the happening of an event would be required to be
redeemed or repurchased prior to the final stated maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to such final
stated maturity, or (b) is convertible into or exchangeable at the option of the
issuer thereof or any other Person for debt securities.
"DTC" means The Depository Trust Company.
"Equipment Financing" means Purchase Money Obligations (or Refinancing
Indebtedness incurred to Refinance such Purchase Money Obligations) or Capital
Lease Obligations incurred to finance the acquisition or lease of fixtures or
equipment.
"Equity Interests" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Notes for Exchange
Securities.
"Exchange Securities" has the meaning provided for such term in the
Registration Rights Agreement.
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<PAGE> 11
"gaap" means generally accepted accounting principles, as in effect from
time to time, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession, and in the rules and regulations of the
Commission, as in effect from time to time.
"GAAP" means gaap as in effect on the Issue Date.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof.
"guaranty" or "guarantee," used as a noun, means any guaranty (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness or other Obligation. "guarantee," used as
a verb, has a correlative meaning.
"Hedging Obligations" means, with respect to any Person, the Obligations
of such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means the Person in whose name a Note is registered in the
register of the Notes.
"Indebtedness" of any Person means (without duplication)
(a) all liabilities and obligations, contingent or otherwise, of
such Person (i) in respect of borrowed money (regardless of whether the
recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) evidenced by bonds, debentures, notes
or other similar instruments, (iii) representing the deferred purchase
price of property or services (other than deferred membership revenues
and trade payables on customary terms incurred in the ordinary course of
business), (iv) created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property), (v) as lessee under capitalized leases, (vi)
under bankers' acceptance and letter of credit facilities, (vii) to
purchase, redeem, retire, defease or otherwise acquire for value any
Disqualified Stock, or (viii) in respect of Hedging Obligations;
(b) all Indebtedness of others that is guaranteed by such
Person; and
(c) all Indebtedness of others that is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness, provided, that the amount of such Indebtedness shall
(to the extent such Person has not assumed or become liable for the
payment of such Indebtedness) be the lesser of (x) the fair market value
of such property at the time of determination and (y) the amount of such
Indebtedness.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
Notwithstanding the
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<PAGE> 12
foregoing, the term Indebtedness shall not include Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary course
of business; provided, that such Indebtedness is extinguished within three
Business Days of the incurrence thereof. The principal amount outstanding of any
Indebtedness issued with original issue discount is the accreted value of such
Indebtedness.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Purchasers" means Jefferies & Company, Inc. and CIBC
Oppenheimer Corp.
"Intercreditor Agreement" means (a) the Intercreditor and Subordination
Agreement, dated as of the date hereof, among the Company, the Designated
Guarantors named therein, and Comerica Bank-California, as agent under the
Credit Facility, and the Trustee or (b) any replacement intercreditor agreement
substantially in the form of such intercreditor agreement entered into among the
Company, any applicable Designated Guarantors, the Trustee and the lender with
respect to Indebtedness incurred pursuant to section 4.9(b)(i) hereof.
"Interest Coverage Ratio" means, for any period, the ratio of (a)
Consolidated EBITDA of the Company for such period, to (b) Consolidated Interest
Expense of the Company for such period. In calculating the Interest Coverage
Ratio for any period, pro forma effect shall be given to the incurrence,
assumption, guarantee, repayment, repurchase, redemption or retirement by the
Company or any of its Subsidiaries of any Indebtedness subsequent to the
commencement of the period for which the Interest Coverage Ratio is being
calculated, as if the same had occurred at the beginning of the applicable
period. For purposes of making the computation referred to above, acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers and consolidations, subsequent to the commencement of such
period shall be calculated on a pro forma basis, assuming that all such
acquisitions, mergers and consolidations had occurred on the first day of such
period. Without limiting the foregoing, the financial information of the Company
with respect to any portion of such period that falls before the Issue Date
shall be adjusted to give pro forma effect to the issuance of the Notes and the
application of the proceeds therefrom as if they had occurred at the beginning
of such period.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
guaranties, advances or capital contributions, purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other securities, and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP (excluding (i) commission, travel and similar
advances to officers and employees of such Person made in the ordinary course of
business, (ii) advances made under customary indemnification agreements entered
into in the ordinary course of business and (iii) bona fide accounts receivable
arising from the sale of goods or services in the ordinary course of business
consistent with past practice).
"Issue Date" means the date upon which the Notes are first issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
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<PAGE> 13
"Liquidated Damages" has the meaning set out in the Registration Rights
Agreement.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with
GAAP, excluding (a) any gain or loss, together with any related provision for
taxes on such gain or loss, realized in connection with any Asset Sales and
dispositions pursuant to Sale-Leaseback Transactions, (b) any extraordinary gain
or loss, together with any related provision for taxes on such gain or loss and
(iii) any Pre-Opening Expenses (after giving effect to any related tax benefit
on such Pre-Opening Expenses).
"Net Proceeds" means the aggregate proceeds received in the form of cash
or Cash Equivalents in respect of any Asset Sale (including payments in respect
of deferred payment obligations when received), net of (a) the reasonable and
customary direct out-of-pocket costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions), other than any such costs and expenses payable to an Affiliate of
the Company, (b) taxes actually payable directly as a result of such Asset Sale
(after taking into account any available tax credits or deductions (to the
extent reasonably allocable thereto) and any tax sharing arrangements), (c)
amounts required to be applied to the permanent repayment of Indebtedness in
connection with such Asset Sale, (d) appropriate amounts provided as a reserve
by the Company or any Restricted Subsidiary, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
such Restricted Subsidiary, as the case may be, after such Asset Sale
(including, without limitation, as applicable, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations arising from such Asset Sale)
and (e) if such Person is a Partnership Entity, any distribution of the portion
of the Net Proceeds payable to any Person other than the Company or a Restricted
Subsidiary pursuant to the Partnership Agreements.
"Notes" means the 11_% Senior Secured Notes due 2006 authenticated and
issued by the Company pursuant to this Indenture, including the Exchange
Securities.
"Obligation" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"Offering Circular" means the Offering Circular of the Company, dated
March 29, 1999, relating to the offer and sale of $100,000,000 aggregate
principal amount of Notes.
"Officers" means the Chairman of the Board, the President, the Chief
Financial Officer, the Chief Operating Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, any Assistant Secretary or Senior Vice
President of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the Chairman of the
Board, President, Chief Executive Officer, Chief Financial Officer, Treasurer,
Controller or a Senior or Executive Vice President of the Company.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.
"Partnership Agreement" means the partnership agreements of the
Partnership Entities as in effect on the Issue Date or as thereafter amended,
modified or supplemented; provided that such amendment, modification or
supplement does not result, directly or indirectly, (i) in a partner (other than
the Company or a Wholly-Owned Subsidiary) being entitled to receive
distributions or any other economic benefit in an amount greater than the
distributions and economic benefit to which such partner was entitled
immediately
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<PAGE> 14
prior to such amendment, modification or supplement or (ii) in the Company or
any Restricted Subsidiary being entitled to receive distributions or any other
economic benefit in an amount lesser than the distributions to which the Company
or such Restricted Subsidiary was entitled immediately prior to such amendment,
modification, or supplement.
"Partnership Entity" means each of Sports Connection - ES/MB, Reebok -
Sports Club/NY, El Segundo TDC Ltd. and LA/Irvine Sports Club, Ltd., in each
case so long as it is a Restricted Subsidiary.
"Permitted Investments" means:
(a) (i) Investments in the Company or in any Subsidiary
Guarantor other than a Designated Guarantor; (ii) Investments of cash in
any Designated Guarantor that is concurrently used by such Designated
Guarantor in the operation of the Shared Collateral in the ordinary
course of its business; and (iii) intercompany receivables permitted
pursuant to Section 4.9(b)(v)
(b) Investments in Cash Equivalents;
(c) Investments in a Person, if, as a result of such Investment,
such Person (i) becomes a Wholly Owned Subsidiary, or (ii) is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary;
(d) purchases of partnership interests in the Partnership
Entities outstanding on the Issue Date that comply with Section 4.11;
(e) Hedging Obligations;
(f) Investments received as consideration in connection with an
Asset Sale made in compliance with Section 4.10;
(g) Investments existing on the Issue Date (including up to
$6,800,000 in contributions to Designated Guarantors to satisfy existing
Indebtedness of such Designated Guarantors, as described in the Offering
Circular under the caption "Use of Proceeds");
(h) Investments paid for solely with Capital Stock (other than
Disqualified Stock) of the Company; and
(i) credit extensions to members in the ordinary course of
business.
"Permitted Liens" means:
(a) Liens arising by reason of any judgment, decree or order of
any court for an amount and for a period not resulting in an Event of
Default with respect thereto, so long as such Lien is being contested in
good faith and is adequately bonded, and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order shall not have been finally adversely
terminated or the period within which such proceedings may be initiated
shall not have expired;
(b) security for the performance of bids, tenders, trade,
contracts (other than contracts for the payment of money) or leases,
surety bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, consistent with industry
practice;
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<PAGE> 15
(c) Liens (other than Liens arising under ERISA) for taxes,
assessments or other governmental charges not yet due or that are being
contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company
in accordance with gaap;
(d) Liens of carriers, warehousemen, mechanics, landlords,
material men, repairmen or other like Liens arising by operation of law
in the ordinary course of business consistent with industry practices
(other than Liens arising under ERISA) and Liens on deposits made to
obtain the release of such Liens if (i) the underlying obligations are
not overdue for a period of more than 30 days or (ii) such Liens are
being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of
the Company in accordance with gaap;
(e) easements, rights of way, zoning and similar restrictions
and other similar encumbrances or title defects incurred in the ordinary
course of business consistent with industry practices that, in the
aggregate, are not substantial in amount, and that do not in any case
materially detract from the value of the property subject thereto (as
such property is used by the Company or a Subsidiary) or interfere with
the ordinary conduct of the business of the Company or any of its
Subsidiaries; provided, that such Liens are not incurred in connection
with any borrowing of money or any commitment to loan any money or to
extend any credit;
(f) pledges or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security legislation;
(g) Liens that secure Acquired Debt, provided, that such Liens
do not extend to or cover any property or assets other than those of the
Person being acquired and were not put in place in anticipation of such
acquisition;
(h) Liens that secure Purchase Money Obligations (or Refinancing
Indebtedness incurred to Refinance such Purchase Money Obligations)
permitted to be incurred under this Indenture or Capital Lease
Obligations permitted to be incurred under this Indenture, provided,
that such Liens do not extend to or cover any property or assets other
than those being acquired;
(i) Liens securing Obligations under this Indenture, the Notes,
the Security Agreements or the Disbursement Agreement;
(j) Liens on the Shared Collateral securing Indebtedness
incurred pursuant to Section 4.9(b)(i); and
(k) Liens securing Indebtedness of the Partnership Entities
incurred pursuant to Section 4.9(b)(i).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"Pre-Opening Expenses" means all costs of start-up activities, including
organization costs and Club openings that are required to be expensed (and are
not capitalized) in accordance with SOP 98-5.
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<PAGE> 16
"Public Equity Offering" means a bona fide underwritten public offering
of Qualified Capital Stock of the Company, pursuant to a registration statement
filed with and declared effective by the Commission in accordance with the
Securities Act.
"Purchase Money Obligations" means Indebtedness representing, or
incurred to finance, the cost (a) of acquiring any assets and (b) of
construction or build-out of facilities (including Purchase Money Obligations of
any other Person at the time such other Person is merged with or into or is
otherwise acquired by the Company); provided, that (i) the principal amount of
such Indebtedness does not exceed 80% of such cost, including construction
charges, (ii) any Lien securing such Indebtedness does not extend to or cover
any other asset or property other than the asset or property being so acquired,
and (iii) such Indebtedness is incurred, and any Liens with respect thereto are
granted, within 180 days of the acquisition of such property or asset.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person other than Disqualified Stock.
"Related Business" means the businesses conducted (or proposed to be
conducted) by the Company and its Restricted Subsidiaries as of the Issue Date
and any and all businesses that in the good faith judgment of the Board of
Directors of the Company are materially related businesses.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and among the Company, the Subsidiary Guarantors
and the Initial Purchasers, as such agreement may be amended, modified or
supplemented from time to time.
"Rent Coverage Ratio" means, for any period, the ratio of (a) the sum of
(i) Consolidated EBITDA of the Company for such period and (ii) Consolidated
Rent Expense of the Company for such period, to (b) the sum of (i) Consolidated
Interest Expense of the Company for such period and (ii) Consolidated Rent
Expense of the Company for such period. In calculating the Rent Coverage Ratio
for any period, pro forma effect shall be given to the incurrence, assumption,
guarantee, repayment, repurchase, redemption or retirement of any Indebtedness
and the entry into or termination of any lease, in each case by the Company or
any of its Subsidiaries subsequent to the commencement of the period for which
the Rent Coverage Ratio is being calculated, as if the same had occurred at the
beginning of the applicable period. For purposes of making the computation
referred to above, acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including all mergers and consolidations, subsequent to
the commencement of such period shall be calculated on a pro forma basis,
assuming that all such acquisitions, mergers and consolidations had occurred on
the first day of such period. Without limiting the foregoing, the financial
information of the Company with respect to any portion of such period that falls
before the Issue Date shall be adjusted to give pro forma effect to the issuance
of the Notes and the application of the proceeds therefrom as if they had
occurred at the beginning of such period.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee located at the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
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<PAGE> 17
"Restricted Securities" means Notes that bear or are required to bear
the legends relating to restrictions on transfer set forth on Exhibit A hereto.
"Restricted Subsidiary" means a Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"Sale-Leaseback Transaction" means any arrangement providing for the
transfer by the Company or any Subsidiary of any property to any Person, which
property has been or is to be leased back by the Company or any Subsidiary from
such Person or any subsequent transferee of such property.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the security agreements listed on Schedule 1
hereto and any other document, instrument or agreement executed or delivered by
the Company or any of the Subsidiary Guarantors from time to time pursuant to
which the Company or any such Subsidiary Guarantor grants a Lien on any of their
respective properties, assets or revenues to secure payment of the Obligations
hereunder and under the Notes.
"Shared Collateral" means (a) any assets now existing or hereafter
acquired in the ordinary course of business (whether real or personal) that are
owned by a Designated Guarantor and are reasonably related to the operation of
The Sports Club/Las Vegas, The Sports Club/Irvine, or the Agoura Hills or Canoga
Park Spectrum Clubs, and (b) all of the Capital Stock of, or any other interest
in, any Designated Guarantor; in each case only if such property, Capital Stock
or other interest (i) is Collateral and (ii) also secures the Obligations of the
Company and the Designated Guarantor under the Credit Facility.
"subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (b) any partnership in which such Person or any of its subsidiaries is a
general partner.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guaranty" means an unconditional guaranty by a Subsidiary
Guarantor of the Obligations of the Company under the Notes and this Indenture,
as set forth herein, as amended from time to time in accordance with the terms
hereof.
"Subsidiary Guarantor" means any Wholly Owned Subsidiary that has
executed and delivered in accordance with this Indenture a Subsidiary Guaranty,
and such Person's successors and assigns.
"Thousand Oaks Transaction" means the sale-leaseback by the Spectrum
Club Company, Inc. of its property in Thousand Oaks, California pursuant to the
transaction contemplated by the letter of intent, dated January 4, 1999, with
Equity Advisory Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date hereof until such time as
this Indenture is qualified under the TIA, and thereafter as in effect on the
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<PAGE> 18
date on which this Indenture is qualified under the TIA, unless the context
requires reference thereto as in effect from time to time.
"transfer" has the meaning given to such term in the definition of the
term "Asset Sale."
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that, at or prior to the
time of determination, shall have been designated by the Board of Directors of
the Company as an Unrestricted Subsidiary; provided, that such Subsidiary does
not hold any Indebtedness or Capital Stock of, or any Lien on any assets of, the
Company or any Restricted Subsidiary. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary as of such date. The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the Interest
Coverage Ratio test set forth in Section 4.9 calculated on a pro forma basis as
if such designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default or Event of Default would be in existence following
such designation. The Company shall be deemed to make an Investment in each
Subsidiary designated as an Unrestricted Subsidiary immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation; provided, that if such
Subsidiary is subsequently redesignated as a Restricted Subsidiary, the amount
of such Investment shall be deemed to be reduced (but not below zero) by the
fair market value of the net consolidated assets of such Subsidiary on the date
of such redesignation. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a certified
copy of the Board of Directors resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complies with the
foregoing conditions and is permitted by Section 4.9.
"U.S. Government Obligations" means direct obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
"Voting Stock" means, with respect to any Person, (a) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the Board of Directors, managers or trustees of such
Person (regardless of whether at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) above.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years (rounded to the nearest
one-twelfth) obtained by dividing (a) the then outstanding principal amount of
such Indebtedness into (b) the total of the product obtained by multiplying (i)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means a subsidiary of such
Person all the Capital Stock of which is owned directly or indirectly by such
Person; provided, that with respect to the Company, the
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term Wholly Owned Subsidiary (a) shall exclude Unrestricted Subsidiaries (b)
shall include LA/Irvine Sports Clubs, Ltd ("LASC") so long as (i) LASC is both a
Restricted Subsidiary and Subsidiary Guarantor and (b) no amendment,
modification or supplement to any agreement or arrangement governing or relating
to such partnership is effected after the Issue Date that directly or indirectly
in any manner (x) increases the economic benefit to D. Michael Talla under such
agreements and arrangement as in effect on the Issue Date or (y) decreases the
economic benefit to the Company or any of its Subsidiaries under such agreements
and arrangements as in effect on the Issue Date.
Section 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Affiliate Transaction"............................ 4.11
"Change of Control Offer".......................... 4.14
"Change of Control Payment"........................ 4.14
"Change of Control Payment Date"................... 4.14
"Covenant Defeasance".............................. 8.3
"Definitive Notes"................................. 2.1
"Event of Default"................................. 6.1
"Excess Proceeds".................................. 4.10
"Excess Proceeds Offer"............................ 4.10
"Excess Proceeds Offer Period"..................... 4.10
"Excess Proceeds Payment Date"..................... 4.10
"Global Notes"..................................... 2.1
"incur"............................................ 4.9
"Legal Defeasance"................................. 8.2
"Paying Agent"..................................... 2.3; 8.5 (solely for
purposes of Section 8.5)
"Purchase Amount".................................. 4.10
"Refinance"........................................ 4.9
"Refinancing Indebtedness"......................... 4.9
"Registrar"........................................ 2.3
"Restricted Payments".............................. 4.7
"Security Interest"................................ 11.1
"Subsidiary Guaranty".............................. 10.1
</TABLE>
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
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<PAGE> 20
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, the Subsidiary Guarantors and
any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute, or defined by Commission rule under
the TIA have the meanings so assigned to them.
Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision, and the terms "Article," "Section," "Exhibit" and
"Schedule," unless otherwise specified or indicated by the context in
which used, mean the corresponding Article or Section of, or the
corresponding Exhibit or Schedule to, this Indenture;
(6) references to agreements and other instruments include
subsequent amendments, supplements and waivers to such agreements or
instruments but only to the extent not prohibited by this Indenture; and
(7) provisions apply to successive events and transactions.
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ARTICLE II
THE NOTES
Section 2.1 Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
incorporated in and made a part of this Indenture. Each Note shall include the
Subsidiary Guaranty executed by each of the Subsidiary Guarantors in the form of
Exhibit C attached hereto, the terms of which are incorporated in and made a
part of this Indenture. The Notes may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company is subject
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be issued in denominations of $1,000 and integral multiples thereof.
The Notes will be issued (i) in global form (the "Global Notes"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnote 1 thereto) and (ii) under certain circumstances, in
definitive form (the "Definitive Notes"), substantially in the form of Exhibit A
attached hereto (excluding the text referred to in footnote 1 thereto). Each
Global Note shall represent the aggregate amount of outstanding Notes from time
to time endorsed thereon; provided, that the aggregate amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Notes represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof, as required by Section
2.6.
Notes may not be issued with original issue discount as determined under
Section 1273 of the Internal Revenue Code of 1986, as amended.
Section 2.2 Execution and Authentication.
The Notes shall be executed on behalf of the Company, by manual or
facsimile signature, by its Chairman of the Board, its President or one of its
Vice Presidents and attested by another Officer by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time the Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A attached hereto.
The Trustee shall, upon a Company Order, authenticate for original issue
(i) up to $100,000,000 aggregate principal amount of Notes, and (ii) up to
$100,000,000 aggregate principal amount of Exchange Securities from time to time
for issue only in exchange for a like principal amount of Notes originally
issued. The aggregate principal amount of Notes (including Exchange Securities)
outstanding at any time may not exceed $100,000,000 except as provided in
Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authenticating by the Trustee includes
authenticating by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
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<PAGE> 22
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Note is registered as the owner of such Note
for the purpose of receiving payment of principal of and (subject to the
provisions of this Indenture and the Notes with respect to record dates)
interest on such Note and for all other purposes whatsoever, regardless of
whether such Note is overdue, and neither the Company, the Trustee nor any agent
of the Company or the Trustee shall be affected by notice to the contrary.
Section 2.3 Registrar, Paying Agent and Depository.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Company initially appoints the Trustee as Registrar and Paying Agent. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to appoint or maintain another entity as Registrar or
Paying Agent, the Trustee shall act as such. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar, except that for purposes of
Articles III and VIII and Sections 4.1, 4.10 and 4.14, neither the Company nor
any of its Subsidiaries shall act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Company initially appoints DTC to act as Depository with respect to
the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Notes.
Section 2.4 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes and shall notify the
Trustee in writing of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary of the
Company) shall have no further liability for the money delivered to the Trustee.
If the Company or a Subsidiary of the Company acts as Paying Agent (subject to
Section 2.3), it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent.
Section 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders,
including the aggregate principal amount of Notes held by each such Holder, and
the Company shall otherwise comply with TIA Section 312(a).
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<PAGE> 23
Section 2.6 Transfer and Exchange.
(1) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented by a Holder to the Registrar with a request (1) to
register the transfer of the Definitive Notes or (2) to exchange such
Definitive Notes for an equal principal amount of Definitive Notes of
other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided, that the Definitive Notes so presented
(A) have been duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such
Holder or by his attorney, duly authorized in writing; and (B) in the
case of a Restricted Security, such request shall be accompanied by the
following additional documents:
(1) if such Restricted Security is being delivered to the
Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification to that effect (in
substantially the form of Exhibit B attached hereto); or
(2) if such Restricted Security is being transferred to a
QIB in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification
to that effect (in substantially the form of Exhibit B attached
hereto); or
(3) if such Restricted Security is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and an
opinion of counsel reasonably acceptable to the Company and the
Registrar to the effect that such transfer is in compliance with
the Securities Act.
(2) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may be exchanged for a beneficial
interest in a Global Note only upon receipt by the Trustee of a
Definitive Note, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(1) written instructions directing the Trustee to make an
endorsement on the appropriate Global Note to reflect an
increase in the aggregate principal amount of the Notes
represented by such Global Note, and
(2) if such Definitive Note is a Restricted Security, a
certification (in substantially the form of Exhibit B attached
hereto) and, if applicable, a legal opinion, in each case
similar to that required pursuant to clauses (i), (ii) or (iii)
of Section 2.6(a), as applicable;
in which case the Trustee shall cancel such Definitive Note and cause
the aggregate principal amount of Notes represented by the appropriate
Global Note to be increased accordingly. If no Global Note is then
outstanding, the Company shall issue and the Trustee shall authenticate
a new Global Note in the appropriate principal amount.
(3) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture and
the procedures of the Depository therefor, which shall include
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act.
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<PAGE> 24
(4) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note. Upon receipt by the Trustee of written transfer
instructions (or such other form of instructions as is customary for the
Depository), from the Depository (or its nominee) on behalf of any
Person having a beneficial interest in a Global Note, the Trustee shall,
in accordance with the standing instructions and procedures existing
between the Depository and the Trustee, cause the aggregate principal
amount of Global Notes to be reduced accordingly and, following such
reduction, the Company shall execute and the Trustee shall authenticate
and deliver to the transferee a Definitive Note in the appropriate
principal amount; provided, that in the case of a Restricted Security,
such instructions shall be accompanied by the following additional
documents:
(1) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial
owner, a certification to that effect (in substantially the form
of Exhibit B attached hereto); or
(2) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification
to that effect (in substantially the form of Exhibit B attached
hereto); or
(3) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and an
opinion of counsel reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in compliance
with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a
Global Note shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Trustee.
(5) Transfer and Exchange of Global Notes. Notwithstanding any
other provision of this Indenture, the Global Note may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository; provided, that if:
(1) the Depository notifies the Company that the Depository
is unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days after
delivery of such notice; or
(2) the Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of
Definitive Notes under this Indenture,
then the Company shall execute and the Trustee shall authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
aggregate principal amount of the Global Note in exchange for such
Global Note.
(6) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in the Global Note have either been
exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
Global Note shall be returned to (or retained by) and cancelled by the
Trustee. At any time prior to such cancellation, if any beneficial
interest in the Global Note is exchanged for Definitive Notes, redeemed,
repurchased or cancelled, the aggregate principal amount of Notes
represented by such Global Note shall be reduced accordingly and an
endorsement shall be made on such Global Note by the Trustee to reflect
such reduction.
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<PAGE> 25
(7) General Provisions Relating to Transfers and Exchanges. To
permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Definitive Notes and Global
Notes at the Registrar's request. All Definitive Notes and Global Notes
issued upon any registration of transfer or exchange of Definitive Notes
or Global Notes shall be legal, valid and binding obligations of the
Company, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Definitive Notes or Global Notes
surrendered upon such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange (without transfer to
another person) pursuant to Sections 2.10, 3.7, 4.10, 4.14 and 9.5).
The Company shall not be required to (i) issue, register the
transfer of or exchange Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for
redemption under Section 3.2 and ending at the close of business on the
day of selection; or (ii) register the transfer of or exchange any Note
so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part; (iii) during a Change of
Control Offer or Excess Proceeds Offer if such Note is tendered pursuant
to such Change of Control Offer or Excess Proceeds Offer and not
withdrawn or (iv) register the transfer of or exchange a Note between a
record date and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of
such Note for all purposes, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(8) Exchange of Notes for Exchange Securities. Notes may be
exchanged for Exchange Securities pursuant to the terms of the Exchange
Offer. The Trustee and Registrar shall make the exchange as follows:
The Company shall present the Trustee with an Officers'
Certificate certifying the following:
(1) upon issuance of the Exchange Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(2) the principal amount of Notes properly tendered in the
Exchange Offer that are represented by a Global Note and the
principal amount of Notes properly tendered in the Exchange
Offer that are represented by Definitive Notes; the name of each
Holder of such Definitive Notes; the principal amount properly
tendered in the Exchange Offer by each such Holder; and the name
and address to which Definitive Notes for Exchange Securities
shall be registered and sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Exchange Securities have
been registered under Section 5 of the Securities Act and this Indenture
has been qualified under the TIA and (y) with respect to the matters set
forth in Section 5(p) of the Registration Rights Agreement and (iii) a
Company Order, shall authenticate (A) a Global Note for Exchange
Securities in aggregate principal amount equal to the aggregate
principal amount of Notes represented by a Global Note indicated in such
Officers' Certificate as having been
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<PAGE> 26
properly tendered and (B) Definitive Notes representing Exchange
Securities registered in the names of, and in the principal amounts
indicated in such Officers' Certificate.
The Trustee shall make available for delivery such Definitive
Notes for Exchange Securities to the Holders thereof as indicated in
such Officers' Certificate.
Section 2.7 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent or any authenticating
agent from any loss that any of them may suffer if a Note is replaced. The
Company or the Trustee may charge for its expenses in replacing a Note.
Every replacement Note is an obligation of the Company and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.8 as not outstanding.
If a Note is replaced pursuant to Section 2.7, the replaced Note ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.9, a Note does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Note.
Section 2.9 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Affiliate of the Company shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that a Responsible Officer of the Trustee knows to be so owned shall be
considered as not outstanding.
Section 2.10 Temporary Notes.
Pending the preparation of definitive Notes, the Company (and the
Subsidiary Guarantors) may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Notes that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as conclusively evidenced by their execution of such Notes.
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<PAGE> 27
If temporary Notes are issued, the Company (and the Subsidiary
Guarantors) shall cause definitive Notes to be prepared without unreasonable
delay. The definitive Notes shall be printed, lithographed or engraved, or
provided by any combination thereof, or in any other manner permitted by the
rules and regulations of any principal national securities exchange, if any, on
which the Notes are listed, all as determined by the Officers executing such
definitive Notes. After the preparation of definitive Notes, the temporary Notes
shall be exchangeable for definitive Notes upon surrender of the temporary Notes
at the office or agency maintained by the Company for such purpose pursuant to
Section 4.2, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Notes, the Company (and the Subsidiary Guarantors)
shall execute, and the Trustee shall authenticate and make available for
delivery, in exchange therefor the same aggregate principal amount of definitive
Notes of authorized denominations. Until so exchanged, the temporary Notes shall
in all respects be entitled to the same benefits under this Indenture as
definitive Notes.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment and
not previously received by the Trustee. The Trustee and no one else shall cancel
all Notes redeemed, paid or surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall retain or destroy cancelled Notes
in accordance with its normal practices (subject to the record retention
requirement of the Exchange Act) unless the Company directs them to be returned
to it. The Company may not issue new Notes to replace Notes that have been
redeemed or paid or that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at the earliest practicable
date but in all events at least ten Business Days prior to the payment date, in
each case at the rate provided in the Notes and in Section 4.1. The Company
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 30 days before the special record
date, the Company (or the Trustee, in the name of and at the expense of the
Company, upon 15 days written notice to the Trustee) shall mail to the Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
Section 2.13 Legends.
(1) Except as permitted by subsections (b) or (c) of this
Section 2.13, each Note shall bear legends relating to restrictions on
transfer pursuant to the securities laws in substantially the form set
forth on Exhibit A attached hereto.
(2) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented by a Global Note)
pursuant to Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities Act:
(1) in the case of any Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof
to exchange such Restricted Security for a Definitive Note that
does not bear the legends required by subsection (a) above; and
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<PAGE> 28
(2) in the case of any Restricted Security represented by a
Global Note, such Restricted Security shall not be required to
bear the legends required by subsection (a) above, but shall
continue to be subject to the provisions of Section 2.6(c);
provided, that with respect to any request for an exchange of a
Restricted Security that is represented by a Global Note for a
Definitive Note that does not bear the legends required by
subsection (a) above, which request is made in reliance upon
Rule 144, the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule 144.
(3) The Company (and the Subsidiary Guarantors) shall issue and
the Trustee shall authenticate Exchange Securities in exchange for Notes
accepted for exchange in the Exchange Offer. The Exchange Securities
shall not bear the legends required by subsection (a) above unless the
Holder of such Notes is either:
(1) a broker-dealer who purchased such Notes directly from
the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act,
(2) a Person participating in the distribution of the Notes,
or
(3) a Person who is an affiliate (as defined in Rule 144) of
the Company.
(4) each Note and Subsidiary Guaranty shall bear a legend
noting that the Obligations of the Designated Guarantors under
the Subsidiary Guaranties with respect to the Notes are subject
to the terms of the Intercreditor Agreement.
Section 2.14 Deposit of Moneys.
Subject to Section 3.5, prior to 10:00 a.m. Eastern time on each
date on which the principal of, premium, if any, and interest on the Notes are
due, the Company shall deposit with the Trustee or Paying Agent in immediately
available funds money sufficient to make cash payments, if any, due on such date
in a timely manner which permits the Trustee or such Paying Agent to remit
payment to the Holders on such date.
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee.
If the Company elects or is required to redeem Notes pursuant to Section
3.7 or 3.8, it shall furnish to the Trustee, at least 45 days but not more than
60 days before a redemption date (except in the case of a Required Regulatory
Redemption requiring less notice), an Officers' Certificate setting forth (i)
the clause of Section 3.7 or 3.8 pursuant to which the redemption shall occur,
(ii) the redemption date, (iii) the principal amount of Notes to be redeemed and
(iv) the redemption price.
Section 3.2 Selection of Notes to Be Redeemed.
If less than all the Notes are to be redeemed pursuant to Section 3.7,
the Trustee shall select the Notes to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, pro rata, by lot or by
such method as the Trustee deems to be fair and reasonable.
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<PAGE> 29
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date
(except in the case of a Required Regulatory Redemption requiring less notice),
the Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part only, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of the original Note, a new Note or
Notes in principal amount equal to the unredeemed portion shall be
issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on Notes or portions of Notes called for redemption
ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or the section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(8) the CUSIP number of the Notes to be redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the name of the Company and at the Company's expense; provided
that the Company shall deliver to the Trustee, at least 45 days (unless a
shorter period is acceptable to the Trustee) prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
Section 3.4 Effect of Notice of Redemption.
Once notice of redemption has been mailed to the Holders in accordance
with Section 3.3, Notes called for redemption become due and payable on the
redemption date at the redemption price. At any time prior to the mailing of a
notice of redemption to the Holders pursuant to Section 3.3, the Company may
withdraw, revoke or rescind any notice of redemption delivered to the Trustee
without any continuing obligation to redeem the Notes as contemplated by such
notice of redemption.
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<PAGE> 30
Section 3.5 Deposit of Redemption Price.
At or before 10:00 a.m. Eastern time on the redemption date, the Company
shall deposit with the Trustee (to the extent not already held by the Trustee)
or with the Paying Agent money in immediately available funds sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
Interest on the Notes to be redeemed shall cease to accrue on the
applicable redemption date, regardless of whether such Notes are presented for
payment, if the Company makes or deposits the redemption payment in accordance
with this Section 3.5. If any Note called for redemption shall not be paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes.
Section 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7 Optional Redemption.
(1) Except as set forth in Section 3.7(b), the Notes are not
redeemable at the Company's option prior to March 15, 2003. Thereafter,
the Notes will be subject to redemption at the option of the Company, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest
thereon, if any, to the applicable redemption date, if redeemed during
the 12-month period beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 105.688%
2004 102.844%
2005 and thereafter 100.000%
</TABLE>
(2) At any time or from time to time prior to March 15, 2002,
the Company may, at its option, redeem up to 35% of the original
principal amount of the Notes issued on or after the Issue Date, at a
redemption price of 111.375% of the principal amount thereof, plus
accrued and unpaid interest, if any, through the applicable redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided, that (I) such redemption shall occur within 60 days of the
date of closing of such Public Equity Offering and (ii) at least 65% of
the aggregate principal amount of Notes issued on or after the Issue
Date remains outstanding immediately after giving effect to each such
redemption.
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<PAGE> 31
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes.
The Company shall pay the principal and premium, if any, of, and
interest on, the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest shall be considered paid on the date
due if the Paying Agent, other than the Company or a Subsidiary of the Company,
holds on or before that date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due. Such Paying Agent shall return to the Company, no
later than three Business Days following the date of payment, any money that
exceeds such amount of principal, premium, if any, and interest then due and
payable on the Notes. The Company shall pay any and all amounts, including,
without limitation, Liquidated Damages, if any, on the dates and in the manner
required under the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest) on
overdue principal at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; it shall pay
interest (including post-petition interest) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.2 Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office
of the Trustee, Registrar or co-registrar) in the Borough of Manhattan, the City
of New York, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.3.
Section 4.3 Reports.
(1) The Company shall file with the Trustee, within 15 days
after the date of filing with the Commission, copies of the reports,
information and other documents (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe)
that the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. If the Company is not subject
to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Trustee all such reports, information and
other documents as it would be required to file if it were subject to
the requirements of Section 13 or 15(d) of the Exchange Act, within the
period applicable to such report, information or other document pursuant
to the Exchange
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<PAGE> 32
Act. From and after the time the Company files a registration statement
with the Commission with respect to the Notes, the Company shall file
such information with the Commission; provided, that the Company shall
not be in default of the provisions of this Section 4.3 for any failure
to file reports with the Commission solely by refusal by the Commission
to accept the same for filing. The Company shall deliver (or cause the
Trustee to deliver) copies of all reports, information and documents
required to be filed with the Trustee pursuant to this Section 4.3 to
the Holders at their addresses appearing in the register of Notes
maintained by the Registrar. The Company shall also comply with the
provisions of TIA Section 314(a).
(2) If the Company is required to furnish annual, quarterly or
current reports to its stockholders pursuant to the Exchange Act, the
Company shall cause any annual, quarterly, current or other financial
report furnished by it generally to its stockholders to be filed with
the Trustee and mailed to the Holders by the Company at their addresses
appearing in the register of Notes maintained by the Registrar. If the
Company is not required to furnish annual, quarterly or current reports
to its stockholders pursuant to the Exchange Act, the Company shall
cause the financial statements of the Company and its consolidated
Subsidiaries, including any notes thereto (and, with respect to annual
reports, an auditors' report by an accounting firm of established
national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," comparable to that which
would have been required to appear in annual or quarterly reports filed
under Section 13 or 15(d) of the Exchange Act to be so filed with the
Trustee and mailed to the Holders by the Company promptly, but in any
event, within 90 days after the end of each of the fiscal years of the
Company and within 45 days after the end of each of the first three
quarters of each such fiscal year.
(3) So long as is required for an offer or sale of the Notes to
qualify for an exemption under Rule 144A, the Company (and the
Subsidiary Guarantors) shall, upon request, provide the information
required by clause (d)(4) thereunder to each Holder and to each
beneficial owner and prospective purchaser of Notes identified by any
Holder of Restricted Securities.
Section 4.4 Compliance Certificate.
(1) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate (provided
that one of the signatories to such Officers' Certificate shall be the
Company's principal executive officer, principal financial officer or
principal accounting officer) stating that a review of the activities of
the Company and its Subsidiaries during the preceding fiscal year has
been made under the supervision of the signing Officers with a view to
determine whether each has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that each of the Company and its
Subsidiaries has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions
hereof or thereof (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he
may have knowledge and what action each is taking or proposes to take
with respect thereto).
(2) The year-end financial statements delivered pursuant to
Section 4.3 shall be accompanied by a written statement of the
independent public accountants of the Company (which shall be a firm of
established national reputation reasonably satisfactory to the Trustee)
that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would
lead them to believe that either the Company or any of its Subsidiaries
has violated any provisions of this Indenture or, if any such violation
has occurred, specifying the
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<PAGE> 33
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(3) So long as any of the Notes are outstanding, the Company
shall deliver to the Trustee forthwith upon any Officer becoming aware
of (i) any Default or Event of Default or (ii) any event of default
under any mortgage, indenture or instrument referred to in Section
6.1(a)(v), an Officers' Certificate specifying such Default, Event of
Default or other event of default and what action the Company is taking
or proposes to take with respect thereto.
Section 4.5 Taxes.
The Company shall, and shall cause its Subsidiaries to, file all tax
returns required to be filed and to pay prior to delinquency all material taxes,
assessments and governmental levies except as contested in good faith and by
appropriate proceedings and for which reserves have been established in
accordance with GAAP.
Section 4.6 Stay, Extension and Usury Laws.
The Company (and each Subsidiary Guarantor) covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, usury or other law, wherever enacted, now or at any time hereafter in
force, that would prohibit or forgive the payment of all or any portion of the
principal of or interest on the Notes, or that may affect the covenants or the
performance of this Indenture, and the Company and each Subsidiary Guarantor (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it shall not, by resort to any such
law, hinder, delay or impede the execution of any power herein granted to the
Trustee but shall suffer and permit the execution of every such power as though
no such law has been enacted.
Section 4.7 Limitation on Restricted Payments.
(1) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly (i) declare or pay
any dividend or make any distribution on account of any Equity Interests
of the Company or any of its Subsidiaries (other than (A) dividends or
distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or (B) amounts payable to the Company or any
Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interest of the Company, any Subsidiary or
any other Affiliate of the Company (other than (x) any such Equity
Interest owned by the Company or any Subsidiary Guarantor and (y) the
purchase of partnership interests in the Partnership Entities
outstanding on the Issue Date in compliance with Section 4.11); (iii)
make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness of the Company or any
Subsidiary Guarantor that is expressly subordinated in right of payment
to the Notes or such Subsidiary Guarantor's Subsidiary Guaranty thereof,
as the case may be, prior to any scheduled principal payment, sinking
fund payment or other payment at the stated maturity thereof or (iv)
make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to
as "Restricted Payments"), unless, at the time of such Restricted
Payment:
(1) no Default or Event of Default has occurred and is
continuing or would occur as a consequence thereof,
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<PAGE> 34
(2) immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur at least
$1.00 of additional Indebtedness under the Interest Coverage
Ratio test set forth in Section 4.9(a), and
(3) such Restricted Payment (the value of any such payment,
if other than cash, being determined in good faith by the Board
of Directors of the Company and evidenced by a resolution set
forth in an Officers' Certificate delivered to the Trustee),
together with the aggregate of all other Restricted Payments
made after the Issue Date (including Restricted Payments
permitted by clauses (i) and (ii) of Section 4.7(b) and
excluding Restricted Payments permitted by the other clauses of
Section 4.7(b)), is less than the sum of:
(1) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the
Issue Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit,
100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds (and of the
net cash proceeds received upon the conversion of non-cash
proceeds into cash) received by the Company from the
issuance or sale, other than to a Subsidiary, of Equity
Interests of the Company (other than Disqualified Stock)
after the Issue Date and on or prior to the time of such
Restricted Payment, plus
(3) 100% of the aggregate net cash proceeds from the
issuance or sale, other than to a Subsidiary, of any
convertible or exchangeable debt security of the Company
that has been converted or exchanged into Equity Interests
of the Company (other than Disqualified Stock) pursuant to
the terms thereof after the Issue Date and on or prior to
the time of such Restricted Payment (including any
additional net proceeds received by the Company upon such
conversion or exchange).
(2) The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such
payment would not have been prohibited by the provisions of this
Indenture;
(2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any
Restricted Subsidiary in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a
Subsidiary) of, other Equity Interests of the Company (other
than Disqualified Stock);
(3) the repurchase, retirement or other acquisition for
value of common stock of the Company held by any future, present
or former employee of the Company or any Restricted Subsidiary
or the estate, heirs or legatees of, or any entity controlled
by, any such employee, pursuant to (A) any bona fide management
equity plan or stock option plan, (B) any other management or
employee benefit plan or (C) agreement in connection with the
termination of such person's employment for any reason
(including by reason of death or
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<PAGE> 35
disability); provided, that the aggregate amount of Restricted
Payments made under this clause (iii) does not exceed $500,000
in any calendar year;
(4) the redemption, repurchase or payoff of any Indebtedness
of the Company or a Restricted Subsidiary with proceeds of any
Refinancing Indebtedness permitted to be incurred pursuant to
Section 4.9;
(5) distributions to the partners of the Partnership
Entities, in each case in accordance with their respective
interests pursuant to the terms of the respective Partnership
Agreements;
(6) the repurchase by HFA Services, Inc. of up to 15,000
shares of its common stock subject to options (or the underlying
options) outstanding on the Issue Date, pursuant to that certain
Shareholder Agreement dated July 1, 1997, or any amendment,
modification or supplement thereto; provided, that such
amendment, modification or supplement does not decrease the
exercise price of such options or increase the amount payable in
respect of such repurchase; and
(7) Restricted Investments in an aggregate amount not to
exceed (x) $5 million less (y) any Restricted Payments made on
or after March 1, 1999 and on or prior to the Issue Date;
provided, that (A) no Default or Event of Default shall have
occurred and be continuing at the time, or shall occur as a
consequence thereof and (B) if any Person in which such
Restricted Investment is made, pays or makes any dividend or
distribution to the Person that made such Restricted Investment,
the aggregate amount of such dividends and distributions not
exceeding the original cost of such Restricted Investment will
replenish the amount of Restricted Investments permitted to be
made pursuant to this clause (vii).
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating
that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.7 were computed,
which calculations may be based upon the Company's latest available
financial statements.
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<PAGE> 36
Section 4.8 Limitation on Restrictions on Subsidiary Dividends.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(a) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries (i) on such Restricted
Subsidiary's Capital Stock or (ii) with respect to any other
interest or participation in, or measured by, such Restricted
Subsidiary's profits, or
(b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, or
(c) make loans or advances to the Company or any of its
Restricted Subsidiaries, or
(d) transfer any of its assets to the Company or any of its
Restricted Subsidiaries,
except, with respect to clauses (a) through (d) above, for such
encumbrances or restrictions existing under or by reason of:
(1) the Credit Facility as in effect on the Issue Date,
or any amendments, modifications, supplements,
refinancings or replacements thereof containing dividend
or other payment restrictions that are not more
restrictive than those contained in the documents
governing the Credit Facility, as in effect on the Issue
Date;
(2) this Indenture, the Security Agreements, the
Disbursement Agreement and the Notes;
(3) applicable law;
(4) Acquired Debt; provided, that such encumbrances and
restrictions are not applicable to any Person, or the
properties or assets of any Person, other than the
Person, or the property or assets of the Person, so
acquired;
(5) customary non-assignment, subletting and net worth
provisions of any contract or lease entered into in the
ordinary course of business;
(6) customary restrictions on the transfer of assets
subject to a Permitted Lien imposed by the holder of
such Lien;
(7) Indebtedness incurred by the Partnership Entities
pursuant to Section 4.9(b)(i) provided, that such
restrictions are ordinary and customary with respect to
the type of Indebtedness being incurred and are not
applicable to any Person other than the Partnership
Entity incurring such Indebtedness;
(8) the agreements governing permitted Refinancing
Indebtedness; provided, that such restrictions contained
in any agreement governing such Refinancing Indebtedness
are no more restrictive than those contained in any
agreements governing the Indebtedness being refinanced;
and
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<PAGE> 37
(9) an agreement for the sale or disposition of assets or
the Capital Stock of such Restricted Subsidiary; provided,
that such restriction or encumbrance is (i) only
applicable to such Restricted Subsidiary or assets, as
applicable, and (ii) effective only for a period from the
execution and delivery of such agreement through a
termination date not later than 270 days after such
execution and delivery.
Section 4.9 Limitation on Incurrence of Indebtedness.
(1) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, (i) create, incur,
issue, assume, guaranty or otherwise become directly or indirectly
liable with respect to, contingently or otherwise (collectively,
"incur"), any Indebtedness (including, without limitation, Acquired
Debt) or (ii) issue any Disqualified Stock; provided, that the Company
may incur Indebtedness (including, without limitation, Acquired Debt)
and issue shares of Disqualified Stock (and a Restricted Subsidiary may
incur Acquired Debt) if (w) no Default or Event of Default shall have
occurred and be continuing at the time of, or would occur after giving
effect on a pro forma basis to, such incurrence or issuance, (x) the
Rent Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been not less
than 1.0x, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter
period, (y) the Interest Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been at least equal to the ratio set forth below opposite the period in
which such incurrence or issuance occurs, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom),
as if the additional Indebtedness had been incurred, or the Disqualified
Stock had been issued, as the case may be, at the beginning of such
four-quarter period:
<TABLE>
<CAPTION>
Period Ending Ratio
- ------------- -----
<S> <C>
December 31, 2000......................................... 2.00x
December 31, 2002......................................... 2.25x
Thereafter................................................ 2.50x
</TABLE>
and (z) in the case of Indebtedness (other than Purchase Money
Obligations, Capital Lease Obligations or Acquired Debt), the Weighted
Average Life to Maturity and final stated maturity of such Indebtedness
is equal to or greater than the Weighted Average Life to Maturity and
final stated maturity of the Notes.
(2) Notwithstanding the foregoing, the limitations of Section
4.9(a) shall not prohibit the incurrence of:
(1) Indebtedness of the Company and its Restricted
Subsidiaries (including, without limitation, Indebtedness
outstanding under the Credit Facility and Indebtedness of the
Partnership Entities); provided, that the aggregate principal
amount of Indebtedness so incurred on any date, together with
the principal amount of all other Indebtedness incurred
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<PAGE> 38
pursuant to this clause (i) and outstanding on such date, shall
not exceed $20,000,000 less the aggregate amount of commitment
reductions contemplated by clause (iii) of the first paragraph
of Section 4.10(a);
(2) Equipment Financing, in an aggregate amount not to
exceed $10,000,000 at any time outstanding;
(3) performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations
(including Obligations under letters of credit) incurred in the
ordinary course of business;
(4) Hedging Obligations incurred to fix the interest rate on
any variable rate Indebtedness otherwise permitted by this
Indenture; provided, that the notional principal amount of each
such Hedging Obligation does not exceed the principal amount of
the Indebtedness to which such Hedging Obligation relates;
(5) so long as no Default exists, intercompany receivables
between the Company and any Restricted Subsidiary incurred in
connection with cash management activities in the ordinary
course of business, consistent with past practices; provided,
that each such receivable owed by the Company shall be
eliminated by an intercompany dividend or distribution within 45
days after the end of the fiscal quarter in which it was
incurred except to the extent such dividend or distribution is
prohibited by applicable law;
(6) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date (other than Equipment Financing),
including the Notes outstanding on the Issue Date and the
Subsidiary Guaranties thereof, and Subsidiary Guaranties issued
after the Issue Date; or
(7) Indebtedness of the Company or any Restricted Subsidiary
issued in exchange for, or the proceeds of which are
contemporaneously used to extend, refinance, renew, replace, or
refund (collectively, "Refinance"), Indebtedness of such Person
incurred pursuant to the Interest Coverage Ratio test set forth
in Section 4.9(a) or Section 4.9(b)(vi) or pursuant to this
clause (vii) (collectively, the "Refinancing Indebtedness");
provided, that (1) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of
Indebtedness so Refinanced (including any required premiums and
out-of-pocket expenses reasonably incurred in connection
therewith), (2) the Refinancing Indebtedness has a final
scheduled maturity that equals or exceeds the final stated
maturity, and a Weighted Average Life to Maturity that is equal
to or greater than the Weighted Average Life to Maturity, of the
Indebtedness being Refinanced and (3) the Refinancing
Indebtedness ranks, in right of payment, no more favorable to
the Notes than the Indebtedness being Refinanced.
Section 4.10 Limitation on Asset Sales.
(1) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale not less
than the fair market value of the assets subject to such
Asset Sale;
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(ii) at least 80% of the consideration for such Asset
Sale is in the form of cash or Cash Equivalents or
liabilities of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms
subordinated to the Notes or any Subsidiary Guaranty)
that are assumed by the transferee of such assets
(provided, that following such Asset Sale there is no
further recourse to the Company or its Restricted
Subsidiaries with respect to such liabilities); and
(iii) within 360 days of such Asset Sale, the Net
Proceeds thereof are (A) applied to repay Indebtedness
under the Credit Facility (and permanently reduce, in an
amount equal to the full amount of such payment, amounts
available to be borrowed thereunder), (B) invested in
assets related to the business of the Company or its
Restricted Subsidiaries; (C) applied to repay Purchase
Money Obligations (or Refinancing Indebtedness incurred
to Refinance such Purchase Money Obligations) secured by
the asset sold; or (D) to the extent not used as
provided in clauses (A), (B) or (C), applied to make an
offer to purchase Notes as described below (an "Excess
Proceeds Offer"); provided, that the Company shall not
be required to make an Excess Proceeds Offer until the
amount of Excess Proceeds is greater than $10,000,000.
Notwithstanding the foregoing, the Net Proceeds of any
Asset Sale of the Thousand Oaks Spectrum Club or the
Santa Ana Spectrum Club shall not be required to be
reinvested within 360 days to the extent such Net
Proceeds remain deposited in the Disbursement Account.
The foregoing provisions in (i) or (ii) above shall not apply to
an Event of Loss. Notwithstanding clause (iii), above, within 30 days of
an Asset Sale of The Sports Club/LA or the Upper East Side Club, the
Company shall use the Net Proceeds thereof to make an Excess Proceeds
Offer.
Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Indebtedness under the Credit Facility or
temporarily invest such Net Proceeds in Investments described under
clauses (a) or (b) of the definition of Permitted Investments in Section
1.1 hereof.
Net Proceeds not invested or applied as set forth in the
preceding clauses (A), (B) and (C) constitute "Excess Proceeds." If the
Company elects, or becomes obligated to make an Excess Proceeds Offer,
the Company shall offer to purchase Notes having an aggregate principal
amount equal to the Excess Proceeds (the "Purchase Amount"), at a
purchase price equal to 100% of the aggregate principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date. The
Company must commence such Excess Proceeds Offer not later than 30 days
after the expiration of the 360 day period following the Asset Sale that
produced such Excess Proceeds. If the aggregate purchase price for the
Notes tendered pursuant to the Excess Proceeds Offer is less than the
Excess Proceeds, the Company and its Restricted Subsidiaries may use the
portion of the Excess Proceeds remaining after payment of such purchase
price for general corporate purposes.
Each Excess Proceeds Offer shall remain open for a period of 20
Business Days and no longer, unless a longer period is required by law
(the "Excess Proceeds Offer Period"). Promptly after the termination of
the Excess Proceeds Offer Period (the "Excess Proceeds Payment Date"),
the Company shall purchase and mail or deliver payment for the Purchase
Amount for the Notes or portions thereof tendered, pro rata or by such
other method as may be required by law, or, if less than the Purchase
Amount has been tendered, all Notes tendered pursuant to the Excess
Proceeds Offer. The principal amount of Notes to be purchased pursuant
to an Excess Proceeds Offer may be reduced by the principal amount of
Notes acquired by the Company through purchase or
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redemption (other than pursuant to a Change of Control Offer) subsequent
to the date of the Asset Sale and surrendered to the Trustee for
cancellation.
Each Excess Proceeds Offer shall be conducted in compliance with
all applicable laws, including, without limitation, Regulation 14E under
the Exchange Act and all other applicable federal and state securities
laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.10, the
Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this
Section 4.10 by virtue thereof. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, create or suffer to exist
or become effective any restriction that would impair the ability of the
Company to make an Excess Proceeds Offer upon an Asset Sale or, if such
Excess Proceeds Offer is made, to pay for the Notes tendered for
purchase.
(2) The Company shall, no later than 30 days following the
expiration of the 360-day period following the Asset Sale that produced
Excess Proceeds, commence the Excess Proceeds Offer by mailing to the
Trustee and each Holder, at such Holder's last registered address, a
notice, which shall govern the terms of the Excess Proceeds Offer, and
shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.10, the principal amount of Notes which shall be
accepted for payment and that all Notes validly tendered shall
be accepted for payment on a pro rata basis;
(2) the purchase price and the date of purchase;
(3) that any Notes not tendered or accepted for payment
pursuant to the Excess Proceeds Offer shall continue to accrue
interest in accordance with the terms thereof;
(4) that, unless the Company defaults in the payment of the
purchase price with respect to any Notes tendered, Notes
accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest after the Excess Proceeds Payment Date;
(5) that Holders electing to have Notes purchased pursuant
to an Excess Proceeds Offer shall be required to surrender their
Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company
prior to the close of business on the third Business Day
immediately preceding the Excess Proceeds Payment Date;
(6) that Holders shall be entitled to withdraw their
election if the Company receives, not later than the close of
business on the second Business Day preceding the Excess
Proceeds Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount of Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have
such Notes purchased;
(7) that Holders whose Notes are purchased only in part
shall be issued Notes representing the unpurchased portion of
the Notes surrendered; provided that each Note purchased and
each new Note issued shall be in principal amount of $1,000 or
whole multiples thereof; and
(8) the instructions that Holders must follow in order to
tender their Notes.
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On or before the Excess Proceeds Payment Date, the Company shall
(i) accept for payment the Notes or portions thereof (or an allocable
amount thereof) tendered pursuant to the Excess Proceeds Offer, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price
of all Notes or portions thereof so accepted and (iii) deliver to the
Trustee the Notes so accepted, together with an Officers' Certificate
stating that the Notes or portions thereof (or an allocable amount
thereof) tendered to the Company are accepted for payment. The Paying
Agent shall promptly mail to each Holder of Notes so accepted payment in
an amount equal to the purchase price of such Notes, and the Trustee
shall promptly authenticate and mail to such Holders new Notes equal in
principal amount to any unpurchased portion of the Notes surrendered.
After payment to the Holders of the purchase price of all Notes or
portions thereof so accepted, the Paying Agent shall deliver promptly to
the Company the balance, if any, of any money so deposited by the
Company with the Paying Agent remaining after such payment to the
Holders.
The Company shall make a public announcement of the results of
the Excess Proceeds Offer as soon as practicable after the Excess
Proceeds Payment Date. For the purposes of this Section 4.10, the
Trustee shall act as the Paying Agent.
The foregoing provisions of this Section 4.10 shall not apply to
a transaction consummated in compliance with Article V hereof.
Section 4.11 Limitation on Transactions With Affiliates.
(1) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guaranty with, or for the
benefit of, any Affiliate (other than the Company or a Wholly Owned
Subsidiary of the Company) (each of the foregoing, an "Affiliate
Transaction"), except for:
(1) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$2,000,000; provided, that (i) such transactions are conducted
in good faith and on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction at such
time by the Company or such Restricted Subsidiary on an
arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary; and (ii) prior to
entering into such transaction the Company shall have delivered
to the Trustee an Officers' Certificate certifying to such
effect;
(2) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$5,000,000; provided, that (i) a majority of the disinterested
members of the Board of Directors of the Company determines that
such transactions are conducted in good faith and on terms that
are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a
comparable transaction at such time by the Company or such
Restricted Subsidiary on an arm's-length basis from a Person
that is not an Affiliate of the Company or such Restricted
Subsidiary; and (ii) prior to entering into such transaction the
Company shall have delivered to the Trustee an Officers'
Certificate certifying to such effect; and
(3) Affiliate Transactions for which the Company delivers to
the Trustee an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by
an investment banking firm of national standing or in the case
of the
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sale or lease of real property, an appraisal from an MAI
certified appraiser employed by a real estate appraisal firm of
national standing.
(2) Notwithstanding the foregoing, the following will be deemed
not to be Affiliate Transactions:
(1) employment agreements, arrangements and plans (including
stock plans) entered into by the Company or any Restricted
Subsidiary (and the granting of awards and customary benefits
thereunder) in each case in the ordinary course of business with
the approval of the disinterested members of the Board of
Directors of the Company or, if none, unanimously by such Board
of Directors;
(2) Restricted Payments permitted by Section 4.7 hereof;
(3) reasonable and customary fees and compensation paid to
and indemnity provided on behalf of, directors of the Company;
(4) the performance by the Company or its Restricted
Subsidiaries of any of their obligations under the Partnership
Agreements as in effect on the Issue Date;
(5) the performance of services by a Wholly-Owned Subsidiary
of the Company in the ordinary course of business, consistent
with past practice (and the receipt of payment therefor)
pursuant to the management agreements governing the management
of the Manhattan Beach Spectrum Club and the Reebok Sports
Club/NY, each as in effect on the Issue Date, or as thereafter
amended, modified or supplemented; provided, that, the
amendment, modification or supplement thereto does not result in
terms any less favorable to the Wholly-Owned Subsidiary managing
such Club than the terms in existence immediately prior to such
amendment, modification or supplement;
(6) the Thousand Oaks Transaction;
(7) the performance by the Company or its Restricted
Subsidiaries of their obligations under the following agreements
with Millennium or Affiliates of Millennium: (1) that certain
Agreement of Lease, dated June 3, 1992, governing the lease of
the Reebok Sports Club/NY; (2) leases entered into with
Millennium with respect to the San Francisco Club, the Boston
Club and the Washington, D.C. Club; provided, that such leases
are no less favorable to the Company and the Restricted
Subsidiaries than those described in the Offering Circular under
the caption "Certain Relationships and Related Transactions --
Millennium"; and (3) that certain Agreement of Lease, dated
December 31, 1997 (the "Fullerton/Santa Ana Lease Agreement"),
governing the lease of the property on which the Fullerton Club
is located (the "Fullerton Land") and the lease of the property
on which the Santa Ana Club is located (the "Santa Ana Land"),
each as in effect on the Issue Date or as thereafter amended,
modified or supplemented in the case of clauses (1) and (3);
provided, that no such amendment, modification or supplement,
directly or indirectly, shall result in terms any less favorable
to the Company or its Restricted Subsidiaries than the terms in
existence immediately prior to such amendment, modification or
supplement;
(8) the purchase by the Company of the Santa Ana Land and of
Millennium's leasehold interest in the Fullerton Land pursuant
to the Fullerton/Santa Ana Lease Agreement; and
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(9) the performance by the Company of its obligations under
the registration and pre-emptive rights granted to Millennium
pursuant to (1) that certain letter agreement dated March 13,
1997, as amended in writing June 10, 1997, and as corrected by
letter agreement dated April 28, 1998; and (2) that certain
letter agreement dated December 29, 1997.
Section 4.12 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset (including, without limitation, all real, tangible or intangible
property) of the Company or any Restricted Subsidiary, whether now owned or
hereafter acquired, or on any income or profits therefrom, or assign or convey
any right to receive income therefrom, except Permitted Liens.
Section 4.13 Corporate Existence.
Subject to Article V, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with their respective organizational documents (as
the same may be amended from time to time) and (ii) its (and its Subsidiaries')
rights (charter and statutory), licenses and franchises; provided, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any Subsidiary, if the Board
of Directors on behalf of the Company shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries taken as a whole and that the loss thereof is
not adverse in any material respect to the Holders.
Section 4.14 Repurchase Upon a Change of Control.
(1) Upon the occurrence of a Change of Control, the Company
shall notify the Trustee in writing thereof and shall make an offer to
purchase all of the Notes then outstanding as described below (the
"Change of Control Offer") at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase (the "Change of Control Payment").
(2) The Change of Control Offer shall be made in compliance with
all applicable laws, including, without limitation, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable
Federal and state securities laws. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of this
Section 4.14, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.14 by virtue thereof.
(3) Within 20 days following any Change of Control, the Company
shall commence the Change of Control Offer by mailing to the Trustee and
each Holder a notice, which shall govern the terms of the Change of
Control Offer, and shall state:
(1) that the Change of Control Offer is being made pursuant
to this Section 4.14 and that all Notes tendered will be
accepted for payment;
(2) the purchase price and the purchase date, which shall be
a Business Day no earlier than 30 days nor later than 45 days
from the date such notice is mailed (the "Change of Control
Payment Date");
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(3) that any Note not tendered for payment pursuant to the
Change of Control Offer shall continue to accrue interest in
accordance with the terms thereof;
(4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue
interest on the Change of Control Payment Date;
(5) that any Holder electing to have Notes purchased
pursuant to a Change of Control Offer shall be required to
surrender such Notes, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change
of Control Payment Date;
(6) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount of Notes such Holder delivered for purchase, and a
statement that such Holder is withdrawing its election to have
such Notes purchased;
(7) that a Holder whose Notes are being purchased only in
part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an
integral multiple thereof;
(8) the instructions that Holders must follow in order to
tender their Notes; and
(9) the circumstances and relevant facts regarding such
Change of Control.
(4) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment the Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect
of all Notes or portions thereof so tendered and not withdrawn, and
(iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating that the Notes
or portions thereof tendered to the Company are accepted for payment.
The Paying Agent shall promptly mail to each Holder of Notes so accepted
payment in an amount equal to the purchase price for such Notes, and the
Trustee shall authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any, provided, that
each such new Note will be in principal amount of $1,000 or an integral
multiple thereof.
(5) The Company shall make a public announcement of the results
of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. For the purposes of this Section 4.14,
the Trustee shall act as the Paying Agent.
(6) The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth in this Section 4.14 and purchases all
Notes validly tendered and not withdrawn under such Change of Control
Offer.
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Section 4.15 Maintenance of Properties.
The Company shall, and shall cause each of its Subsidiaries to, maintain
their properties and assets in normal working order and condition as on the date
of this Indenture (reasonable wear and tear excepted) and make all necessary
repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of the business
of the Company and its Subsidiaries taken as a whole; provided, that nothing
herein shall prevent the Company or any of its Subsidiaries from discontinuing
any maintenance of any such properties if the Company determines that such
discontinuance is desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole.
Section 4.16 Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to, maintain
liability, casualty and other insurance (including self-insurance consistent
with prior practice) with responsible insurance companies in such amounts and
against such risks as is in accordance with customary industry practice in the
general areas in which the Company and its Subsidiaries operate.
Section 4.17 Restrictions on Sale and Issuance of Subsidiary Stock.
The Company shall not, and shall not permit any Restricted Subsidiary
to, issue or sell any Equity Interests of any Restricted Subsidiary to any
Person other than the Company or a Wholly Owned Subsidiary of the Company;
provided, that the Company and its Restricted Subsidiaries may sell all (but not
less than all) of the Capital Stock of a Restricted Subsidiary owned by the
Company and its Restricted Subsidiaries if the Net Proceeds from such Asset Sale
are used in accordance with the terms of Section 4.10.
Section 4.18 Limitation on Lines of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly engage to any substantial extent in any
line or lines of business activity other than that which, in the reasonable good
faith judgment of the Board of Directors of the Company, is a Related Business.
The Company shall not permit the Designated Guarantors to own any material
assets other than (i) the Shared Collateral and (ii) equipment encumbered by
Liens contemplated by clause (h) of the definition of Permitted Liens.
Section 4.19 Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into any Sale-Leaseback Transaction (other
than the Thousand Oaks Transaction), unless: (a) immediately prior to such
transaction the Company could have incurred Indebtedness under the Interest
Coverage Ratio test set forth in Section 4.9(a) in an amount equal to the
Attributable Indebtedness in respect of such transaction and (b) the gross cash
proceeds received by the Company or a Restricted Subsidiary, as the case may be,
from such sale equals or exceeds the fair market value of the property sold in
such transaction.
ARTICLE V
SUCCESSORS
Section 5.1 When the Company May Merge, etc.
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The Company shall not consolidate or merge with or into (regardless of
whether the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, any other Person unless:
(1) the Company is the surviving Person or the Person formed by
or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition has been made is a corporation organized and
existing under the laws of the United States, any state thereof or the
District of Columbia,
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition has been
made assumes all the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee,
under the Notes, this Indenture, the Security Agreements and the
Registration Rights Agreement,
(3) immediately after giving effect to such transaction on a pro
forma basis, no Default or Event of Default exists or would occur, and
(4) the Company, or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made, (A) has
Consolidated Net Worth (immediately after the transaction but prior to
any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will be permitted, at the
time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable
four-quarter period, to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.9(a).
The Company shall deliver to the Trustee prior to the consummation of
any proposed transaction an Officers' Certificate to the foregoing effect, an
Opinion of Counsel, stating that all conditions precedent to the proposed
transaction provided for in this Indenture have been complied with, and a
written statement from a firm of independent public accountants of established
national reputation reasonably satisfactory to the Trustee stating that the
proposed transaction complies with clause (d) of this Section 5.1.
For purposes of this Section 5.1, the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the properties
and assets of one or more Subsidiaries of the Company, which properties and
assets, if held by the Company instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of the Company on a
consolidated basis, shall be deemed to be the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the properties
and assets of the Company.
Section 5.2 Successor Substituted.
In the event of any transaction (other than a lease) contemplated by
Section 5.1 in which the Company is not the surviving Person, the successor
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, conveyance or other disposition is made,
or formed by such reorganization, as the case may be, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under,
and the Company shall be discharged from its Obligations under, this Indenture,
the Notes, the Security Agreements and the Registration Rights Agreement, with
the same effect as if such successor Person had been named as the Company herein
or therein.
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ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
(1) "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal (or
premium, if any) on any Note when the same becomes due and
payable at maturity, upon redemption, by acceleration, in
connection with an Excess Proceeds Offer or a Change of Control
Offer or otherwise;
(3) the Company defaults in the performance of or breaches
the provisions of Sections 4.10, 4.14 or 4.19 or Article V;
(4) the Company or any Subsidiary Guarantor fails to comply
with any of its other agreements or covenants in, or provisions
of, the Notes or this Indenture and the Default continues for 30
days after written notice thereof has been given to the Company
by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the then
outstanding Notes, such notice to state that it is a "Notice of
Default;"
(5) a default occurs under (after giving effect to any
waivers, amendments, applicable grace periods or any extension
of any maturity date) any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company
or any Restricted Subsidiary (or the payment of which is
guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness or guarantee now exists or is created after
the Issue Date, if (a) either (i) such default results from the
failure to pay principal of or interest on such Indebtedness
when the same becomes due or (ii) as a result of such default
the maturity of such Indebtedness has been accelerated, and (b)
the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness with respect to
which such a payment default (after the expiration of any
applicable grace period or any extension of the maturity date)
has occurred, or the maturity of which has been so accelerated,
exceeds $5,000,000 in the aggregate;
(6) a final non-appealable judgment or judgments for the
payment of money (other than judgments as to which a reputable
insurance company has accepted full liability) is or are entered
by a court or courts of competent jurisdiction against the
Company or any Subsidiary and such judgment or judgments remain
undischarged, unbonded or unstayed for a period of 60 days after
entry, provided that the aggregate of all such judgments exceeds
$5,000,000;
(7) repudiation by the Company or any Subsidiary of its
obligations under this Indenture, the Notes, the Security
Agreements or the Subsidiary Guaranties, or the unenforceability
of this Indenture, the Notes, the Security Agreements or the
Subsidiary Guaranties against the Company or any of the
Subsidiaries for any reason;
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(8) any event of default under the Security Agreements or
the Disbursement Agreement;
(9) the Company or any Subsidiary Guarantor pursuant to or
within the meaning of any Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief
against it in an involuntary case,
(3) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(4) makes a general assignment for the benefit of its
creditors,
(5) admits in writing its inability to pay debts as the
same become due; and
(10) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company or any Subsidiary
Guarantor in an involuntary case,
(2) appoints a Custodian of the Company or any
Subsidiary Guarantor or for all or substantially all of
their property,
(3) orders the liquidation of the Company, or any
Subsidiary Guarantor,
and the order or decree remains unstayed and in effect for 60
days.
(2) The Company shall, upon becoming aware that a Default or
Event of Default has occurred, deliver to the Trustee a statement
specifying such Default or Event of Default and what action the Company
is taking or proposes to take with respect thereto.
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Section 6.2 Acceleration.
Subject to the terms of the Intercreditor Agreement, if an Event of
Default (other than an Event of Default specified in clause (ix) or (x) of
Section 6.1(a)) occurs and is continuing, the Trustee by written notice to the
Company, or the Holders of at least 25% in principal amount of the then
outstanding Notes by written notice to the Company and the Trustee, may declare
the unpaid principal of and any accrued interest on all the Notes to be due and
payable. Upon such declaration the principal and interest shall be due and
payable immediately. If an Event of Default specified in clause (ix) or (x) of
Section 6.1(a) occurs, all outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. At any time after a declaration of acceleration, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Notes outstanding, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if (a) the Company has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest
(including any interest accrued subsequent to an Event of Default specified in
clause (ix) or (x) of Section 6.1(a)) on all Notes, (iii) the principal of and
premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate borne
by the Notes, and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; (b) all Events of
Default, other than the non-payment of principal of and interest on the Notes
that have become due solely by such declaration or occurrence of acceleration,
have been cured or waived; and (c) the rescission would not conflict with any
judgment, order or decree of any court of competent jurisdiction.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy (under this Indenture or otherwise) to collect the payment
of principal or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
Section 6.4 Waiver of Past Defaults.
Holders of a majority of the aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of the Holders
of all of the Notes (a) waive any existing Default or Event of Default and its
consequences under this Indenture except a continuing Default or Event of
Default in the payment of the principal of, or interest on, any Note or a
Default or an Event of Default with respect to any covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected, and/or (b) rescind an acceleration and its
consequences pursuant to Section 6.2 if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except nonpayment
of principal or interest that has become due solely because of the acceleration)
have been cured or waived. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
Section 6.5 Control by Majority.
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The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Holders, or that may involve the Trustee in personal
liability.
Section 6.6 Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
Section 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(i) or 6.1(a)(ii)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal and interest remaining unpaid on the Notes and interest on
overdue principal (and premium, if any) and, to the extent lawful, interest on
overdue interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor under the Notes), their creditors or their property and shall be
entitled and empowered to collect, receive and distribute any money
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or other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel, and any other amounts due
the Trustee under Section 7.7. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee and its agents
and counsel, and any other amounts due the Trustee under Section 7.7 out of the
estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders of the Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article VI that is
not subject to the provisions of the Intercreditor Agreement, it shall pay out
the money in the following order:
First: to the Trustee and its agents and attorneys for amounts
due under Section 7.7, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively;
Third: without duplication, to Holders for any other Obligations
owing to the Holders under the Notes, this Indenture, the Security
Agreements or the Registration Rights Agreement; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee, upon written notice to the Company, may fix a record date
and payment date for any payment to Holders.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.6, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
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ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(2) Except during the continuance of an Event of Default:
(1) The duties of the Trustee shall be determined solely by
the express provisions of this Indenture, and the Trustee need
perform only those duties that are specifically set forth in
this Indenture, and no others, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether they
conform to the requirements of this Indenture (but need not
confirm the accuracy of mathematical calculations or other facts
stated therein).
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.1.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.5.
(4) Regardless of whether therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may
refuse to perform any duty or exercise any right or power unless it
receives security and indemnity satisfactory to it against any loss,
liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
Section 7.2 Rights of Trustee.
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(1) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company, on behalf of the
Company.
(6) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of the Company's covenants in
Article IV. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of
Default occurring pursuant to Sections 6.1(a)(i), 6.1(a)(ii) and 4.1, or
(ii) any Default or Event of Default of which the Trustee shall have
received written notification or a Responsible Officer of the Trustee
shall have obtained actual knowledge.
(7) Delivery of reports, information and documents to the
Trustee pursuant to Section 4.3 is for informational purposes only and
the Trustee's receipt of the foregoing shall not constitute constructive
notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with
any of its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on an Officer's Certificate).
(8) The Trustee may and is hereby directed to, concurrently
herewith, enter into the Intercreditor Agreement, the Disbursement
Agreement and the Security Agreements.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or an Affiliate of
the Company with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
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Section 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision hereof,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if the
Trustee has actual knowledge thereof (within the meaning of Section 7.2(f)), the
Trustee shall mail to the Holders a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in the payment of principal of, premium, if any, or interest on any
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interest of the Holders of the Notes.
Section 7.6 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall mail to the Holders a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a copy
of each report at the time of its mailing to the Holders shall be filed with the
Commission and each stock exchange on which the Notes are listed. The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such compensation
as shall be agreed to in writing by the Company and the Trustee for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel, except such disbursements, advances and expenses as may be attributable
to its negligence or bad faith.
The Company shall indemnify the Trustee and any predecessor against any
and all losses, liabilities, damages, claims or expenses incurred by it without
negligence or bad faith on its part arising out of or in connection with the
acceptance or administration of its duties under this Indenture (including the
costs and expenses of enforcing this Indenture against Company and defending
itself against any claim (regardless of whether asserted by Company or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder), except as set forth
below. The Trustee shall notify the Company promptly of any claim for which it
may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee shall cooperate in the defense. In the event that a
conflict of interest or conflicting
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defenses would arise in connection with the representation of the Company and
the Trustee by the same counsel, the Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through its own negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal of (and
premium, if any) and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(a)(viii) or (ix) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of this
Indenture.
Section 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8 and upon the Company's receipt of
notice from the successor Trustee of such appointment.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided that all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee, and the Company shall pay to any such replaced
or removed Trustee all amounts owed under Section 7.7 upon such replacement or
removal.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
banking association, the successor corporation without any further act shall be
the successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that shall (a) be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or of the District of Columbia authorized under
such laws to exercise corporate trustee power, (b) be subject to supervision or
examination by Federal or state or the District of Columbia authority, and (c)
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is
subject to TIA Section 310(b); provided, however, that there shall be excluded
from the operations of TIA Section 310(b)(1) any indenture or indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
The provisions of TIA Section 311 shall apply to the Company, as obligor on the
Notes.
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Discharge; Option to Effect Legal or Covenant Defeasance.
This Indenture shall cease to be of further effect (except that the
Company's and the Subsidiary Guarantors' obligations under Section 7.7 and the
Trustee's and the Paying Agent's obligations under Sections 8.6 and 8.7 shall
survive) when all outstanding Notes theretofore authenticated and issued have
been delivered (other than destroyed, lost or stolen Notes that have been
replaced or paid) to the Trustee for cancellation and the Company or the
Subsidiary Guarantors have paid all sums payable hereunder. In addition, the
Company may elect at any time to have Section 8.2 or Section 8.3, at the
Company's option,
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of this Indenture applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article VIII.
Section 8.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.2, except as set forth below, the Company and the Subsidiary
Guarantors shall be deemed to have been discharged from their respective
obligations with respect to all outstanding Notes on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). Following such
Legal Defeasance, (a) the Company shall be deemed to have paid and discharged
the entire Indebtedness outstanding hereunder, and this Indenture shall cease to
be of further effect as to all outstanding Notes and Subsidiary Guaranties, and
(b) the Company and the Subsidiary Guarantors shall be deemed to have satisfied
all other of their respective obligations under the Notes, the Subsidiary
Guaranties and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder:
(1) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest (and Liquidated Damages, if
any) on such Notes when such payments are due from the trust described
in Section 8.5;
(2) the Company's obligations under Sections 2.4, 2.6, 2.7,
2.10, 4.2, 8.5, 8.6 and 8.7; and
(3) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's and the Subsidiary Guarantors'
obligations in connection therewith.
Subject to compliance with the provisions of this Article VIII, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3.
Section 8.3 Covenant Defeasance.
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.3, the Company and the Subsidiary Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18 and 4.19 and
Article V on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. Following such Covenant Defeasance, (a)
neither the Company nor any Subsidiary Guarantor need comply with, and none of
them shall have any liability in respect of, any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document, but,
except as specified above, the remainder of this Indenture, the Notes and the
Subsidiary Guaranties shall be unaffected thereby, and (b) Sections 6.1(a)(iii)
through 6.1(a)(x) shall not constitute Events of Default with respect to the
Notes.
Section 8.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 to the outstanding Notes:
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(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the
provisions of this Article VIII applicable to it), in trust, for the
benefit of the Holders, cash, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on such outstanding Notes on the stated date
for payment thereof or on the applicable redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the Issue Date, there has been a change
in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to such Trustee confirming that the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
other creditors of the Company or others;
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating, subject to certain
factual assumptions and bankruptcy and insolvency exceptions, that the
conditions precedent provided for in, in the case of the Officers'
Certificate, (a) through (f) and, in the case of the opinion of counsel,
clauses (b), (c) and (e) of this paragraph, have been complied with; and
(8) in the event all or any portion of the Notes are to be
redeemed through such irrevocable trust, Company must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving
of notice of such redemption or redemptions by the Trustee in the name
and at the expense of Company.
Section 8.5 Deposits to be Held in Trust; Other Miscellaneous
Provisions.
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Subject to Section 8.6, all cash and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.5, the "Paying Agent")
pursuant to Section 8.4 in respect of the outstanding Notes shall be held in
trust and applied by the Paying Agent, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any other
Paying Agent as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest (and Liquidated Damages, if any).
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of outstanding Notes.
Section 8.6 Repayment to the Company.
(1) The Trustee or the Paying Agent shall deliver or pay to the
Company from time to time upon the request of the Company any cash or
U.S. Government Obligations held by it as provided in Section 8.4 which
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee (which may be the opinion delivered under Section 8.4(a)),
are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
(2) Any cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest (and Liquidated Damages, if any) on any
Note and remaining unclaimed for two years after such principal, and
premium, if any, or interest has become due and payable shall be paid to
the Company on its request; and the Holder of such Note shall thereafter
look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, shall at the
expense of the Company cause to be published once, in the New York Times
and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3, as the case may
be, of this Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, or if any event occurs at any time in the period ending on the 91st
day after the date of deposit pursuant to Section 8.2 or 8.3 which event would
constitute an Event of Default under Section 6.1(a)(ix) or (x) had Legal
Defeasance or Covenant Defeasance, as the case may be, not occurred, then the
Company's and the Subsidiary Guarantors' obligations under this Indenture and
the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is
permitted to apply such money in accordance with Section 8.2 or 8.3, as the case
may be; provided, however, that, if the Company makes any payment of principal
of, premium, if any, or interest (and Liquidated Damages, if any) on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the cash
or U.S. Government Obligations held by the Trustee or Paying Agent.
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ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders.
(1) The Company, the Subsidiary Guarantors and the Trustee may
amend or supplement this Indenture and the Notes without the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to comply with Article V and Section 10.6;
(4) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder or thereunder of any
Holder;
(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of this Indenture under
the TIA; or
(6) to release any Subsidiary Guaranty of the Notes
permitted to be released under Section 10.7.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee of the
documents described in Section 9.6 required or requested by the Trustee, the
Trustee shall join with the Company in the execution of any supplemental
indenture or amendment authorized or permitted by the terms of this Indenture
and shall make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture or amendment that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2 With Consent of Holders.
(1) Subject to Sections 6.4 and 6.7, the Company and the
Trustee, as applicable, may amend, or waive any provision of, this
Indenture or the Notes, with the written consent of the Holders of at
least a majority of the principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or
exchange offer for Notes); provided, that no amendment to:
(i) increase the aggregate principal amount of, or interest
rate on (unless the guarantees of the Designated Guarantors
shall be amended to exclude any such increased interest amount
from the obligations guaranteed), the Notes or change (to
earlier dates) the dates upon which principal is due thereon;
(ii) alter the redemption or prepayment provisions thereof
(other than to delay any payment or otherwise to reduce the
obligations of any issuer) if such alteration affects the
guarantee obligations of the Designated Guarantors under their
respective guarantees of the Notes and this Indenture in any
manner other than to reduce the same;
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(iii) alter the Subordination Provisions (as defined in the
Intercreditor Agreement);
(iv) alter the covenants and events of default under the
Notes and this Indenture in a manner which would make such
provisions more onerous or restrictive to any Designated
Guarantor;
(v) alter the guaranty of any Designated Guarantor in any
manner which could make the obligations under the same more
onerous or could otherwise affect adversely the interests of
such Designated Guarantor, or the agent or any lender under the
Credit Facility; or
(vi) otherwise increase the obligations of the Issuer in
respect of the Notes and this Indenture if such increase affects
the obligations of the Designated Guarantors under their
respective guaranties of the Notes and this Indenture in any
manner;
will be effective until the Trustee has received a written notice of the agent
under the Credit Facility of its consent thereto.
(2) Upon the request of the Company, accompanied by a resolution
of the Board of Directors of the Company authorizing the execution of
any such supplemental indenture or amendment, and upon filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the
Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.6, the Trustee shall join with the Company in the
execution of such supplemental indenture or amendment unless such
supplemental indenture or amendment affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
(3) It shall not be necessary for the consent of the Holders
under this Section 9.2 to approve the particular form of any proposed
supplemental indenture or amendment, but it shall be sufficient if such
consent approves the substance thereof.
(4) After a supplemental indenture or amendment under this
Section 9.2 becomes effective, the Company shall mail to the Holders of
each Note affected thereby a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture, amendment or waiver.
(5) Notwithstanding any other provision hereof, without the
consent of each Holder affected, an amendment or waiver under this
Section 9.2 may not (with respect to any Notes held by a non-consenting
Holder):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of, or the premium (including,
without limitation, redemption premium) on, or change the fixed
maturity of any Note or alter the provisions with respect to
payment on redemption of the Notes or alter the price at which
the Company shall offer to purchase such Notes pursuant to
Section 4.10 or 4.14;
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(3) reduce the rate of or change the time for payment of
interest on any Note;
(4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (other
than a Default in the payment of an amount due as a result of an
acceleration if the Holder rescinds such acceleration pursuant
to Section 6.2);
(5) make any Note payable in money other than that stated in
the Notes;
(6) make any change in Section 6.4 or 6.7;
(7) waive a redemption payment with respect to any Note;
(8) make any change adversely affecting the contractual
ranking of the Obligations of the Company under the Notes, this
Indenture, the Security Agreements and the Registration Rights
Agreement or of the Subsidiary Guarantors under their respective
Subsidiary Guaranties; or
(9) make any change in this Section 9.2.
Section 9.3 Compliance with Trust Indenture Act.
If, at the time of an amendment to this Indenture or the Notes, this
Indenture shall be qualified under the TIA, every amendment to this Indenture or
the Notes shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders furnished to the Trustee prior to such solicitation pursuant to
Section 2.5, or (ii) such other date as the Company shall designate.
Section 9.5 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. The Company
in exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
Section 9.6 Trustee to Sign Amendments, etc.
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The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article IX if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.1, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it shall be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors of the Company approves it.
ARTICLE X
SUBSIDIARY GUARANTIES
Section 10.1 Subsidiary Guaranty.
(1) For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, subject to Section 10.3,
each Subsidiary Guarantor, jointly and severally, hereby unconditionally
guarantees (such guaranties being referenced herein individually as a
"Subsidiary Guaranty" and collectively, together with additional
guaranties granted from time to time pursuant to Section 10.6, as the
"Subsidiary Guaranties") to each Holder and the Trustee, irrespective of
the validity or enforceability of the Obligations of the Company under
this Indenture, the Notes or the Registration Rights Agreement:
(i) the due and punctual payment of the principal and
premium, if any, of, and interest on, the Notes (including,
without limitation, interest after the filing of a petition
initiating any proceedings referred to in clause (ix) or (x) of
Section 6.1(a)), whether at maturity or on an interest payment
date, by acceleration, call for redemption or otherwise;
(ii) the due and punctual payment of interest on the overdue
principal and premium, if any, of, and interest on, the Notes,
if lawful;
(iii) the due and punctual payment of all other Obligations
of the Company under the Notes, this Indenture and the
Registration Rights Agreement, all in accordance with the terms
set forth herein and in the Notes; and
(iv) in case of any extension of time of payment or renewal
of any Notes or any of such other Obligations, the due and
punctual payment thereof in accordance with the terms of the
extension or renewal, whether at stated maturity, by
acceleration or otherwise.
(2) Failing payment when due by the Company of any amount so
guaranteed for whatever reason, the Subsidiary Guarantors shall be
jointly and severally obligated to pay the same immediately.
(3) Each Subsidiary Guarantor hereby agrees that
(i) its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of
the Notes, this Indenture or the Registration Rights Agreement,
the absence of any action to enforce the same, any waiver or
consent by any Holder with respect to any provisions hereof or
thereof, any amendment of the Obligations of the Company under
this Indenture or the Notes, the recovery of any judgment
against the Company or any of its Subsidiaries, any action to
enforce the same, or any other
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circumstance that might otherwise constitute a legal or
equitable discharge or defense of a guarantor;
(ii) other than pursuant to Section 10.7, each Subsidiary
Guaranty will not be discharged except by complete performance
of the Obligations of the Company under the Notes, this
Indenture and the Registration Rights Agreement; and
(iii) it shall not be entitled to and irrevocably waives
diligence, presentment, demand of payment, filing of claim with
a court in the event of insolvency or bankruptcy of the Company,
any Subsidiary Guarantor, any other Subsidiary or any other
obligor under the Notes, any right to require a proceeding first
against the Company, any Subsidiary Guarantor, any other
Subsidiary or any other obligor under this Indenture or the
Notes, protest, notice and all demands whatsoever.
(4) Each Subsidiary Guarantor shall be subrogated to all rights
of the Holders of the Notes upon which its Subsidiary Guaranty is
endorsed against the Company in respect of any amounts paid by such
Subsidiary Guarantor on account of such Note pursuant to the provisions
of its Subsidiary Guaranty or this Indenture, and each Subsidiary
Guarantor shall have the right to seek contribution from any non-paying
Subsidiary Guarantor; provided, that no Subsidiary Guarantor shall be
entitled to enforce or receive any payments arising out of, or based
upon, such rights of subrogation or contribution until the principal of
(and premium, if any) and interest on the Notes issued hereunder shall
have been paid in full (and, if any such payments shall be paid to or
recovered by such Subsidiary Guarantor (whether directly or by way of
set-off, recoupment or counterclaim), such payments shall be held in
trust by such Subsidiary Guarantor for the benefit of the Trustee and
the Holders, not commingled with any of such Subsidiary Guarantor's
other funds and forthwith paid over to the Trustee, in the exact form
received, together with any necessary endorsements, to be applied and
credited against, or held as security for the Obligations hereunder.
(5) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor, any other
Subsidiary or any other obligor under this Indenture or the Notes, or
any trustee, liquidator or other similar official, any amount paid by
the Company, any Subsidiary Guarantor, any other Subsidiary or any other
obligor under this Indenture or the Notes to the Trustee or such Holder,
the Subsidiary Guaranties, to the extent theretofore discharged, shall
be reinstated in full force and effect.
(6) Each Subsidiary Guarantor agrees that, as between the
Subsidiary Guarantors, on the one hand, and the Holders and the Trustee,
on the other hand, (i) the maturity of the Obligations of the Company
guaranteed hereby may be accelerated as provided in Section 6.2 for the
purposes of the Subsidiary Guaranties, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the
Company of the Obligations guaranteed hereby, and (ii) in the event of
any declaration of acceleration of those Obligations as provided in
Section 6.2, those Obligations (regardless of whether due and payable)
will forthwith become due and payable by each of the Subsidiary
Guarantors for the purpose of the Subsidiary Guaranties.
Section 10.2 Execution and Delivery of the Subsidiary Guaranties.
(1) To evidence the Subsidiary Guaranties, the Company and each
Subsidiary Guarantor hereby agrees that
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(i) a notation of the Subsidiary Guaranties substantially as
set forth on Exhibit C hereto shall be endorsed on each Note
authenticated and delivered by the Trustee;
(ii) such endorsement shall be executed on behalf of each
Subsidiary Guarantor by its Chairman of the Board, President,
Chief Financial Officer, Chief Operating Officer, Treasurer,
Secretary or any Vice President; and
(iii) a counterpart signature page to this Indenture shall
be executed on behalf of each Subsidiary Guarantor by its
Chairman of the Board, President or one of its Vice Presidents
and attested to by another officer acknowledging such Subsidiary
Guarantor's agreement to be bound by the provisions hereof and
thereof.
(2) Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guaranty set forth in Section 10.1 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guaranty.
(3) If an officer whose signature is on this Indenture no longer
holds that office at the time the Trustee authenticates the Notes on
which a Subsidiary Guaranty is endorsed, the Subsidiary Guaranty shall
nevertheless be valid.
(4) The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guaranties set forth in this Indenture on behalf of the
Subsidiary Guarantors.
Section 10.3 Limitation on Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guaranty
by such Subsidiary Guarantor pursuant to its Subsidiary Guaranty not constitute
a fraudulent transfer or conveyance for purposes of any federal or state law. To
effectuate the foregoing intention, the Holders and the Subsidiary Guarantors
hereby irrevocably agree that the obligations of each Subsidiary Guarantor under
its Subsidiary Guaranty shall be limited to the maximum amount that will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of the Company or any other Subsidiary Guarantor in respect of the
Obligations of the Company under this Indenture or the Notes or of such other
Subsidiary Guarantor under its Subsidiary Guaranty or of the Senior Credit
Agreement Obligations (as defined in the Intercreditor Agreement) of such
Subsidiary Guarantor, result in the Obligations of such Subsidiary Guarantor
under its Subsidiary Guaranty or the Senior Credit Agreement (as defined in the
Intercreditor Agreement) not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law or rendering such Subsidiary Guarantor
insolvent.
Section 10.4 Rights under the Subsidiary Guaranties.
(1) No payment by any Subsidiary Guarantor pursuant to the
provisions hereof shall give rise to any claim of the Subsidiary
Guarantors against the Trustee or any Holder.
(2) Each Subsidiary Guarantor waives notice of the issuance,
sale and purchase of the Notes and notice from the Trustee or the
Holders from time to time of any of the Notes of their acceptance and
reliance on its Subsidiary Guaranty.
(3) No set-off, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature (other than performance
by the Subsidiary Guarantors of their obligations
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hereunder) that any Subsidiary Guarantor may have or assert against the
Trustee or any Holder shall be available hereunder to such Subsidiary
Guarantor.
(4) Each Subsidiary Guarantor shall pay all reasonable costs,
expenses and fees, including all reasonable attorneys' fees, that may be
incurred by the Trustee in enforcing or attempting to enforce the
Subsidiary Guaranties or protecting the rights of the Trustee or the
Holder, if any, in accordance with this Indenture.
Section 10.5 Primary Obligations.
The Obligations of each Subsidiary Guarantor hereunder shall constitute
a guaranty of payment and not of collection. Each Subsidiary Guarantor agrees
that it is directly liable to each Holder hereunder, that the Obligations of
each Subsidiary Guarantor hereunder are independent of the Obligations of the
Company or any other Subsidiary Guarantor, and that a separate action may be
brought against each Subsidiary Guarantor, whether such action is brought
against the Company or any other Subsidiary Guarantor or whether the Company or
any other Subsidiary Guarantor is joined in such action. Each Subsidiary
Guarantor agrees that its liability hereunder shall be immediate and shall not
be contingent upon the exercise or enforcement by the Trustee or the Holders of
whatever remedies they may have against the Company or any other Subsidiary
Guarantor. Each Subsidiary Guarantor agrees that any release that may be given
by the Trustee or the Holders to the Company or any other Subsidiary Guarantor
shall not release such Subsidiary Guarantor.
Section 10.6 Guarantee by Future Subsidiaries.
The Company shall cause each Person that becomes a Wholly Owned
Subsidiary after the Issue Date (regardless of whether through formation,
acquisition, merger or otherwise) to, concurrently with so becoming a Wholly
Owned Subsidiary to (a) become a Subsidiary Guarantor hereunder and execute and
deliver to the Trustee an endorsement of its Subsidiary Guaranty in the form of
Exhibit C attached hereto and a supplemental indenture in form reasonably
satisfactory to the Trustee, pursuant to which such Wholly Owned Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the
Notes, this Indenture and the Registration Rights Agreement as set forth in
Section 10.1, (b) execute Security Agreements (substantially in the form of the
Security Agreements entered into on the Closing Date) necessary to grant to
Trustee a valid, enforceable, perfected Lien on the Collateral described
therein, and (c) deliver to the Trustee an Opinion of Counsel, in form
reasonably satisfactory to the Trustee, to the effect that (i) such supplemental
indenture, Subsidiary Guaranty and Security Agreements have been duly
authorized, executed and delivered by such Restricted Subsidiary and (ii) such
supplemental indenture, Subsidiary Guaranty and Security Agreements constitute
legal, valid, binding and enforceable obligations of such Wholly Owned
Subsidiary, subject to customary exceptions for bankruptcy, fraudulent transfer
and equitable principles.
Each Note issued after the date of execution by any Subsidiary Guarantor
of a Subsidiary Guaranty shall be endorsed with a form of Subsidiary Guaranty
that has been executed by such Subsidiary Guarantor. However, the failure of any
Note to have endorsed thereon a Subsidiary Guaranty executed by such Subsidiary
Guarantor shall not affect the validity or enforceability of such Subsidiary
Guaranty against such Subsidiary Guarantor.
Section 10.7 Release of Subsidiary Guarantors.
(a) If all of the Capital Stock of any Subsidiary Guarantor is
sold to a Person (other than the Company or any of its Subsidiaries) and
the Net Proceeds from such Asset Sale are used in
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accordance with Section 4.10, then such Subsidiary Guarantor will be
released and discharged from all of its obligations under its Subsidiary
Guaranty of the Notes and this Indenture.
(b) If any agent or lender under the Credit Facility shall (i)
foreclose upon, (ii) with the Company's consent, transfer in lieu of
foreclosure on or (iii) exercise any similar remedy with respect to,
Equity Interests of any Designated Guarantor, the guaranty of such
Designated Guarantor shall terminate and cease to be of any further
force and effect.
ARTICLE XI
SECURITY INTEREST
Section 11.1 Grant of Security Interest.
(1) In order to secure the performance of the Company's
obligation to pay the principal amount of, premium, if any, and interest
on the Notes when and as the same shall be due and payable, whether at
maturity or on an interest payment date, by acceleration, call for
redemption or otherwise, and interest on the overdue principal of and
premium, if any, and interest, if lawful, on the Notes and performance
of all other Obligations of the Company to the Holders and the Trustee
under this Indenture and the Notes, according to their terms hereunder
or thereunder, the Company and the Subsidiary Guarantors pursuant to the
Security Agreements have unconditionally and absolutely granted to the
Trustee for the benefit of itself and all Holders, a first priority
security interest in all Collateral, whether owned on the Issue Date or
thereafter acquired (the "Security Interest"); provided, that the
Trustee's security interest in the Shared Collateral may be subordinated
pursuant to the terms of the Intercreditor Agreement to a Lien securing
Indebtedness outstanding pursuant to Section 4.9(b)(i) hereof. Without
limiting the foregoing, the Company shall, and shall cause each of the
Subsidiary Guarantors to, grant a Security Interest in all real assets
(and related fixtures and equipment (other than equipment subject to
Permitted Liens)) acquired after the date hereof.
(2) The Security Interest as now or hereafter in effect shall be
held for the Trustee and for the equal and ratable benefit and security
of the Notes without preference, priority or distinction of any thereof
over any other by reason, or difference in time, of issuance, sale or
otherwise, and for the enforcement of the payment of principal of,
premium, if any, and interest on the Notes in accordance with their
terms.
(3) The Company represents and warrants that it has executed and
delivered, filed and recorded and/or will execute and deliver, file and
record, all instruments and documents, and has done or will do or cause
to be done all such acts and other things as are necessary to subject
the Collateral to the Lien of the Security Agreements. The Company shall
execute and deliver, file and record all instruments and do all acts and
other things as may be reasonably necessary or advisable to perfect,
maintain and protect the Security Interest and shall pay all filing,
recording, mortgage or other taxes or fees incidental thereto.
(4) The Company shall furnish to the Trustee (i) promptly after
the recording or filing, or re-recording or re-filing of the Security
Agreements and other security filings, an Opinion of Counsel (who may be
counsel for the Company) stating that in the opinion of such counsel the
Security Agreements and other security filings have been properly
recorded, filed, re-recorded or re-filed so as to make effective and
perfect the Security Interest intended to be created thereby and
reciting the details of such action; and (ii) at least annually on the
anniversary date of the execution and delivery of this Indenture, an
Opinion of Counsel (who may be counsel for the Company) either stating
that in the opinion of such counsel such action with respect to the
recording, filing, re-
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recording or re-filing of the Security Agreements and other security
filings has been taken as is necessary to maintain the Lien and Security
Interest of the Security Agreements and other security filings, and
reciting the details of such action, or stating that in the opinion of
such counsel no such action is necessary to maintain such Lien and
Security Interest.
In giving the opinions required by this Section 11.1(d), such
counsel may rely, to the extent recited in such opinions, on (i)
certificates of relevant public officials; (ii) certificates of an
officer or officers of the Company; (iii) photocopies of filed and
recorded documents certified by public officials as being accurate
copies of such documents; (iv) the opinions of other counsel reasonably
acceptable to the Trustee with respect to matters governed by law of any
jurisdiction other than the state in which such counsel is licensed to
practice law; and (v) title insurance policies and commitments. In
addition, such opinions may contain such qualifications, exceptions and
limitations as are appropriate for similar opinions relating to the
nature of the Collateral.
Section 11.2 Suits to Protect the Collateral.
To the extent permitted under the Security Agreements, the Intercreditor
Agreement and this Indenture, the Trustee shall have power to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of this Indenture or the Security Agreements and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interest of the Holders in the Collateral and in the profits, rents, revenues
and other income arising therefrom (including power to institute an maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the Security Interest thereunder or
be prejudicial to the interest of the Holders or of the Trustee).
Section 11.3 Further Assurances and Security.
The Company represents and warrants that at the time the Security
Agreements and this Indenture are executed, the Company (a) will have full
right, power and lawful authority to grant, bargain, sell, release, convey,
hypothecate, assign, mortgage, pledge, transfer and confirm, absolutely, the
Collateral, in the manner and form done, or intended to be done, in the Security
Agreements, free and clear of all Liens, except for Permitted Liens, and will
forever warrant and defend the title to the same against the claims of all
Persons whatsoever; (b) will execute, acknowledge and deliver to the Trustee, at
the company's expense, at any time and from time to time such further
assignments, transfer, assurances or other instruments as may, in the opinion of
the Trustee, be required to effectuate the terms of this Indenture or the
Security Agreements; and (c) will at any time and from time to time do or cause
to be done all such acts and things as may be necessary or proper, or as may be
required by the Trustee, to assure and confirm to the Trustee the Security
Interest in the Collateral contemplated hereby and by the Security Agreements.
Section 11.4 Release of Collateral.
Unless a Default or Event of Default shall have occurred and be
continuing, Collateral shall be released from the Liens created by the Security
Agreements from time to time at the sole cost and expense of the Company:
(i) upon payment in full of the Notes and all other Obligations
then due and owing, or
(ii) upon a Legal Defeasance or Covenant Defeasance, or
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(iii) upon the sale or other disposition of such Collateral
pursuant to an Asset Sale made in accordance with Section 4.10 hereof,
; provided, that the Trustee shall not release any Lien on any Collateral
pursuant to clause (iii) above unless and until it shall have received each of
the following:
(1) an Officers' Certificate, dated the date on which Collateral
shall be released, stating in substance as to certain matters (which
statements shall be true), including the following:
(1) the reason the Company is requesting a release of the
Collateral and a description of the use to be made of the
Collateral to be released;
(2) that, in case of the application of Net Proceeds in
accordance with Section 4.10(a)(iii)(B), the Company and/or its
Restricted Subsidiaries, as the case may be, have taken and will
take all steps necessary or desirable so that upon such
application of Net Proceeds the Trustee shall receive a first
priority security interest in the assets invested in by the
Company or its Restricted Subsidiaries (subject to Permitted
Liens);
(3) that no Default or Event of Default has occurred and is
continuing at the time of or after giving effect to such release
of Collateral; and
(4) that all conditions precedent in this Indenture and the
Security Agreements relating to the release of the Collateral
have been complied with.
(2) An Opinion of Counsel that complies with Section 314(d) of
the TIA stating that the certificate, opinions or other instruments
which have been or are therewith delivered to and deposited with the
Trustee conform to the requirements of this Indenture, that the
Collateral to be released may be lawfully released from the Lien of the
Security Agreements and that all conditions precedent in this Indenture
and the Security Agreements relating to such release (including, without
limitation, the requirement that the Trustee receive a first priority
security interest in any assets invested in) have been complied with.
Section 11.5 Reliance on Opinion of Counsel.
The Trustee shall, before taking any action under this Article XI, be
entitled to receive an Opinion of Counsel, stating the legal effect of such
action, the steps necessary to consummate the same and to perfect the Trustee's
priority with respect to any Lien in connection therewith and that such action
will not be in contravention of the provisions thereof or this Indenture and
such opinion shall be full protection to the Trustee for any action taken or
omitted to be taken in reliance thereon.
Section 11.6 Purchaser May Rely.
A purchaser in good faith of the Collateral or any part thereof or
interest therein which is purported to be transferred, granted or released by
the Trustee as provided in this Article XI shall not be bound to ascertain, and
may rely on the authority of the Trustee to execute, transfer, grant or release,
or to inquire as to the satisfaction of any conditions precedent to the exercise
of such authority, or to see to the application of the purchase price therefor.
Section 11.7 Payment of Expenses.
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On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for the payment of all reasonable expenditures incurred
by the Trustee under this Article XI, including, without limitation, the costs
of title insurance, surveys, attorneys' fees and expenses, recording fees and
taxes, transfer taxes, taxes on indebtedness and other expenses incidental
thereto and al such sums shall be a Lien upon the Collateral prior to the Notes
and shall be secured thereby.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 12.2 Notices.
Any notice or communication by the Company or the Trustee to the others
is duly given if in writing and delivered in person or mailed by first-class
mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' addresses:
If to the Company:
The Sports Club Company
11100 Santa Monica Boulevard
Suite 300
Los Angeles, California 90025
Attention: Timothy O'Brien
Telecopier No.: (310) 479-5740
If to the Trustee:
U.S. Bank Trust National Association
100 Wall Street
New York, NY 10005
Attention: Corporate Trust Administration
SPFT 0210
Telecopier No.: (212) 809-5459
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; upon receipt, if deposited in the mail, postage prepaid; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
All notices and communications to the Trustee shall be deemed to have been duly
given only if actually received by the Trustee.
Any notice or communication to a Holder shall be mailed by first-class
mail, to his address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
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If a notice communication is mailed in the manner provided above within
the time prescribed, it is duly given, regardless of whether the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
Section 12.3 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
Section 12.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
Section 12.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of such Person,
such condition or covenant has been complied with,
provided that with respect to matters of fact, an Opinion of Counsel may rely
upon an Officers' Certificate or a certificate of a public official.
Section 12.6 Rules by Trustee and Agents.
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The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
Section 12.8 No Recourse Against Others.
No director, officer, employee, incorporator, stockholder or controlling
person of the Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, this Indenture or the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release shall be part of the consideration for the issuance of the
Notes and the Subsidiary Guaranties. Notwithstanding the foregoing, nothing in
this provision shall be construed as a waiver or release of any claims under the
Federal securities laws.
Section 12.9 Governing Law.
THIS INDENTURE SHALL BE CONSTRUED AND INTERPRETED, AND THE RIGHTS OF THE
PARTIES DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, INCLUDING,
WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b). THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
Section 12.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
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Section 12.11 Successors.
All agreements of the Company and any Subsidiary Guarantors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee in this Indenture shall bind its successor.
Section 12.12 Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.13 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.14 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
(Signature pages follow.)
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<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Indenture as of the date first written above.
Company:
THE SPORTS CLUB COMPANY
By: /s/ John M. Gibbons
------------------------------------
Name: John M. Gibbons
Title: President
Attest:
By: /s/ Lois Barberio
----------------------------------
Name: Lois Barberio
Subsidiary Guarantors:
----------------------
CANOGA AGOURA SPECTRUM CLUB, INC.
LA/IRVINE SPORTS CLUBS, LTD.
By: /s/ Timothy O'Brien By: Sports Club, Inc. of California,
------------------------------- its general partner
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
GREEN VALLEY SPECTRUM CLUB, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien PONTIUS REALTY, INC.
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
HFA SERVICES, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien SCC SPORTS CLUB, INC.
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
IRVINE SPORTS CLUB, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
C-69
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Title: Chief Financial Officer
C-70
<PAGE> 76
SPORTS CLUB, INC. OF CALIFORNIA
SEPULVEDA REALTY AND
DEVELOPMENT CO., INC. By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer TALLA NEW YORK, INC.
SF SPORTS CLUB, INC. By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer TVE, INC.
SPECTRUM CLUB ANAHEIM By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer THE SPECTRUM CLUB COMPANY, INC.
SPECTRUM LIQUIDATING CORP. By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
THE SPORTS CONNECTION HOLDING
COMPANY
WASHINGTON D.C. SPORTS CLUB, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien By: /s/ Timothy O'Brien
Title: Chief Financial Officer -------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
THE SPORTSMED COMPANY, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
C-71
<PAGE> 77
Trustee:
U.S. BANK TRUST NATIONAL ASSOCIATION
Trustee
By: /s/ Richard Prokosch
-------------------------------
Name: Richard Prokosch
Title: Assistant Vice President
C-72
<PAGE> 1
EXHIBIT 4.3
THE SPORTS CLUB COMPANY, INC.
$100,000,000 11 3/8% Senior Secured Notes due 2006
REGISTRATION RIGHTS AGREEMENT
April 1, 1999
JEFFERIES & COMPANY, INC.
CIBC OPPENHEIMER CORP.
c/o JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
The Sports Club Company, Inc., a Delaware corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc. and CIBC
Oppenheimer Corp. (the "Purchasers"), upon the terms set forth in a purchase
agreement, dated as of March 29, 1999 (the "Purchase Agreement"), $100,000,000
aggregate principal amount of its 11 3/8% Senior Secured Notes due 2006,
originally issued under the Indenture, including the guarantees endorsed thereon
(the "Notes"). As an inducement to the Purchasers to enter into the Purchase
Agreement, the Company and each of the guarantors (the "Guarantors") signatory
to the Purchase Agreement agree with the Purchasers, for the benefit of the
holders of the Securities (defined below) (including, without limitation, the
Purchasers), as follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
<PAGE> 2
Advice: See Section 5.
Agreement: This Registration Rights Agreement.
Applicable Period: See Section 2(f).
Business Days: Any day other than (i) Saturday or Sunday, or (ii)
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
Closing Date: April 1, 1999.
Effectiveness Date: The 120th day following the Closing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(a).
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: 11_% Senior Secured Notes due 2006, of the
Company, including the guarantees endorsed thereon, identical in all respects to
the Notes, except for references to series and restrictive legends.
Filing Date: The 60th day following the Closing Date.
Holder: Each holder of Registrable Securities.
Indenture: The Indenture, dated the date hereof, among the
Company, the Guarantors and State Street Bank and Trust Company, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time, in accordance with the terms thereof.
Initial Shelf Registration: See Section 3(a).
Losses: See Section 7(a).
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<PAGE> 3
NASD: The National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2(f).
Person: An individual, trustee, corporation, partnership, joint
stock company, joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof, union, business association,
firm or other entity.
Private Exchange: See Section 2(g).
Private Exchange Securities: See Section 2(g).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Registrable Securities: (i) Notes, (ii) Private Exchange
Securities and (iii) Exchange Securities received in the Exchange Offer that may
not be sold without restriction under federal or state securities law.
Registration Statement: Any registration statement of the Company
that covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
3
<PAGE> 4
Rule 144A: Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities: The Notes, the Private Exchange Securities and the
Exchange Securities, collectively.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(i).
Shelf Registration: The Initial Shelf Registration and any
Subsequent Shelf Registration.
Special Counsel: Counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
Subsequent Shelf Registration: See Section 3.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if any, the trustee
under any indenture subsequently entered into by the Company and governing the
Exchange Securities or the Private Exchange Securities.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
Weekly Liquidated Damages Amount: means, with respect to any
Event, an amount per week per $1,000 principal amount of Registrable Securities
equal to (i) $.05 for the first 90-day period immediately following the
applicable Event Date, (ii) $.10 for the second 90-day period immediately
following the
4
<PAGE> 5
applicable Event Date, (iii) $.15 for the third 90-day period immediately
following the applicable Event Date, and (iv) $.20 thereafter.
2. Exchange Offer
(a) The Company and the Guarantors shall (i) prepare and file
with the SEC promptly after the date hereof, but in no event later than the
Filing Date, a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to a
proposed offer (the "Exchange Offer") to the Holders to issue and deliver to
such Holders, in exchange for the Notes, a like aggregate principal amount of
Exchange Securities, (ii) use their best efforts to cause the Exchange Offer
Registration Statement to become effective as promptly as practicable after the
filing thereof, but in no event later than the Effectiveness Date, (iii) use
their best efforts to keep the Exchange Offer Registration Statement effective
until the consummation of the Exchange Offer pursuant to its terms, and (iv)
unless the Exchange Offer would not be permitted by a policy of the SEC,
commence the Exchange Offer and use their best efforts to issue, on or prior to
30 business days after the date on which the Exchange Offer Registration
Statement is declared effective, Exchange Securities in exchange for all Notes
tendered prior thereto in the Exchange Offer. The Exchange Offer shall not be
subject to any conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and entitled
to the benefits of, the Indenture or a trust indenture that is identical to the
Indenture (other than such changes as are necessary to comply with any
requirements of the SEC to effect or maintain the qualification thereof under
the TIA).
(c) In connection with the Exchange Offer, the Company and the
Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal that is an exhibit to the Exchange Offer Registration
Statement, and any related documents;
(ii) keep the Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
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<PAGE> 6
(iii) utilize the services of a depository for the
Exchange Offer with an address in the Borough of Manhattan, The City of New
York;
(iv) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last Business Day on which
the Exchange Offer shall remain open; and
(v) otherwise comply with all laws applicable to the
Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company and the Guarantors shall:
(i) accept for exchange all Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and
deliver to each Holder of Notes, Exchange Securities equal in aggregate
principal amount to the Notes of such Holder so accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange
Security will accrue from the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor or, if no interest has been
paid on the Notes, from the date of original issue of the Notes.
(f) The Company and the Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," containing a summary statement of the positions
taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such
"Plan of Distribution" section shall also allow the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including (without limitation) all Participating Brokers-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Securities. The Company shall use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus so that it may be lawfully
6
<PAGE> 7
delivered by all Persons subject to the prospectus delivery requirement of the
Securities Act for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Securities (the "Applicable
Period").
(g) If, prior to consummation of the Exchange Offer, any
Purchaser holds any Notes acquired by it and having the status as an unsold
allotment in the initial distribution, the Company shall, upon the request of
such Purchaser, simultaneously with the delivery of the Exchange Securities in
the Exchange Offer, issue (pursuant to the same indenture as the Exchange
Securities) and deliver to such Purchaser, in exchange for the Notes held by
such Purchaser (the "Private Exchange"), a like principal amount of debt
securities of the Company that are identical to the Exchange Securities (the
"Private Exchange Securities"), except that such Securities shall bear
appropriate transfer restrictions. The Company shall use its reasonable best
efforts to insure that the Private Exchange Securities shall bear the same CUSIP
number as the Exchange Securities.
(h) The Company may require each Holder participating in the
Exchange Offer to represent to the Company that, at the time of the consummation
of the Exchange Offer, (i) any Exchange Securities received by such Holder in
the Exchange Offer will be acquired in the ordinary course of its business, (ii)
such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Securities within the meaning of
the Securities Act or resale of the Exchange Securities in violation of the
Securities Act, (iii) if such Holder is not a broker-dealer, that it is not
engaged in and does not intend to engage in, the distribution of the Exchange
Securities, (iv) if such Holder is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Notes that were acquired as a
result of market-making or other trading activities, that it will deliver a
prospectus, as required by law, in connection with any resale of such Exchange
Securities, and (v) if such Holder is an affiliate of the Company, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer,
either the Company or the Holders of a majority in aggregate principal amount of
Registrable Securities determines in its or their reasonable judgment that (A)
the Exchange Securities would not, upon receipt, be tradeable by the Holders
thereof without restriction under the Securities Act and the Exchange Act and
without material restrictions under applicable Blue Sky or state securities
laws, or (B) the interests of the Holders under this Agreement, taken as a
whole, would be materially adversely affected by the consummation of the
Exchange Offer, (ii) applicable interpretations of the staff of the SEC would
not permit the consummation of the
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<PAGE> 8
Exchange Offer prior to the Effectiveness Date, (iii) subsequent to the
consummation of the Private Exchange, either Purchaser so requests, (iv) the
Exchange Offer is not consummated within 210 days of the Closing Date for any
reason or (v) in the case of any Holder not permitted to participate in the
Exchange Offer or of any Holder participating in the Exchange Offer that
receives Exchange Securities that may not be sold without restriction under
state and federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities Act)
and, in either case contemplated by this clause (v), such Holder notifies the
Company within six months of consummation of the Exchange Offer, then the
Company shall promptly deliver to the Holders (or in the case of any occurrence
of the event described in clause (v) hereof, to any such Holder) and the Trustee
notice thereof (the "Shelf Notice") and shall as promptly as possible thereafter
file an Initial Shelf Registration pursuant to Section 3.
3 Shelf Registration
If a Shelf Notice is required to be delivered pursuant to Section
2(i)(i), (ii), (iii) or (iv), then this Section 3 shall apply to all Securities.
Otherwise, upon consummation of the Exchange Offer in accordance with Section 2,
the provisions of this Section 3 shall apply solely with respect to (i) Notes
held by any Holder thereof not permitted to participate in the Exchange Offer
and (ii) Exchange Securities that are not freely tradeable as contemplated by
Section 2(i)(v) hereof.
(a) Initial Shelf Registration. The Company and the Guarantors
shall prepare and file with the SEC a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration"). If the Company and
the Guarantors have not yet filed an Exchange Offer, the Company and the
Guarantors shall file with the SEC the Initial Shelf Registration on or prior to
the Filing Date. Otherwise, the Company and the Guarantors shall use their best
efforts to file the Initial Shelf Registration within 20 days of the delivery of
the Shelf Notice or as promptly as possible following the request of the
Purchasers. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Securities for
resale by such Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company and the
Guarantors shall (i) not permit any securities other than the Registrable
Securities to be included in any Shelf Registration, and (ii) use their best
efforts to cause the Initial Shelf Registration to be declared effective under
the Securities Act as promptly as practicable after the filing thereof and to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date that is 24 months after being declared effective (subject to
extension pursuant to
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<PAGE> 9
the last paragraph of Section 6 hereof) (the "Effectiveness Period"), or such
shorter period ending when (i) all Registrable Securities covered by the Initial
Shelf Registration have been sold or (ii) a Subsequent Shelf Registration
covering all of the Registrable Securities has been declared effective under the
Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the Registrable Securities registered
thereunder), the Company and the Guarantors shall use their best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within 30 days of such cessation of effectiveness amend
the Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration") required to be registered
pursuant to this Section 3. If a Subsequent Shelf Registration is filed, the
Company and the Guarantors shall use their best efforts to cause the Subsequent
Shelf Registration to be declared effective as soon as practicable after such
filing and to keep such Subsequent Shelf Registration continuously effective for
a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration, and any
Subsequent Shelf Registration, was previously effective.
4 Liquidated Damages.
(a) The Company and the Guarantors acknowledge and agree that the
Holders will suffer damages, and that it would not be feasible to ascertain the
extent of such damages with precision, if the Company and the Guarantors fail to
fulfill their obligations hereunder. Accordingly, in the event of such failure,
the Company and the Guarantors jointly and severally agree to pay liquidated
damages to each Holder under the circumstances and to the extent set forth
below:
(i) if neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration has been filed with the SEC on or prior to
the Filing Date; or
(ii) if neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration is declared effective by the SEC on or prior
to the Effectiveness Date; or
(iii)if the Company has not exchanged Exchange Securities
for all Notes validly tendered in accordance with the terms of the Exchange
Offer within
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<PAGE> 10
30 days after the date on which an Exchange Offer Registration Statement is
declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared
effective by the SEC but thereafter ceases to be effective without being
succeeded within 30 days by a Subsequent Shelf Registration filed and declared
effective
(each of the foregoing an "Event," and the date on which the Event occurs being
referred to herein as an "Event Date").
Upon the occurrence of any Event, the Company shall pay, or cause
to be paid (and the Guarantors hereby guarantee the payment of), in addition to
amounts otherwise due under the Indenture and the Registrable Securities, as
liquidated damages, and not as a penalty, to each Holder for each weekly period
beginning on the Event Date an amount equal to the Weekly Liquidated Damages
Amount per $1,000 principal amount of Registrable Securities held by such
Holder; provided, that such liquidated damages will, in each case, cease to
accrue (subject to the occurrence of another Event) on the date on which all
Events have been cured. An Event under clause (i) above shall be cured on the
date that either the Exchange Offer Registration Statement or the Initial Shelf
Registration is filed with the SEC; an Event under clause (ii) above shall be
cured on the date that either the Exchange Offer Registration Statement or the
Initial Shelf Registration is declared effective by the SEC; an Event under
clause (iii) above shall be cured on the earlier of the date (A) the Exchange
Offer is consummated with respect to all Notes validly tendered or (B) the
Company delivers a Shelf Notice to the Holders; and an Event under clause (iv)
above shall be cured on the earlier of (A) the date on which the applicable
Shelf Registration is no longer subject to an order suspending the effectiveness
thereof or proceedings relating thereto or (B) a new Subsequent Shelf
Registration is declared effective.
(b) The Company shall notify the Trustee within five Business
Days after each Event Date. The Company shall pay the liquidated damages due on
the Registrable Securities by depositing with the Trustee, in trust, for the
benefit of the Holders thereof, by 12:00 noon, New York City time, on or before
the applicable semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the record Holder entitled to receive the interest payment to be
made on such date as set forth in the Indenture.
5 Registration Procedures
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In connection with the registration of any Securities pursuant to
Sections 2 or 3 hereof, each of the Company and each Guarantor shall effect such
registrations to permit the sale of such Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company and each Guarantor shall:
(a) Prepare and file with the SEC, within the periods specified
in Section 2 or 3 hereof, a Registration Statement or Registration Statements as
prescribed by Section 2 or 3, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, that, if (i) such filing is pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company and the Guarantors shall, if
requested, furnish to and afford the Holders of the Securities covered by such
Registration Statement, their Special Counsel, each Participating Broker-Dealer,
the managing underwriters, if any, and their counsel a reasonable opportunity to
review and make available for inspection by such Persons copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company and the Guarantors, and cause
the officers, directors and employees of the Company and the Guarantors, Company
counsel and independent certified public accountants of the Company, to respond
to such inquiries, as shall be necessary, in the opinion of respective counsel
to such Holders, Participating Broker-Dealer and underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
may require each Holder to agree to keep confidential any non-public information
relating to the Company received by such Holder and not disclose such
information (other than to an Affiliate or prospective purchaser who agrees to
respect the confidentiality provisions of this Section 5(a)) until such
information has been made generally available to the public unless the release
of such information is required by law or necessary to respond to inquiries of
regulatory authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors); provided, that if
any Holder is required to disclose any such non-public information, it will
notify the Company of such proposed disclosure as soon as reasonably practicable
so that the Company may seek a protective order with respect to such non-public
information. Neither the Company nor any Guarantor shall file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded an opportunity to review prior to
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<PAGE> 12
the filing of such document, if the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement,
their Special Counsel, any Participating Broker-Dealer or the managing
underwriters, if any, or their counsel shall reasonably object.
(b) Provide an indenture trustee for the Registrable Securities
or the Exchange Securities, as the case may be, and cause the Indenture (or
other indenture relating to the Registrable Securities) to be qualified under
the TIA not later than the effective date of the first Registration Statement;
and in connection therewith, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the time periods
required hereby; cause the related Prospectus to be supplemented by any
Prospectus supplement required by Applicable Law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating
Broker-Dealers who so request (i) upon the Company's receipt, a copy of the
order of the SEC declaring such Registration Statement and any post-effective
amendment thereto effective and (ii) such reasonable number of copies of such
Registration Statement and of each amendment and supplement thereto (in each
case including any documents incorporated therein by reference and all
exhibits), (iii) such reasonable number of copies of the Prospectus included in
such Registration Statement (including each preliminary Prospectus), and such
reasonable number of copies of the final Prospectus as filed by the Company
pursuant to Rule 424(b) under the Securities Act, in conformity with the
requirements of the Securities Act, and (iv) such other documents (including any
amendments required to be filed pursuant to clause (c) of this Section) as any
such Person may reasonably request in order to facilitate the public sales of
the Registrable Securities. The Company and the Guarantors hereby consent to the
use of the Prospectus by each of the selling Holders
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<PAGE> 13
of Registrable Securities or each such Participating Broker-Dealer, as the case
may be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Securities covered by,
or the sale by Participating Broker-Dealers of the Exchange Securities pursuant
to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act, (ii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (iii) if, at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Company or of
any Guarantor contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct in any material
respect, (iv) of the receipt by the Company or any Guarantor of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Securities
or the Exchange Securities to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the contemplation, initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) Use its best efforts to register or qualify, and, if
applicable, to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a
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<PAGE> 14
Registration Statement for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer or the managing underwriters reasonably request in
writing; and, if Securities are offered other than through an Underwritten
Offering, the Company shall cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed pursuant to this
Section 5(f) at the expense of the Company; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Securities covered by the applicable Registration
Statement, provided, however, that none of the Company nor the Guarantors shall
be required to (i) qualify generally to do business in any jurisdiction where it
is not then so qualified, (ii) to take action that would subject it to general
service of process in any jurisdiction where it is not so subject or (iii)
subject it to taxation in respect of doing business in any such jurisdiction
where it is not then subject.
(g) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Securities for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any applicable
law and (ii) make all required filings of such Prospectus or such post-effective
amendment as soon as practicable after the Company has received notification of
such matters required by Applicable Law to be incorporated in such Prospectus or
post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3 or
(B) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate
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<PAGE> 15
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or such Holders
may request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3 or
(ii) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(e)(v) or 5(e)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the Purchasers of the Registrable Securities being sold thereunder
or to the Purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
appropriate, if so requested by the holders of a majority in aggregate principal
amount of Securities covered by such Registration Statement or the managing
underwriters, if any.
(l) Prior to the effective date of the first Registration
Statement relating to the Securities, (i) provide the applicable trustee with
printed certificates for the Securities in a form eligible for deposit with DTC
and (ii) use its best efforts to provide a CUSIP number for each of the
Securities.
(m) Use its best efforts to cause all Securities covered by such
Registration Statement to be listed on each securities exchange, if any, on
which similar debt securities issued by the Company are then listed.
(n) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of Registrable
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<PAGE> 16
Securities being sold) in order to expedite or facilitate the registration or
the disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, (i) make such representations and
warranties to the Holders and the underwriters, if any, with respect to the
business of the Company and its subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in Underwritten Offerings, and confirm the same
if and when reasonably requested; (ii) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and the
Holders of a majority in aggregate principal amount of the Registrable
Securities being sold), addressed to each selling Holder and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in Underwritten Offerings; (iii) obtain "cold comfort" letters and
updates thereof (which letters and updates (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters) from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters and each selling Holder, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with Underwritten Offerings and
such other matters as reasonably requested by underwriters; and (iv) deliver
such documents and certificates as may be reasonably requested by the Holders of
a majority in principal amount of the Registrable Securities being sold and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its subsidiaries made pursuant
to clause (i) above and to evidence compliance with any conditions contained in
the underwriting agreement or other similar agreement entered into by the
Company.
(o) Comply with all applicable rules and regulations of the SEC
and make generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing on the first
day of the fiscal quarter following each fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the
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<PAGE> 17
Company after the effective date of a Registration Statement, which earnings
statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer or Private Exchange,
obtain an opinion of counsel to the Company (in form, scope and substance
reasonably satisfactory to the Purchasers), addressed to all Holders
participating in the Exchange Offer or Private Exchange, as the case may be, to
the effect that (i) the Company and the Guarantors have duly authorized,
executed and delivered the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture, (ii) the Exchange Securities
or the Private Exchange Securities, as the case may be, and the Indenture
constitute legal, valid and binding obligations of the Company and the
Guarantors, enforceable against the Company and the Guarantors in accordance
with their respective terms, except as such enforcement may be subject to (x)
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and (y) general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law), and (iii) all obligations of the Company and the Guarantors
under the Exchange Securities or the Private Exchange Securities, as the case
may be, and the Indenture are secured by Liens on the assets securing the
obligations of the Company under the Notes.
(q) If an Exchange Offer or Private Exchange is to be
consummated, upon delivery of the Registrable Securities by such Holders to the
Company (or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or caused to be marked, on such Registrable Securities that
such Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be, and in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied.
(r) Cooperate with each seller of Registrable Securities covered
by any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(s) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish
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to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities as the Company may, from time to time, reasonably request in writing.
The Company may exclude from such registration the Registrable Securities of any
seller or Exchange Securities of any Participating Broker-Dealer who
unreasonably fails to furnish such information in a timely fashion.
Each Holder and each Participating Broker-Dealer agrees by
acquisition of such Registrable Securities or Exchange Securities of any
Participating Broker-Dealer that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 5(e)(ii),
5(e)(iv), 5(e)(v) or 5(e)(vi), such Holder will forthwith discontinue
disposition (in the jurisdictions specified in a notice of a 5(e)(iv) event, and
elsewhere in a notice of a 5(e)(ii), 5(e)(v) or 5(e)(vi) event) of such
Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j), or until it is advised in writing (the "Advice")
by the Company that offers or sales in a particular jurisdiction may be resumed
or that the use of the applicable Prospectus may be resumed, as the case may be,
and has received copies of any amendments or supplements thereto. If the Company
shall give such notice, each of the Effectiveness Period and the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each seller of such Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(j) or (y) the Advice.
6 Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company and the Guarantors shall be borne
by the Company and the Guarantors whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation:
(i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with
the NASD and (B) fees and expenses of compliance with state securities
or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Securities or Exchange Securities and determination of
the eligibility of the Registrable Securities or Exchange Securities for
investment under the laws of such jurisdictions (x) where the Holders
are located, in the case of the
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Exchange Securities, or (y) as provided in Section 5(f), in the case of
Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period);
(ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities or Exchange
Securities in a form eligible for deposit with DTC and of printing
prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or, in respect of Registrable Securities
or Exchange Securities to be sold by a Participating Broker-Dealer
during the Applicable Period, by the Holders of a majority in aggregate
principal amount of the Registrable Securities included in any
Registration Statement or of such Exchange Securities, as the case may
be);
(iii) messenger, telephone, duplication, word processing
and delivery expenses incurred by the Company in the performance of its
obligations hereunder;
(iv) fees and disbursements of counsel for the Company;
(v) fees and disbursements of all independent certified
public accountants referred to in Section 6(n)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);
(vi) fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only
where the need for such a "qualified independent underwriter" arises due
to a relationship with the Company;
(vii) Securities Act liability insurance, if the Company
so desires such insurance;
(viii) fees and expenses of all other Persons retained by
the Company; internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties); and the expense of any
annual audit; and
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(ix) rating agency fees and the fees and expenses incurred
in connection with the listing of the Securities to be registered on any
securities exchange.
(b) The Company and the Guarantors shall reimburse the Holders
for the reasonable fees and disbursements of not more than one counsel (in
addition to appropriate local counsel) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be included in any
Registration Statement and other reasonable and necessary out-of-pocket expenses
of the Holders incurred in connection with the registration of the Registrable
Securities.
7 Indemnification
(a) Indemnification by the Company. The Company and each of the
Guarantors, jointly and severally, shall, without limitation as to time,
indemnify and hold harmless each Holder and each Participating Broker-Dealer,
each Person who controls each such Holder (within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors, partners, employees, representatives and agents of each such Holder,
Participating Broker-Dealer and controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (including, without limitation, costs and expenses incurred
in connection with investigating, preparing, pursuing or defending against any
of the foregoing) (collectively, "Losses"), as incurred, directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus, or in any amendment or
supplement thereto, or in any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such Losses are
based upon information relating to such Holder or Participating Broker-Dealer
and furnished in writing to the Company by such Holder or Participating
Broker-Dealer expressly for use therein. The Company and each of the Guarantors
shall also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders or the Participating Broker-Dealer.
20
<PAGE> 21
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of prospectus,
any amendment or supplement thereto, or any preliminary prospectus in which a
Holder is participating, such Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent lawful, as incurred from and against all Losses
relating to, arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, Prospectus or form
of prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement of a material fact or omission or alleged omission of a material fact
is contained in or omitted from any information so furnished in writing by such
Holder to the Company expressly for use therein. In no event shall the liability
of any selling Holder be greater in amount than the dollar amount of the
proceeds (net of payment of all expenses incurred by such Holder) received by
such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "indemnified party"), such indemnified party shall promptly notify the party
or parties from which such indemnity is sought (the "indemnifying parties") in
writing; provided, that the failure to so notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.
The indemnifying party shall have the right, exercisable by
giving written notice to an indemnified party, within 20 business days after
receipt of written notice from such indemnified party of such Proceeding, to
assume, at its expense, the defense of any such Proceeding, provided, that an
indemnified party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be
21
<PAGE> 22
at the expense of such indemnified party or parties unless: (1) the indemnifying
party has agreed to pay such fees and expenses; or (2) the indemnifying party
shall have failed promptly to assume the defense of such Proceeding or shall
have failed to employ counsel reasonably satisfactory to such indemnified party;
or (3) the named parties to any such Proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party or any
of its affiliates or controlling persons, and such indemnified party shall have
been advised by counsel that there may be one or more defenses available to such
indemnified party that are in addition to, or in conflict with, those defenses
available to the indemnifying party or such affiliate or controlling person (in
which case, if such indemnified party notifies the indemnifying parties in
writing that it elects to employ separate counsel at the expense of the
indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and the reasonable fees and expenses of such counsel
shall be at the expense of the indemnifying party; it being understood, however,
that, the indemnifying party shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified
party).
No indemnifying party shall be liable for any settlement of any
such Proceeding effected without its written consent, but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
Proceeding, each indemnifying party jointly and severally agrees, subject to the
exceptions and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any and all Losses by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 7
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 7), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party, on the
22
<PAGE> 23
one hand, and such indemnified party, on the other hand, from the offering of
the Notes, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent any such statement or omission. The amount paid or payable by an
indemnified party as a result of any Losses shall be deemed to include any legal
or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 7(a) or 7(b) was
available to such party.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such Holder's Maximum Contribution Amount. A selling
Holder's "Maximum Contribution Amount" shall equal the excess of (i) the
aggregate proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability that the indemnifying parties may
have to the indemnified parties.
8 Rule 144 and Rule 144A
Each of the Company and each Guarantor covenants that it shall
(a) file the reports required to be filed by it (if so required) under the
Securities Act and
23
<PAGE> 24
the Exchange Act in a timely manner and, if at any time any such Person is not
required to file such reports, it will, upon the request of any Holder, make
publicly available other information necessary to permit sales pursuant to Rule
144 and Rule 144A and (b) take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
pursuant to the exemptions provided by Rule 144 and Rule 144A. Upon the request
of any Holder, the Company and the Guarantors shall deliver to such Holder a
written statement as to whether they have complied with such information
requirements.
9 Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an Underwritten Offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering and be reasonably acceptable to
the Company. In such event, all commissions, fees and other compensation payable
to such bankers and/or managers selected by the Holders to manage the offering
shall be borne by the Holders.
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
10 Miscellaneous
(a) Remedies. In the event of a breach by the Company or any of
the Guarantors of any of its respective obligations under this Agreement, each
Holder, in addition to being entitled to exercise all rights provided herein, in
the Indenture or, in the case of the Purchasers, in the Purchase Agreement, or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each of the
Guarantors agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
24
<PAGE> 25
(b) No Inconsistent Agreements. The Company has not entered into,
as of the date hereof, and shall not enter into, after the date of this
Agreement, any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Securities; provided, that Sections 5(a) and 7 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Company has obtained the written consent of
each Holder affected by any such amendment modification, supplement, waiver or
consent. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, certified
first-class mail, return receipt requested, next-day air courier or facsimile:
(i) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this
Section 11(d), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300
South Grand Avenue, Los Angeles, California 90071, telecopy number (213)
687-5600, Attention: Michael A. Woronoff, Esq.; and
(ii) if to the Company or any of the Guarantors, initially
at 11100 Santa Monica Boulevard, Suite 300, Los Angeles, California
90025, Attention: Chief Executive Officer, telecopy number (310)
479-4350, and thereafter at such other address, notice of which is given
in accordance with
25
<PAGE> 26
the provisions of this Section 11(d), with a copy to Kinsella, Boesch,
Fujikawa and Towle, LLP, 1901 Avenue of the Stars, 7th Floor, Los
Angeles, California 90067, telecopy number (310) 284-6018, Attention:
Joseph P. Bartlett, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE COMPANY AND EACH GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND
EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST
26
<PAGE> 27
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE COMPANY AND EACH GUARANTOR IRREVOCABLY CONSENTS,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR ANY GUARANTOR IN
ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company in
respect of securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a
27
<PAGE> 28
defense, the prevailing party, as determined by the courts, shall be entitled to
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than Holders deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[Signature pages follow]
28
<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
THE SPORTS CLUB COMPANY
By: /s/ Timothy O'Brien
---------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
CANOGA AGOURA SPECTRUM CLUB INC.
IRVINE SPORTS CLUBS, LTD.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien By: /s/ Timothy O'Brien
Title: Chief Financial Officer -------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
GREEN VALLEY SPECTRUM CLUB, INC.
LA/IRVINE SPORTS CLUBS, LTD.
By: /s/ Timothy O'Brien By: Sports Club, Inc. of California,
------------------------------- its General partner
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
HFA SERVICES, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien NY SPORTS CLUB, INC.
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
PONTIUS REALTY Title: Chief Financial Officer
By: /s/ Timothy O'Brien By: /s/ Timothy O'Brien
------------------------------- -------------------------------
Name: Timothy O'Brien Name: Timothy O'Brien
Title: Chief Financial Officer Title: Chief Financial Officer
29
<PAGE> 30
SCC SPORTS CLUB, INC. SEPULVEDA REALTY AND
DEVELOPMENT COMPANY, INC.
By: /s/ Timothy O'Brien
----------------------------
Name: Timothy O'Brien By: /s/ Timothy O'Brien
Title: Chief Financial Officer -------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SF SPORTS CLUB, INC.
THE SPECTRUM CLUB COMPANY, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien By: /s/ Timothy O'Brien
Title: Chief Financial Officer -------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SPECTRUM CLUB ANAHEIM
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer THE SPECTRUM CLUB COMPANY,INC.
SPECTRUM LIQUIDATING CORP. By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SPORTS CLUB, INC. OF CALIFORNIA
WASHINGTON D.C. SPORTS CLUB, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
30
<PAGE> 31
TALLA NEW YORK, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
TVE, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
31
<PAGE> 32
THE SPORTS CONNECTION HOLDING WASHINGTON D.C. SPORTS CLUB, INC.
COMPANY
By: /s/ Timothy O'Brien
-------------------------------
By: /s/ Timothy O'Brien Name: Timothy O'Brien
------------------------------- Title: Chief Financial Officer
Name: Timothy O'Brien
Title: Chief Financial Officer
THE SPORTSMED COMPANY, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
32
<PAGE> 33
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By: /s/ Andrew Booth
-------------------------------
Name: Andrew Booth
Title: Senior Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Patrice Daniels
-------------------------------
Name: Patrice Daniels
Title:
33
<PAGE> 1
EXHIBIT 10.1
THE SPORTS CLUB COMPANY, INC.
$100,000,000 11 3/8% Senior Secured Notes due 2006
PURCHASE AGREEMENT
March 29, 1999
JEFFERIES & COMPANY, INC.
CIBC OPPENHEIMER CORP.
c/o JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Each of The Sports Club Company, Inc., a Delaware corporation
(the "ISSUER"), and each other Sports Club Entity (as defined below) hereby
agrees with you as follows:
1. ISSUANCE OF SECURITIES. The Issuer proposes to issue and sell to
Jefferies & Company, Inc. ("Jefferies") and CIBC Oppenheimer Corp. (together
with Jefferies, the "INITIAL PURCHASERS"), and the Initial Purchasers propose to
purchase $100,000,000 aggregate principal amount of the Issuer's 11 3/8% Senior
Secured Notes due 2006, Series A (the "SERIES A NOTES"). The Series A Notes will
be issued pursuant to an indenture (the "Indenture"), to be dated as of April 1,
1999, among the Issuer, the guarantors named therein (the "GUARANTORS") and U.S.
Bank Trust National Association, as trustee (the "TRUSTEE"). The Guarantors will
unconditionally guarantee the obligations under the Notes (defined below) and
the Indenture (collectively, the "GUARANTY"). The obligations under the Notes
and the Guaranty will be secured by security interests in or pledges of (the
"SECURITY INTERESTS") certain assets (the "COLLATERAL") of the Issuer and
certain of its subsidiaries (collectively, the "GRANTORS") as set forth in the
Offering Circular (defined below).
The Series A Notes will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "ACT"). The Issuer has prepared a
preliminary offering circular, dated March 12, 1999 (the "PRELIMINARY OFFERING
CIRCULAR"), and a final offering circular, dated March 29, 1999 (the "OFFERING
CIRCULAR"), relating to the offer and sale of the Series A Notes (the
"OFFERING").
Upon original issuance thereof, and until such time as the same
is no longer required under the applicable requirements of the Act, the Series A
Notes shall bear the following legend:
<PAGE> 2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT
IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED
UNDER RULE 144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE SPORTS CLUB COMPANY, INC.
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, the Issuer shall issue and sell to the Initial
Purchasers (and, in order to induce the Initial Purchasers to purchase the
Notes, the Guaran-
<PAGE> 3
tors shall Guaranty and the Grantors shall grant the Security Interests)
$100,000,000 aggregate principal amount of Series A Notes, and each Initial
Purchaser severally and not jointly agrees to purchase from the Issuer, the
respective principal amount of Series A Notes set forth opposite such Initial
Purchaser's name on Annex A hereto. The purchase price for the Series A Notes
shall be 95.817% of the principal amount thereof.
3. TERMS OF OFFERING. The Initial Purchasers have advised the Issuer
that the Initial Purchasers will make offers to sell (the "EXEMPT RESALES") some
or all of the Series A Notes purchased by the Initial Purchasers hereunder on
the terms set forth in the Offering Circular, as amended or supplemented, solely
to (i) Persons (as defined below) whom the Initial Purchasers reasonably believe
to be "qualified institutional buyers" as defined in Rule 144A under the Act
("QIBS"), and (ii) a limited number of institutional "accredited investors," as
defined in Rule 501(a)(1), (2), (3) or (7) under the Act ("ACCREDITED INVESTORS"
and, together with QIBs, "ELIGIBLE INITIAL PURCHASERS"). "PERSON" means any
individual, corporation, partnership, joint venture, association, joint stock
company, unincorporated organization, government or any agency or political
subdivision thereof, or any other entity.
Holders of the Series A Notes (including subsequent transferees)
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be executed on and dated as of the
Closing Date (as defined below). Pursuant to the Registration Rights Agreement,
the Issuer and the Guarantors will agree, among other things, to file with the
Securities and Exchange Commission (the "COMMISSION") (i) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to, among other things, the 11?% Senior Secured Notes due 2006, Series B, of the
Issuer (the "SERIES B NOTES" and, together with the Series A Notes, each with
the Guaranty endorsed thereon, the "NOTES"), identical in all material respects
to the Series A Notes (except that the Series B Notes shall have been registered
pursuant to such registration statement) to be offered in exchange for the
Series A Notes (such offer to exchange being referred to as the "REGISTERED
EXCHANGE OFFER") and/or (ii) under certain circumstances, a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION
STATEMENT") relating to the resale by certain holders of the Series A Notes.
On the Closing Date, the Grantors will enter into certain
security and pledge agreements, mortgages and certain other documents, including
(without limitation) a cash collateral and disbursement agreement (collectively,
the "SECURITY DOCUMENTS"), that will provide for the grant of the Security
Interests in the Collateral to the Trustee, as collateral agent (in such
capacity, the "COLLATERAL AGENT"), for the benefit of the holders of the Notes.
The Security Interests will secure the payment and performance when due of all
of the obligations of the Issuer, the Guarantors and the Grantors under the
Indenture, the Notes, and the Security Documents.
In connection with the offering of the Series A Notes
contemplated hereby, the Issuer is amending and restating (the "AMENDMENT") the
Third Amended and Restated Loan Agreement, dated as of February 1, 1999, among
the Issuer, The Spectrum Club Company, Inc., Pontius Realty, Inc., Sports Club,
Inc. of California, Irvine Sports Club, Inc., The SportsMed Company, Inc.,
L.A./Irvine Sports Clubs, Ltd., Talla New York, Inc., SCC Sports Club, Inc.,
Spectrum Club/Anaheim Hills, Inc., Green Valley Spectrum Club, Inc. and Comerica
Bank-California (the "LOAN AGREEMENT").
<PAGE> 4
This Agreement, the Indenture, the Guaranty, the Registration
Rights Agreement, the Security Documents, the Notes, the Amendment, the
Intercreditor and Subordination Agreement, to be dated the Closing Date, among
the Issuer, the Trustee and the Agent under the Loan Agreement (the
"INTERCREDITOR AGREEMENT") and all other documents or instruments executed by
the Issuer or any of the Subsidiaries (as defined below) in connection with the
transactions contemplated hereby and thereby are referred to herein as the
"DOCUMENTS." The Issuer, the Guarantors and the Grantors are collectively
referred to herein as the "SPORTS CLUB ENTITIES." The transactions contemplated
by the Documents, including without limitation, the Offering and the use of the
proceeds therefrom as described in the Offering Circular, are collectively
referred to herein as the "TRANSACTIONS."
4. DELIVERY AND PAYMENT. Delivery to the Initial Purchasers of and
payment for the Series A Notes shall be made at a Closing (the "CLOSING") to be
held at 10:00 a.m., New York City time, on April 1, 1999 (the "CLOSING DATE") at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue,
Los Angeles, California 90071. The Closing Date and the location of delivery of
and the form of payment for the Series A Notes may be varied by agreement
between the Initial Purchasers and the Issuer.
The Issuer shall deliver to the Initial Purchasers one or more
certificates, respectively, representing the Series A Notes (the "GLOBAL
SECURITIES"), each in definitive form, registered in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"), or such other names as the
Initial Purchasers may request upon at least one business day's notice to the
Issuer, in an amount corresponding to the aggregate principal amount of the
Series A Notes sold pursuant to Exempt Resales to QIBs and to Accredited
Investors, respectively, in each case against payment by the Initial Purchasers
of the purchase price therefor by immediately available Federal funds bank wire
transfer to such bank account as the Issuer shall designate at least two
business days prior to the Closing. In consideration of delivery of payment by
the Initial Purchasers in same day funds, the Issuer hereby acknowledges that
the Initial Purchasers will deduct from the purchase price an amount equal to
the Initial Purchasers' cost of funds with respect thereto.
The Global Securities in definitive form shall be made available
to the Initial Purchasers for inspection at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP (or such other place as shall be acceptable to the Initial
Purchasers) not later than 9:30 a.m. one business day immediately preceding the
Closing Date.
5. AGREEMENTS OF THE SPORTS CLUB ENTITIES. Each Sports Club Entity,
jointly and severally, hereby agrees:
(a) To (i) advise the Initial Purchasers promptly after obtaining
knowledge (and, if requested by the Initial Purchasers, confirm such advice in
writing) of (A) the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of any of the
Notes for offer or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority, or (B) the happening of any event that makes any statement of a
material fact made in the Offering Circular untrue or that requires the making
of any
<PAGE> 5
additions to or changes in the Offering Circular in order to make the statements
therein, in the light of the circumstances under which they are made, not
materially misleading, (ii) use its best efforts to prevent the issuance of any
stop order or order suspending the qualification or exemption from qualification
of any of the Notes under any state securities or Blue Sky laws, and (iii) if at
any time any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification of
any of the Notes under any such laws, use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To (i) furnish the Initial Purchasers, without charge, as
many copies of the Offering Circular, and any amendments or supplements thereto,
as the Initial Purchasers may request and (ii) promptly prepare, upon the
Initial Purchasers' request, any amendment or supplement to the Offering
Circular that the Initial Purchasers deem may be reasonably necessary in
connection with Exempt Resales (and the Sports Club Entities hereby consent to
the use of the Preliminary Offering Circular and the Offering Circular, and any
amendments and supplements thereto, by the Initial Purchasers in connection with
Exempt Resales).
(c) Not to amend or supplement the Offering Circular prior to the
Closing Date unless the Initial Purchasers shall previously have been advised
thereof and shall not have objected thereto within five business days after
being furnished a copy thereof.
(d) So long as the Initial Purchasers shall hold any Notes, (i)
if any event shall occur as a result of which, in the reasonable judgment of the
Issuer or the Initial Purchasers, it becomes necessary or advisable to amend or
supplement the Offering Circular in order to make the statements therein, in the
light of the circumstances under which they were made, not materially
misleading, or if it is necessary to amend or supplement the Offering Circular
to comply with Applicable Law (as defined below), forthwith to prepare an
appropriate amendment or supplement to the Offering Circular (in form and
substance satisfactory to the Initial Purchasers) so that (A) as so amended or
supplemented the Offering Circular will not include an untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (B) the Offering Circular will comply with Applicable
Law, and (ii) if it becomes necessary or advisable to amend or supplement the
Offering Circular so that the Offering Circular will contain all of the
information specified in, and meet the requirements of, Rule 144A(d)(4) of the
Act, forthwith to prepare an appropriate amendment or supplement to the Offering
Circular (in form and substance satisfactory to the Initial Purchasers) so that
the Offering Circular, as so amended or supplemented, will contain the
information specified in, and meet the requirements of, such Rule.
(e) To cooperate with the Initial Purchasers and the Initial
Purchasers' counsel in connection with the qualification of the Notes under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may
request and continue such qualification in effect so long as reasonably required
for Exempt Resales; provided, that no Sports Club Entity shall be required in
connection therewith to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction where it is not now so
qualified or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
<PAGE> 6
(f) Whether or not any of the Transactions are consummated or
this Agreement is terminated, to pay (i) all costs, expenses, fees and taxes
incident to and in connection with: (A) the preparation, printing and
distribution of the Preliminary Offering Circular and the Offering Circular and
all amendments and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda and
all other agreements, memoranda, correspondence and other documents prepared and
delivered in connection herewith, (B) the printing, processing and distribution
(including, without limitation, word processing and duplication costs) and
delivery of, and performance under, each of the Documents, (C) the issuance and
delivery of the Notes, including the fees of the Trustee and the cost of its
personnel, (D) the qualification of the Notes for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the fees and disbursements of the Initial Purchasers' counsel
relating to such registration or qualification), (E) furnishing such copies of
the Preliminary Offering Circular and the Offering Circular, and all amendments
and supplements thereto, as may reasonably be requested for use by the Initial
Purchasers, and (F) the preparation of the Notes, (ii) all fees and expenses of
the counsel and accountants of the Sports Club Entities, (iii) all expenses and
listing fees in connection with the application for quotation of the Notes in
the National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (iv) all fees and expenses (including fees
and expenses of counsel) of the Sports Club Entities in connection with approval
of the Notes by DTC for "book-entry" transfer, (v) all fees charged by rating
agencies in connection with the rating of the Notes and (vi) all fees and
expenses (including reasonable fees and expenses of counsel) in excess of
$100,000 incurred by the Initial Purchasers in connection with the preparation,
negotiation and execution of the Documents and the consummation of the
Transactions.
(g) To use the proceeds from the sale of the Series A Notes in
the manner described in the Offering Circular under the caption "Use of
Proceeds."
(h) To the extent it may lawfully do so, not to insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension, usury or other law, wherever enacted, now or at any time
hereafter in force, that would prohibit or forgive the payment of all or any
portion of the principal of or interest on the Notes, or that may affect the
covenants or the performance of the Indenture (and, to the extent it may
lawfully do so, each Sports Club Entity hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power granted to the
Trustee in the Indenture or the Collateral Agent in the Security Documents but
shall suffer and permit the execution of every such power as though no such law
had been enacted).
(i) To do and perform all things required to be done and
performed under the Documents prior to and after the Closing Date (including,
without limitation, (1) all things necessary or advisable to obtain, on the
Closing Date, all termination statements, mortgage releases and other documents
necessary to terminate the Liens (as defined in the Indenture) of record with
respect to Indebtedness (as defined in the Indenture) that is being repaid with
the net proceeds of the Offering; and (2) subject to the terms of the
Intercreditor Agreement, using its best efforts to obtain any consent necessary
to grant a first priority Lien on such Sports Club Entity's interest in the
Collateral (as defined in the Offering Circular) and to the foreclosure by the
Collateral Agent thereon following an Event of Default (as defined in the
Indenture) as promptly as practicable following the Closing Date).
<PAGE> 7
(j) Not to, and to ensure that no affiliate (as defined in Rule
501(b) of the Act) of any of them will, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any "security" (as defined in the
Act) that would be integrated with the sale of the Series A Notes in a manner
that would require the registration under the Act of the sale to the Initial
Purchasers or to the Eligible Initial Purchasers of the Series A Notes.
(k) For so long as any of the Notes remain outstanding, during
any period in which any of them is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available, upon request, to any owner of the Notes in connection with any sale
thereof and any prospective Eligible Initial Purchasers of such Notes from such
owner, the information required by Rule 144A(d)(4) under the Act.
(l) To comply with the representation letter of the Issuer to DTC
relating to the approval of the Notes by DTC for "book entry" transfer.
(m) To use its best efforts to effect the inclusion of the Notes
in PORTAL.
(n) For so long as the Notes are outstanding, and whether or not
required to do so by the rules and regulations of the Commission, (1) to file
with the Commission, in a timely manner, all reports required by the Securities
Exchange Act of 1934, as amended, including all rules and regulations thereunder
(collectively, the "EXCHANGE ACT"), so long as the Commission will accept such
filings, and (2) if not required under the Exchange Act, and prior to the time
the Exchange Offer Registration Statement or the Shelf Registration Statement
(or such other registration statement with respect to the Notes) is filed with
the Commission, to furnish to the Trustee and deliver or cause to be delivered
to the holders of the Notes and the Initial Purchasers (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Issuer were required to file
such Forms, including for each a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Issuer's independent certified public
accountants and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Issuer were required to file such reports.
(o) Except in connection with the Registered Exchange Offer or
the filing of the Shelf Registration Statement, not to, and not to authorize or
permit any Person acting on its behalf to, (i) distribute any offering material
in connection with the offer and sale of the Notes other than the Preliminary
Offering Circular and the Offering Circular and any amendments and supplements
to the Offering Circular complying with Section 5(c) hereof, or (ii) solicit any
offer to buy or offer to sell the Notes by means of any form of general
solicitation or general advertising (including, without limitation, as such
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(p) Not to, directly or indirectly, without the prior consent of
the Initial Purchasers, offer, sell, grant any option to purchase, or otherwise
dispose (or announce any offer, sale, grant of any option
<PAGE> 8
to purchase or other disposition) of any debt securities of any of them for a
period of six months after the date of the Offering Circular, except as
contemplated by the Registration Rights Agreement.
(q) For so long as the Initial Purchasers shall hold any Notes,
to notify the Initial Purchasers promptly in writing if any Sports Club Entity
or any of their Affiliates becomes a party in interest or a disqualified person
with respect to any employee benefit plan. The terms "ERISA," "Affiliates,"
"party in interest," "disqualified person" and "employee benefit plan" shall
have the meanings as set forth in Section 6(x) hereof.
(r) Following the Closing, the Company and the Subsidiaries, as
applicable, will take all actions listed on Schedule 5(r) hereto.
6. REPRESENTATIONS AND WARRANTIES OF THE SPORTS CLUB ENTITIES. The Sports
Club Entities, jointly and severally, represent and warrant to the Initial
Purchasers that:
(a) The Preliminary Offering Circular as of its date did not, and
the Offering Circular, as of its date does not, and as of the Closing Date will
not, and each supplement or amendment thereto as of its date will not, contain
any untrue statement of a material fact or omit to state any material fact
(except, in the case of the Preliminary Offering Circular, for pricing terms and
other financial terms intentionally left blank) necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. No injunction or order has been issued that either (i)
asserts that any of the Transactions is subject to the registration requirements
of the Act or (ii) would prevent or suspend the issuance or sale of the Notes or
the use of the Preliminary Offering Circular, the Offering Circular, or any
amendment or supplement thereto, in any jurisdiction. Each of the Preliminary
Offering Circular and the Offering Circular, as of their respective dates
contained, and the Offering Circular as amended or supplemented as of the
Closing Date will contain, all the information specified in, and meet the
requirements of, Rule 144A(d)(4) under the Act. Except as adequately disclosed
in the Offering Circular, there are no related party transactions that would be
required to be disclosed in the Offering Circular if the Offering Circular were
a prospectus included in a registration statement on Form S-1 filed under the
Act.
(b) Other than the Issuer's common stock, par value $.01 per
share, there are no securities of any Sports Club Entity registered under the
Exchange Act or listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a United States automated
inter-dealer quotation system. The Series A Notes are eligible for resale
pursuant to Rule 144A.
(c) Each of the Issuer and each Subsidiary (defined below) (i)
has been duly organized, is validly existing and is in good standing under the
laws of its jurisdiction of organization, (ii) has all requisite power and
authority to carry on its business and to own, lease and operate its properties
and assets as described in the Offering Circular and (iii) is duly qualified or
licensed to do business and is in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the nature of such
businesses or the ownership or leasing of such properties requires such
qualification, except where the failure to be so qualified could not, singly or
in the aggregate, have a material adverse effect on (i) the properties,
business, prospects, operations, earnings, assets, liabilities or condition
(financial or
<PAGE> 9
otherwise) of the Issuer and the Subsidiaries, taken as a whole, (ii) the
ability of any Sports Club Entity to perform its obligations under any of the
Documents or (iii) the perfection or priority of any Security Interest in any
portion of the Collateral (each, a "MATERIAL ADVERSE EFFECT").
(d) Immediately following the Closing, (i) the only direct or
indirect subsidiaries of the Issuer (collectively, the "SUBSIDIARIES") will be
the entities identified on Schedule 6(d), and (ii) except as set forth on
Schedule 6(d), the Issuer will directly or indirectly beneficially own 100% of
the outstanding shares of capital stock or other equity interests of each
Subsidiary, free and clear of Liens, except for Liens securing the Notes, and
all of such shares of capital stock or other equity interests will be duly
authorized and validly issued, fully paid and nonassessable and not issued in
violation of, or subject to, any preemptive or similar rights. Except as
adequately disclosed in the Offering Circular, there are no outstanding (x)
securities convertible into or exchangeable for any capital stock of the Issuer
or any of the Subsidiaries, (y) options, warrants or other rights to purchase or
subscribe to capital stock of the Issuer or any of the Subsidiaries or
securities convertible into or exchangeable for capital stock of the Issuer or
any of the Subsidiaries or (z) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any capital stock of the Issuer or any of the Subsidiaries, any such
convertible or exchangeable securities or any such options, warrants or rights.
Except as adequately disclosed in the Offering Circular, immediately following
the Closing, the Issuer will not directly or indirectly own any capital stock or
other equity interest in any Person other than the Subsidiaries.
(e) All of the outstanding shares of capital stock of the Issuer
have been duly authorized and validly issued, are fully paid and nonassessable,
and were not issued in violation of, and are not subject to, any preemptive or
similar rights. The table under the caption "Capitalization" in the Offering
Circular (including the footnotes thereto) sets forth, as of its date, (i) the
capitalization of the Issuer and its Subsidiaries on a consolidated basis, and
(ii) the pro forma as adjusted capitalization of the Issuer and its Subsidiaries
on a consolidated basis after giving effect to the Transactions. Except as set
forth in such table, immediately following the Closing, neither the Issuer nor
any of the Subsidiaries will have any liabilities, absolute, accrued, contingent
or otherwise other than (x) liabilities that are reflected in the Financial
Statements (defined below), or (y) liabilities incurred subsequent to the date
thereof in the ordinary course of business, consistent with past practice, that
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(f) Except for this Agreement and the Registration Rights
Agreement, and except as disclosed in the Offering Circular, neither the Issuer
nor any of the Subsidiaries has entered into any agreement (i) to register its
securities under the Act or (ii) to purchase or offer to purchase any securities
of the Issuer, any of the Subsidiaries or any of their respective affiliates.
(g) Each Sports Club Entity has all requisite power and authority
to enter into, deliver and perform its obligations under the Documents to which
it is a party and to consummate the Transactions. Each of the Documents has been
duly and validly authorized by each Sports Club Entity that is, or will be, a
party hereto or thereto, and this Agreement is, and when executed and delivered
on the Closing Date each other Document will be, a legal, valid and binding
obligation of each Sports Club Entity that is a party hereto or thereto,
enforceable against each such Person in accordance with its terms. When executed
and delivered, each Document will conform in all material respects to the
description thereof in the
<PAGE> 10
Offering Circular. The Guaranty ranks and will rank on a parity with all senior
Indebtedness of the applicable Guarantor that is outstanding on the date hereof
or that may be incurred hereafter, and senior to all other Indebtedness of the
applicable Guarantor that is outstanding on the date hereof or that may be
incurred hereafter. On the Closing Date, the Indenture will conform to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA"),
applicable to an indenture that is required to be qualified under the TIA.
(h) The Series A Notes have been duly and validly authorized by
the Issuer for issuance and sale to the Initial Purchasers pursuant to this
Agreement and, when executed and authenticated in accordance with the terms of
the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms hereof, will be legal, valid and binding obligations
of the Issuer, enforceable against the Issuer in accordance with their terms.
The Series B Notes have been duly and validly authorized by the Issuer and, when
executed, authenticated and delivered in accordance with the terms of the
Indenture and the Registration Rights Agreement, will be legal, valid and
binding obligations of the Issuer, enforceable against the Issuer in accordance
with their terms. Each Guaranty has been duly and validly authorized by the
applicable Guarantor and, when issued in accordance with the terms of the
Indenture, will be a legal, valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms. The Notes rank
and will rank on a parity with all senior Indebtedness of the Issuer that is
outstanding on the date hereof or that may be incurred hereafter, and senior to
all other indebtedness of the Issuer that is outstanding on the date hereof or
that may be incurred hereafter.
(i) Neither the Issuer nor any of the Subsidiaries is (i) in
violation of its respective charter or by-laws (collectively, "CHARTER
DOCUMENTS"), (ii) in violation of any federal, state, local or foreign statute,
law or ordinance, or any judgment, decree, rule, regulation or order
(collectively, "APPLICABLE LAW") of any government, governmental or regulatory
agency or body, court, arbitrator or self-regulatory organization, domestic or
foreign (each, a "GOVERNMENTAL AUTHORITY"), other than violations that could
not, singly or in the aggregate, result in a Material Adverse Effect, or (iii)
in breach of or default under any bond, debenture, note or other evidence of
indebtedness, indenture, mortgage, deed of trust, lease or any other agreement
or instrument to which any such Person is a party or by which any of them or
their respective property is bound (collectively, "APPLICABLE AGREEMENTS"),
other than breaches or defaults that could not, singly or in the aggregate,
result in a Material Adverse Effect. There exists no condition that, with the
passage of time or otherwise, would constitute a violation of such Charter
Documents or Applicable Laws or a breach of or default under any Applicable
Agreement or result in the imposition of any penalty or the acceleration of any
indebtedness, other than breaches, violations, penalties, defaults or conditions
which could not, singly or in the aggregate, result in a Material Adverse
Effect. All Applicable Agreements are in full force and effect and are legal,
valid and binding obligations, and no default has occurred or is continuing
thereunder, other than such defaults that could not, singly or in the aggregate,
have a Material Adverse Effect.
(j) Neither the execution, delivery or performance of the
Documents nor the consummation of the Transactions shall conflict with, violate,
constitute a breach of or a default (with the passage of time or otherwise)
under, require the consent of any Person (other than consents already obtained)
under, result in the imposition of a Lien on any assets of the Issuer or any of
the Subsidiaries (except pursuant to the Documents), or result in an
acceleration of indebtedness pursuant to (i) the Charter Documents of the
<PAGE> 11
Issuer or any of the Subsidiaries, (ii) any Applicable Agreement, other than
such breaches, violations or defaults that could not, singly or in the
aggregate, result in a Material Adverse Effect or (iii) any Applicable Law.
After giving effect to the Transactions, no Default (as defined in the
Indenture) or Event of Default will exist.
(k) No permit, certificate, authorization, approval, consent,
license or order of, or filing, registration, declaration or qualification with,
any Governmental Authority (collectively, "Permits") and no approval or consent
of any other Person, is required in connection with, or as a condition to, the
execution, delivery or performance of any of the Documents or the consummation
of any of the Transactions, other than such Permits (i) as have been made or
obtained on or prior to the Closing Date, (ii) as are not required to be made or
obtained on or prior to the Closing Date that will be made or obtained when
required, or (iii) the failure of which to make or obtain could not, singly or
in the aggregate, result in a Material Adverse Effect.
(l) Except as disclosed in the Offering Circular, there is no
action, claim, suit, demand, hearing, notice of violation or deficiency, or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), domestic or foreign (collectively,
"PROCEEDINGS"), pending or to the Issuer's knowledge threatened, that either (i)
seeks to restrain, enjoin, prevent the consummation of, or otherwise challenge
any of the Documents or any of the Transactions, or (ii) could, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither the
Issuer nor any of the Subsidiaries is subject to any judgment, order, decree,
rule or regulation of any Governmental Authority that could, singly or in the
aggregate, have a Material Adverse Effect.
(m) The Issuer and each of the Subsidiaries has, and is in
compliance with the terms and conditions of, all Permits necessary or advisable
to own, lease and operate the properties and to conduct the businesses described
in the Offering Circular other than those the failure of which to have could
not, singly or in the aggregate, result in a Material Adverse Effect. All such
Permits are valid and in full force and effect. No event has occurred which
allows, or after notice or lapse of time would allow, the imposition of any
material penalty, revocation or termination by the issuer thereof or which
results, or after notice or lapse of time would result, in any material
impairment of the rights of the holder of any such Permits. Neither the Issuer
nor any of the Subsidiaries has any reason to believe that any issuer is
considering limiting, conditioning, suspending, modifying, revoking or not
renewing any such Permit.
(n) Immediately following the Closing, the Issuer and the
Subsidiaries (i) will have good and marketable title, free and clear of all
Liens (except for Permitted Liens (as defined in the Indenture)), to all
property and assets described in the Offering Circular as being owned by them
and (ii) will enjoy peaceful and undisturbed possession under all leases to
which any of them is a party as lessee.
(o) The Issuer and the Subsidiaries maintain insurance covering
their properties, operations, personnel and businesses against such losses and
risks as they reasonably deem adequate in accordance with customary industry
practice. All such insurance is outstanding and duly in force.
(p) Upon execution and delivery of the Security Documents and the
issuance of the Notes, the Security Documents will create, in favor of the
Collateral Agent, for the benefit of the holders
<PAGE> 12
of the Notes, a valid security interest in the Collateral and the proceeds
thereof and, upon the filings or the recording required by the Security
Documents, the Collateral Agent will have a first priority perfected security
interest in the Collateral (other than the Shared Collateral (as defined in the
Intercreditor Agreement)).
(q) All tax returns required to be filed by the Issuer and the
Subsidiaries in any jurisdiction (including foreign jurisdictions) have been
filed and, when filed, all such returns were accurate in all material respects,
and all taxes, assessments, fees and other charges (including, without
limitation, withholding taxes, penalties and interest) due or claimed to be due
from such entities have been paid, other than those being contested in good
faith by appropriate proceedings, or those that are currently payable without
penalty or interest and, in each case, for which an adequate reserve or accrual
has been established on the books and records of the Issuer in accordance with
generally accepted accounting principles of the United States, consistently
applied ("GAAP"). There are no actual or proposed additional tax assessments for
any fiscal period against the Issuer or any of the Subsidiaries that could,
singly or in the aggregate, have a Material Adverse Effect. The Issuer believes
that the charges, accruals and reserves on the books of each of the Issuer and
the Subsidiaries in respect of any income and other tax liability for any years
not finally determined are adequate to meet any assessments or re-assessments
for additional income tax for any years not finally determined.
(r) The Issuer and the Subsidiaries own, or are licensed under,
and have the right to use, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "INTELLECTUAL
PROPERTY") currently used in, or necessary for the conduct of, their businesses,
free and clear of all Liens, other than Permitted Liens. No claims have been
asserted by any Person challenging the use of any such Intellectual Property by
the Issuer or any of the Subsidiaries or questioning the validity or
effectiveness of any license or agreement related thereto, to the Issuer's
knowledge there is no valid basis for any such claim (other than any claims that
could not, singly or in the aggregate, have a Material Adverse Effect), and the
use of such Intellectual Property by the Issuer and the Subsidiaries will not
infringe on the Intellectual Property rights of any other Person.
(s) Each of the Issuer and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
material transactions are executed in accordance with management's general or
specific authorization, (ii) material transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP, and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
material differences.
(t) The audited consolidated financial statements and related
notes of the Issuer contained in the Offering Circular (the "FINANCIAL
STATEMENTS") present fairly the consolidated financial position, results of
operations and cash flows of the applicable Person (and in the case of the
Issuer, its Subsidiaries), as of the respective dates and for the respective
periods to which they apply, and have been prepared in accordance with GAAP and
the requirements of Regulation S-X that would be applicable if
<PAGE> 13
the Offering Circular were a prospectus included in a registration statement on
Form S-1 filed under the Act (the "S-X Requirements"). The summary historical
financial data included in the Offering Circular have been prepared on a basis
consistent with that of the Financial Statements and present fairly the
consolidated financial position and results of operations of the Issuer and its
Subsidiaries as of the respective dates and for the respective periods
indicated. The summary pro forma financial information included in the Offering
Circular present fairly the pro forma consolidated financial position and
results of operation of the Issuer and its Subsidiaries as of the respective
dates and for the respective periods indicated. All other financial and
statistical data included in the Offering Circular are fairly and accurately
presented. KPMG LLP are independent public accountants with respect to the
Issuer and the Subsidiaries.
(u) Subsequent to the respective dates as of which information is
given in the Offering Circular, except as disclosed in the Offering Circular,
(i) neither the Issuer nor any of the Subsidiaries has incurred any liabilities,
direct or contingent, that are material, singly or in the aggregate, to any of
them, or has entered into any material transactions not in the ordinary course
of business, (ii) there has not been any decrease in the capital stock or any
increase in long-term indebtedness or any material increase in short-term
indebtedness of any of them, or any payment of or declaration to pay any
dividends or any other distribution with respect to any of them, and (iii) there
has not been any material adverse change in the properties, business, prospects,
operations, earnings, assets, liabilities or condition (financial or otherwise)
of the Issuer and the Subsidiaries taken as a whole (each of clauses (i), (ii)
and (iii), a "MATERIAL ADVERSE CHANGE"). There is no event that is reasonably
likely to occur, which if it were to occur, could, singly or in the aggregate,
have a Material Adverse Effect, except such events that have been disclosed in
the Offering Circular.
(v) Immediately following the Closing, after giving effect to the
Transactions, (i) the present fair salable value of the assets of each Sports
Club Entity will exceed the amount that will be required to be paid on or in
respect of the then existing debts and other liabilities (including contingent
liabilities) of such Person as they become absolute and matured and (ii) no
Sports Club Entity will have unreasonably small capital to carry out its
businesses as conducted or as proposed to be conducted. Neither the Issuer nor
any of the Subsidiaries intends to, or believes that it will, incur debts beyond
its ability to pay such debts as they mature.
(w) Neither the Issuer nor any of its affiliates has (i) taken,
directly or indirectly, any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of any of them to
facilitate the sale or resale of any of the Notes, (ii) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, any of
the Notes or (iii) except as disclosed in the Offering Circular, paid or agreed
to pay to any Person any compensation for soliciting another to purchase any
other securities of any of them.
(x) Without limiting clause (k) above, no registration under the
Act, and no qualification of the Indenture under the TIA, is required for the
sale of the Series A Notes to the Initial Purchasers as contemplated hereby or
for the Exempt Resales, assuming (i) that the purchasers in the Exempt Resales
are Eligible Initial Purchasers, (ii) the accuracy of the Initial Purchasers'
representations contained herein regarding the absence of general solicitation
in connection with the sale of the Series A Notes to the Initial Purchasers and
in the Exempt Resales, and (iii) the accuracy of the representations made by
each Ac-
<PAGE> 14
credited Investor who purchases the Series A Notes pursuant to an Exempt Resale
as set forth in the letters of representation in the form of Annex A to the
Offering Circular. No form of general solicitation or general advertising was
used by the Issuer or any of its affiliates or any of their representatives in
connection with the offer and sale of any of the Series A Notes or in connection
with Exempt Resales. No securities of the same class as any of the Notes have
been offered, issued or sold by the Issuer or any of its affiliates within the
six-month period immediately prior to the date hereof.
(y) Neither the Issuer nor any of its "Affiliates" is a "party in
interest" or a "disqualified person" with respect to any employee benefit plans.
No condition exists or event or transaction has occurred in connection with any
employee benefit plan that could result in the Issuer or any such "Affiliate"
incurring any liability, fine or penalty that could, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. With respect to any
employee pension benefit plan that is subject to Title IV of the Employee
Retirement Income Act of 1974, as amended, or the rules and regulations
promulgated thereunder ("ERISA"), (i) the fair market value of the assets of
such employee pension benefit plan equals or exceeds the present value of the
liabilities of such pension plan (as determined in accordance with the actuarial
methods and assumptions set forth in the latest actuarial report for such
employee pension benefit plan), except where the failure to so equal or exceed
would not, singly or in the aggregate, have a Material Adverse Effect and (ii)
there exists no accumulated funding deficiency which could, singly or in the
aggregate, have a Material Adverse Effect. The terms "employee benefit plan,"
"employee pension benefit plan," and "party in interest" shall have the meanings
assigned to such terms in Section 3 of ERISA. The term "Affiliate" shall have
the meaning assigned to such term in Section 407(d)(7) of ERISA, and the term
"disqualified person" shall have the meaning assigned to such term in section
4975 of the Internal Revenue Code of 1986, as amended, or the rules, regulations
and published interpretations promulgated thereunder (the "CODE").
(ab) None of the Transactions will violate or result in a
violation of Section 7 of the Exchange Act (including, without limitation,
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System). Neither the Issuer nor any of the Subsidiaries is subject to
regulation, or shall become subject to regulation upon the consummation of the
Transactions, under the Investment Company Act of 1940, as amended, and the
rules and regulations and interpretations promulgated thereunder, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or any Federal or state
statute or regulation limiting its ability to incur or assume indebtedness for
borrowed money.
(ac) Neither the Issuer nor any of the Subsidiaries has dealt
with any broker, finder, commission agent or other Person (other than the
Initial Purchasers in connection with the Transactions) and neither the Issuer
nor any of the Subsidiaries is under any obligation to pay any broker's fee or
commission in connection with such Transactions (other than commissions and fees
to the Initial Purchasers as set forth in the Offering Circular).
(ad) Neither the Issuer nor any Subsidiary is engaged in any
unfair labor practice. Except as disclosed in the Offering Circular, there is
(i) no unfair labor practice complaint or other proceeding pending or, to the
knowledge of the Issuer after due inquiry, threatened against the Issuer or any
of the
<PAGE> 15
Subsidiaries before the National Labor Relations Board or any state, local or
foreign labor relations board or any industrial tribunal, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending or to the Issuer's knowledge threatened, (ii) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Issuer
after due inquiry, threatened against the Issuer or any of the Subsidiaries, and
(iii) no union representation question existing with respect to the employees of
the Issuer or any of the Subsidiaries, and, to the Issuer's knowledge after due
inquiry, no union organizing activities are taking place that, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(ae) In the ordinary course of their businesses, the Issuer and
each of the Subsidiaries conduct a periodic review of the effect of
Environmental Laws (as defined below) on the business, operations and properties
of the Issuer and each of the Subsidiaries in the course of which they identify
and evaluate associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for cleanup, closure of
properties or compliance with Environmental Laws or any Permit, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Issuer and the Subsidiaries have
reasonably concluded that such associated costs and liabilities could not
reasonably be expected, singly or in the aggregate, to have a Material Adverse
Effect. Except as disclosed in the Offering Circular or as otherwise could not
reasonably be expected, singly or in the aggregate, to have a Material Adverse
Effect:
(1) each of the Issuer and the Subsidiaries (i) has obtained all
Permits that are required with respect to the operation of its business,
property and assets under the Environmental Laws (as defined below) and
are in compliance with all terms and conditions of such required
Permits, and (ii) is in compliance with all Environmental Laws
(including, without limitation, compliance with standards, schedules and
timetables therein);
(2) no real property or facility owned, used, operated, leased,
managed or controlled by the Issuer or any of the Subsidiaries, or any
predecessor in interest, is listed or proposed for listing on the
National Priorities List or the Comprehensive Environmental Response,
Compensation, and Liability Information System, both promulgated under
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), or on any other state or local list
established pursuant to any Environmental Law, and neither the Issuer
nor any of the Subsidiaries has received any notification of potential
or actual liability or request for information under CERCLA or any
comparable state or local law;
(3) no underground storage tank or other underground storage
receptacle, or related piping, is located on a facility or property
currently owned, operated, leased, managed or controlled by the Issuer
or any of the Subsidiaries in violation of any Environmental Law;
(4) there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping,
on-site or, to the knowledge of the Issuer and the Subsidiaries after
due inquiry, off-site) of Hazardous Materials (as defined below) by the
Issuer, any of the Subsidiaries or any predecessor in interest or any
Person whose liability for any release of Hazardous Materials, the
<PAGE> 16
Issuer or any of the Subsidiaries has retained or assumed either
contractually or by operation of law at, on, under, from or into any
facility or real property owned, operated, leased, managed or controlled
by any such Person;
(5) neither the Issuer, the Subsidiaries nor any Person whose
liability the Issuer or any of the Subsidiaries has retained or assumed
either contractually or by operation of law has any liability, absolute
or contingent, under any Environmental Law, and there is no Proceeding
pending or threatened against any of them under any Environmental Law;
and
(6) there are no events, activities, practices, incidents or actions
or conditions, circumstances or plans that may interfere with or prevent
compliance by the Issuer or any of the Subsidiaries with any
Environmental Law, or that may give rise to any liability under any
Environmental Laws.
"ENVIRONMENTAL LAWS" means all Applicable Laws, now or hereafter
in effect, relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to (i)
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous constituents,
substances or wastes, including, without limitation, asbestos or
asbestos-containing materials, polychlorinated biphenyls, petroleum or
any constituents relating to or arising out of any oil production
activities, including crude oil or any fraction thereof, or any
petroleum product or other wastes, chemicals or substances regulated by
any Environmental Law (collectively referred to as "HAZARDOUS
MATERIALS"), into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata), (ii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport or handling of
Hazardous Materials and (iii) underground storage tanks, and related
piping, and emissions, discharges, releases or threatened releases
therefrom.
(af) No statement, representation or warranty made by the Issuer,
any of the Subsidiaries, or any other Person in any of the Documents or in any
certificate or document required by any of the Documents to be delivered to the
Initial Purchasers was or will be, when made, inaccurate, untrue or incorrect in
any material respect. Each certificate signed by any officer of the Issuer or
any Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers in connection with the Transactions shall be deemed to be a
representation and warranty by the Issuer and such Guarantor to each Initial
Purchaser as to the matters covered thereby.
7. REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASERS. Each
Initial Purchaser represents and warrants with respect to itself that:
(a) It is a QIB.
(b) It (i) is not acquiring the Series A Notes with a view to any
distribution thereof that would violate the Act or the securities laws of any
state of the United States or any other applicable jurisdiction and (ii) will be
soliciting offers for the Series A Notes only from, and will be reoffering and
re-
<PAGE> 17
selling the Series A Notes only to, (A) Persons in the United States whom it
reasonably believes to be QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A or (B) a limited
number of Accredited Investors that execute and deliver to the Issuer and the
Initial Purchasers a letter containing certain representations and agreements in
the form attached as Annex A to the Offering Circular.
(c) No form of general solicitation or general advertising in
violation of the Securities Act has been or will be used by such Initial
Purchaser or any of its representatives in connection with the offer, sale and
resale of any of the Series A Notes.
(d) In connection with the Exempt Resales, it will solicit offers
to buy the Series A Notes only from, and will offer and sell the Series A Notes
only to, Eligible Initial Purchasers who, in purchasing such Series A Notes,
will be deemed to have represented and agreed (i) if such Eligible Initial
Purchasers are QIBs, that they are purchasing the Series A Notes for their own
accounts or accounts with respect to which they exercise sole investment
discretion and that they or such accounts are QIBs, (ii) that such Series A
Notes will not have been registered under the Act and may be resold, pledged or
otherwise transferred only (A) inside the United States to a Person whom the
seller reasonably believes is a QIB in a transaction meeting the requirements of
Rule 144A, in a transaction meeting the requirements of Rule 144 or in
accordance with another exemption from the registration requirements of the Act,
(B) to the Issuer, (C) pursuant to an effective registration statement and (D)
outside the United States to a foreign Person in a transaction meeting the
requirements of Regulation S under the Act and, in each case, in accordance with
any applicable securities laws of any state of the United States or any other
applicable jurisdiction, and (iii) that the holder will, and each subsequent
holder is required to, notify any Initial Purchaser from it of the security
evidenced thereby of the resale restrictions set forth in (ii) above.
(e) It has all requisite power and authority to enter into,
deliver and perform its obligations under this Agreement and the Registration
Rights Agreement and each of this Agreement and the Registration Rights
Agreement has been duly and validly authorized by it.
<PAGE> 18
8. INDEMNIFICATION.
(a) Each Sports Club Entity shall, jointly and severally, without
limitation as to time, indemnify and hold harmless each Initial Purchaser and
each Person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act) each Initial Purchaser (any of such
Persons being hereinafter referred to as a "controlling person"), and the
respective officers, directors, partners, employees, representatives and agents
of each Initial Purchaser and any such controlling person (collectively, the
"INDEMNIFIED PARTIES"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (including,
without limitation, costs and expenses incurred in connection with
investigating, preparing, pursuing or defending against any of the foregoing)
(collectively, "LOSSES"), as incurred, directly or indirectly caused by, related
to, based upon, arising out of or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Circular or the Offering Circular (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
(ii) any act, omission, transaction or event contemplated by the Documents;
provided, that neither the Issuer nor any other Sports Club Entity shall be
liable to any Indemnified Party for any Losses that arise solely from the gross
negligence or willful misconduct of such Indemnified Party. The Issuer shall
notify each Initial Purchaser promptly of the institution, threat or assertion
of any Proceeding of which the Issuer or any Subsidiary is aware in connection
with the matters addressed by this Agreement which involves the Issuer, any of
the Subsidiaries or any of the Indemnified Parties.
(b) If any Proceeding shall be brought or asserted against any
Person entitled to indemnification hereunder, such Indemnified Party shall give
prompt written notice to the Issuer; provided, that the failure to so notify the
Issuer shall not relieve any Sports Club Entity from any obligation or liability
except to the extent (but only to the extent) that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal) that such Sports Club Entity has been prejudiced materially
by such failure.
Neither the Issuer nor any of its Subsidiaries shall consent to
entry of any judgment in or enter into any settlement of any pending or
threatened Proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Party is a party thereto)
unless such judgment or settlement includes, as an unconditional term thereof,
the giving by the claimant or plaintiff to each Indemnified Party of a release,
in form and substance satisfactory to each Initial Purchaser, from all Losses
that may arise from such Proceeding or the subject matter thereof (whether or
not any Indemnified Party is a party thereto).
(c) If the indemnification provided for in this Section 8 is
unavailable to an Indemnified Party or is insufficient to hold such Indemnified
Party harmless for any Losses in respect of which this Section 8 would otherwise
apply by its terms (other than by reason of exceptions provided in this Section
8), then each indemnifying party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses (i) in such proportion as is
<PAGE> 19
appropriate to reflect the relative benefits received by the Sports Club
Entities, on the one hand, and the Initial Purchasers, on the other hand, from
the offering of the Series A Notes or (ii) if the allocation provided by clause
(i) above is not permitted by Applicable Law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Sports Club Entities, on the one hand,
and the Initial Purchasers, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. The relative benefits received by the Sports
Club Entities, on the one hand, and the Initial Purchasers, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Sports Club Entities, and
the total discounts and commissions received by the Initial Purchasers, bear to
the total price of the Series A Notes in Exempt Resales in each case as set
forth in the table on the cover page of the Offering Circular. The relative
fault of the Sports Club Entities, on the one hand, and the Initial Purchasers,
on the other hand, shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Sports Club Entities, on the one hand, or the Initial Purchasers, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by an Indemnified Party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in connection
with any Proceeding, to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section 8 was
available to such party.
Each party hereto agrees that it would not be just and equitable
if contribution pursuant to this Section 8(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(c), neither of the Initial
Purchasers shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
with respect to the Series A Notes purchased by it exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(d) The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the Sports Club Entities may
otherwise have to the Indemnified Parties.
9. CONDITIONS.
(a) The respective obligations of each Initial Purchaser to
purchase the Series A Notes under this Agreement is subject to the satisfaction
or waiver of each of the following conditions:
(i) All the representations and warranties of each Sports Club
Entity in each of the Documents to which it is a party shall be true and correct
at and as of the Closing Date after giving effect to the Transactions with the
same force and effect as if made on and as of such date. On or prior to the
Closing Date, each of the Sports Club Entities and, to the knowledge of the
Issuer after due inquiry, each
<PAGE> 20
other party to the Documents (other than the Initial Purchasers) shall have
performed or complied in all material respects with all of the agreements and
satisfied in all material respects all conditions on their respective parts to
be performed, complied with or satisfied pursuant to the Documents.
(ii) The Offering Circular shall have been printed and copies
made available to the Initial Purchasers not later than 12:00 noon, New York
City time, on the first business day following the date of this Agreement or at
such later date and time as the Initial Purchasers may approve.
(iii) No injunction, restraining order or order of any nature by
a Governmental Authority shall have been issued as of the Closing Date that
would prevent or interfere with the consummation of any of the Transactions; and
no stop order suspending the qualification or exemption from qualification of
any of the Series A Notes in any jurisdiction shall have been issued and no
Proceeding for that purpose shall have been commenced or be pending or
contemplated.
(iv) No action shall have been taken and no Applicable Law shall
have been enacted, adopted or issued that would, as of the Closing Date, prevent
the consummation of any of the Transactions. No Proceeding shall be pending or
threatened other than Proceedings that (A) if adversely determined could not,
singly or in the aggregate, adversely affect the issuance or marketability of
the Series A Notes and (B) could not reasonably be expected to have a Material
Adverse Effect.
(v) Since the date as of which information is given in the
Offering Circular, there shall not have been any Material Adverse Change.
(vi) The Notes shall have (A) been designated PORTAL securities
in accordance with the rules and regulations adopted by the NASD relating to
trading in the PORTAL market, and (B) received a rating of at least B1 and B
from Standard & Poor's Corporation and Moody's Investors Services, Inc.,
respectively.
(vii) The Initial Purchasers shall have received on the Closing
Date (A) certificates dated the Closing Date, signed by (1) the Chief Executive
Officer and (2) the principal financial or accounting officer of the Issuer, on
behalf of the Issuer, (x) confirming the matters set forth in paragraphs (i)
through (v) of this Section 9(a) and (y) certifying as to such other matters as
the Initial Purchasers may reasonably request, (B) a certificate, dated the
Closing Date, signed by the Secretary of each Sports Club Entity, certifying
such matters as the Initial Purchasers may reasonably request and (C) a
certificate of solvency, dated the Closing Date, signed by the principal
financial or accounting officer of the Issuer substantially in the form
previously approved by the Initial Purchasers.
(viii) The Initial Purchasers shall have received:
(1) an opinion (in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers) of Kinsella,
Boesch, Fujikawa and Towle, LLP, special counsel to the Issuer, dated
the Closing Date, in the form of Exhibit A hereto;
<PAGE> 21
(2) reliance letters from each counsel or special counsel to any
Sports Club Entity (in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers), dated the Closing
Date, permitting the Initial Purchasers to rely on all other opinions
rendered by such counsel in connection with the Transactions; and
(3) an opinion, dated the Closing Date, of Skadden, Arps, Slate,
Meagher & Flom LLP, in form and substance reasonably satisfactory to the
Initial Purchasers covering such matters as are customarily covered in
such opinions.
(ix) The Initial Purchasers shall have received from KPMG LLP
with respect to the Issuer and its Subsidiaries (A) a customary comfort letter,
dated the date of the Offering Circular, in form and substance reasonably
satisfactory to the Initial Purchasers, with respect to the financial statements
and certain financial information contained in the Offering Circular, and (B) a
customary comfort letter, dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, to the effect that they
reaffirm the statements made in the letter furnished pursuant to clause (A),
except that the specified date referred to shall be a date not more than five
days prior to the Closing Date.
(x) The Documents shall have been executed and delivered by all
parties thereto and the Initial Purchasers shall have received a fully executed
original of each Document.
(xi) On or prior to the Closing Date, the Transactions shall have
been duly consummated. The Initial Purchasers shall have received copies of all
opinions, certificates, letters and other documents delivered under or in
connection with the Transactions.
(xii) The Initial Purchasers shall have received copies of duly
executed payoff letters, UCC-3 termination statements, mortgage releases and
other collateral releases and terminations, each in form and substance
satisfactory to the Initial Purchasers, evidencing (1) the repayment of (x) all
amounts outstanding under the Credit Facility, (y) the note issued in connection
with the acquisition of the Spectrum Club - Agoura Hills and (z) the note issued
in connection with the acquisition of The Sports Club/Irvine; (2) the
termination of each agreement or instrument relating thereto; and (3) the
release of each item of Collateral securing such Indebtedness and the
termination of all Liens created thereunder, and each such payoff letter,
release and termination shall be in full force and effect.
(xiii) The Collateral Agent shall have received (A) executed
copies of each UCC-1 financing statement signed by the Issuer and each Grantor,
naming the Collateral Agent as secured party and filed in such jurisdictions as
the Initial Purchasers may reasonably require, (B) bailee letters, in form and
substance reasonably satisfactory to the Initial Purchasers, executed by the
Issuer or the appropriate Grantors for delivery to each of the Persons
identified in the Security Documents as holding Collateral, and (C) the original
stock certificates pledged to the Collateral Agent pursuant to the Documents,
together with undated stock powers or endorsements duly executed in blank in
connection therewith.
(xiv) Counsel to the Initial Purchasers shall have been furnished
with such documents as they may reasonably require for the purpose of enabling
them to review or pass upon the matters re-
<PAGE> 22
ferred to in this Section 9 and in order to evidence the accuracy, completeness
or satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(b) The obligation of the Issuer to sell the Series A Notes under
this Agreement is subject to the satisfaction or waiver of each of the following
conditions:
(i) The Initial Purchasers shall have delivered payment to the
Issuer for the Series A Notes pursuant to Sections 2 and 4 of this Agreement.
(ii) All of the representations and warranties of the Initial
Purchasers in this Agreement shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as if made on and
as of such date.
(iii) No injunction, restraining order or order of any nature by
a Governmental Authority shall have been issued as of the Closing Date that
would prevent or interfere with the issuance and sale of the Series A Notes; and
no stop order suspending the qualification or exemption from qualification of
any of the Series A Notes in any jurisdiction shall have been issued and no
Proceeding for that purpose shall have been commenced or be pending or
contemplated as of the Closing Date.
10. TERMINATION. The Initial Purchasers may terminate this Agreement
at any time prior to the Closing Date by written notice to the Issuer if any of
the following has occurred:
(a) since the date as of which information is given in the
Offering Circular, any Material Adverse Effect or development involving a
prospective adverse effect on the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise), of the
Issuer or any Subsidiary, whether or not arising in the ordinary course of
business, that could, in Jefferies' judgment, (i) make it impracticable or
inadvisable to proceed with the Offering or delivery of the Series A Notes on
the terms and in the manner contemplated in the Offering Circular or (ii)
materially impair the investment quality of any of the Notes;
(b) the failure of the Issuer to satisfy the conditions contained
in Section 9(a) hereof on or prior to the third business day following the date
of this Agreement;
(c) any outbreak or escalation of hostilities or other national
or international calamity or crisis or material adverse change in economic
conditions in the financial markets of the United States or elsewhere, if the
effect of such outbreak, escalation, calamity, crisis or material adverse change
in the economic conditions in or in the financial markets of the United States
or elsewhere could make it, in Jefferies' judgment, impracticable or inadvisable
to market or proceed with the offering or delivery of the Series A Notes on the
terms and in the manner contemplated in the Offering Circular or to enforce
contracts for the sale of any of the Series A Notes;
(d) the suspension or limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market or any setting of limitations on prices for securities on
any such exchange or NASDAQ National Market;
<PAGE> 23
(e) the enactment, publication, decree or other promulgation
after the date hereof of any Applicable Law that in Jefferies' opinion could
have a Material Adverse Effect;
(f) any securities of any Sports Club Entity shall have been
downgraded or placed on any "watch list" for possible downgrading by any
"nationally recognized statistical rating organization", as such term is defined
for purposes of Rule 431(g)(2) under the Act; or
(g) the declaration of a banking moratorium by any Governmental
Authority; or the taking of any action by any Governmental Authority after the
date hereof in respect of its monetary or fiscal affairs that in Jefferies'
opinion could have a material adverse effect on the financial markets in the
United States or elsewhere.
The indemnities and contribution and expense reimbursement
provisions and other agreements, representations and warranties of the Sports
Club Entities set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchasers, (ii) acceptance of the Notes, and payment for them
hereunder, and (iii) any termination of this Agreement (including, without
limitation, any termination pursuant to this Section 10 or Section 11 below.
Without limiting the foregoing, notwithstanding any termination of this
Agreement, the Sports Club Entities shall be jointly and severally liable (i)
for all expenses that they have agreed to pay pursuant to Section 5(f) hereof,
and (ii) pursuant to Section 8 hereof.
Default by Initial Purchaser. If either Initial Purchaser shall
fail or refuse to purchase the Series A Notes that it has agreed to purchase
hereunder on the Closing Date and arrangements for purchase of such Series A
Notes are not made within 36 hours of such default, this Agreement shall
terminate without liability on the part of the Issuer, except as otherwise
provided in Section 10 hereof, or the non-defaulting Initial Purchaser. Nothing
herein shall relieve the defaulting Initial Purchaser from liability for its
default.
11. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuer, 11100 Santa Monica
Boulevard, Suite 300, Los Angeles, California 90025, Attention: Chief Executive
Officer, with a copy to Kinsella, Boesch, Fujikawa and Towle, LLP, 1901 Avenue
of the Stars, 7th Floor, Los Angeles, California 90067, Attention: Joseph P.
Bartlett, Esq. and (ii) if to the Initial Purchasers, to Jefferies & Company,
Inc., 11100 Santa Monica Boulevard, 10th Floor, Los Angeles, California 90025,
Attention: Jerry M. Gluck, Esq., with a copy to Skadden, Arps, Slate, Meagher &
Flom LLP, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Michael A. Woronoff, Esq. (provided that any notice pursuant to
Section 8 hereof will be mailed, delivered, telegraphed or telecopied and
confirmed to the party to be notified and its counsel), or in any case to such
other address as the Person to be notified may have requested in writing.
<PAGE> 24
(b) This Agreement has been and is made solely for the benefit of
and shall be binding upon the Issuer, the Initial Purchasers and, to the extent
provided in Section 8 hereof, the controlling persons, officers, directors,
partners, employees, representatives and agents referred to in Section 8 and
their respective heirs, executors, administrators, successors and assigns, all
as and to the extent provided in this Agreement, and no other Person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the Series A
Notes from the Initial Purchasers merely because of such purchase.
Notwithstanding the foregoing, it is expressly understood and agreed that each
purchaser who purchases Series A Notes from the Initial Purchasers is intended
to be a beneficiary of the Issuer's covenants contained in the Registration
Rights Agreement to the same extent as if the Notes were sold and those
covenants were made directly to such purchaser by the Issuer, and each such
purchaser shall have the right to take action against the Issuer to enforce, and
obtain damages for any breach of, those covenants.
(c) THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS
OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH SPORTS CLUB ENTITY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH SPORTS CLUB ENTITY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH SPORTS CLUB
ENTITY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY SPORTS CLUB ENTITY AT THE
ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE INITIAL PURCHASERS TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY SPORTS CLUB ENTITY IN ANY OTHER
JURISDICTION.
(d) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 25
(f) If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(g) This Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may be given,
provided that the same are in writing and signed by each of the signatories
hereto.
(h) The indemnities and contribution and expense reimbursement
provisions set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery and payment
for the Series A Notes, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any party hereto, (ii) acceptance
of the Series A Notes, and payment for them hereunder, and (iii) any termination
of this Agreement.
<PAGE> 26
Please confirm that the foregoing correctly sets forth the
agreement between the Issuer and the Initial Purchasers.
Very truly yours,
THE SPORTS CLUB COMPANY, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
CANOGA AGOURA SPECTRUM CLUB, INC. LA/IRVINE SPORTS CLUBS, LTD.
By: Sports Club, Inc. of California,
its general partner
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
GREEN VALLEY SPECTRUM CLUB, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien NY SPORTS CLUB, INC.
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
HFA SERVICES, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien PONTIUS REALTY, INC.
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
IRVINE SPORTS CLUB, INC. Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
1
<PAGE> 27
SCC SPORTS CLUB, INC. By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien SPORTS CLUB, INC. OF CALIFORNIA
Title: Chief Financial Officer
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
DEVELOPMENT COMPANY, INC. Title: Chief Financial Officer
TALLA NEW YORK, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SF SPORTS CLUB, INC.
TVE, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SPECTRUM CLUB ANAHEIM
THE SPECTRUM CLUB COMPANY, INC.
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
SPECTRUM LIQUIDATING CORP.
THE SPORTSMED COMPANY, INC.
THE SPORTS CONNECTION HOLDING
COMPANY
By: /s/ Timothy O'Brien
-------------------------------
Name: Timothy O'Brien
By: /s/ Timothy O'Brien Title: Chief Financial Officer
-------------------------------
Name: Timothy O'Brien
Title: Chief Financial Officer
2
<PAGE> 28
Accepted and Agreed to:
WASHINGTON D.C. SPORTS CLUB, INC. JEFFERIES & COMPANY, INC.
By: /s/ Timothy O'Brien By: /s/ Andrew Booth
------------------------------- -------------------------------
Name: Timothy O'Brien Name: Andrew Booth
Title: Chief Financial Officer Title: Senior Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Patrice Daniels
-------------------------------
Name: Patrice Daniels
Title:
3
<PAGE> 1
EXHIBIT 10.2
================================================================================
FOURTH AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of April 1, 1999
between
THE SPORTS CLUB COMPANY, INC.,
and various of its subsidiaries,
as Borrowers,
and
COMERICA BANK-CALIFORNIA
and such other financial institutions
as may become a lending party hereto
as Banks
and
COMERICA BANK-CALIFORNIA,
as Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS............................................2
1.1 Defined Terms...............................................................2
1.2 Use of Defined Terms.......................................................14
1.3 Accounting Terms...........................................................14
1.4 Exhibits and Schedules.....................................................14
ARTICLE 2 LOANS AND LETTERS OF CREDIT................................................14
2.1 General Provisions Regarding Loans and Borrowing Procedures................14
2.2 Intentionally Omitted......................................................15
2.3 Prime Rate Loans...........................................................15
2.4 Eurodollar Loans...........................................................16
2.5 Redesignation of Loans.....................................................16
2.6 Standby Letters of Credit..................................................17
2.7 Agent's Right to Assume Funds Available for Advances.......................20
ARTICLE 3 PAYMENTS AND FEES..........................................................20
3.1 Principal and Interest.....................................................20
3.2 Commitment Fee.............................................................21
3.3 Eurodollar Fees and Costs..................................................22
3.4 Letter of Credit Fees......................................................23
3.5 Agent Fee..................................................................23
3.6 Late Payments/Default Rate.................................................23
3.7 Computation of Interest and Fees...........................................24
3.8 Non-Banking Days...........................................................24
3.9 Manner and Treatment of Payments...........................................24
3.10 Funding Sources............................................................25
3.11 Failure to Charge Not Subsequent Waiver....................................25
3.12 Agent's Right to Assume Payments Will be Made by Borrowers.................25
3.13 Survivability..............................................................25
3.14 Unused Line Fee............................................................25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.............................................25
4.1 Existence and Qualification; Power; Compliance With Laws...................25
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations.....................................................27
4.3 No Governmental Approvals Required.........................................28
4.4 Subsidiaries...............................................................28
4.5 Financial Statements and Title to Assets...................................29
4.6 No Other Liabilities; No Material Adverse Changes..........................29
4.7 Intangible Assets..........................................................30
4.8 Filing of Financing Statements.............................................30
4.9 Public Utility Holding Company Act.........................................30
4.10 Litigation.................................................................30
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
4.11 Binding Obligations........................................................30
4.12 No Default.................................................................30
4.13 ERISA......................................................................30
4.14 Regulations T, U and X; Investment Company Act.............................31
4.15 Disclosure.................................................................31
4.16 Tax Liability..............................................................31
4.17 Projections................................................................31
4.18 Fiscal Year................................................................32
4.19 Employee Matters...........................................................32
4.20 Solvency...................................................................32
4.21 Year 2000..................................................................32
4.22 Valid Issuance of Senior Notes.............................................32
4.23 Offering Circular..........................................................33
4.24 Senior Note Documents......................................................33
4.25 Capitalization of Canoga Agoura Spectrum Club, Inc.........................33
Capitalization of Canoga Agoura Spectrum Club, Inc................................33
ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS)..............................................................33
5.1 Payment of Taxes and Other Potential Charges...............................33
5.2 Preservation of Existence..................................................33
5.3 Maintenance of Properties..................................................34
5.4 Maintenance of Insurance...................................................34
5.5 Compliance With Laws.......................................................34
5.6 Additional Borrowers.......................................................34
5.7 Inspection Rights..........................................................35
5.8 Keeping of Records and Books of Account....................................35
5.9 Compliance With Agreements, Duties and Obligations.........................35
5.10 Use of Proceeds............................................................35
5.11 Establishment of Accounts..................................................35
5.12 Year 2000 Compliance.......................................................36
ARTICLE 6 NEGATIVE COVENANTS.........................................................36
6.1 Disposition of Property....................................................36
6.2 Transactions with Borrowers and Non-Borrower Affiliates....................36
6.3 Mergers, Acquisitions and New Club Developments............................37
6.4 [Intentionally Omitted.]...................................................38
6.5 Redemption, Dividends and Distributions; Payments to Partners;
Prepayments................................................................38
6.6 ERISA......................................................................39
6.7 Change in Nature of Business/Management....................................40
6.8 Real Property Leases.......................................................40
6.9 Indebtedness, Guaranties and Liens.........................................40
6.10 Transactions with Affiliates...............................................41
6.11 Change in Fiscal Year......................................................41
6.12 Capital Expenditures and Purchase Money Transactions.......................41
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE(s)
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<S> <C> <C> <C>
6.13 Tangible Net Worth.........................................................42
6.14 Ratio of Total Unsubordinated Liabilities to Tangible Net Worth............43
6.15 Debt Service Coverage Ratio................................................43
6.16 Certain Inter-Company Indebtedness.........................................43
6.17 Loans to Officers..........................................................43
6.18 Deposit Accounts...........................................................43
6.19 Amendment to Senior Note Documents.........................................43
6.20 Liens on Equipment.........................................................43
ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS.....................................43
7.1 Financial and Business Information.........................................43
7.2 Compliance Certificates....................................................46
7.3 Revisions or Updates to Schedules..........................................46
7.4 New Club Development Project Reports.......................................47
ARTICLE 8 CONDITIONS.................................................................47
8.1 Initial Loans, Etc.........................................................47
8.2 Any Loan...................................................................50
8.3 Termination of Prior Pledge Agreements and Release of Liens................51
8.4 Release of Lien on Properties of Irvine Sports Club, Inc...................51
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT.......................52
9.1 Events of Default..........................................................52
9.2 Remedies Upon Event of Default.............................................54
ARTICLE 10 THE AGENT..................................................................55
10.1 Appointment and Authorization..............................................55
10.2 Agent and Affiliates.......................................................55
10.3 Proportionate Interest of the Banks in any Collateral......................56
10.4 Banks' Credit Decisions....................................................56
10.5 Action by Agent............................................................56
10.6 Liability of Agent.........................................................57
10.7 Indemnification............................................................58
10.8 Successor Agent............................................................58
ARTICLE 11 MISCELLANEOUS..............................................................58
11.1 Intentionally Omitted......................................................58
11.2 Cumulative Remedies; No Waiver.............................................59
11.3 Amendments; Consents.......................................................59
11.4 Costs, Expenses and Taxes..................................................59
11.5 Nature of Banks' Obligations...............................................60
11.6 Survival of Representations and Warranties.................................60
11.7 Notices....................................................................60
11.8 Execution of Loan Documents................................................61
11.9 Sharing of Setoffs.........................................................61
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
11.10 Binding Effect; Assignment.................................................62
11.11 Assignment of Deposits.....................................................62
11.12 Participation of Loan......................................................62
11.13 Indemnity by Borrowers.....................................................62
11.14 Nonliability of Banks......................................................63
11.15 No Third Parties Benefited.................................................63
11.16 Further Assurances.........................................................63
11.17 Integration................................................................64
11.18 Governing Law..............................................................64
11.19 Severability of Provisions.................................................64
11.20 Headings...................................................................64
11.21 Time of the Essence........................................................64
11.22 Securities Representation..................................................64
11.23 Joint Borrower Provisions..................................................64
11.24 Waiver of Jury Trial.......................................................69
</TABLE>
iv
<PAGE> 6
FOURTH AMENDED AND RESTATED LOAN AGREEMENT
Dated as of April 1, 1999
This Fourth Amended and Restated Loan Agreement, dated as of April 1,
1999, is made and entered into by and among (a) The Sports Club Company, Inc., a
Delaware corporation; The Spectrum Club Company, Inc., a California corporation;
Pontius Realty, Inc., a California corporation; The SportsMed Company, Inc., a
California corporation; LA/Irvine Sports Clubs, Ltd., a California limited
partnership; Talla New York, Inc., a New York corporation; SCC Sports Club,
Inc., a Texas corporation; Canoga Agoura Spectrum Club, Inc., a California
corporation; Irvine Sports Club, Inc., a California corporation; Green Valley
Spectrum Club, Inc., a Nevada corporation; Sports Club, Inc. of California, a
California corporation; Spectrum Liquidating Corp., a California corporation
f/k/a Spectrum Club/Anaheim Hills, Inc.; TVE, Inc., a California corporation;
Spectrum Club Anaheim, a California Corporation; SF Sports Club, Inc., a
Delaware corporation; and Washington D.C. Sports Club, Inc., a Delaware
corporation; HFA Services, Inc., a California corporation; and NY Sports Club,
Inc., a Delaware corporation as Borrowers; (b) Comerica Bank-California, as a
Bank; and (c) Comerica Bank-California, as Agent, with reference to the
following:
A. The Sports Club Company, Inc., The Spectrum Club Company, Inc.,
Pontius Realty, Inc., Sports Club, Inc. of California, Irvine Sports Club, Inc.,
The SportsMed Company, Inc., formerly HealthFitness Organization of America,
Inc., L.A./Irvine Sports Clubs, Ltd., Talla New York, Inc., SCC Sports Club,
Inc., Spectrum Club/Anaheim Hills, Inc. and Green Valley Spectrum Club, Inc.
(the "Original Borrowers") are parties to that certain Amended and Restated Loan
Agreement dated as of February 2, 1998, as amended by a First Amendment, dated
as of February 23, 1998, a Second Amendment, dated as of March 16, 1998, a
Second Amended and Restated Loan Agreement, dated as of June 9, 1998, and a
Third Amendment to Amended and Restated Loan Agreement, dated as of January __,
1999 with Sumitomo Bank of California and Comerica Bank-California, as lenders,
and Sumitomo Bank of California, as the agent ("Predecessor Agent") for such
lenders, and to that certain letter agreement with Predecessor Agent, dated
August 12, 1998 (collectively, the "Original Loan Agreement");
B. Pursuant to that certain Assignment and Acceptance Agreement, dated
as of February 1, 1999, by and between California Bank & Trust, a California
banking corporation, as successor to Sumitomo Bank of California, and Comerica
Bank-California, California Bank & Trust assigned to Comerica Bank-California,
and Comerica Bank-California accepted, all of the rights of California Bank &
Trust under the Original Loan Agreement, including, but not limited to, all of
its rights under the Loan Documents and in the Loans and all of its rights as
Agent under the Loan Documents;
C. Effective as of February 1, 1999, the Original Loan Agreement was
amended and restated in full by that certain Third Amended and Restated Loan
Agreement (the "Third Amended and Restated Loan Agreement"), dated as of
February 1, 1999, by and among the Original Borrowers, Comerica Bank-California,
as a lender, and Comerica Bank-California, as the agent for such lenders;
1
<PAGE> 7
D. Effective as of February 1, 1999, the Third Amended and Restated Loan
Agreement was amended by that certain First Amendment to Third Amended and
Restated Loan Agreement among the Original Borrowers, Comerica Bank-California,
as a lender, and Comerica Bank-California, as the agent for such lenders (the
"First/Third Amendment"); and
E. The parties hereto wish to amend and restate in full the
above-referenced Third Amended and Restated Loan Agreement to add certain
additional Borrowers and to modify certain of the terms of the Loan Documents
and the Loans as more particularly set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto covenant and agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth respectively after each:
"Acquisition" means any transaction, or any series of related
transactions, by which any Borrower and/or any of its Subsidiaries
directly or indirectly acquires control of any going business or all or
substantially all of the assets of any firm, partnership, joint venture,
limited liability company, corporation (or division thereof) operating
as a health and fitness facility, whether through purchase of assets,
merger or otherwise, (control meaning possession, directly or
indirectly, of the power to direct or cause the direction of management
or policies of such entities); provided that, in any event, the term
"Acquisition" shall include any acquisition in which any Borrower and/or
any Subsidiaries thereof controls a majority in ordinary voting power of
the securities of a corporation operating as a health and fitness
facility which have ordinary voting power for the election of directors
or other governing body of a corporation (other than securities having
such power only by reason of the happening of a contingency), or control
50% or more ownership interest in any partnership, limited liability
company or joint venture operating as a health and fitness facility.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and
its correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person that
owns, directly or indirectly, 50% or more of the securities having
ordinary voting power for the election of directors or other governing
body of a corporation (other than securities having such power only by
reason of the happening of a contingency), or 50% or more of the
partnership or other ownership interests of any other Person (other than
as a limited partner of such other Person), will be deemed to control
such corporation or other Person.
2
<PAGE> 8
"Agent" means Comerica Bank - California, a California state
bank, when acting in its capacity as agent under any of the Loan
Documents, and any successor agent.
"Agent's Office" means the office designated by Agent as its
address for purposes of notice under this Agreement.
"Agreement" means this Fourth Amended and Restated Loan
Agreement, either as originally executed or as it may from time to time
be supplemented, modified, amended, restated or extended.
"Applicable Pricing Level" means, for any Eurodollar Period, the
pricing level set forth below opposite the Debt Service Coverage Ratio,
which Agent shall determine quarterly upon, and with effect from and
after the date of, Agent's receipt of the quarterly compliance
certificates required by Section 7.2 of this Agreement:
<TABLE>
<CAPTION>
Debt Service
Pricing Level Coverage Ratio
------------- --------------
<S> <C>
I Equal to or less than 2.25 to 1.0
II Greater than 2.25 to 1.00 but equal to
or less than 2.75 to 1.00
III Greater than 2.75 to 1.00.
</TABLE>
"Bank" or "Banks" means individually or collectively Comerica
Bank - California and any one or more banks or other financial
institutions which become lending parties to this Agreement in
accordance with the terms hereof.
"Banking Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday on which all of the Banks are open for business at their
respective addresses for notice designated as provided herein.
"Borrower or Borrowers" means, individually or collectively, The
Sports Club Company, Inc.; The Spectrum Club Company, Inc.; Pontius
Realty, Inc.; The SportsMed Company, Inc.; LA/Irvine Sports Clubs, Ltd.;
Talla New York, Inc.; SCC Sports Club, Inc.; Spectrum Liquidating Corp.;
Canoga Agoura Spectrum Club, Inc.; Irvine Sports Club, Inc.; Green
Valley Spectrum Club, Inc.; The Sports Club, Inc. of California; TVE,
Inc.; Spectrum Club Anaheim, a California Corporation; SF Sports Club,
Inc.; Washington D.C. Sports Club, Inc.; HFA Services, Inc.; and NY
Sports Club, Inc. and any subsequent Person who becomes a Borrower
pursuant to the terms hereof.
"Capital Expenditure" means any expenditure (including any
capitalized lease expenditure) that is considered a capital expenditure
under generally accepted accounting principles, consistently applied,
including, without limitation, any amount that is required to be treated
as a capitalized asset pursuant to Financial Accounting Standards Board
Statement No. 13.
3
<PAGE> 9
"Cash" means, when used in connection with any Person, all
monetary and non-monetary items belonging to such Person that are
treated as cash in accordance with generally accepted accounting
principles, consistently applied.
"Cash Equivalents" means, when used in connection with any
Person, such Person's Investments in:
(a) Government Securities due within one year after the date of
the making of the Investment;
(b) certificates of deposit issued by, bank deposits in,
bankers' acceptances of, and repurchase agreements covering, Government
Securities executed by, any bank doing business in and incorporated
under the Laws of the United States of America or any state thereof and
having on the date of such Investment combined capital, surplus and
undivided profits of at least $100,000,000, in each case due within one
year after the date of the making of the Investment; and/or
(c) readily marketable commercial paper of corporations doing
business in and incorporated under the Laws of the United States of
America or any state thereof given on the date of such Investment the
highest credit rating by NCO/Moody's Commercial Paper Division of
Moody's Investors Service, Inc. or Standard & Poor's Corporation, in
each case due within six months after the date of the making of the
Investment.
"Certificate of a Responsible Official" means a certificate
signed by a Responsible Official of the Person providing the
certificate.
"Closing Date" means the Banking Day on which the consummation
of all of the transactions contemplated in Section 8.1 occurs.
"Club" means a health and fitness facility operated by any
Borrower.
"Collateral" means, collectively, all Property on or in which
the Agent or any Bank has a Lien pursuant to this Agreement or any other
Loan Document.
"Commitment" means, collectively, the lending commitment
hereunder of the Banks, as such commitment may be reduced or offset
under this Agreement. The percentage obligations of each Bank with
respect to the Commitment are as follows:
<TABLE>
<CAPTION>
Bank Amount Percentage
---- ------ ----------
<S> <C> <C>
Comerica Bank - California $20,000,000 100%
</TABLE>
"Debt Service Coverage Ratio" means, with respect to each
applicable fiscal period, the ratio of (i) EBITDA plus or minus, without
double counting, all non-recurring items of income or expense to (ii)
interest expense on all indebtedness, including capitalized interest,
plus the current portion of long term debt of Borrowers for that fiscal
period, minus interest income for that fiscal period, determined in
accordance with
4
<PAGE> 10
generally accepted accounting principles, consistently applied. The Debt
Service Coverage Ratio shall be determined as of the end of each fiscal
quarter of the Borrowers and their Subsidiaries, computed on a rolling
four quarter basis.
"Deeds of Trust" means, collectively, the Deed of Trust,
Security Agreement and Fixture Filing (With Assignment of Rents and
Leases) executed by each of Canoga Agoura Spectrum Club, Inc., Irvine
Sports Club, Inc. and Green Valley Spectrum Club, Inc. in favor of Agent
for the ratable benefit of Banks, in the forms of those attached hereto
as Exhibits B-1 to B-3, as the same may from time to time hereafter be
supplemented, modified, amended, restated or extended.
"Default" means any Event of Default and/or any event that, with
the giving of notice or passage of time or both, would be an Event of
Default.
"Default Rate" means the rate of interest per annum otherwise
provided under this Agreement plus two percent (2%).
"Designated Deposit Account" means deposit account no.
1891145326 to be maintained by Borrowers with Agent at Agent's Office,
or such other deposit account as from time to time designated by
Borrowers by written notification to Agent and approved by Agent.
"Designated Eurodollar Market" means, with respect to any
Eurodollar Loan, the London Eurodollar Market, or such other Eurodollar
Market as may from time to time be designated by Agent.
"dollars" or "$" means United States dollars.
"EBITDA" means, for any fiscal period, for Borrowers, their
Subsidiaries, Sports Connection-ES/MB, to the extent of Borrowers'
interest therein, and, on a pro forma basis, any entity acquired by any
of the Borrowers or any of the Subsidiaries, adjusted for verifiable
cost savings acceptable to Banks: (a) the consolidated net income before
extraordinary items of such Persons for that period, plus (b) the
consolidated interest expense for that period, plus (c) the consolidated
income tax expense for that fiscal period, plus (d) the consolidated
depreciation expense for that fiscal period plus (e) the consolidated
amortization expense for that fiscal period, each as determined in
accordance with generally accepted accounting principles, consistently
applied.
"Environmental Indemnity" means the Environmental Indemnity
executed by each of the Borrowers for the ratable benefit of the Banks,
in the form of that attached hereto as Exhibit C, as the same may from
time to time hereafter be supplemented, modified, amended, restated or
extended.
"ERISA" means the Employee Retirement Income Security Act of
1974, and any regulations issued pursuant thereto, as amended or
replaced and as in effect from time to time.
5
<PAGE> 11
"Eurodollar Banking Day" means any Banking Day on which dealings
in dollar deposits are conducted by and between banks in the Designated
Eurodollar Market.
"Eurodollar Lending Office" means as to each Bank, its office or
branch so designated by written notice to Borrowers and Agent as its
Eurodollar Lending Office. If no Eurodollar Lending Office separately is
designated by a Bank, its Eurodollar Lending Office shall be its office
as designated for purposes of notice hereunder.
"Eurodollar Loan" means a Loan made hereunder and designated or
redesignated as a Eurodollar Loan in accordance with Article 2.
"Eurodollar Market" means a regular established market located
outside the United States of America by and among banks for Eurodollar
Obligations.
"Eurodollar Obligations" means eurocurrency liabilities, as
defined in Regulation D.
"Eurodollar Period" means, as to each Eurodollar Loan, the
period commencing on the date specified by Borrowers pursuant to
Sections 2.1(b) or 2.5(c) and ending 30, 60 or 90 days thereafter, as
specified by Borrowers in the applicable Request for Loan or Request for
Redesignation of Loans, provided that:
(a) The first day of any Eurodollar Period shall be a Eurodollar
Banking Day;
(b) Any Eurodollar Period that would otherwise end on a day that
is not a Eurodollar Banking Day shall be extended to the next succeeding
Eurodollar Banking Day unless such Eurodollar Banking Day falls in
another calendar month, in which case such Eurodollar Period shall end
on the next preceding Eurodollar Banking Day; and
(c) No Eurodollar Period shall extend beyond the Maturity Date.
"Eurodollar Rate" means, with respect to any Eurodollar Loan,
(a) the LIBOR Rate offered for deposits as of about 10:00 a.m., Los
Angeles time, two (2) Eurodollar Banking Days before the first day of
the applicable Eurodollar Period in an aggregate amount approximately
equal to the amount of such Eurodollar Loan and for a period of time
comparable to the number of days in the applicable Eurodollar Period
divided by (b) 1.00 minus the Reserve Percentage. The determination of
the Eurodollar Rate by Agent shall be conclusive in the absence of
manifest error.
"Eurodollar Rate Spread" means, for each Eurodollar Period, the
applicable additional component of interest, expressed as a percentage
per annum, set forth below opposite the Applicable Pricing Level, to be
added to the Eurodollar Rate in determining the applicable rate of
interest for Eurodollar Loans:
6
<PAGE> 12
<TABLE>
<CAPTION>
Applicable Pricing Eurodollar Rate
Level Spread
------------------ ---------------
<S> <C>
I 2.25%
II 2.00%
III 1.75%
</TABLE>
"Event of Default" shall have the meaning provided in Section
9.1.
"Fee Letter" means that certain letter agreement dated as of
April 1, 1999 executed by Agent and countersigned by Borrowers with
respect to, among other things, the agency fee to be paid by Borrowers
in connection with this Agreement.
"Funded Debt" means all liabilities of Borrowers and their
Subsidiaries for borrowed money, including capitalized leases.
"Government Securities" means readily marketable direct
obligations of the United States of America or obligations fully
guarantied by the United States of America.
"Governmental Agency" means (a) any international, foreign,
federal, state, county or municipal government, or political subdivision
thereof, (b) any governmental or quasi-governmental agency, authority,
board, bureau, commission, department, instrumentality or public body,
(c) any court, administrative tribunal or public utility, or (d) any
arbitration tribunal or other non-governmental authority to whose
jurisdiction a Person has consented.
"Intercreditor and Subordination Agreement" means the
Intercreditor and Subordination Agreement, dated April 1, 1999, by and
among Borrowers, Agent, for the ratable benefit of Banks, and U.S. Bank
Trust, National Association, as trustee for the holders of the Senior
Notes. The Intercreditor and Subordination Agreement is a Loan Document.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities or by means of loan, advance,
capital contribution, guaranty or other debt or equity participation or
interest in any other Person, or otherwise, and includes, without
limitation, any partnership and joint venture interests of such Person.
"Irvine Environmental Resolution" means that: (1) Agent shall
have received Phase 1 and Phase 2 environmental reports with respect to
the condition of each of the Properties covered by the Deed of Trust
executed by Irvine Sports Club, Inc., dated as of a recent date prior
to, or a date following, the Closing Date, prepared by a qualified firm
acceptable to Agent, stating, among other things, that each of such
Properties is in compliance with all environmental laws, and accompanied
by: (a) a letter or other written statement from each Governmental
Agency exercising jurisdiction over such
7
<PAGE> 13
Properties, hazardous substances found thereon or any remediation work
related thereto that no further action is required, and (b) written
confirmation that all contaminated soil and other materials removed from
such Properties and any other property affected by the remediation work
performed thereon have been properly disposed of in accordance with all
applicable laws, ordinances, rules and regulations and the orders and
directives of all Governmental Agencies having jurisdiction over such
Properties, the hazardous substances found thereon or the remediation
work related thereto, which environmental report, letter, and written
confirmation shall have been reviewed by, and be satisfactory to, an
Agent-approved environmental consultant and to Agent in its sole
discretion; and (2) Agent shall have concluded in its sole judgment that
no further action is required.
"Issuing Bank" means, with respect to any Standby Letter of
Credit, Comerica Bank - California or any other Bank designated by
Borrowers (with the consent of the Requisite Banks) which issued that
Standby Letter of Credit.
"Laws" means, collectively, all international, foreign, federal,
state and local statutes, treaties, rules, regulations, ordinances,
codes and administrative or judicial precedents.
"LIBOR Rate" means the interest (rounded upward to the nearest
1/16th of one percent) as determined by the British Bankers Association
and disseminated daily as an average of the rate at which certain major
banks would offer U.S. dollar deposits for the applicable Eurodollar
Period to other major banks in the London inter-bank market.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, lien or charge of any kind, whether
voluntarily incurred or arising by operation of Law or otherwise,
affecting any Property, including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and/or the filing of or agreement to give
any financing statement under the Uniform Commercial Code or comparable
Laws of any jurisdiction.
"Loan" or "Loans" means the advances to be made by Banks to
Borrowers pursuant to this Agreement. Each individual Loan shall consist
of advances made by Banks pursuant to Article 2, including advances made
as new advances, and also including advances made by converting or
redesignating existing advances in accordance with the provisions of
Article 2. In connection with each Loan, the amount of such Loan by each
Bank shall be determined according to that Bank's percentage share of
the Commitment.
"Loan Documents" means, collectively, this Agreement, the Fee
Letter, the Notes, the Intercreditor and Subordination Agreement, the
Pledge Agreements, the Security Agreements (All Assets), the Deeds of
Trust, the Environmental Indemnity, the Standby Letters of Credit, any
assignments, any financing statements and any other certificates,
documents or agreements of any type of nature heretofore or hereafter
executed or delivered by Borrowers and/or any one or more of their
Subsidiaries or Affiliates to Agent or to Banks in any way relating to
or in furtherance of this Agreement, in each case
8
<PAGE> 14
either as originally executed or as the same may from time to time be
supplemented, modified, amended, restated or extended.
"Maturity Date" means May 31, 2001, subject to the option of all
Banks, in their sole and absolute discretions, following the written
request of Borrowers, to be received by Agent no later than sixty (60)
days prior to each anniversary of the date of this Agreement, and
subject to such terms and conditions as all Banks may require, to extend
the Maturity Date for an additional period of one year.
"Maximum Loan Amount" means, as of any date of determination
thereof, the amount of the Commitment.
"Maximum Standby Letter of Credit Amount" means $8,000,000.
"Multiemployer Plan" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA.
"New Club Development" means the establishment de novo of a new
health and fitness facility, or any other investment in a health and
fitness facility that does not constitute an Acquisition, by one or more
existing or future Borrowers and/or Subsidiaries.
"Non-Borrower Affiliate" means any Affiliate of a Borrower, now
existing or hereafter acquired, that is not a Borrower hereunder.
"Note" means any of the promissory notes executed by Borrowers
in favor of Banks evidencing the Loans made by Banks or any of them
under the Commitment, substantially in the form of Exhibit A hereto,
either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or refinanced.
"Obligations" means all present and/or future obligations of
every kind or nature of Borrowers or any Party at any time and/or from
time to time owed to Agent or Banks or any one or more of them, under
any one or more of the Loan Documents, whether due or to become due,
matured or unmatured, liquidated or unliquidated, or contingent or
noncontingent, including obligations of performance as well as
obligations of payment, and including interest that accrues prior to or
after the commencement of any bankruptcy or insolvency proceeding by or
against any Borrower or any Party.
"Opinion of Counsel" means the favorable written legal opinion
of counsel to Borrowers and their Subsidiaries, in a form acceptable to
Agent, together with copies of all factual certificates and legal
opinions upon which such counsel has relied.
"Outstanding Standby Letters of Credit" means, as of any date of
determination thereof, the aggregate face amount of all Standby Letters
of Credit outstanding on such date, not to exceed the Maximum Standby
Letter of Credit Amount.
9
<PAGE> 15
"Party" means any Person (including Borrowers and/or any
Subsidiaries or Affiliates of Borrowers), other than Agent and Banks,
which now or hereafter is a party to any of the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereof established under ERISA.
"Person" means any entity, whether an individual, trustee,
corporation, general partnership, limited partnership, limited liability
company, joint stock company, trust, unincorporated organization, bank,
business association, firm, joint venture, Governmental Agency, or
otherwise.
"Plan" means any employee benefit plan subject to ERISA and
maintained by Borrowers and/or any Subsidiary thereof or to which
Borrowers and/or any Subsidiary thereof are required to contribute on
behalf of their employees.
"Pledge Agreement" means the Pledge Agreement (Stock), dated as
of April 1, 1999, executed by SCC, Inc. in favor of Agent, for the
ratable benefit of Banks, in the form attached hereto as Exhibits D, as
such document may from time to time hereafter be supplemented, modified,
amended, restated or extended.
"Prime Rate" means the floating commercial loan rate of Comerica
Bank - California, announced from time to time as its "base rate", which
interest rate may not necessarily be the lowest interest rate at which
Comerica Bank - California is willing to extend credit facilities.
"Prime Rate Loan" means a Loan designated or redesignated as a
Prime Rate Loan in accordance with Article 2, or converted to a Prime
Rate Loan in accordance with Section 3.3(a).
"Prime Rate Spread" means the additional component of interest,
expressed as a percentage per annum, to be added to the Prime Rate in
determining the applicable rate of interest for Prime Rate Loans. As of
the date of this Agreement, the Prime Rate Spread is zero percent (0%)
per annum.
"Prior Pledge Agreements" means the Pledge Agreement dated as of
February 2, 1998 executed by SCC, Inc. in favor of Agent and the Pledge
Agreement (Partnership) dated as of February 2, 1998 executed by certain
Borrowers identified therein as the "Grantors" in favor of Agent, in
each case as supplemented, modified, amended, restated or extended.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Qualified Stock Repurchase" means the common stock repurchase
program instituted in April 1, 1998; provided that the aggregate amount
expended in repurchasing common stock of SCC, Inc. after March 1, 1999
shall not exceed $5,000,000.
10
<PAGE> 16
"Regulations T, U and X" means Regulation T,U and X as at any
time amended, of the Board of Governors of the Federal Reserve System,
or any other regulation in substance substituted therefor.
"Request for Standby Letter of Credit" means a written request
for the issuance of a Standby Letter of Credit substantially in the form
of Exhibit "E", signed by a Responsible Official of a Borrower on behalf
of the Borrowers and properly completed to provide all information
required to be included therein.
"Request for Loan" means a written request for a Loan
substantially in the form of Exhibit "F", signed by a Responsible
Official of a Borrower on behalf of the Borrowers and properly completed
to provide all information required to be included therein.
"Request for Redesignation of Loans" means a written request for
redesignation of Loans substantially in the form of Exhibit "G", signed
by a Responsible Official of a Borrower on behalf of the Borrowers and
properly completed to provide all information required to be included
therein.
"Requisite Banks" means, at any time, Banks holding at least 70%
of the aggregate unpaid amount of the Loans outstanding, or, if no Loans
then are outstanding, Banks having at least 70% of the aggregate
Commitment then in effect.
"Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for eurocurrency liabilities, as
defined in Regulation D, rounded upward to the nearest 1/100th of one
percent. The percentage will be expressed as a decimal, and will
include, without limitation, marginal, emergency, supplemental, special,
and other reserve percentages.
"Responsible Official" means:
(a) When used with reference to any Person, other than an
individual, any corporate officer of such Person, general partner of
such Person, corporate officer of a corporate general partner of such
Person, or corporate officer of a corporate general partner of a
partnership that is a general partner of such Person, or any other
responsible official thereof duly acting on behalf thereof; and
(b) When used with reference to a Person who is an individual,
such Person.
Except as otherwise specifically provided herein, any requirement that
any document or certificate be signed or executed by any Person requires
that such document or certificate be signed or executed by a Responsible
Official of such Person, and that the Responsible Official signing or
executing such document or certificate on behalf of such Person shall be
authorized to do so by all necessary corporate, partnership and/or other
action.
"Right of Others" means, as to any Property in which a Person
has an interest, any legal or equitable claim, right, title or other
interest (other than a Lien) in or with respect
11
<PAGE> 17
to that Property held by any other Person, and any option or right held
by any other Person to acquire any such claim, right, title or other
interest, including any option or right to acquire a Lien.
"SCC, Inc." means The Sports Club Company, Inc., a Delaware
corporation.
"Security Agreements (All Assets)" means, collectively, the
Security Agreement (All Assets) executed by each of Canoga Agoura
Spectrum Club, Inc., Irvine Sports Club, Inc. and Green Valley Spectrum
Club, Inc. in favor of Agent, for the ratable benefit of Banks, in the
forms of those attached hereto as Exhibits H-1 to H-3, as the same may
from time to time hereafter be supplemented, modified, amended, restated
or extended.
"Senior Note Liens" has the meaning provided in Section 6.9.
"Senior Notes" means the 11.375% Senior Secured Notes of SCC,
Inc. due March 15, 2006.
"Solvency Certificate" means, with respect to each Borrower, a
certificate, in the form of that attached hereto as Exhibit I, duly
executed by the Chief Financial Officer of that Borrower.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(a) the fair value of its assets (both at fair valuation and at
present fair saleable value) is in excess of the total amount of its
liabilities, including, without limitation, contingent liabilities;
(b) it is then able to pay its debts as they mature;
(c) it owns property having a value (both at fair valuation and
at present fair saleable value) in excess of the total amount required
to pay its debts; and
(d) it has capital sufficient to carry on its business.
For purposes of this Agreement, the foregoing terms shall be interpreted in
accordance with applicable federal and state laws governing determinations of
the insolvency of debtors.
"Special Eurodollar Circumstance" means the application or
adoption of any Law or interpretation, or any change therein or thereof,
or any change in the interpretation or administration thereof by any
Governmental Agency, central bank or comparable authority charged with
the interpretation or administration thereof, or compliance by any Bank
or its Eurodollar Lending Office with any request or directive (whether
or not having the force of Law) of any such Governmental Agency, central
bank or comparable authority, or the existence or occurrence of
circumstances affecting the Designated Eurodollar Market generally, in
each case, that is beyond the reasonable control of such Bank.
12
<PAGE> 18
"Standby Letter of Credit" means any standby letter of credit
issued by the Issuing Bank pursuant to Section 2.6, in the standard form
for standby letters of credit of the Issuing Bank, either as originally
issued or as the same may from time to time be supplemented, modified,
amended, renewed or extended.
"Subsidiary" means, as of any date of determination thereof and
with respect to any Person, any corporation, limited liability company,
partnership or joint venture, whether now existing or hereafter
organized or acquired: (a) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election
of directors or other governing body (other than securities having such
power only by reason of the happening of a contingency) are at the time
owned by such Person and/or one or more Subsidiaries of such Person, or
(b) in the case of a partnership, joint venture or limited liability
company, of which such Person or a Subsidiary of such Person is a
general partner or joint venturer or of which a majority of the
partnership or other ownership interests are at the time owned by such
Person and/or one or more of its Subsidiaries.
"Tangible Net Worth" means, as of any date of determination
thereof, the consolidated net worth of Borrowers, excluding goodwill,
patents, trademarks, trade names, organization expenses, capitalized
acquisition expenses, deferred tax assets and money due from any
Affiliate, officers, directors or shareholders of Borrowers or their
Subsidiaries, determined in accordance with generally accepted
accounting principles, consistently applied.
"The Spectrum Club/Agoura Hills" means the athletic club owned
by Canoga Agoura Spectrum Club, Inc. located at 5515 North Clareton
Drive, Agoura Hills, California.
"The Spectrum Club/Canoga Park" means the athletic club owned by
Canoga Agoura Spectrum Club, Inc. located at 22235 Sherman Way, Canoga
Park, California.
"The Sports Club/Irvine" means the athletic club owned by Irvine
Sports Club, Inc. located at 1980 Main Street, Irvine, California.
"The Sports Club/Las Vegas" means the athletic club owned by
Green Valley Spectrum Club, Inc. located at 2100 Olympic Avenue,
Henderson, Nevada.
"Thousand Oaks Sale/Leaseback" means the consummation of the
sale of certain real property assets and improvements at the Thousand
Oaks Club on the terms and conditions contemplated by that certain
non-binding letter of intent dated January 4, 1999 with Equity Advisory
Group, and the subsequent reduction of the outstanding balance of Loans
extended by Banks under this Agreement, if any.
"to the best knowledge of" means, when modifying a
representation, warranty or other statement of any Person, that the fact
or situation described therein is known by the Person (or, in the case
of a Person other than a natural Person, known by a Responsible Official
of that Person) making the representation, warranty or other statement,
or with the exercise of reasonable due diligence under the circumstances
(in accordance with
13
<PAGE> 19
the standard of what a reasonable Person in similar circumstances would
have done) should have been known by the Person (or, in the case of a
Person other than a natural Person, should have been known by a
Responsible Official of that Person).
"Total Unsubordinated Liabilities" means, as of any date of
determination thereof, the sum of (a) all liabilities that should be
reflected as a liability in a consolidated balance sheet of Borrowers
and their Subsidiaries on such date prepared in accordance with
generally accepted accounting principles, consistently applied, minus
(b) subordinated debt as to which a subordination agreement acceptable
to Agent has been executed, plus (c) the aggregate face amount of all
outstanding Standby Letters of Credit and other letters of credit issued
at the request of Borrowers; provided, however, that any amount
described in clause (c) shall be added only to the extent that the
Standby Letter of Credit or other letter of credit covers liabilities
that would not be reflected in a consolidated balance sheet of Borrowers
and their Subsidiaries on such date.
"Total Outstanding" means, as of any date of determination
thereof, the sum of (a) all outstanding Loans evidenced by the Notes on
that date and (b) Outstanding Standby Letters of Credit.
"type", when used with respect to any Loan, means the
designation of whether such Loan is a Prime Rate Loan or a Eurodollar
Loan.
"Year 2000 Compliance" or "Year 2000 Compliant" means, with
respect to a Person, that all software, hardware, firmware, equipment,
goods and systems utilized by or material to the business operations or
financial condition of that Person will properly perform date sensitive
functions before, during or after the year 2000.
1.2 Use of Defined Terms. Any defined term used in the plural shall
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
generally accepted accounting principles applied on a consistent basis, as in
effect on the date hereof, except as otherwise specifically prescribed herein.
1.4 Exhibits and Schedules. All exhibits and schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 General Provisions Regarding Loans and Borrowing Procedures.
(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time prior to the Maturity Date,
each Bank shall, pro rata according to
14
<PAGE> 20
that Bank's percentage of the then Commitment, make Loans to Borrowers
in such amounts as Borrowers may request that do not exceed in the
aggregate at any one time outstanding the amount of the Commitment;
provided that, Banks shall not be obligated to make a Loan if, after
giving effect to such Loan, the Total Outstanding would exceed
$20,000,000. Except as may otherwise be payable on an earlier date as
provided in Section 3.1, all Obligations of Borrowers hereunder shall be
due and payable on the Maturity Date. Subject to the limitations set
forth herein and in Section 3.1(e), Borrowers may borrow, repay and
reborrow under the Commitment without premium or penalty.
(b) Except as otherwise provided in Section 2.5(c), each Loan
shall be made pursuant to a written Request for Loan. Not later than
11:00 a.m., Los Angeles time, at least two (2) Banking Days prior to the
date that a proposed Loan is to be made (unless greater notice is
required by Section 2.4), Agent shall have received, at Agent's Office,
a properly completed Request for Loan specifying the requested (1) date
of such Loan, (2) type of Loan, (3) amount of such Loan, and (4) in the
case of a Eurodollar Loan, specifying the Eurodollar Period. Agent may,
in its sole and absolute discretion, permit any Request for Loan to be
made by telephone or telecopier by a Responsible Official of a Borrower
on behalf of Borrowers, in which case such Borrower shall confirm same
by mailing or faxing a written Request for Loan to Agent within 48 hours
following the Loan. If Borrowers fail to make a written Request for
Loan, Borrowers hereby waive the right to dispute the amount, interest
rate or term of any such Loan made upon such telephone request.
(c) Promptly following receipt of a Request for Loan, Agent
shall notify each Bank by telephone, telecopier or Telex of the date and
type of the Loan, the applicable Eurodollar Period (in the case of a
Eurodollar Loan), and that Bank's pro rata portion of the Loan. Not
later than 11:00 a.m., Los Angeles time, on the date specified for any
Loan, each Bank shall make its portion of the Loan in immediately
available funds available to Agent at Agent's Office. Upon fulfillment
of the applicable conditions set forth in Article 8, all Loans shall be
credited in immediately available funds to Borrowers' Designated Deposit
Account, or to such other deposit account of Borrowers with Agent as
Borrowers may specify in writing to Agent.
(d) Unless the Requisite Banks otherwise consent, the aggregate
amount of each Eurodollar Loan shall be in an integral multiple of
$250,000, and the aggregate amount of each Prime Rate Loan shall be in
an integral multiple of $100,000 or the balance of the Commitment.
(e) The Loans made by each Bank shall be evidenced by that
Bank's Note.
(f) A Request for Loan shall be irrevocable upon receipt by
Agent.
2.2 Intentionally Omitted.
2.3 Prime Rate Loans. All Loans shall constitute Prime Rate Loans unless
properly designated or redesignated as Eurodollar Loans pursuant to Sections 2.4
or 2.5.
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2.4 Eurodollar Loans.
(a) Subject to the terms and conditions set forth in this
Agreement, Borrowers may, from time to time, designate all or any
portion of the Loans to be Eurodollar Loans.
(b) Each request by Borrowers for a Eurodollar Loan shall be
made pursuant to a Request for Loan received by Agent, at Agent's
Office, not later than 12:00 noon, Los Angeles time, at least three (3)
Eurodollar Banking Days before the first day of the applicable
Eurodollar Period.
(c) At or about 10:00 a.m., Los Angeles time, two (2) Eurodollar
Banking Days before the first day of the applicable Eurodollar Period,
Agent shall determine the applicable Eurodollar Rate (which
determination shall be conclusive in the absence of manifest error) and
promptly shall give notice of the same to Borrowers and the Banks by
telephone or telecopier.
(d) Upon fulfillment of the applicable conditions set forth in
Article 8, a Eurodollar Loan shall become effective on the first day of
the applicable Eurodollar Period.
(e) Unless the Requisite Banks otherwise consent, no more than
six (6) Eurodollar Loans, in the aggregate, shall be outstanding at any
one time.
(f) Nothing contained herein shall require any Bank to fund any
Eurodollar Loan in the Designated Eurodollar Market.
2.5 Redesignation of Loans.
(a) Subject to Section 8.2, if any Eurodollar Loan is not repaid
or renewed on the last day of the applicable Eurodollar Period, such
Eurodollar Loan automatically shall be redesignated as a Prime Rate Loan
on such date.
(b) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date until
the thirty-third day preceding the Maturity Date, Borrowers may request
that all or a portion of outstanding Prime Rate Loans be redesignated as
a Eurodollar Loan or that a maturing Eurodollar Loan be redesignated as
a new Eurodollar Loan, provided that no Loan redesignated as a
Eurodollar Loan shall have a Eurodollar Period expiring after the
Maturity Date.
(c) Each redesignation of all or a portion of outstanding Prime
Rate Loans or to renew a maturing Eurodollar Loan as a Eurodollar Loan
shall be made pursuant to a written Request for Redesignation of Loans.
Not later than 12:00 noon, Los Angeles time, at least three (3)
Eurodollar Banking Days prior to the first day of the applicable
Eurodollar Period, Agent shall have received, at Agent's Office, a
properly completed Request for Redesignation of Loans specifying the
requested (1) date of redesignation and (2) amount of Loans to be
redesignated as a Eurodollar Loan, and (3) the applicable Eurodollar
Period. Agent may, in its sole and absolute discretion, permit a Request
for Redesignation of Loans to be made by telephone by a Responsible
Official of a Borrower
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on behalf of the Borrowers, in which case such Borrower shall confirm
same by mailing or faxing a written Request for Redesignation of Loans
to Agent within 48 hours following the date of redesignation. If
Borrowers fail to make a written Request for Redesignation of Loans,
Borrowers hereby waive the right to dispute the amount, interest rate or
term of any such Eurodollar Loan.
(d) Unless the Requisite Banks otherwise consent, the amount of
such Loans to be redesignated as a Eurodollar Loan shall be an integral
multiple of $250,000.
(e) With respect to any redesignation of a Loan as a Eurodollar
Loan, at or about 10:00 a.m., Los Angeles time, three (3) Eurodollar
Banking Days before the first day of the applicable Eurodollar Period,
Agent shall determine the applicable Eurodollar Rate (which
determination shall be conclusive in the absence of manifest error) and
promptly shall give notice of the same to Borrowers and the Banks by
telephone or telecopier.
(f) Upon fulfillment of the applicable conditions set forth in
Article 8, the redesignation of all or a portion of outstanding Loans as
a Eurodollar Loan shall become effective on the first day of the
applicable Eurodollar Period.
(g) Nothing contained herein shall require any Bank to fund any
Eurodollar Loan resulting from redesignation of all or a portion of any
of its Prime Rate Loans, in the Designated Eurodollar Market.
(h) A request for Redesignation of Loans shall be irrevocable
upon receipt by Agent.
2.6 Standby Letters of Credit.
(a) Subject to the terms and conditions hereof, at any time and
from time to time from the Closing Date through the Banking Day
immediately preceding May 31, 2001 or other applicable Maturity Date,
the Issuing Bank shall issue such Standby Letters of Credit as a
Responsible Official of a Borrower on behalf of Borrowers may request by
a Request for Standby Letter of Credit; provided that, upon giving
effect to such Standby Letter of Credit, (i) Total Outstanding shall not
exceed $20,000,000 and (ii) Outstanding Standby Letters of Credit shall
not exceed the Maximum Standby Letter of Credit Amount. Unless the
Requisite Banks otherwise consent in writing, the term of any Standby
Letter of Credit shall not exceed the Maturity Date. If on the Maturity
Date, there exist any Outstanding Standby Letters of Credit, Borrowers
shall provide to Agent a standby letter of credit issued by a bank
satisfactory to the Requisite Banks, in form and substance satisfactory
to the Requisite Banks, in favor of Banks in a face amount equal to the
Outstanding Standby Letters of Credit on that date, or shall make other
provisions satisfactory to the Requisite Banks for the collateralization
or settlement of such Outstanding Standby Letters of Credit. No Standby
Letter of Credit shall be issued except in the ordinary course of
business of Borrowers or their Subsidiaries. Unless otherwise agreed to
by the Requisite Banks, the face amount of any Standby Letter of Credit
shall not be less than $250,000.
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(b) Each Request for Standby Letter of Credit shall be submitted
to the Issuing Bank not later than 11:00 a.m., Los Angeles time, at
least five (5) Banking Days prior to the date upon which the requested
Standby Letter of Credit is to be issued and Borrowers shall execute
such documents and agreements relating to such Standby Letter of Credit
as the Issuing Bank may reasonably require. Upon issuance of a Standby
Letter of Credit, the Issuing Bank promptly shall notify Agent and Banks
of the amount and terms thereof. The Issuing Bank shall notify Agent and
Banks within ten (10) days after the end of each month of all payments,
reimbursements, expirations, negotiations, transfers and other activity
during that month with respect to outstanding Standby Letters of Credit.
(c) Upon the issuance of a Standby Letter of Credit, each Bank
shall be deemed to have purchased a pro rata participation therein from
the Issuing Bank in a amount equal to that Bank's pro rata share,
according to its percentage of the Commitment, of the face amount of the
Standby Letter of Credit. Without limiting the scope and nature of each
Bank's participation in any Standby Letter of Credit, to the extent that
the Issuing Bank has not been reimbursed by Borrowers for any payment
required to be made by the Issuing Bank under any Standby Letter of
Credit, each Bank shall, pro rata according to its participation,
reimburse the Issuing Bank promptly upon demand for the amount of such
payment. The obligation of each Bank to so reimburse the Issuing Bank
shall be absolute and unconditional and shall not be affected by the
occurrence of any Event of Default or any other occurrence or event. Any
such reimbursement shall not relieve or otherwise impair the obligation
of Borrowers to reimburse the Issuing Bank for the amount of any payment
made by the Issuing Bank under any Standby Letter of Credit together
with interest as hereinafter provided.
(d) Borrowers agree to pay to the Issuing Bank, at its Office
designated as the address for notices pursuant to this Agreement, or at
such other payment location as the Issuing Bank shall have specified in
writing to Borrowers, with respect to each Standby Letter of Credit,
within one (1) Banking Day after demand therefor, a principal amount
equal to any payment made by the Issuing Bank under that Standby Letter
of Credit, together with interest on such amount from the date of any
payment made by the Issuing Bank through the date of payment by
Borrowers at the rate provided for in Section 3.6. The principal amount
of any such payment made by Borrowers to the Issuing Bank shall be used
to reimburse the Issuing Bank for the payment made by it under the
Standby Letter of Credit. Each Bank that has reimbursed the Issuing Bank
pursuant to Section 2.6(c) for its pro rata share of any payment made by
the Issuing Bank under a Standby Letter of Credit thereupon shall
acquire a pro rata participation, to the extent of such reimbursement,
in the claim of the Issuing Bank against Borrowers under this Section
2.6(d).
(e) At all times prior to the Maturity Date, if Borrowers fail
to make any payment required by Section 2.6(d), Agent may, but is not
required to, without notice to or the consent of Borrowers, make Loans
under the Commitment in an aggregate amount equal to the amount paid by
the Issuing Bank on the relevant Standby Letter of Credit, whether or
not the same would cause the Commitment to exceed $20,000,000, and, for
this purpose, the conditions precedent set forth in Article 8 and the
amount limitations set
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forth in Section 2.1(d) shall not apply. The proceeds of such Loans
shall be retained by the Issuing Bank to reimburse it for the payment
made by it under the Standby Letter of Credit.
(f) The issuance of any supplement, modification, amendment,
renewal or extension to or of any Standby Letter of Credit shall be
treated in all respects the same as the issuance of a new Standby Letter
of Credit.
(g) The obligation of Borrowers to pay to the Issuing Bank the
amount of any payment made by the Issuing Bank under any Standby Letter
of Credit shall be absolute, unconditional and irrevocable. Without
limiting the foregoing, such obligation of Borrowers shall not be
affected by any of the following circumstances absent the Issuing Bank's
gross negligence or willful misconduct:
(i) any lack of validity or enforceability of the
Standby Letter of Credit, this Agreement, or any other agreement
or instrument relating thereto;
(ii) any amendment or waiver of or any consent to
departure from the Standby Letter of Credit, this Agreement, or
any other agreement or instrument relating thereto;
(iii) the existence of any claim, setoff, defense or
other rights which Borrowers may have at any time against any
Bank, any beneficiary of the Standby Letter of Credit (or any
Persons or entities for whom any such beneficiary may be acting)
or any other Person, whether in connection with the Standby
Letter of Credit, this Agreement or any other agreement or
instrument relating thereto, or any unrelated transactions;
(iv) any demand, statement or any other document
presented under the Standby Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect
whatsoever;
(v) payment by the Issuing Bank under the Standby Letter
of Credit against presentation of a draft or any accompanying
document which does not strictly comply with the terms of the
Standby Letter of Credit;
(vi) the solvency (or insolvency) or financial
responsibility (or lack thereof) of any party issuing any
documents in connection with a Standby Letter of Credit;
(vii) any error in the transmission of any message
relating to a Standby Letter of Credit, or any delay or
interruption in any such message not caused by the Issuing Bank;
and/or
(viii) any error, neglect or default of any
correspondent of the Issuing Bank in connection with a Standby
Letter of Credit.
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2.7 Agent's Right to Assume Funds Available for Advances. Unless Agent
shall have been notified by any Bank at least two hours prior to the funding by
Agent of any Loan that such Bank does not intend to make available to Agent such
Bank's portion of the total amount of such Loan, Agent may assume that such Bank
has made such amount available to Agent on the date of the Loan and Agent may,
in reliance upon such assumption, make available to Borrowers a corresponding
amount. If such corresponding amount is not in fact made available to Agent by
such Bank, Agent shall be entitled to recover such corresponding amount on
demand from such Bank, which demand shall be made in a reasonably prompt manner.
If such Bank does not pay such corresponding amount forthwith upon Agent's
demand therefor, Agent promptly shall notify Borrowers and Borrowers shall pay
such corresponding amount to Agent. Agent also shall be entitled to recover from
such Bank or Borrowers, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by Agent to Borrowers to the date such corresponding amount is
recovered by Agent, at a rate per annum equal to the actual cost to Agent of
funding such amount as notified by Agent to such Bank or Borrowers, as the case
may be. Nothing herein shall be deemed to relieve any Bank from its obligation
to fulfill its share of the Commitment or to prejudice any rights which the
Agent or Borrowers may have against any Bank as a result of any default by such
Bank hereunder.
ARTICLE 3
PAYMENTS AND FEES
3.1 Principal and Interest.
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Loan from the date thereof until payment in
full is made and shall accrue and be payable at the rates set forth
herein both before and after default and before and after maturity and
judgment, with overdue amounts to bear interest at the rate set forth in
Section 3.6, to the fullest extent permitted by applicable Law. Upon any
partial prepayment or redesignation of outstanding Prime Rate Loans to
Eurodollar Loans, interest accrued through the date of such prepayment
or redesignation shall be payable on the next following interest payment
date occurring pursuant to Section 3.1(b). Upon any partial prepayment
or payment in full or redesignation or conversion of any Eurodollar Loan
or upon any payment or redesignation in full of all outstanding Prime
Rate Loans, interest accrued through the date of such prepayment,
payment, redesignation or conversion shall be payable on such date.
(b) Interest accrued on each Prime Rate Loan shall be payable on
the first day of each month, commencing with the first such date to
occur after the Closing Date. Agent shall use its best efforts to notify
Borrowers of the amount of interest so payable prior to each interest
payment date, but failure of Agent to do so shall not excuse payment of
such interest when payable. Except as otherwise provided in Section 3.6,
the unpaid principal amount of any Prime Rate Loan shall bear interest
at a fluctuating rate per annum equal to the Prime Rate plus the
applicable Prime Rate Spread. Each change in the interest rate shall
take effect simultaneously with the corresponding change in the Prime
Rate and/or the Prime Rate Spread. Each change in the Prime Rate shall
be effective as of 12:01 a.m. on the Banking Day on which the change in
the Prime Rate is
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announced, unless otherwise specified in such announcement, in which
case the change shall be effective as so specified.
(c) Interest accrued on each Eurodollar Loan shall be payable on
the first day of each month, commencing with the first such date to
occur after the Closing Date, and on the maturity date of that
Eurodollar Loan. Agent shall use its best efforts to notify Borrowers of
the amount of interest so payable prior to each interest payment date,
but failure of Agent to do so shall not excuse payment of such interest
when payable. Except as otherwise provided in Section 3.6, the unpaid
principal amount of any Eurodollar Loan shall bear interest at a rate
per annum equal to the Eurodollar Rate for that Eurodollar Loan plus the
Eurodollar Rate Spread.
(d) If not sooner paid, the principal indebtedness under this
Agreement shall be payable as follows:
(i) subject to the right to renew or convert a
Eurodollar Rate Loan to a Prime Rate Loan, the principal amount
of each Loan shall immediately be payable in Cash on the
Maturity Date or, in the case of a Eurodollar Loan, on the last
day of the Eurodollar Period for such Loan; and
(ii) the principal indebtedness evidenced by the Notes
shall be payable in Cash within two (2) Banking Days in the
amount by which the aggregate outstanding amount of Loans at any
time exceeds the Commitment. The outstanding principal
indebtedness evidenced by the Notes shall, in any event, be
payable on the Maturity Date.
(e) The Notes, or any of them, may, at any time and from time to
time, be paid or prepaid in whole or in part without premium or penalty,
except that (i) any partial prepayment shall be an integral multiple of
$100,000, (ii) Agent shall have received notice, by telephone or
telecopier, of any prepayment prior to 12:00 noon on the Banking Day of
such prepayment (unless greater notice is otherwise required by this
Agreement), which notice shall identify the date and amount of the
prepayment and the Loan(s) being prepaid, (iii) each prepayment of
principal, except for partial prepayments of Prime Rate Loans, shall be
accompanied by payment of interest accrued through the date of payment
on the amount of principal paid, (iv) except as required by subsections
(d)(ii) above, no Eurodollar Loan may be paid or prepaid in whole or in
part prior to the last day of the applicable Eurodollar Period without
the prior consent of the Requisite Banks, and, notwithstanding such
required prepayment or such consent, any payment or prepayment of all or
any part of Eurodollar Loan on a day other than the last day of the
applicable Eurodollar Period shall be made on a Eurodollar Banking Day,
as applicable, shall be preceded by at least four (4) Eurodollar Banking
Days' written notice to Agent of the date and amount of such payment or
prepayment, and shall be subject to Section 3.3(c).
3.2 Commitment Fee. On the Closing Date, Borrowers shall pay to Banks a
commitment fee equal to .10% of the Commitment. Such commitment fee shall be
fully earned on the Closing Date.
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3.3 Eurodollar Fees and Costs.
(a) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance shall, in the reasonable discretion
of any Bank, make it unlawful, impossible or impracticable for such Bank
or its Eurodollar Lending Office to make or maintain any Eurodollar
Loan, or materially restrict the authority of such Bank to purchase or
sell, or to take deposits of, dollars in the Designated Eurodollar
Market, or to determine or charge interest rates based upon the
Eurodollar Rate, then such Bank will notify Agent and such Bank's
obligation to make Eurodollar Loans shall be suspended for the duration
of such illegality, impossibility or impracticability and Agent
forthwith shall give notice thereof to the other Banks and Borrowers.
Upon receipt of such notice, the outstanding principal amount of such
Bank's Eurodollar Loans, together with accrued interest thereon,
automatically shall be converted to Prime Rate Loans on either (1) the
last day of the Eurodollar Period(s) applicable to such Eurodollar Loans
if such Bank may lawfully continue to maintain and fund such Eurodollar
Loans to such day(s) or (2) immediately if such Bank may not lawfully
continue to fund and maintain such Eurodollar Loans to such day(s),
provided that in such event the conversion shall not be subject to
payment of a prepayment fee under Section 3.3(c). In the event that such
Bank is unable, for the reasons set forth above, to make, maintain or
fund any Eurodollar Loan, such Bank shall fund such amount as a Prime
Rate Loan, and such amount shall be treated in all respects as a Prime
Rate Loan.
(b) If, with respect to any proposed Eurodollar Loan:
(1) Agent reasonably determines that, by reason of
Special Eurodollar Circumstances, deposits in dollars (in the
applicable amounts) are not being offered to each of the Banks
in the Designated Eurodollar Market for the applicable
Eurodollar Period; or
(2) the Requisite Banks advise Agent that the Eurodollar
Rate as determined by the Banks (i) does not represent the
effective pricing to the Banks for deposits in dollars in the
Designated Eurodollar Market in the relevant amount for the
applicable Eurodollar Period, or (ii) will not adequately and
fairly reflect the cost to such Banks of making the applicable
Eurodollar Loans;
then Agent forthwith shall give notice thereof to Borrowers and the
Banks, whereupon until Agent notifies Borrowers that the circumstances
giving rise to such suspension no longer exist, and the obligation of
the Banks to make any future Eurodollar Loans shall be suspended.
(c) Upon payment or prepayment of any Eurodollar Loan, or
conversion of a Eurodollar Loan to a Prime Rate Loan (other than as the
result of a conversion required under Section 3.3(a)), on a day other
than the last day in the applicable Eurodollar Period (whether
voluntarily, involuntarily, by reason of acceleration, or otherwise),
Borrowers shall pay to the Banks an amount equal to the accrued interest
on the amount prepaid plus a prepayment fee equal to the amount (if any)
by which: (1) the additional interest which would have been payable on
the amount prepaid had it not been paid until the last day of
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the Eurodollar Period, exceeds (2) the interest which would have been
recoverable by placing the amount prepaid on deposit in the Eurodollar
market for a period starting on the date on which it was prepaid and
ending on the last day of the Eurodollar Period for such portion, plus
all reasonable out-of-pocket expenses incurred by Banks and reasonably
attributable to such payment or prepayment; provided that no prepayment
fee shall be payable (and no credit or rebate shall be required) if the
product of the foregoing formula is not positive. Each Bank's
determination of the amount of any prepayment fee payable under this
Section 3.3(c) shall be conclusive in the absence of manifest error.
(d) Borrowers hereby indemnify each Bank against, and agree to
hold each Bank harmless from and reimburse each Bank on demand for, all
reasonable costs, expenses, claims, penalties, liabilities, losses,
legal fees and damages (including, without limitation, any interest paid
by any Bank for deposits in dollars in the Designated Eurodollar Market
and any loss sustained by any Bank in connection with the reemployment
of funds) incurred or sustained by such Bank, as reasonably determined
by such Bank, as a result of any failure of Borrowers to borrow on the
date or in the amount specified in any Request for Loan or Request for
Redesignation of Loans; provided that such Bank shall not be entitled to
indemnification for any loss caused by its own gross negligence or
willful misconduct. The determination of such amount by each Bank shall
be conclusive in the absence of manifest error.
(e) Any Bank requesting any payment from Borrowers under this
Section 3.3, shall, at the request of Borrowers, provide reasonable
detail to Borrowers regarding the manner in which the amount of any such
payment has been determined.
2.4 Letter of Credit Fees. Borrowers shall pay to the Issuing Bank a
letter of credit fee of 1.5% of the face amount of the Standby Letter of Credit
for the term of each Standby Letter of Credit issued under Section 2.6, payable
at the time of issuance. Each Standby Letter of Credit fee is earned upon
issuance of each Standby Letter of Credit and is nonrefundable. The Issuing Bank
promptly shall make available to Agent in immediately available funds, and Agent
promptly shall make available to Banks in immediately available funds, pro rata
according to their percentages of the Commitment, the portion of each Standby
Letter of Credit fee which is for the account of Banks as aforesaid.
3.5 Agent Fee. From and after such time as this credit facility shall be
syndicated by Agent, Borrowers shall pay Agent an agency fee in the amount and
at the times set forth in the Fee Letter.
3.6 Late Payments/Default Rate.
(a) Should any installment of principal or interest or any fee
or cost or other amount payable under any Loan Document to Agent or any
Bank not be paid when due, such installment shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to
two percent (2.0%) above the then prevailing applicable Prime Rate based
interest rate for all Loans made hereunder, to the fullest extent
permitted by applicable Law. Accrued and unpaid interest on past due
amounts (including, without limitation, interest on past due interest)
shall be compounded monthly, on the last day of each
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calendar month, to the fullest extent permitted by applicable Law and
payable on the first day of the following month.
(b) Upon the occurrence and during the continuance of any other
Event of Default, at the option of the Requisite Banks, Borrowers shall
pay interest on the outstanding principal and interest at the Default
Rate. This shall not constitute a waiver of any Event of Default.
3.7 Computation of Interest and Fees. All computations of interest and
fees under any Loan Document that relate to any Prime Rate Loan or any
Eurodollar Loan shall be calculated on the basis of a year of 360 days and the
actual number of days elapsed.
3.8 Non-Banking Days. If any payment to be made by Borrowers or any
other Party under any Loan Document shall come due on a day other than a Banking
Day (and a Eurodollar Banking Day, in the case of a Eurodollar Loan), payment
shall be made on the next succeeding Banking Day (and, in the case of a
Eurodollar Loan, the next succeeding Eurodollar Banking Day that is also a
Banking Day) and the extension of time shall be reflected in computing interest.
3.9 Manner and Treatment of Payments.
(a) Borrowers agree that interest and principal payments and any
fees will be deducted automatically on the due date from the Designated
Deposit Account, or any other accounts of Borrowers held by Agent which
contain sufficient funds. Such debits shall occur on the dates the
payments become due. If the due date does not fall on a Banking Day,
Agent will cause such debits to be made on the first Banking Day
following the due date. Borrowers shall maintain sufficient funds in the
Designated Deposit Account on the dates Agent enters debits authorized
by this Agreement. If there are insufficient funds in the Designated
Deposit Account or the other accounts of Borrowers on the date Agent
enters any debit authorized by this Agreement, Borrowers shall
immediately, after notice from Agent, pay such shortfall to Agent. The
amount of all payments received by Agent for the account of each Bank
shall be immediately paid by Agent to the applicable Bank in immediately
available funds. All payments shall be made in lawful money of the
United States of America.
(b) Each Bank shall use its best efforts to keep a record of
Loans made by it and payments received by it with respect to each Note
and such record shall be presumptive evidence of the amounts owing.
(c) Each payment or prepayment on account of any Loan shall be
made and applied pro rata according to the outstanding Loans made by
each Bank.
(d) Each payment of any amount payable by Borrowers and/or any
other Party under this Agreement and/or any other Loan Document shall be
made free and clear of, and without reduction by reason of, any taxes,
assessments or other charges imposed by any Governmental Agency, central
bank or comparable authority.
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3.10 Funding Sources. Nothing in this Agreement shall be deemed to
obligate Agent or any Bank to obtain the funds for any Loan in any particular
place or manner or to constitute a representation by Agent or any Bank that it
has obtained or will obtain the funds for any Loan in any particular place or
manner.
3.11 Failure to Charge Not Subsequent Waiver. Any decision by Agent or
any Bank not to require payment of any interest (including default interest),
fee, cost or other amount payable under any Loan Document on any occasion shall
in no way limit or be deemed a waiver of Agent's or such Bank's right to require
full payment of any interest (including default interest), fee, cost or other
amount payable under any Loan Document on any other or subsequent occasion.
3.12 Agent's Right to Assume Payments Will be Made by Borrowers. Unless
Agent shall have been notified by Borrowers prior to the date on which any
payment to be made by Borrowers hereunder is due that Borrowers do not intend to
remit such payment, Agent may, in its discretion, assume that Borrowers will
make such payment when so due and Agent may, in its discretion and in reliance
upon such assumption, make available to each Bank on such payment date an amount
equal to such Bank's share of such assumed payment. If Borrowers do not in fact
make such payment to Agent, each Bank shall forthwith on demand repay to Agent
the amount of such assumed payment made available to such Bank, together with
interest thereon in respect of each day from and including the date such amount
was made available by Agent to such Bank to the date such amount is repaid to
Agent at a rate per annum equal to the actual cost to Agent of funding such
amount as notified by Agent to such Bank.
3.13 Survivability. All of Borrowers' obligations under this Article 3
shall survive for one year following the date on which all Loans hereunder are
fully paid.
3.14 Unused Line Fee. On the last day of each calendar quarter,
commencing with the first such date to occur after the Closing Date, Borrower
shall pay to Banks a fee of .25% per annum based on the difference between the
Commitment and an amount equal to the weighted average Total Outstanding during
the previous quarterly period or portion thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant to Agent and each Bank, as of the
Closing Date, that:
4.1 Existence and Qualification; Power; Compliance With Laws.
(a) SCC, Inc. is a corporation duly formed, validly existing and
in good standing under the Laws of Delaware. The chief executive offices
of SCC, Inc. are in Los Angeles, California.
(b) The Spectrum Club Company, Inc. is a corporation duly
formed, validly existing and in good standing under the Laws of
California. Its chief executive offices are in Los Angeles, California.
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(c) Pontius Realty, Inc. is a corporation duly formed, validly
existing and in good standing under the Laws of California. Its chief
executive offices are in Los Angeles, California.
(d) Sports Club, Inc. of California is a corporation duly
formed, validly existing and in good standing under the Laws of
California. Its chief executive offices are in Los Angeles, California.
(e) Irvine Sports Club, Inc. is a corporation duly formed,
validly existing and in good standing under the Laws of California. Its
chief executive offices are in Los Angeles, California.
(f) The SportsMed Company, Inc. is a corporation duly formed,
validly existing and in good standing under the Laws of California. Its
chief executive offices are in Los Angeles, California.
(g) SCC Sports Club, Inc. is a corporation duly formed, validly
existing and in good standing under the Laws of Texas. Its chief
executive offices are in Los Angeles, California.
(h) L.A./Irvine Sports Clubs, Ltd. is a limited partnership duly
formed, validly existing and in good standing under the Laws of
California. Its chief executive offices are in Los Angeles, California.
(i) Talla New York, Inc. is a corporation duly formed, validly
existing and in good standing under the Laws of New York. Its chief
executive offices are in Los Angeles, California.
(j) Canoga Agoura Spectrum Club, Inc. is a corporation duly
formed, validly existing and in good standing under the Laws of
California. Its chief executive offices are in Los Angeles, California.
(k) Green Valley Spectrum Club, Inc. is a corporation duly
formed, validly existing and in good standing under the Laws of Nevada.
Its chief executive offices are in Los Angeles, California.
(l) TVE, Inc. is a corporation duly formed, validly existing and
in good standing under the Laws of California. Its chief executive
offices are in Los Angeles, California.
(m) Spectrum Club, Anaheim, a California Corporation, is a
corporation duly formed, validly existing and in good standing under the
Laws of California. Its chief executive offices are in Los Angeles,
California.
(n) Spectrum Liquidating Corp. is a corporation duly formed,
validly existing and in good standing under the Laws of California. Its
chief executive offices are in Los Angeles, California.
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(o) Washington D.C. Sports Club, Inc. is a corporation duly
formed, validly existing and in good standing under the Laws of
Delaware. Its chief executive offices are in Los Angeles, California.
(p) SF Sports Club, Inc. is a corporation duly formed, validly
existing and in good standing under the Laws of Delaware. Its chief
executive offices are in Los Angeles, California.
(q) HFA Services, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of California. Its chief
executive offices are in Los Angeles, California.
(r) NY Sports Club, Inc. is a corporation duly formed, validly
existing and in good standing under the laws of Delaware. Its chief
executive offices are in Los Angeles, California.
Each Borrower is duly qualified or registered to transact business and is in
good standing in each other jurisdiction in which the conduct of its business or
the ownership or leasing of its Properties makes such qualification or
registration necessary, except where the failure so to qualify or register and
to be in good standing would not have a material adverse effect on the business,
operations or condition (financial or otherwise) of such Borrower and its
Subsidiaries, taken as a whole. Each Borrower has all requisite power and
authority to conduct its business, to own and lease its Properties and to
execute, deliver and perform all of its Obligations under the Loan Documents.
All outstanding shares of capital stock of each Borrower, as applicable, are
duly authorized, validly issued, fully paid, non-assessable and issued in
compliance with all applicable state and federal securities and other Laws. Each
Borrower is in compliance with all Laws and other legal requirements applicable
to its business, has obtained all authorizations, consents, approvals, orders,
licenses and permits from, and has accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing from, any
Governmental Agency that are necessary for the transaction of its business,
except where the failure so to comply, file, register, qualify or obtain
exemptions would not have a material adverse effect on the business, operations
or condition (financial or otherwise) of such Borrower and its Subsidiaries,
taken as a whole.
4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations. The execution, delivery and performance by each Borrower
and its Subsidiaries of the Loan Documents to which it is a Party have been duly
authorized by all necessary action, and do not and will not:
(a) Except as set forth in Schedule 4.2, require any consent or
approval not heretofore obtained of any partner, director, stockholder,
security holder or creditor;
(b) Violate or conflict with any provision of such Party's
partnership agreement, certificate of limited partnership, charter,
articles of incorporation or bylaws, or amendments thereto, as
applicable;
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(c) Result in or require the creation or imposition of any Lien
or Right of Others (other than as provided under the Loan Documents)
upon or with respect to any Property now owned or leased or hereafter
acquired by such Party;
(d) Violate any provision of any Law (including, without
limitation, Regulations T, U and/or X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award presently in effect and having applicability to
such Party; or
(e) Result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement,
lease or instrument to which such Party is a party or by which such
Party or any of its Property is bound or affected;
and no Borrower nor any Subsidiary thereof is in default under any Law, order,
writ, judgment, injunction, decree, determination or award, or any indenture,
agreement, lease or instrument described in this Section 4.2(e), in any respect
that is materially adverse to the interests of Agent or any Bank or that would
have any material adverse effect on the business, operations or condition
(financial or otherwise) of Borrowers and their Subsidiaries, taken as a whole.
4.3 No Governmental Approvals Required. No authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, or exemption from any of the foregoing from, any
Governmental Agency is or will be required to authorize or permit under
applicable Law the execution, delivery and performance by any Borrower or any
Subsidiary thereof of the Loan Documents to which it is a Party.
4.4 Subsidiaries.
(a) Except as described in Schedule 4.4, Borrowers do not own
any capital stock, partnership interest, joint venture interest or other
equity interest in any Person. Unless otherwise indicated in Schedule
4.4 all of the outstanding shares of capital stock or partnership or
joint venture interests of each Borrower are owned of record and
beneficially by Borrowers and all securities and interests so owned are
duly authorized, validly issued, fully paid, non-assessable and issued
in compliance with all applicable state and federal securities and other
Laws, and are free and clear of all Liens and Rights of Others.
(b) Each Subsidiary identified in Schedule 5.2 as an "Inactive
Subsidiary" has (i) aggregate collections or distributions of cash from
its operations of less than $50,000 and (ii) no tangible or intangible
real or personal property assets having an aggregate fair market value
in excess of $50,000.
(c) Each Subsidiary of each Borrower is a legal entity of the
form described for that Subsidiary in Schedule 4.4, duly formed, validly
existing and in good standing under the Laws of its jurisdiction of
formation, is duly qualified or registered to transact business and is
in good standing in each other jurisdiction in which the conduct of its
business or the ownership or leasing of its Properties makes such
qualification or registration necessary, except where the failure so to
qualify or register and to be in good
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standing does not have a material adverse effect on the business,
operations or condition (financial or otherwise) of the Borrowers and
their Subsidiaries, taken as a whole, and has all requisite legal power
and authority to conduct its business and to own and lease its
Properties and to execute, deliver and perform all of its Obligations
under the Loan Documents.
(d) Each Subsidiary of each Borrower is in compliance with all
Laws and other legal requirements applicable to its business, has
obtained all authorizations, consents, approvals, orders, licenses and
permits from, and has accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of
its business, except where the failure to so comply, file, register,
qualify or obtain exemptions would not have a material adverse effect on
the business, operations or condition (financial or otherwise) of the
Borrowers and their Subsidiaries, taken as a whole.
4.5 Financial Statements and Title to Assets.
(a) Borrowers have furnished to Agent and Banks (i) the audited
consolidated balance sheet of Borrowers and their Subsidiaries as at
December 31, 1998, and the audited consolidated income statement and
cash flow statement of Borrowers and their Subsidiaries for their fiscal
year then ended, (ii) the unaudited individual Club operating statements
for the month of December, 1998 and for the fiscal year then ended, and
(iii) the unaudited balance sheets of Green Valley Spectrum Club, Inc.,
Irvine Sports Club, Inc., and Canoga Agoura Spectrum Club, Inc. as at
December 31, 1998. Such financial statements fairly present the
financial condition, results of operations and cash flow of Borrowers
and their Subsidiaries, or Green Valley Spectrum Club, Inc., Irvine
Sports Club, Inc., or Canoga Agoura Spectrum Club, Inc., as the case may
be, as at such dates and for such periods, in conformity with generally
accepted accounting principles, consistently applied, provided that the
balance sheets and statements referred to in (ii) and (iii) above are
subject to normal year-end audit adjustments.
(b) Each of Green Valley Spectrum Club, Inc.; Irvine Sports
Club, Inc.; and Canoga Agoura Spectrum Club, Inc. holds (subject only to
Liens permitted pursuant to Section 6.9(a)) good and marketable title
to, and all rights and interest in, all such Property shown in the most
recent financial statement referred to in Section 4.5 as is necessary
for the operation and conduct of, or is otherwise reasonably related to
the operation of, The Sports Club/Las Vegas, The Sports Club/Irvine and
The Spectrum Club/Agoura Hills and The Spectrum Club/Canoga Park,
respectively (including but not limited to all rights under any
membership contracts or agreements with users or potential users of the
same), and enjoys peaceful and undisturbed possession of all such
Property.
4.6 No Other Liabilities; No Material Adverse Changes. Except as set
forth in Schedule 4.6 hereto, Borrowers and their Subsidiaries do not have any
material liability or material contingent liability not reflected or disclosed
in the financial statements or notes thereto described in Section 4.5. There has
been no material adverse change in the business, operations or condition
(financial or otherwise) of Borrowers and their Subsidiaries, taken as a whole,
since the date of the financial statements described in Section 4.5(b).
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4.7 Intangible Assets. Borrowers and their Subsidiaries own, or possess
the unrestricted right to use, all trademarks, trade names, copyrights, patents,
patent rights, licenses and deferred tax assets that are used in the conduct of
their businesses as now operated, and no such intangible asset, to the best
knowledge of Borrowers, conflicts with the valid trademark, trade name,
copyright, patent, patent right or deferred tax asset of any other Person to the
extent that such conflict would have a material adverse effect on the business,
operations or condition (financial or otherwise) of Borrowers and their
Subsidiaries, taken as a whole.
4.8 Filing of Financing Statements. Upon the filing and/or recording of
financing statements describing the Collateral with the Governmental Agencies
listed in Schedule 4.8, and except for the requirement that continuation
statements periodically be filed and/or recorded with respect thereto, and upon
the taking of possession of the stock certificates representing all of the
issued and outstanding capital stock of Canoga Agoura Spectrum Club, Inc., Green
Valley Spectrum Club, Inc. and Irvine Sports Club, Inc., all necessary steps
will have been taken to fully perfect and to maintain fully perfected the Liens
of Agent and Banks on the Collateral, to the fullest extent that such Liens may
be perfected pursuant to Article 9 of the Uniform Commercial Code.
4.9 Public Utility Holding Company Act. No Borrower or any Subsidiary
thereof is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.10 Litigation. Except for (a) the matters set forth in Schedule 4.10,
(b) any matter fully covered as to subject matter and amount (subject to
applicable deductibles and retentions) by insurance for which the insurance
carrier has not asserted lack of subject matter coverage or reserved its right
to do so, or (c) any matter, or series of related matters, involving a
threatened claim against Borrowers of less than $100,000, there are no actions,
suits or proceedings pending or, to the best knowledge of Borrowers, threatened
against or affecting Borrowers or any of its Subsidiaries or any Property of any
of them in any court of Law or before any Governmental Agency.
4.11 Binding Obligations. Each of the Loan Documents to which any
Borrower or any Subsidiary thereof is a Party will, when executed and delivered
by such Party, constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms.
4.12 No Default. No event has occurred and is continuing that is a
Default.
4.13 ERISA.
(a) Except as disclosed in Schedule 4.13, there are no Plans.
(b) With respect to each Plan:
(1) such Plan complies in all material respects with
ERISA and any other applicable Law;
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(2) such Plan has not incurred any material "accumulated
funding deficiency", as that term is defined in Section 302 of
ERISA;
(3) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that could result in the termination or
disqualification of such Plan; and
(4) no Borrower nor any Subsidiary thereof has engaged
in any "prohibited transaction" (as defined in Section 4975 of
the Internal Revenue Code of 1954, as amended).
(c) no Borrower nor any Subsidiary thereof is or has been a
party to any Multi-employer Plan.
(d) Borrowers and their Subsidiaries are in compliance with each
covenant contained in Section 6.6.
4.14 Regulations T, U and X; Investment Company Act. No Borrower nor any
of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" or "margin security" within the meanings of
Regulations T, U or X, respectively, of the Board of Governors of the Federal
Reserve System. If requested by Agent or any Bank, Borrowers will furnish or
will cause their Subsidiaries, as requested, to furnish Agent or any Bank with a
statement or statements in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U of said Board of Governors. No part of the
proceeds of any Loan hereunder will be used to purchase or carry any such
"margin security" or "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any such "margin security" or "margin stock"
in violation of Regulations T, U or X of said Board of Governors. No Borrower
nor any of its Subsidiaries is or is required to be registered under the
Investment Company Act of 1940.
4.15 Disclosure. No written statement made by Borrowers or any
Subsidiary thereof to Agent or any Bank in connection with this Agreement, or in
connection with any Loan, or in connection with the issuance of any Standby
Letter of Credit, contains any untrue statement of a material fact or omits a
material fact necessary to make the statement made not misleading. To the best
knowledge of Borrowers, there is no fact which Borrowers have not disclosed to
Agent and Banks in writing which materially and adversely affects nor, so far as
Borrowers can now foresee, is reasonably likely to prove to affect materially
and adversely the business, operations, Properties, prospects, profits or
condition (financial or otherwise) of Borrowers and their Subsidiaries, taken as
a whole, or the ability of Borrowers and their Subsidiaries to perform their
Obligations under the Loan Documents.
4.16 Tax Liability. Borrowers and their Subsidiaries have filed all
income tax returns which are required to be filed, and have paid, or made
provision for the payment of, all taxes which have become due pursuant to said
returns or pursuant to any assessment received by any Borrower or any Subsidiary
thereof, except such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided.
4.17 Projections. The financial projections set forth in Schedule 4.17
are based on facts known to Borrowers and on assumptions that are reasonable and
consistent with such facts.
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To the best knowledge of Borrowers, except as may be disclosed on Schedule 4.17,
no material fact or assumption is omitted as a basis for such projections, and
such projections are reasonably based on such facts and assumptions. Nothing in
this Section 4.17 shall be construed as a representation that such projections
in fact will be achieved.
4.18 Fiscal Year. Borrowers and their Subsidiaries each operate on a
fiscal year corresponding to the calendar year and ending on December 31, the
fiscal months of which correspond to the calendar months of the calendar year.
4.19 Employee Matters. There is no strike, work stoppage or labor
dispute with any union or group of employees pending or overtly threatened
involving Borrowers or any of their Subsidiaries. Since January 1, 1999, there
has been no increase in the salary, bonus or other compensation arrangements of
the employees of Borrowers and their Subsidiaries other than normal increases in
the ordinary course of business.
4.20 Solvency. Each Borrower is and will continue to be Solvent taking
into account, among other things, (a) the proceeds of the Loans and the Senior
Notes derived by that Borrower, (b) all indebtedness of that Borrower evidenced
by the Notes and (c) all indebtedness and obligations of that Borrower evidenced
by the Senior Notes and the guarantees thereof.
4.21 Year 2000.
(a) All reprogramming and testing reasonably required to ensure
the Year 2000 Compliance of all critical systems (and all software,
hardware, firmware, and goods relating thereto) of Borrowers will be
completed on or before September 30, 1999. The cost to Borrowers of such
reprogramming and testing and of the reasonably foreseeable consequences
of the year 2000 on such systems and equipment (including reprogramming
errors) will not result in any Event of Default, Default or a material
adverse effect upon the operations, business, properties, condition
(financial or otherwise) or prospects of Borrowers taken as a whole, or
a material impairment of Borrowers' abilities to perform under any Loan
Document. Except for such of the foregoing reprogramming and testing as
may be necessary, the critical computer and management information
systems of Borrower are and, with ordinary course upgrading and
maintenance, will continue to be sufficient to permit Borrowers to
conduct their businesses in a manner consistent with past practice.
(b) Borrowers have made appropriate inquiry of all suppliers and
vendors that are material to the business of any Borrower and each such
Person has provided assurance to Borrowers that all reprogramming and
testing reasonably required to ensure the Year 2000 Compliance of all
software, hardware, firmware, goods and systems (including systems and
equipment with which Borrowers' systems interface) of such Person will
be completed in a timely manner and will continue to be sufficient to
permit Borrowers to conduct their businesses in a manner consistent with
past practice.
4.22 Valid Issuance of Senior Notes. The Senior Notes to be issued and
sold on or before the Closing Date by SCC, Inc., when issued and delivered, will
be duly and validly issued in compliance with all applicable laws. The issuance
and sale of the Senior Notes will, upon
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such issuance and sale, either (i) have been registered or qualified under
applicable federal and state securities laws or (ii) be exempt therefrom.
4.23 Offering Circular. SCC, Inc. has delivered to Agent a complete and
correct copy of the Circular Statement prepared in connection with the offering
and sale of the Senior Notes. Such Offering Statement (including, without
limitation, the financial statements and other financial and statistical
information contained therein) does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.24 Senior Note Documents. Each of the Senior Notes, the Indenture
relating to the Senior Notes, the guarantees of the Senior Notes executed and
delivered by Borrowers and each other agreement and instrument entered into by
any Borrower in connection therewith constitutes, or when executed and delivered
will constitute, the legal, valid and binding obligation of each of the parties
thereto, and each of such agreements and instruments will be enforceable in
accordance with its respective terms. No party to any such agreements and
instruments is in violation of any term or provision thereof.
4.25 Capitalization of Canoga Agoura Spectrum Club, Inc. SCC, Inc. has
contributed sufficient capital to Canoga Agoura Spectrum Club, Inc. to enable
Canoga Agoura Sports Club Company, Inc. to meet its anticipated liabilities as
they mature.
ARTICLE 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
So long as any Loan or any other indebtedness owing in connection
therewith remains unpaid hereunder or any portion of the Commitment remains
outstanding, Borrowers shall, and shall cause each of its Subsidiaries to,
unless the Requisite Banks otherwise consent in writing:
5.1 Payment of Taxes and Other Potential Charges. Pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed upon
any of them, upon their respective Property or any part thereof, upon their
respective income or profits or any part thereof or upon any right or interest
of Agent or any Bank under any Loan Document, except that Borrowers and their
Subsidiaries shall not be required to pay or cause to be paid (a) any income or
gross receipts tax generally applicable to banks or (b) any tax, assessment,
charge or levy that is not yet past due, or is being contested in good faith by
appropriate proceedings, so long as the relevant entity has established and
maintains adequate reserves for the payment of the same and by reason of such
nonpayment and contest no material item or portion of Property of Borrowers and
their Subsidiaries, taken as a whole, is in jeopardy of being seized, levied
upon or forfeited.
5.2 Preservation of Existence. Preserve and maintain their respective
existences, except for mergers permitted in Section 6.3 of this Agreement.
Preserve and maintain all material licenses, rights, franchises and privileges
in the jurisdiction of their formation and all authorizations, consents,
approvals, orders, licenses, permits, or exemptions from, or registrations with,
any Governmental Agency that are necessary for the transaction of their
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respective business. Qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of their
respective business, except any Subsidiaries listed in Schedule 5.2 that are
inactive or have immaterial assets. With respect to any Subsidiaries listed in
Schedule 5.2 that are inactive or have immaterial assets, Borrowers shall
immediately give Agent and Banks written notice of any change in such entities'
respective existences or statuses of qualification.
5.3 Maintenance of Properties. Maintain, preserve and protect all of
their respective Properties and equipment in good order and condition, subject
to replacement wear and tear in the ordinary course of business, and not permit
any waste of their respective Properties, except that the failure to maintain,
preserve and protect a particular item of Property or equipment that is not of
significant value, either intrinsically or to the operations of Borrowers and
their Subsidiaries, taken as a whole, shall not constitute a violation of this
covenant.
5.4 Maintenance of Insurance. Maintain liability and casualty insurance
with responsible insurance companies acceptable to the Requisite Banks in such
amounts and against such risks as is usually carried by responsible companies
engaged in similar businesses and owning similar Properties in the general areas
in which Borrowers and their Subsidiaries operate; and, as requested by the
Agent, cause Agent and Banks to be designated as additional insured and loss
payees with respect to such insurance, and obtain the written agreement of such
insurers that such insurance shall not be canceled or terminated, nor shall the
coverage or terms or exclusions thereof be materially modified, without at least
thirty (30) days prior written notice to Agent.
5.5 Compliance With Laws. Comply with the requirements of all applicable
Laws and orders of any Governmental Agency, noncompliance with which could
materially adversely affect the business, operations or condition (financial or
otherwise) of Borrowers and their Subsidiaries, taken as a whole, except that
Borrowers and their Subsidiaries need not comply with a requirement then being
contested by any of them in good faith by appropriate proceedings so long as no
interest of Agent or any Bank would be materially impaired thereby.
5.6 Additional Borrowers. In the event (i) the aggregate amount of all
advances to, investments in or commitments to any Non-Borrower Affiliate by
Borrowers, after the date hereof, exceeds at any time $200,000, in addition to
the amounts set forth for the Non-Borrower Affiliates in Schedule 5.6, but
excluding accrued management fees owing to Borrowers from such Non-Borrower
Affiliates, (ii) any Non-Borrower Affiliate identified in Schedule 5.2 ceases to
meet the criteria for an "Inactive Subsidiary" set forth in Section 4.4(b) of
this Agreement, (iii) any Borrower becomes a majority shareholder or a general
partner of any Non-Borrower Affiliate now or hereafter existing, or (iv) any
Borrower or Borrowers, taken as a whole, obtain a majority of the partnership or
other ownership interests of any Non-Borrower Affiliate, Borrowers shall cause
such Non-Borrower Affiliate to become a Borrower hereunder or enter into such
other agreement or arrangement with Banks concerning such Non-Borrower Affiliate
as may be acceptable to the Requisite Banks in its sole discretion. In order to
add a Non-Borrower Affiliate as a Borrower hereunder, the Borrowers shall
deliver to Agent and Banks (a) the agreement of such Non-Borrower Affiliate to
be added as a Borrower hereunder and to be bound by the terms hereof, (b) the
agreement of the owners of all capital stock or other ownership interests, as
applicable, of such new Borrower to become a party to a Pledge
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Agreement, in the form prescribed by Agent, (c) the certificates and other
documents required to be delivered pursuant to the terms of such Pledge
Agreement, and (d) such other documents as the Requisite Banks may reasonably
require. Schedule 5.6 attached hereto sets forth as of the date hereof the
amount of all advances to, investments in or commitments to any Non-Borrower
Affiliate by Borrowers, the percentage ownership of each Borrower in any
Non-Borrower Affiliate, and Borrowers which are general partners of any
Non-Borrower Affiliate.
5.7 Inspection Rights. Upon reasonable notice by Agent or any Bank to
Borrowers, at any time during regular business hours and as reasonably
requested, permit Agent or any Bank, or any employee, agent or representative
thereof, to examine, audit and make copies and abstracts from the records and
books of account and to visit and inspect the Properties of Borrowers and their
Subsidiaries and to discuss the affairs, finances and accounts of Borrowers and
their Subsidiaries with any of their officers and key employees, customers or
vendors, and, upon request, furnish promptly to Agent or any Bank true copies of
all financial information and internal management reports made available to the
senior management of Borrowers or any of their Subsidiaries. If any of
Borrowers' Property, books or records are in the possession of a third party,
Borrowers, upon not less than three (3) days' advance notice, hereby authorize
such third party to permit Agent or Banks to have access to perform inspections
or audits and to respond to Agent's or a Bank's request for information
concerning such Property, books or records. If an Event of Default has occurred
and is continuing, no advance notice of any audits and inspections shall be
required.
5.8 Keeping of Records and Books of Account. Keep adequate records and
books of account reflecting all financial transactions in conformity with
generally accepted accounting principles, consistently applied, and in material
conformity with all applicable requirements of any Governmental Agency having
regulatory jurisdiction over Borrowers or any of their Subsidiaries.
5.9 Compliance With Agreements, Duties and Obligations. Promptly and
fully comply with all their respective agreements, duties and obligations under
the Loan Documents, and with material terms of any other material agreements,
indentures, leases and/or instruments to which any one or more of them is a
party, whether such other agreements, indentures, leases and/or instruments are
with Agent and any Bank or another Person.
5.10 Use of Proceeds. Use the proceeds of the Loans for the following
purposes only: (i) for working capital purposes; (ii) for Capital Expenditures;
(iii) for Standby Letters of Credit; (iv) to fund non-hostile Acquisitions; and
(v) to fund New Club Developments.
5.11 Establishment of Accounts. Not later than ninety (90) days
following the execution of this Agreement: (i) each of Canoga Agoura Spectrum
Club, Inc. and Irvine Sports Club, Inc. shall have established one account at,
and shall have caused all of its bank accounts to be established at, Agent's
Office and shall have executed sweep instructions in form and substance
satisfactory to Agent providing, among other things, that without the consent of
Agent, no monies shall be swept from any of their accounts to the account of any
other Person following the occurrence of a Default; (ii) Green Valley Spectrum
Club, Inc. shall have executed, and shall have caused each bank at which its
bank accounts may be located to execute, sweep instructions in form and
substance satisfactory to Agent, providing, among other things, that, absent
written
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consent of Agent to the contrary, all monies in such accounts will, without
impairment or limitation (other than the right of the bank to offset its usual
and customary fees and expenses with respect to such accounts) be swept to an
account at Agent's Office following a Default; and (iii) each other Borrower
shall, to the extent it, or a Club that it owns, is located within reasonable
proximity to a branch of Agent, have caused all of its bank accounts or the bank
accounts of such Club, respectively, to be established at Agent's Office or such
branch of Agent, provided, however, that, in the event such other Borrower
wishes for valid business reasons to establish an account at a location that is
not within reasonable proximity to a branch of Agent, such Borrower may
establish such account at a financial institution other than Agent with the
prior written approval of Agent (which shall not be unreasonably withheld).
Agent hereby disclaims any banker's lien it may have at law on any account, at
Agent's office or at any other branch of Agent, in which none of Irvine Sports
Club, Inc., Canoga Agoura Spectrum Club, Inc. or Green Valley Spectrum Club,
Inc. has any ownership interest.
5.12 Year 2000 Compliance. Borrowers shall perform all acts reasonably
necessary to ensure that all critical systems (and all software, hardware,
firmware, equipment, and goods relating thereto) of Borrowers become Year 2000
Compliant on or before September 30, 1999. Such acts will include, without
limitation, a comprehensive review and assessment of all such systems (including
all software, hardware, firmware, and goods relating thereto) and adopting a
detailed plan, with itemized budgets, for the remediation, monitoring and
testing of the same. Borrowers shall, immediately upon request, provide to Agent
such certifications or other evidence of compliance with this Section 5.12 as
Agent may from time to time require.
ARTICLE 6
NEGATIVE COVENANTS
So long as any Loan or other indebtedness owing in connection therewith
remains unpaid hereunder or any portion of the Commitment remains outstanding,
Borrowers shall not (and shall cause each of their Subsidiaries to not) unless
the Requisite Banks otherwise consent in writing:
6.1 Disposition of Property. Except as set forth on Schedule 6.1, sell,
assign, exchange, transfer, lease or otherwise dispose of, or contract to sell,
assign, exchange, transfer, lease or otherwise dispose of, any of their
respective Properties, whether now owned or hereafter acquired, and whether to
an Affiliate or otherwise, except (a) Properties sold, assigned, exchanged,
transferred, leased or otherwise disposed of in the ordinary course of business,
and (b) as permitted under Section 6.3.
6.2 Transactions with Borrowers and Non-Borrower Affiliates. Advance
funds to, guarantee obligations of, or make any other investments in or
commitments or make distributions to any Non-Borrower Affiliate unless (a) such
Non-Borrower Affiliate is made a Borrower under this Agreement or some other
arrangement acceptable to the Requisite Banks in their sole discretion is made
in accordance with Section 5.6, or (b) the aggregate amount of all advances to,
guaranties of, investments in and commitments to all Non-Borrower Affiliates
does not exceed $200,000, in addition to the amounts set forth for the
Non-Borrower Affiliates in Schedule 5.6, but excluding accrued management fees
owing to Borrowers from such Non-Borrower Affiliates, Borrowers shall provide
Agent and Banks a monthly report detailing such transactions, such report to be
in a form as is acceptable to Agent and Requisite Banks. The Borrowers shall
have
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the right, with the consent of the Requisite Banks, not to be unreasonably
withheld but subject to such terms and conditions as the Requisite Banks may
require, to add any Non-Borrower Affiliate as a Borrower hereunder.
6.3 Mergers, Acquisitions and New Club Developments.
(a) Merge, consolidate or amalgamate with or into any Person,
except mergers, consolidations or amalgamations of a Subsidiary of a
Borrower into a Borrower (with such Borrower as the surviving entity)
prior notice of the details of which shall have been given to Agent and
Banks, or mergers, consolidations or amalgamations in connection with an
Acquisition or New Club Development permitted pursuant to Section 6.3(b)
or 6.3(c).
(b) Except as set forth on Schedule 6.3(b), make any Acquisition
or enter into any agreement to make any Acquisition, provided that the
consent of the Requisite Banks shall not be required in connection with
any Acquisition satisfying the following conditions: (i) such
Acquisition requires payment of an amount of less than either (A)
$10,000,000 of total consideration in connection with such Acquisition
alone or (B) $15,000,000 of total consideration when such Acquisition is
combined with all other Acquisitions made by Borrowers during the twelve
months prior to such Acquisition, excluding Borrowers' investment in the
Vertical Club and Borrowers' investment in any Acquisition set forth on
Schedule 6.3(b) or approved after the date of this Agreement by the
Requisite Banks, (ii) such Acquisition is not for a sum greater than
seven and one-half (7.5) times the EBITDA of the acquired entity, with
adjustments acceptable to Banks for identifiable savings which will
occur as a result of such Acquisition, or (iii) such Acquisition is not
of an entity engaged in a business different from that of Borrowers. In
connection with an Acquisition meeting the above requirements, the
Borrowers may enter into a partnership or a corporate or other joint
venture with one or more unaffiliated Persons.
(c) Except as set forth on Schedule 6.3(c), pursue any New Club
Development, provided that the consent of the Requisite Banks shall not
be required for a New Club Development satisfying the following
conditions: (i) such New Club Development is, at time of Borrowers'
commitment to proceed with the same, projected to generate positive
EBITDA for the twelve-month period commencing on the first anniversary
following completion of such New Club Development; and (ii) Borrowers do
not expend more than $5,000,000 on such New Club Development alone or
more than $10,000,000 when the expenditures for such New Club
Development are combined with all other New Club Development
expenditures during the twelve months prior to the commencement of such
New Club Development, exclusive of expenditures in connection with
existing development projects set forth on Schedule 6.3(c) or approved
after the date of this Agreement by the Requisite Banks.
(d) [Intentionally Omitted.]
(e) Prior to any Acquisition, Borrowers shall deliver to Agent
and Banks (i) an executive summary of the Acquisition in form and
substance acceptable to Agent and
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Banks, (ii) a multi-year financial forecast, including assumptions,
(iii) a pro forma financial statement giving effect to the proposed
Acquisition, (iv) a pro forma compliance certificate executed by a
Responsible Official of a Borrower certifying that giving effect to the
proposed Acquisition, Borrowers shall be in compliance with the terms of
this Section 6.3 and all other terms and financial covenants set forth
in this Agreement, (v) a schedule of sources and uses of funds, and (vi)
such other details about such Acquisition as Agent or any Bank may
reasonably request. Prior approval by the Requisite Banks shall be
required for every Acquisition other than those permitted under Section
6.3(b) above.
(f) Prior to any New Club Development, other than a New Club
Development approved by the Requisite Banks, Borrowers shall deliver to
Agent and Banks (i) an executive summary detailing the development
project, demographic and site analysis, cost estimates and financing
sources, (ii) a multi-year financial forecast, including assumptions,
demonstrating positive projected EBITDA for the twelve-month period
commencing on the first anniversary following completion of such New
Club Development, (iii) a pro forma compliance certificate executed by a
Responsible Officer of a Borrower certifying that giving effect to the
proposed development, Borrowers shall be in compliance with the terms of
this Section 6.3 and all other terms and financial covenants set forth
in this Agreement, and (iv) such other details about such development as
Agent or any Bank may reasonably request. Prior approval by the
Requisite Banks shall be required for every New Club Development other
than those permitted under Section 6.3(c) above.
(g) [Intentionally Omitted.]
(h) [Intentionally Omitted.]
(i) [Intentionally Omitted.]
(j) Notwithstanding the right of Borrowers' pursuant to Section
6.3(b) and (c) above to make certain Acquisitions or pursue certain New
Club Developments without obtaining the prior consent of the Requisite
Banks, Borrowers shall notify Agent of, or submit to Agent a formal
request for approval of, as applicable, any and all intended
Acquisitions or New Club Developments prior to entering into a
definitive purchase agreement, in the case of any intended Acquisition,
or, in the case of any intended New Club Development, upon the earlier
of (i) the approval of such New Club Development by the Board of
Directors of the applicable Borrower or (ii) the applicable Borrower's
execution of a binding commitment to lease or purchase property or to
acquire and develop a new club in connection with such New Club
Development.
6.4 [Intentionally Omitted.]
6.5 Redemption, Dividends and Distributions; Payments to Partners;
Prepayments. Redeem or repurchase any stock, partnership interests or Senior
Notes, declare or pay any dividends, make any other distributions, make any
prepayment of obligations under the Senior Notes, or make any intercompany loans
or advances, in each case whether of capital, income or
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otherwise and whether in Cash or other Property, except that, subject to
applicable statutory restrictions and provided no Event of Default exists or
would exist after such action, (a) any Borrower or Subsidiary of a Borrower may,
subject to Section 6.2, declare and pay dividends or make other distributions,
or make intercompany loans or advances, directly or indirectly, to another
Borrower, (b) SCC, Inc. may make a Qualified Stock Repurchase, (c) Borrowers and
their Subsidiaries may, subject to Section 6.2, pay partner distributions as
required under the partnership agreements as currently in effect as of the date
hereof, or with such amendments as are approved in writing by the Requisite
Banks, of L.A./Irvine Sports Clubs, Ltd., El Segundo TDC, Ltd., Sports
Connection-ES/MB and Reebok-Sports Club/NY or any other entity approved in
writing by the Requisite Banks pursuant to Section 5.6 of this Agreement, (d)
Borrowers and their Subsidiaries may declare or make operating distributions or
declare or pay dividends or make distributions in connection with the purchase
of partnership interests in L.A./Irvine Sports Clubs, Ltd., El Segundo TDC,
Ltd., Sports Connection-ES/MB and/or Reebok-Sports Club/NY or any other entity
approved in writing by the Requisite Banks pursuant to Sections 5.6 and 6.2 of
this Agreement, (e) The SportsMed Company, Inc. and/or HFA Services, Inc. shall
have the right to repurchase securities pursuant to the terms of the
Shareholders Agreements previously entered into by HFA Services, Inc., copies of
which Shareholders Agreements have been delivered to Banks, as such Shareholders
Agreements are currently in effect as of the date hereof, or with such
amendments as are approved in writing by the Requisite Banks, and (f) SCC, Inc.
may make prepayments of obligations under the Senior Notes from proceeds of an
offering of an equity interest in it provided that (1) SCC, Inc. shall first
have repaid, or caused to be repaid, in full all Loans and all other
indebtedness owing in connection therewith (but excluding the undrawn amount of
any Standby Letter of Credit) and (2) no Default has occurred or would occur as
the result of the making of such prepayment.
6.6 ERISA.
(a) At any time, maintain, or be or become obligated to
contribute on behalf of its employees to, any Plan, other than those
Plans disclosed in Schedule 4.13.
(b) At any time, permit any Plan to:
(1) engage in any "prohibited transaction", as such term
is defined in Section 4975 of the Internal Revenue Code of 1954,
as amended;
(2) incur any material "accumulated funding deficiency",
as that term is defined in Section 302 of ERISA; or
(3) terminate in a manner which could result in
liability of Borrowers or any Subsidiary thereof to the Plan or
to the PBGC or the imposition of a Lien on the Property of
Borrowers or any Subsidiary thereof pursuant to Section 4068 of
ERISA.
(c) At any time, assume any obligation to contribute to any
Multiemployer Plan, nor shall Borrowers or any Subsidiary thereof
acquire any Person or assets of any Person which has, or has had at any
time from and after January 2, 1974, an obligation to contribute to any
Multiemployer Plan.
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(d) Fail immediately to notify Agent and Banks of the occurrence
of any "reportable event" (as defined in Section 4043 of ERISA) or of
any "prohibited transaction" (as defined in Section 4975 of the Internal
Revenue Code of 1954, as amended) with respect to any Plan or any trust
created thereunder. Upon request by Agent or any Bank, Borrowers
promptly shall furnish to Agent and Banks copies of any reports or other
documents filed by Borrowers or any Subsidiary thereof with the United
States Secretary of Labor, the PBGC and/or the Internal Revenue Service,
with respect to any Plan.
(e) At any time, permit any Plan to fail to comply with ERISA or
other applicable Law in any material respect.
6.7 Change in Nature of Business/Management. Make any material change in
the nature of the business of Borrowers and their Subsidiaries, as conducted and
presently proposed to be conducted, or remove or allow removal of D. Michael
Talla, John Gibbons or Timothy O'Brien from any management position presently
held by him, unless evidence of satisfactory progress to procure a replacement
acceptable to the Requisite Banks is delivered to Agent and Banks within 30 days
thereafter.
6.8 Real Property Leases. Enter into one or more real property lease
agreements (exclusive of any real property lease agreements in connection with a
New Club Development or an Acquisition previously approved by the Requisite
Banks) requiring lease payments by Borrowers or any of them in excess of
$1,500,000 per annum or enter into one or more real property lease agreements on
or after the date of this Agreement which, when taken together with real
property lease agreements entered into prior to the date of this Agreement, will
cause the aggregate amount of lease payments to be made by Borrowers to exceed
$14,000,000 in calendar 1999 or $20,200,000 in calendar 2000.
6.9 Indebtedness, Guaranties and Liens. Create, incur, assume or suffer
to exist any Lien of any nature upon or with respect to any of their respective
Properties, whether now owned or hereafter acquired; create, incur or assume any
indebtedness for borrowed money or in connection with the purchase of Property
or any liability to the issuer of any letter of credit; guaranty or otherwise
become responsible (including, but not limited to, any agreement to purchase any
obligations, stock, Property, goods or services or to supply or advance any
funds, Property, goods or services) for the indebtedness or obligations of any
other Person; or incur any lease obligation that is required to be capitalized
under generally accepted accounting principles, except:
(a) Indebtedness and Liens securing obligations incurred in the
ordinary course of business and incurred in connection with purchase
money transactions including real estate or equipment or fixture
purchases, provided that the amount of such transactions involving
purchases of new equipment for existing Clubs (i.e., other than in
connection with Acquisitions or New Club Developments, as permitted by
Section 6.12) shall not exceed an aggregate amount of $10,000,000
principal (or the equivalent thereof);
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(b) Indebtedness evidenced by the Senior Notes in aggregate
principal amount not to exceed One Hundred Million Dollars
($100,000,000) and Liens securing the same ("Senior Note Liens"),
provided that such Indebtedness and Liens remain at all times subject to
the terms of the Intercreditor and Subordination Agreement, except as
the Bank may agree otherwise;
(c) Intentionally omitted;
(d) Liens securing the claims or demands of materialmen,
mechanics, and other like Persons not yet delinquent or being contested
in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(e) Indebtedness, liabilities, guaranties or Liens in favor of
Agent and Banks under this Agreement, the Notes and the other Loan
Documents;
(f) Indebtedness and Liens listed on Schedule 6.9 or
Indebtedness and Liens arising out of the extension or refinancing of
the obligations of Borrowers described on Schedule 6.9, provided that
such obligations are not increased and are not secured by any additional
property;
(g) Guaranties arising from endorsement, in the ordinary course
of collection, of negotiable instruments;
(h) Indebtedness and Liens for taxes and assessments or other
government charges or levies if not yet due and payable or, if due and
payable, which are being contested in good faith by appropriate
proceedings and for which appropriate reserves are maintained;
(i) Liens under workers' compensation, unemployment insurance,
social security, or similar legislation, if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves
are maintained; and
(j) Trade credit for goods and services provided to the
Borrowers and the Subsidiaries in the ordinary course of business.
6.10 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of Borrowers other than (a) transactions between or
among Borrowers and their Subsidiaries so long as, as a result of such
transactions, the aggregate amount advanced to, invested in or committed to any
Non-Borrower Affiliate on or after January 1, 1999, does not exceed $200,000,
(b) arms-length transactions with Affiliates which are permitted with
non-Affiliates pursuant to Sections 6.1, 6.3, 6.5, and (c) those transactions
listed in Schedules 6.10 and 6.17.
6.11 Change in Fiscal Year. Change its fiscal year, or the fiscal months
thereof.
6.12 Capital Expenditures and Purchase Money Transactions. Without the
prior written consent of Agent, make or incur obligations for Capital
Expenditures in the aggregate for Borrowers and their Subsidiaries in any fiscal
year in excess of five percent (5.0%) of
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Borrowers' net revenues derived from operation of the Clubs for such fiscal year
before restatements for acquisitions accounted for using the pooling method of
accounting. For the purpose of determining compliance by Borrowers and their
Subsidiaries with the foregoing covenant, the following Capital Expenditures and
indebtedness and Liens securing obligations incurred in connection with purchase
money equipment financings ("Purchase Money Indebtedness and Liens") shall be
excluded:
(i) Capital Expenditures made and Purchase Money
Indebtedness and Liens incurred in connection with, and no later
than one year following the consummation of, an Acquisition for
which the consent of Banks is not required pursuant to Section
6.3(b), so long as the aggregate amount of such Capital
Expenditures and Purchase Money Indebtedness and Liens and of
all other expenditures relating to such Acquisition do not
exceed the respective limits on total consideration for such
Acquisition set forth in Section 6.3(b);
(ii) Capital Expenditures made and Purchase Money
Indebtedness and Liens incurred in connection with, and no later
than one year following the consummation of, an Acquisition for
which the consent of Banks is required pursuant to Section
6.3(b), so long as the aggregate amount of such Capital
Expenditures and Purchase Money Indebtedness and Liens and of
all other expenditures relating to such Acquisition do not
exceed the total consideration limit imposed for such
Acquisition by Banks in issuing their approval of such
Acquisition;
(iii) Capital Expenditures made and Purchase Money
Indebtedness and Liens incurred or accrued in connection with,
and no later than 120 days following the opening of the related
new Club, a New Club Development for which the consent of Banks
is not required pursuant to Section 6.3(c), so long as the
aggregate amount of such Capital Expenditures and Purchase Money
Indebtedness and Liens and of all other expenditures relating to
such New Club Development do not exceed the respective limits on
total consideration for such New Club Development set forth in
Section 6.3(c); and
(iv) Capital Expenditures made and Purchase Money
Indebtedness and Liens incurred in connection with, and no later
than 120 days following the opening of the related new Club, a
New Club Development for which the consent of Banks is required
pursuant to Section 6.3(c), so long as the aggregate amount of
such Capital Expenditures and Purchase Money Indebtedness and
Liens and of all other expenditures relating to such New Club
Development do not exceed the total consideration limit imposed
by Banks in issuing their approval of such New Club Development.
(v) Capital Expenditures set forth on Schedule 6.12.
6.13 Tangible Net Worth. Permit Tangible Net Worth, as of the last day
of any fiscal quarter of Borrowers and their Subsidiaries ending after December
31, 1998, to be less than $80,000,000 plus 75% of Borrowers' cumulative net
income after December 31, 1998 not
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reduced by net losses and increased by one hundred percent (100%) of funds
generated from any equity offering occurring after December 31, 1998.
6.14 Ratio of Total Unsubordinated Liabilities to Tangible Net Worth.
Permit the ratio of Total Unsubordinated Liabilities to Tangible Net Worth, as
of the last day of any fiscal quarter of Borrowers and their Subsidiaries to be
greater than 1.75:1.00.
6.15 Debt Service Coverage Ratio. For Borrowers and their Subsidiaries,
permit the Debt Service Coverage Ratio to be less than (a) 1.40:1.00 for any
fiscal quarter to and including the fiscal quarter ending September 30, 1999;
(b) 1.30:1.00 for the fiscal quarters ending December 31, 1999 and March 31,
2000; (c) 1.40:1.00 for the fiscal quarters ending June 30, 2000 and September
30, 2000; and (d) 1.75:1.00 for any fiscal quarter ending thereafter, with such
ratio to be calculated at the end of each such fiscal quarter, on a rolling four
quarter basis.
6.16 Certain Inter-Company Indebtedness. Cause or permit any of Green
Valley Spectrum Club, Inc., Irvine Sports Club, Inc. or Canoga Agoura Spectrum
Club, Inc., following the occurrence of any Default which has been neither
waived by Agent nor cured, (a) to advance or pay any funds to any other Borrower
(except in payment for goods and services provided after the occurrence of a
Default upon fair and reasonable terms not less favorable than such Person could
obtain in a comparable arm's length transaction with a Person not affiliated
with any Borrower); or (b) to make any payment in respect of inter-company
indebtedness to any other Borrower or to any Non-Borrower Affiliate.
6.17 Loans to Officers. Make any loans, advances or other extensions of
credit to any of Borrowers' executives, officers, directors, shareholders or
employees (or any relatives of any of the foregoing) in an aggregate amount
exceeding $200,000, other than those set forth on Schedule 6.17.
6.18 Deposit Accounts. Establish any deposit accounts in the name of any
Borrower or any Subsidiary without prior notice to Agent.
6.19 Amendment to Senior Note Documents. Cause, suffer or permit any
amendment, modification or revision to any term or provision of the Senior
Notes, the Indenture relating to the Senior Notes, any guarantee of the Senior
Notes or any other agreement or instrument to which any Borrower is party
relating to the Senior Notes, which is prohibited by the Intercreditor and
Subordination Agreement.
6.20 Liens on Equipment. Create, incur, assume or suffer to exist any
Lien of any nature upon or with respect to any equipment located at The Spectrum
Club/Agoura Hills, The Spectrum Club/Canoga Park, The Sports Club/Irvine, or The
Sports Club/Las Vegas other than Liens on the same in existence as of the
Closing Date.
ARTICLE 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 Financial and Business Information. So long as any Loan remains
unpaid, or any other Obligation remains unpaid or unperformed, or any portion of
the Commitment remains outstanding, Borrowers shall, in addition to complying
with the requirements of Section 8.3 of
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this Agreement, and unless the Requisite Banks otherwise consent in writing,
deliver to Agent, at Borrowers' sole expense:
(a) As soon as practicable, and in any event within 45 days
after the end of each fiscal quarter of Borrowers (including the last
quarter of each fiscal year, provided that with respect to such last
quarter the financial statements required hereby may be in preliminary
form, prior to year-end audit adjustments), (i) consolidated balance
sheets of Borrowers and their Subsidiaries as at the end of such
quarter, setting forth in comparative form the corresponding figures as
at the end of the corresponding quarter of their preceding fiscal year,
(ii) consolidated income statements of Borrowers and their Subsidiaries
for such quarter and for the portion of their fiscal year ended with
such quarter, setting forth in comparative form the corresponding
figures for the corresponding periods of their preceding fiscal year and
(iii) consolidated cash flow statements of Borrowers and their
Subsidiaries for the portion of their fiscal year ended with such
quarter, setting forth in comparative form the corresponding figures for
the corresponding periods of their preceding fiscal year, all in
reasonable detail.
The preceding financial statements shall be certified by a Responsible
Official of a Borrower as fairly presenting the financial condition,
results of operations and cash flow of Borrowers and their Subsidiaries
in accordance with generally accepted accounting principles,
consistently applied, as at such date and for such periods, subject only
to normal year-end audit adjustments.
(b) As soon as practicable, and in any event within 90 days
after the close of each fiscal year of Borrowers, (i) consolidated
balance sheets of Borrowers and their Subsidiaries as at the end of such
fiscal year, setting forth in comparative form the corresponding figures
as at the end of their preceding fiscal year, and (ii) consolidated
income statements and cash flow statements of Borrowers and their
Subsidiaries for such fiscal year, setting forth in comparative form the
corresponding figures for their previous fiscal year, all in reasonable
detail. Such balance sheets and statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied, and such consolidated balance sheet and consolidated statements
shall be accompanied by a report and unqualified opinion of independent
public accountants of recognized standing selected by Borrowers and
reasonably satisfactory to the Requisite Banks, which report and opinion
shall be prepared in accordance with generally accepted auditing
principles as at such date, and shall be subject only to such
qualifications and exceptions as are acceptable to the Requisite Banks
in the exercise of their reasonable discretion.
(c) As soon as practicable, and in any event within 45 days
after the end of each fiscal quarter of Borrowers, operating statements
for each individual Club prepared in accordance with generally accepted
accounting principles, consistently applied, and otherwise in such
detail as may be reasonably requested by Agent.
(d) As soon as practicable, and in any event within 45 days
after the end of each fiscal quarter of Borrowers, a Certificate of a
Responsible Official of a Borrower setting forth a schedule of Capital
Expenditures made by Borrowers and/or their
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Subsidiaries during such fiscal quarter, and during their fiscal year to
date, separately for each Club.
(e) As soon as practicable, and in any event within 30 days
after the start of each fiscal year of Borrowers, a quarterly budget for
the then started fiscal year including, without limiting the generality
of the foregoing, quarterly projected consolidated balance sheets,
income statements and cash flow statements of Borrowers and their
Subsidiaries and individual Club operating statements, all in reasonable
detail.
(f) Within 45 days following the end of each fiscal quarter of
Borrower, a membership information report for each Club and in the
aggregate in the form now prepared by Borrowers on a monthly basis,
reflecting no less than the immediately preceding consecutive six
months, and reflecting the number of members, the number of new
memberships sold and the gross reduction in number of memberships, and
supplemented by such additional information as Agent may request.
(g) Within 30 days after the close of each fiscal year of
Borrowers, Borrowers' budget of capital expenditures for capital
improvements, replacements and other related purposes for the following
fiscal year.
(h) Within the earlier of 5 days after (i) the same are filed
with the Securities and Exchange Commission ("SEC") or (ii) the same are
required to be filed with the SEC, subject to allowable SEC extensions,
copies of each annual report, proxy or financial statement or other
report or communication sent to the shareholders of Borrowers, and
copies of all annual, regular, periodic and special reports and
registration statements which Borrowers may file or be required to file
with the Securities and Exchange Commission or any similar or
corresponding Governmental Agency or with any securities exchange.
(i) Within 5 days after receipt of copies of all correspondence
and notices received by Borrowers from the Internal Revenue Service
("IRS") relating to any adverse action or determination by the IRS in
respect of any Borrower's tax status under the Internal Revenue Code.
(j) Immediately upon becoming aware of the existence of any
condition or event which constitutes a Default, a written notice
specifying the nature and period of existence thereof and what action
Borrowers or their Subsidiaries are taking or propose to take with
respect thereto.
(k) Promptly upon request by Agent or the Requisite Banks,
copies of any detailed audit reports submitted to Borrowers or any of
their Subsidiaries by independent accountants in connection with the
accounts or books of Borrowers or any of their Subsidiaries, or any
audit of any of them.
(l) Promptly after request by Agent or the Requisite Banks,
copies of any report or other document filed by Borrowers or any of
their Subsidiaries with any Governmental Agency.
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(m) Promptly upon becoming aware that any Person asserts a claim
against Borrowers or any of their Subsidiaries in excess of $500,000 and
that such Person has given notice or taken any other action with respect
to a claimed default or event of default, a written notice specifying
the notice given or action taken by such Person and the nature of the
claimed default or event of default and what action Borrowers or their
Subsidiaries are taking or propose to take with respect thereto.
(n) As soon as practicable, and in any event within 45 days
after the end of each fiscal quarter of Borrowers, a project development
status report in form and substance acceptable to Agent and Banks, which
shall include, at a minimum, a timetable for architectural and
construction design, permitting, construction milestones, as may be
available, as well as an estimated date for completion. Such report also
shall include the budget as originally approved by the Board of
Directors of the applicable Borrower or Subsidiary and by Banks, as well
as any material modifications that have been approved by Banks or which
may require such approval.
(o) Such other data and information as from time to time may be
reasonably requested by Agent or the Requisite Banks.
7.2 Compliance Certificates. So long as any Loan remains unpaid, or any
other Obligation remains unpaid or unperformed, or any portion of the Commitment
remains outstanding, Borrowers shall, unless the Requisite Banks otherwise
consent in writing, deliver to Agent, at Borrowers' sole expense, not later than
45 days after the end of each fiscal quarter of Borrower, a Certificate of a
Responsible Official of a Borrower (a) setting forth computations showing, in
detail satisfactory to the Requisite Banks, whether Borrowers and their
Subsidiaries were in compliance with their obligations pursuant to Sections 6.8
through 6.17, inclusive; (b) setting forth computations showing, in detail
satisfactory to the Requisite Banks, the Applicable Pricing Level; (c) stating
that a review of the activities of Borrowers and their Subsidiaries during such
fiscal period has been made under supervision of the certifying Responsible
Official with a view to determining whether during such fiscal period Borrowers
and their Subsidiaries performed and observed all their respective Obligations
under the Loan Documents, and either (i) stating that, to the best knowledge of
the certifying Responsible Official, during such fiscal period, Borrowers and
their Subsidiaries performed and observed each covenant and condition of the
Loan Documents applicable to them, or (ii) if Borrowers and their Subsidiaries
have not performed and observed such covenants and conditions, specifying all
such Defaults and their nature and status; (d) stating that the Properties of
Borrowers and their Subsidiaries are being maintained and are in reasonable
working order and condition, ordinary replacement wear and tear excepted; and
(e) stating that (i) the real property assets of Borrowers are free and clear of
all Liens other than the Liens of Agent for the ratable benefit of Banks and the
Senior Note Liens, (ii) no real property assets of Borrowers have been sold,
assigned, exchanged, transferred, leased or otherwise conveyed or disposed of to
any Person, and (iii) no Borrower has entered into any agreement to do any of
the foregoing.
7.3 Revisions or Updates to Schedules. Should any of the information or
disclosures provided on any of the Schedules originally attached hereto become
outdated or incorrect in any material respect, upon request by Agent, Borrowers
promptly shall provide to Agent such revisions or updates to such Schedule(s) as
may be necessary or appropriate to update or correct
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such Schedule(s); provided that no such revisions or updates to any Schedule(s)
shall be deemed to have amended, modified or superseded such Schedule(s) as
originally attached hereto, or to have cured any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule(s), unless and until the Requisite Banks, in their sole and absolute
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
7.4 New Club Development Project Reports. So long as any Loan remains
unpaid, or any other Obligation remains unpaid or unperformed, or any portion of
the Commitment remains outstanding, Borrowers shall, unless the Requisite Banks
otherwise consent in writing, deliver to Agent, at Borrower's sole expense, not
later than 30 days after the end of each calendar month, a Certificate of a
Responsible Official of a Borrower, in form and substance satisfactory to Agent,
setting forth the name of each New Development Project and the aggregate amount
of funds expended in connection with each such New Development Project to and
including the last day of such calendar month.
ARTICLE 8
CONDITIONS
8.1 Initial Loans, Etc. The obligations of Agent and each Bank to amend
and restate the Original Loan Agreement hereby, to make any further Loans or to
issue any further Standby Letters of Credit hereunder, and to consent to the
sale and issuance of the Senior Notes by SCC, Inc. are subject to the following
conditions precedent (in addition to any applicable conditions precedent set
forth elsewhere in this Article 8), each of which shall be satisfied prior to or
concurrently herewith (unless Banks, in their sole and absolute discretion,
shall agree otherwise):
(a) Agent shall have received all of the following, each of
which shall be an original unless otherwise specified, each properly
executed by a Responsible Official of each party thereto, each dated as
of the Closing Date and each in form and substance satisfactory to Agent
and its legal counsel (unless otherwise specified or, in the case of the
date of any of the following, unless Agent otherwise agrees or directs):
(1) six executed counterparts of this Agreement;
(2) the Notes executed by Borrowers payable to the order
of Banks;
(3) with respect to each Borrower and any and each
Subsidiary thereof, such documentation as Agent may require to
establish the due organization, valid existence and good
standing of such Borrower and each such Subsidiary, its
qualification to engage in business in each jurisdiction in
which it is engaged in business or required to be so qualified,
its authority to execute, deliver and perform any Loan Documents
to which it is a Party, and the identity, authority and capacity
of each Responsible Official thereof authorized to act on its
behalf, including, without limitation, certified copies of
articles of incorporation and amendments thereto, bylaws and
amendments thereto, partnership agreements, certificates of
limited partnerships, certificates of good standing and/or
qualification to engage in business, certificates of corporate
resolutions, incumbency certificates, Certificates of
Responsible Officials, and the like;
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(4) The Deeds of Trust executed by each applicable
Borrower, with signatures notarized;
(5) The Environmental Indemnity, executed by each
applicable Borrower;
(6) The Security Agreements (All Assets) executed by
each applicable Borrower;
(7) The Pledge Agreement executed by each applicable
Borrower;
(8) A Solvency Certificate with respect to each of
Irvine Sports Club, Inc.; Canoga Agoura Spectrum Club, Inc.; and
Green Valley Spectrum Club, Inc. executed and delivered by the
Chief Financial Officer of that Person;
(9) An ALTA lender's extended coverage title insurance
policy (or a binding commitment therefor), relating to each Deed
of Trust (A) issued by a title insurance company of recognized
standing satisfactory to Agent, (B) in an amount and form
satisfactory to Agent, (C) naming Agent, for the ratable benefit
of Banks, insured thereunder, (D) insuring that each Deed of
Trust insured thereby creates a valid first priority Lien on the
Properties covered by such Deed of Trust, subject to no other
Liens, other than Liens expressly permitted by Section 6.9, and
to no other exceptions, other than those satisfactory to Agent,
and (E) containing such endorsements and affirmative coverage as
the Agent may reasonably request;
(10) Such appraisals and other documents in connection
with the Properties covered by each Deed of Trust as shall
reasonably be deemed necessary by Agent;
(11) A Phase 1 environmental report with respect to the
condition of each of the Properties covered by each Deed of
Trust other than the Deed of Trust executed by Irvine Sports
Club, Inc., each dated as of a recent date prior to the Closing
Date, prepared by a qualified firm acceptable to Agent, stating,
among other things, that each of such Properties is free from
hazardous substances and in compliance with all environmental
laws, which environmental reports shall have been reviewed by,
and be satisfactory to, an Agent-approved environmental
consultant and Agent in its sole discretion;
(12) The Intercreditor and Subordination Agreement,
executed by Borrowers and U.S. Bank Trust, National Association,
as Trustee for the holders of the Senior Notes;
(13) The Fee Letter executed by Borrowers;
(14) The agreement of Green Valley Investment Company,
Inc. to subordinate its rights under that certain Declaration of
Covenants, Conditions and
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Restrictions relating to real property of Green Valley Spectrum
Club, Inc. to the Lien of Agent on the same;
(15) such other Loan Documents as Agent or Requisite
Banks may require pledging Property of Borrowers and/or any of
their Subsidiaries, together with such related financing
statements or other documents as Agent or Requisite Banks may
request to perfect, effect, facilitate, consent to, give notice
of or otherwise evidence any Liens created thereby;
(16) the Opinions of Counsel of Kinsella, Boesch,
Fujikawa and Towle, counsel to Borrowers, and of Haney, Woloson
& Mullins, special Nevada counsel to Borrowers;
(17) a Certificate of a Responsible Official of
Borrowers certifying that the conditions specified in Sections
8.1(d) and 8.1(e) have been satisfied;
(18) evidence that all Liens or Rights of Others on or
in the Property of Borrowers and/or their Subsidiaries (other
than such Liens and Rights of Others as are permitted by Section
6.9) have been terminated or discharged;
(19) a Contribution Agreement executed by Irvine Sports
Club, Inc.; Canoga Agoura Spectrum Club, Inc.; and Green Valley
Spectrum Club, Inc.;
(20) Non-Exclusive License Agreements executed by each
of Irvine Sports Club, Inc.; Canoga Agoura Spectrum Club, Inc.;
and Green Valley Spectrum Club, Inc.;
(21) Mortgages of Copyright and Security Agreements in
the form attached hereto as Exhibit J executed by each of Irvine
Sports Club, Inc.; Canoga Agoura Spectrum Club, Inc.; and Green
Valley Spectrum Club, Inc.; and
(22) such other certificates, documents, consents or
opinions as Agent or Requisite Banks reasonably may require.
(b) Agent shall be satisfied in all respects in its sole
discretion with the environmental condition of each of the Properties
covered by each Deed of Trust.
(c) Duly executed financing statements with respect to the
Collateral shall have been filed and/or recorded with such Governmental
Agencies, and in such jurisdictions and locales, as Agent or Requisite
Banks may specify.
(d) The representations and warranties of Borrowers contained in
Article 4 shall be true and correct as of the date made or reaffirmed.
(e) Borrowers and their Subsidiaries and any other Parties shall
be in compliance with all the terms and provisions of the Loan
Documents, and no Default shall have occurred and be continuing.
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(f) The fees referred to in Sections 3.2 and 3.5 have been paid
to Banks and/or Agent, as applicable.
(g) The obligations secured by the respective Liens of the
MKDG/Rhodes SC Partnership on the land, improvements and building of The
Sports Club/Irvine and of Hawthorne Savings on the land, improvements
and building of The Spectrum Club/Agoura Hills shall have been paid to
the respective obligees in full and such Liens shall have been released.
(h) All outstanding Loans and other Obligations under the Third
Amended and Restated Loan Agreement (as amended by the First/Third
Amendment) other than the undrawn amounts of any Standby Letters of
Credit shall have been paid to the Agent in full.
8.2 Any Loan. In addition to any applicable conditions precedent set
forth elsewhere in this Article 8, the obligation of Banks to make any Loan, to
redesignate any Loan, and issue any Standby Letter of Credit are subject to the
following conditions precedent:
(a) except (i) for representations and warranties which speak as
of a particular date or are no longer true and correct as a result of a
change which is permitted by this Agreement or (ii) as disclosed by
Borrowers and approved in writing by the Requisite Banks, the
representations and warranties contained in Article 4 shall be true and
correct on and as of the date of the Loan or redesignation or issuance
or creation, as the case may be, as though made on and as of that date;
(b) except for (i) the matters set forth in Schedule 4.10, (ii)
any matter fully covered as to subject matter and amount (subject to
applicable deductibles and retentions) by insurance for which the
insurance carrier has not asserted lack of subject matter coverage or
reserved its right to do so, or (iii) any matter, or series of related
matters, involving a claim against Borrowers of less than $100,000,
there shall be no actions, suits or proceedings pending against or
affecting Borrowers or any of their Subsidiaries or any Property of any
of them in any court of Law or before any Governmental Agency which
might reasonably be expected to have a material adverse effect on the
business, operations or condition (financial or otherwise) of Borrowers
and their Subsidiaries, taken as a whole;
(c) no material adverse change shall have occurred in the
business, operations or condition (financial or otherwise) of Borrowers
and their Subsidiaries, taken as a whole, since the Closing Date;
(d) no Default shall have occurred and be continuing;
(e) Agent shall have timely received a properly completed
Request for Loan, Request for Redesignation of Loans or Request for
Standby Letter of Credit, as the case may be, in compliance with all
applicable provisions of Article 2; and Agent shall have received, dated
as of the date of the Loan or redesignation or issuance or creation, as
the case may be, a Certificate of a Responsible Official of a Borrower
to the effect that all of the above conditions have been satisfied, with
any changes or exceptions thereto being
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described in a schedule attached to such certificate and with such
changes or exceptions being subject to the approval of the Requisite
Banks;
(f) Agent shall have received, in form and substance
satisfactory to the Requisite Banks such other certificates, documents
or consents as the Requisite Banks reasonably may require;
(g) No "Restricted Senior Note Payment" (as defined in the
Intercreditor and Subordination Agreement) shall have been made by any
Borrower; and
(h) If, as a result of the making or redesignation of such Loan
or the issuance of such Standby Letter of Credit, the Total Outstanding
would exceed Twelve Million Five Hundred Thousand Dollars ($12,500,000),
Irvine Environmental Resolution shall have occurred.
8.3 Termination of Prior Pledge Agreements and Release of Liens. The
prior Pledge Agreements shall automatically be terminated upon the satisfaction
of all conditions precedent set forth in Section 8.1 to the obligation of Agent
and each Bank to amend and restate the Original Loan Agreement. Promptly
thereafter, Agent shall file termination statements with respect to all such UCC
Financing Statements executed by any Borrower in favor of Agent (or in favor of
Predecessor or Agent and amended by Predecessor Agent to name Agent as secured
party) as no longer relate to the Collateral and: (i) of which Agent has actual
knowledge or (ii) which any Borrower identifies in writing to Agent. Agent shall
cooperate with Borrower in seeking to cause Predecessor Agent to release all UCC
Financing Statements executed by any Borrower in favor of Predecessor Agent.
8.4 Release of Lien on Properties of Irvine Sports Club, Inc. If Irvine
Environmental Resolution does not occur on or before October 1, 1999:
(a) Irvine Sports Club, Inc. and Agent shall terminate the
Security Agreement (All Assets) of Irvine Sports Club, Inc.;
(b) Agent shall file termination statements with respect to all
UCC Financing Statements executed by Irvine Sports Club, Inc. in Agent's
favor;
(c) Agent shall reconvey the Deed of Trust executed by Irvine
Sports Club, Inc.;
(d) SCC, Inc. and Agent shall amend the Pledge Agreement to
terminate Agent's lien on the stock of Irvine Sports Club, Inc. and
amend any UCC Financing Statement executed by SCC, Inc. with respect to
such stock to delete the reference to such stock;
(e) Agent shall convey all such stock certificates of Irvine
Sports Club, Inc. as Agent holds to the trustee with respect to the
Senior Notes; and
(f) The Commitment shall immediately and automatically be
reduced to Twelve Million Five Hundred Thousand Dollars ($12,500,000).
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ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 Events of Default. The existence or occurrence of any one or more of
the following events, whatever the reason therefor, shall constitute an Event of
Default:
(a) Borrowers fail to pay any installment of principal or
interest on any indebtedness on any of the Notes or any portion thereof,
or to reimburse Agent or any Bank for any payment made under any Standby
Letter of Credit, or to pay any fee or any other amount due Agent or any
Bank under any Loan Document, within five (5) Banking Days following the
giving of notice by Agent or Requisite Banks of such Default; or
(b) Any failure to comply with Section 7.1(j); or
(c) Borrowers, any of their Subsidiaries or any other Party
fails to perform or observe any other term, covenant or agreement
contained in any Loan Document, including, but not limited to, those set
forth in Articles 6 and 7 of this Agreement, on its part to be performed
or observed within fifteen (15) days after the giving of written notice
by Agent or Borrowers otherwise becoming aware of such Default; or
(d) Any representation or warranty made in any Loan Document or
in any certificate, agreement, instrument or other document made or
delivered by any Party pursuant to or in connection with any Loan
Document proves to have been incorrect when made in any respect that is
materially adverse to the interests of Agent or Banks; or
(e) Any event of default occurs under the Senior Notes, the
Indenture relating to the Senior Notes, any guarantee of the Senior
Notes or any other agreement or instrument to which any Borrower is
party relating to the Senior Notes, whether or not waived by the Trustee
under the Senior Note Indenture or the holders of the Senior Notes; or
(f) Except as set forth on Schedule 9.1(f), Borrowers or any of
their Subsidiaries (i) fail to pay the principal, or any principal
installment, of any other present or future indebtedness for borrowed
money of $200,000 or more or in connection with the purchase or lease of
Property, or any other guaranty of present or future indebtedness for
borrowed money of $200,000 or more or issued in connection with the
purchase or lease of Property, on its part to be paid, when due (or
within any stated grace period), whether at the stated maturity, upon
acceleration, by reason of required prepayment or otherwise or (ii)
fails to perform or observe any other term, covenant or agreement on its
part to be performed or observed in connection with any other present or
future indebtedness for borrowed money of $200,000 or more or in
connection with the purchase or lease of Property, or of any other
guaranty of present or future indebtedness of $200,000 or more for
borrowed money or issued in connection with the purchase or lease of
Property, if as a result of such failure any holder or holders thereof
(or an agent or trustee on its or their behalf) has the right to declare
such indebtedness due before the date on which it otherwise would become
due, or has commenced judicial or nonjudicial action to collect such
indebtedness or to foreclose or otherwise realize upon security held
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therefor, or has taken or is taking such other actions as might
materially adversely affect the Collateral, the interests of any Bank
under the Loan Documents or the ability of Borrowers or their
Subsidiaries to pay and perform their Obligations under the Loan
Documents; or
(g) Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of the Requisite
Banks or satisfaction in full of all the Obligations, ceases to be in
full force and effect or is declared by a court of competent
jurisdiction to be null and void, invalid or unenforceable in any
respect which, in the reasonable opinion of the Requisite Banks, is
materially adverse to the interests of the Banks; or any Party thereto
denies that it has any or further liability or obligation under any Loan
Document, or purports to revoke, terminate or rescind same; or
(h) A final judgment against any Borrower or any of its
Subsidiaries is entered for the payment of money in excess of $500,000
and such judgment remains unsatisfied without procurement of a stay of
execution for more than thirty (30) calendar days after the date of
entry of judgment; or
(i) Any Borrower or any of Subsidiary thereof, is the subject of
an order for relief in a bankruptcy case, or is unable or admits in
writing its inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors; or applies for or consents to
the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
part of its Property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of that Person and the appointment continues
undischarged or unstayed for thirty (30) calendar days; or institutes or
consents to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar case or proceedings relating to
it or to all or any part of its Property under the Laws of any
jurisdiction; or any similar case or proceeding is instituted without
the consent of that Person and continues undismissed or unstayed for
thirty (30) calendar days; or any judgment, writ, warrant of attachment
or execution or similar process is issued or levied against all or any
material part of the Property of any such Person and is not released,
vacated or fully bonded within thirty (30) calendar days after its issue
or levy; or
(j) Except as otherwise expressly permitted by any Loan Document
or agreed to by the Requisite Banks, any Lien on any Collateral created
by any Loan Document, at any time after the execution and delivery of
that Loan Document and for any reason other than satisfaction in full of
all Obligations, ceases or fails to constitute a valid, perfected and
subsisting first priority Lien on the Collateral purported to be covered
thereby (unless such cessation or failure is the fault of Agent or the
Banks to timely file continuation statements); or
(k) Any Borrower or any Subsidiary thereof is dissolved or
liquidated or all or substantially all of the assets of any Borrower or
any Subsidiary thereof are sold or otherwise transferred in violation of
the provisions of this Agreement without the written consent of the
Requisite Banks; or
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(l) Any Person, entity or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act), other than SCC, Inc.,
Millenium Entertainment Partners L.P. or D. Michael Talla or any Person
or "group" controlled by one or more of them, (A) acquires beneficial
ownership of 30% or more of any outstanding class of capital stock or
other equity interests of any Borrower having ordinary voting power in
the election of directors or managers of that Borrower or (B) obtains
the power (whether or not exercised) to elect a majority of any
Borrower's directors or managers.
9.2 Remedies Upon Event of Default. Without limiting any other rights or
remedies of Agent or Banks provided for elsewhere in this Agreement, or the Loan
Documents, or by applicable Law, or in equity or otherwise:
(a) Upon the occurrence of any Event of Default other than an
Event of Default described in Section 9.1(f):
(1) the Commitment to make Loans and all other
obligations of the Agent or the Banks and all rights of
Borrowers and any other Parties under the Loan Documents shall
terminate without notice to or demand upon Borrowers, which are
expressly waived by Borrowers, except that the Requisite Banks
may waive the Event of Default or, without waiving, determine,
upon terms and conditions satisfactory to Banks, to make further
Loans, which waiver or determination shall apply equally to, and
shall be binding upon, all of the Banks; and
(2) the Requisite Banks may request the Agent to, and
the Agent thereupon shall declare all or any part of the unpaid
principal of all Notes, all interest accrued and unpaid thereon
and all other amounts payable under the Loan Documents to be
forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of
which are expressly waived by Borrowers.
(b) Upon the occurrence of any Event of Default described in
Section 9.1(f):
(1) the Commitment to make Loans and all other
obligations of Agent or any Bank and all rights of Borrowers and
any other Parties under the Loan Documents shall terminate
without notice to or demand upon Borrowers, which are expressly
waived by Borrowers, except that all of the Banks may waive the
Event of Default or, without waiving, determine, in their sole
discretion, to make further Loans; and
(2) the unpaid principal of all Notes, all interest
accrued and unpaid thereon and all other amounts payable under
the Loan Documents shall be forthwith due and payable, without
protest, presentment, notice of dishonor, demand or further
notice of any kind, all of which are expressly waived by
Borrowers.
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(c) Upon the occurrence of any Event of Default, Agent and Banks
or any of them, without notice to or demand upon Borrowers, which are
expressly waived by Borrowers, except as required by California
Commercial Code Section 9504 or any modification or replacement statute
thereof, or by the terms of this Agreement, may proceed (but only with
the consent of the Requisite Banks) to protect, exercise and enforce its
rights and remedies under the Loan Documents against Borrowers and such
other rights and remedies as are provided by Law or equity.
(d) The order and manner in which the Banks' rights and remedies
are to be exercised shall be determined by the Requisite Banks in their
sole discretion, and all payments received by Agent and the Banks shall
be applied first to the costs and expenses (including outside attorneys'
fees and disbursements) of Agent, acting as Agent and of Banks pro rata
and thereafter to the Obligations owed to Banks, pro rata, under the
Agreement. For the purpose of computing Borrowers' Obligations under the
Loan Documents, payments shall be applied, first, to the costs and
expenses of Agent and Banks, as set forth above, second, to the payment
of accrued and unpaid interest due under any Loan Documents to and
including the date of such application, third, to the payment of all
unpaid principal amounts due under any Loan Documents (including, for
the purposes hereof, principal due under the Notes and reimbursement due
for payments made under Letters of Credit), and fourth, to the payment
of all other amounts (including fees) then owing to Agent and Banks
under the Loan Documents. No application of payments will cure any Event
of Default, or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents, or prevent the exercise, or
continued exercise, of rights or remedies of Banks hereunder or
thereunder or at Law or in equity.
(e) Upon the occurrence of any event that would be an Event of
Default under Section 9.1(g) with the passage of time, Agent and Banks
may take such action as the Requisite Banks deem necessary to protect
the interests of Banks under the Loan Documents.
ARTICLE 10
THE AGENT
10.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints and authorizes Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to Agent by the
terms thereof or are reasonably incidental, as determined by Agent, thereto.
This appointment and authorization is intended solely for the purpose of
facilitating the servicing of the Loans and does not constitute appointment of
Agent as trustee for any Bank or as representative of any Bank for any other
purpose and, except as specifically set forth in the Loan Documents to the
contrary, Agent shall take such action and exercise such powers only in an
administrative and ministerial capacity.
10.2 Agent and Affiliates. Comerica Bank - California (and each
successor Agent) has the same rights and powers under the Loan Documents as any
other Bank and may exercise the same as though it was not the Agent, and the
term "Bank" or "Banks" includes Comerica Bank - California in its individual
capacity. Comerica Bank - California (and each successor Agent) and
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its Affiliates may accept deposits from, lend money to and generally engage in
any kind of banking, trust or other business with Borrowers, any Subsidiary
thereof, or any Affiliate of Borrowers or any Subsidiary thereof, as if it was
not the Agent and without any duty to account therefor to Banks. Comerica Bank -
California (and each successor Agent) need not account to any other Bank for any
monies received by it for reimbursement of its costs and expenses as Agent
hereunder, or for any monies received by it in its capacity as a Bank hereunder.
10.3 Proportionate Interest of the Banks in any Collateral. Agent, on
behalf of all the Banks, shall hold in accordance with the Loan Documents all
items of Collateral or interests therein received or held by Agent. Subject to
Agent's and the Banks' rights to reimbursement for their costs and expenses
hereunder (including attorneys' fees and disbursements and other professional
services) and subject to the application of payments in accordance with Section
9.2(d), each Bank shall have an interest in any Collateral or interests therein
in the same proportions that the aggregate Obligations owed such Bank under the
Loan Documents bear to the aggregate Obligations owed under the Loan Documents
to all the Banks, without priority or preference among the Banks.
10.4 Banks' Credit Decisions. Each Bank agrees that it has,
independently and without reliance upon Agent, any other Bank or the directors,
officers, agents, employees or attorneys of Agent or of any other Bank, and
instead in reliance upon information supplied to it by or on behalf of Borrowers
and upon such other information as it has deemed appropriate, made its own
independent credit analysis and decision to enter into this Agreement. Each Bank
also agrees that it shall, independently and without reliance upon Agent, any
other Bank or the directors, officers, agents, employees or attorneys of Agent
or of any other Bank, continue to make its own independent credit analyses and
decisions in acting or not acting under the Loan Documents.
10.5 Action by Agent.
(a) Agent may assume that no Default has occurred and is
continuing, unless Agent has actual knowledge of the Default, has
received notice from Borrowers stating the nature of the Default, or has
received notice from a Bank stating the nature of the Default and that
such Bank considers the Default to have occurred and to be continuing.
(b) Agent has only those obligations under the Loan Documents as
are expressly set forth therein.
(c) Except for any obligation expressly set forth in the Loan
Documents and as long as Agent may assume that no Event of Default has
occurred and is continuing, Agent may, but shall not be required to
exercise its discretion to act or not act, except that Agent shall be
required to act or not act upon the instructions of the Requisite Banks
(or of all the Banks, to the extent required by Section 11.3) and those
instructions shall be binding upon Agent and all Banks, provided that
Agent shall not be required to act or not act if to do so would be
contrary to any Loan Document or to applicable Law.
(d) If Agent may not assume that no Event of Default has
occurred and is continuing, Agent shall give notice thereof to Banks and
shall act or not act upon the instructions of the Requisite Banks (or of
all the Banks, to the extent required by Section
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11.3), provided that Agent shall not be required to act or not act if to
do so would be contrary to any Loan Document or to applicable Law, and
except that if the Requisite Banks (or all Banks, if required under
Section 11.3) fail, for five (5) Banking Days after the receipt of
notice from Agent, to instruct Agent, then Agent, in its discretion, may
act or not act as it deems advisable for the protection of the interests
of Banks.
(e) Agent shall have no liability to any Bank for acting, or not
acting, as instructed by the Requisite Banks (or all the Banks, if
required under Section 11.3), notwithstanding any other provision
hereof.
10.6 Liability of Agent. Neither Agent nor any of its directors,
officers, agents, employees or attorneys shall be liable for any action taken or
not taken by them under or in connection with the Loan Documents, except for
their own gross negligence or willful misconduct. Without limitation on the
foregoing, Agent and its directors, officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof until
Agent receives notice of the assignment or transfer thereof, in form
satisfactory to Agent, signed by the payee, and may treat each Bank as
the owner of that Bank's interest in the Obligations for all purposes of
this Agreement until Agent receives notice of the assignment or transfer
thereof, in form satisfactory to Agent, signed by that Bank.
(b) May consult with legal counsel (including in-house legal
counsel), accountants (including in-house accountants) and other
professionals or experts selected by it, or with legal counsel,
accountants or other professionals or experts for Borrowers and/or their
Subsidiaries or Banks, and shall not be liable for any action taken or
not taken by it in good faith in accordance with the advice of such
legal counsel, accountants or other professionals or experts.
(c) Shall not be responsible to any Bank for any statement,
warranty or representation made in any of the Loan Documents or in any
notice, certificate, report, request or other statement (written or
oral) given or made in connection with any of the Loan Documents.
(d) Except to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance or
observance by Borrowers or their Subsidiaries of any of the terms,
conditions or covenants of any of the Loan Documents or to inspect any
Collateral or the Property, books or records of Borrowers or their
Subsidiaries.
(e) Will not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, effectiveness,
sufficiency or value of any Loan Document, any other instrument or
writing furnished pursuant thereto or in connection therewith, or any
Collateral.
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate,
statement, request or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties.
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(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by the Borrowers or any Subsidiary
or Affiliate thereof or paid or payable to or received or receivable
from any Bank under any Loan Document, including, without limitation,
principal, interest, commitment fees, advances and other amounts;
provided that, promptly upon discovery of such an error in computation,
the Agent, the Banks and (to the extent applicable) Borrowers and/or
their Subsidiaries or Affiliates shall make such adjustments as are
necessary to correct such error and to restore the parties to the
position that they would have occupied had the error not occurred.
10.7 Indemnification. Each Bank shall, ratably in accordance with its
percentage of the total Commitment, indemnify and hold Agent and its directors,
officers, agents, employees and attorneys harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
without limitation, attorneys' fees and disbursements) that may be imposed on,
incurred by or asserted against it or them in any way relating to or arising out
of the Loan Documents (other than losses incurred by reason of the failure of
Borrowers to pay the indebtedness represented by the Notes and the Standby
Letters of Credit) or any action taken or not taken by it as Agent thereunder,
except such as result from its own gross negligence or willful misconduct.
Without limitation on the foregoing, each Bank shall reimburse Agent upon demand
for that Bank's ratable share of any cost or expense incurred by Agent in
connection with the negotiation, preparation, execution, delivery amendment,
waiver, restructuring, reorganization (including a bankruptcy reorganization),
enforcement or attempted enforcement of the Loan Documents, to the extent that
Borrowers or any other Party are required by Section 11.4 to pay that cost or
expense but fails to do so upon demand.
10.8 Successor Agent. Agent may resign as such at any time by written
notice to Borrowers and the Banks, to be effective upon a successor's acceptance
of appointment as Agent. The Requisite Banks at any time may remove Agent by
written notice to that effect to be effective on such date as the Requisite
Banks designate. In either event: (a) The Requisite Banks shall appoint a
successor Agent, who must be from among Banks, provided that any resigning Agent
shall be entitled to appoint a successor Agent from among Banks, subject to
acceptance of appointment by that successor Agent, if the Requisite Banks have
not appointed a successor Agent within thirty (30) days after the date the
resigning Agent gave notice of resignation; (b) Upon a successor's acceptance of
appointment as Agent, the successor will thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the resigning Agent or the
removed Agent; and (c) Upon the effectiveness of any resignation or removal, the
resigning Agent or the removed Agent thereupon will be discharged from its
duties and obligations thereafter arising under the Loan Documents other than
obligations arising as a result of any action or inaction of the resigning Agent
or the removed Agent prior to the effectiveness of such resignation or removal.
ARTICLE 11
MISCELLANEOUS
11.1 Intentionally Omitted.
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11.2 Cumulative Remedies; No Waiver. The rights, powers, privileges and
remedies of Agent and Banks provided herein or in any Note or other Loan
Document are cumulative and not exclusive of any right, power, privilege or
remedy provided by Law or equity. No failure or delay on the part of Agent or
any Bank in exercising any right, power, privilege or remedy may be, or may be
deemed to be, a waiver thereof; nor may any single or partial exercise of any
right, power, privilege or remedy preclude any other or further exercise of the
same or any other right, power, privilege or remedy. The terms and conditions of
Article 8 hereof are inserted for the sole benefit of Agent and Banks and Agent
(acting with the consent of the Requisite Banks) or the Requisite Banks may
waive them in whole or in part, with or without terms or conditions, in respect
of any Loan or Standby Letter of Credit, without prejudicing Agent's or any
Bank's rights to assert them in whole or in part in respect of any other Loan or
Standby Letter of Credit.
11.3 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder, and no consent to any
departure by the Borrowers or any other Party therefrom, may in any event be
effective unless in writing signed by Agent with approval of the Requisite Banks
(and, in the case of amendments, modifications or supplements of or to any Loan
Document to which any Borrower is a Party, the approval in writing of such
Borrower), and then only in the specific instance and for the specific purpose
given; and, without the approval in writing of all Banks, no amendment,
modification, supplement, termination, waiver or consent may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on, any
Note, or the amount of the Commitment or of any commitment fee payable
to any Bank, or any other fee or amount payable to any Bank under the
Loan Documents or to allow any material release of Collateral;
(b) To postpone any date fixed for any payment of principal of,
prepayment of principal of or any installment of interest on, any Note,
or the facility fee, or any installment of any commitment fee, or any
reimbursement obligation due under any Standby Letter of Credit, or to
extend the term of the Commitment;
(c) To amend or modify the provisions of (1) the definitions of
"Commitment", "Maximum Standby Letter of Credit Amount", "Maximum Loan
Amount", Requisite Banks or "Total Outstanding"; (2) Articles 8 or 9; or
(3) this Section 11.3; or
(d) To amend or modify any other definition or provision of this
Agreement that expressly requires the consent or approval of the
Requisite Banks or some other number of Banks.
Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section 10.2 shall apply equally to and shall be binding upon, Agent and
all Banks.
11.4 Costs, Expenses and Taxes. Borrowers shall pay on demand the
reasonable costs and expenses, including attorneys' fees, of Agent and Banks in
connection with the negotiation,
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preparation, execution and delivery of the Loan Documents, and of Agent and
Banks in connection with the amendment, waiver, refinancing, restructuring,
reorganization (including a bankruptcy reorganization) and enforcement or
attempted enforcement of the Loan Documents, and any matter related thereto,
including, without limitation, filing fees, recording fees, title insurance
fees, appraisal fees, search fees, audit costs incurred by Agent or Banks during
the continuance of or in connection with the occurrence of an Event of Default
and other out-of-pocket expenses and the reasonable fees and out-of-pocket
expenses of any legal counsel, independent public accountants and other outside
experts retained by Agent or any Banks, and including, without limitation, any
costs, expenses or fees incurred or suffered by Agent or any Banks in connection
with or during the course of any bankruptcy or insolvency proceedings of any
Borrower or any Subsidiary thereof. Borrowers shall pay any and all documentary
and other taxes (other than income or gross receipts taxes generally applicable
to banks) and all costs, expenses, fees and charges payable or determined to be
payable in connection with the filing or recording of this Agreement, any other
Loan Document or any other instrument or writing to be delivered hereunder or
thereunder, or in connection with any transaction pursuant hereto or thereto,
and shall reimburse, hold harmless and indemnify Agent and Banks from and
against any and all loss, liability or legal or other expense with respect to or
resulting from any delay in paying or failure to pay any tax, cost, expense, fee
or charge or that any of them may suffer or incur by reason of the failure of
any Party to perform any of its Obligations. Any amount payable to Agent or any
Bank under this Section 11.4 shall bear interest from the fifth Banking Day
following the date of demand for payment at the rate provided for in Section
3.6.
11.5 Nature of Banks' Obligations. The obligations of Banks hereunder
are several and not joint or joint and several. Nothing contained in this
Agreement or any other Loan Document and no action taken by the Agent or Banks
or any of them pursuant hereto or thereto may, or may be deemed to, make Banks a
partnership, an association, a joint venture or other entity, either among
themselves or with Borrowers or any Affiliate of Borrowers. Each Bank's
obligation to make any Loan pursuant hereto is several and not joint or joint
and several, and is conditioned upon the performance by all other Banks of their
obligations to make Loans. A default by any Bank will not increase the
percentage of the Commitment attributable to any other Bank. Any Bank not in
default may, if it desires, assume in such proportion as the nondefaulting Banks
agree the obligations of any Bank in default, but is not obligated to do so.
11.6 Survival of Representations and Warranties. All representations and
warranties contained herein or in any other Loan Document, or in any certificate
or other writing delivered by or on behalf of any one or more of the Parties to
any Loan Document, will survive the making and repayment of the Loans hereunder
and the execution and delivery of the Notes, and have been or will be relied
upon by Agent and each Bank, notwithstanding any investigation made by Agent or
any Bank or on their behalf.
11.7 Notices. Except as otherwise expressly provided in the Loan
Documents: (a) All notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must be
in writing and must be mailed, telecopied or personally delivered to the
appropriate party at the address set forth on the signature pages of this
Agreement or other applicable Loan Document or, as to any party to any Loan
Document, at any other address as may be designated by it in a written notice
sent to all other parties to such Loan Document in accordance with this Section
11.7; and (b) Any notice, request, demand, direction
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or other communication given by telecopier must be confirmed within 48 hours by
letter mailed or delivered to the appropriate party at its respective address.
Except as otherwise expressly provided in any Loan Document, if any notice,
request, demand, direction or other communication required or permitted by any
Loan Document is given by mail it will be effective on the earlier of receipt or
the third calendar day after deposit in the United States mail with first class
or airmail postage prepaid; if given by telecopier, upon electronic confirmation
of receipt, and if given after 4:30 p.m., effective on the next business day; or
if given by personal delivery when delivered.
11.8 Execution of Loan Documents. Unless Agent otherwise specifies with
respect to any Loan Document, this Agreement and any other Loan Document may be
executed in any number of counterparts and any party hereto or thereto may
execute any counterpart, each of which when executed and delivered will be
deemed to be an original and all of which counterparts of this Agreement or any
other Loan Document, as the case may be, when taken together will be deemed to
be but one and the same instrument. The execution of this Agreement or any other
Loan Document by any party hereto or thereto will not become effective until
counterparts hereof or thereof, as the case may be, have been executed by all
the parties hereto or thereto.
11.9 Sharing of Setoffs. Each Bank severally agrees that if it, through
the exercise of any right of setoff, banker's lien or counterclaim against
Borrowers, or otherwise receives payment of the Obligations held by it that is
ratably more than any other Bank, through any means, receives in payment of the
Obligations held by that Bank, then: (a) The Bank exercising the right of
setoff, banker's lien or counterclaim or otherwise receiving such payment shall
purchase, and shall be deemed to have simultaneously purchased, from the other
Bank a participation in the Obligations held by the other Bank and shall pay to
the other Bank a purchase price in an amount so that the share of the
Obligations held by each Bank after the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment shall be in the same
proportion that existed prior to the exercise of the right of setoff, banker's
lien or counterclaim or receipt of payment; and (b) Such other adjustments and
purchases of participations shall be made from time to time as shall be
equitable to ensure that all of the Banks share any payment obtained in respect
of the Obligations ratably in accordance with each Bank's share of the
Obligations immediately prior to, and without taking into account, the payment;
provided that, if all or any portion of a disproportionate payment obtained as a
result of the exercise of the right of setoff, banker's lien, counterclaim or
otherwise is thereafter recovered from the purchasing Bank by Borrowers or any
Person claiming through or succeeding to the rights of Borrowers, the purchase
of a participation shall be rescinded and the purchase price thereof shall be
restored to the extent of the recovery, but without interest. Each Bank that
purchases a participation in the Obligations pursuant to this Section 11.9 shall
from and after the purchase have the right to give all notices, requests,
demands, directions and other communications under this Agreement with respect
to the portion of the Obligations purchased to the same extent as though the
purchasing Bank were the owner of the Obligations purchased. Each Borrower
expressly consents to the foregoing arrangements and agrees that any Bank
holding a participation in an Obligation so purchased may exercise any and all
rights of setoff, banker's lien or counterclaim with respect to the
participation as fully as if the Bank were the original owner of the Obligation
purchased; provided, however, that each Bank agrees that it
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shall not exercise any right of setoff, banker's lien or counterclaim without
first obtaining the consent of the Requisite Banks.
11.10 Binding Effect; Assignment. This Agreement and the other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto and thereto and their respective successors and assigns, except that
Borrowers and/or their Affiliates may not assign their rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of all the Banks. Banks reserve the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or in any interest in, such
Bank's rights and obligations under the Loan Documents, except that no Bank
shall have the right to sell, assign, pledge or transfer any participation in
its rights hereunder or any interest herein (other than to a Federal Reserve
Bank for 90 days or less or to any Affiliate of such Bank) without the consent
of the Agent and Requisite Banks.
11.11 Assignment of Deposits. As security for the prompt payment and
performance of all Obligations, each of Irvine Sports Club, Inc., Green Valley
Spectrum Club, Inc. and Canoga Agoura Spectrum Club, Inc. hereby assigns to
Agent and Banks a security interest in all their right, title, and interest in
and to any and all deposit accounts now or hereafter maintained with California
Bank & Trust, Sumitomo Bank of California, Agent or any Bank and the proceeds
thereof.
11.12 Participation of Loan. Banks shall have the right to participate,
sell or assign interests in the Loans with financial institutions on such terms
and conditions as may be acceptable to Agent and Requisite Banks.
11.13 Indemnity by Borrowers. Borrowers agree to indemnify, save and
hold harmless Agent and Banks and their directors, officers, agents, attorneys
and employees (collectively the "Indemnitees") from and against: (a) Any and all
claims, demands, actions or causes of action that are asserted against any
Indemnitee by any Person (other than Agent or a Bank) if the claim, demand,
action or cause of action directly or indirectly relates to a claim, demand,
action or cause of action that such Person has or asserts against Borrowers, any
Affiliate of Borrowers or any officer, director or shareholder of Borrowers and
arises out of or relates to the relationship between Borrowers and Banks under
any of the Loan Documents or the transactions contemplated thereby; and (b) Any
and all liabilities, losses, costs or expenses (including attorneys' fees and
disbursements and other professional services) that any Indemnitee suffers or
incurs as a result of the assertion of any foregoing claim, demand, action or
cause of action; provided that no Indemnitee shall be entitled to
indemnification for any loss caused by its own gross negligence or willful
misconduct. Each Indemnitee is authorized to employ counsel of its own choosing
in enforcing its rights hereunder and in defending against any claim, demand,
action or cause of action covered by this Section 11.13; provided that each
Indemnitee shall endeavor, in connection with any matter covered by this Section
11.13 which also involves other Indemnitees, to use reasonable efforts to avoid
unnecessary duplication of effort by counsel for all Indemnitees. Any obligation
or liability of Borrowers to any Indemnitee under this Section 11.13 shall be
and hereby is covered and secured by the Loan Documents and the Collateral, and
shall survive the expiration or termination of this Agreement and the repayment
of all Loans and the payment and performance of all other Obligations owed to
Agent and/or Banks.
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11.14 Nonliability of Banks. Borrowers acknowledge and agree that:
(a) Any inspections of Collateral made by or through Agent or
any Bank are for purposes of administration of the Loan only and
Borrowers are not entitled to rely upon the same;
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to Agent or the Banks pursuant to the Loan
Documents, including any certificate, financial statement, insurance
policy or other document, neither Agent nor any Bank shall be deemed to
have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition
thereof, and such acceptance or approval thereof shall not constitute a
warranty or representation to anyone with respect thereto by Agent or
Banks;
(c) The relationship between Borrowers and Agent and Banks is,
and shall at all times remain, solely that of borrower and lenders;
neither Agent nor any Bank shall under any circumstance be construed to
be partners or joint venturers of Borrowers or its Affiliates; neither
Agent nor any Bank shall under any circumstance be deemed to be in a
relationship of confidence or trust or a fiduciary relationship with
Borrowers or their Affiliates, or to owe any fiduciary duty to Borrowers
or their Affiliates; neither Agent nor any Bank shall undertake or
assume any responsibility or duty to Borrowers or their Affiliates to
select, review, inspect, supervise, pass judgment upon or inform
Borrowers or their Affiliates of any matter in connection with their
Property, any Collateral held by Agent or any Bank or the operations of
Borrowers or their Affiliates; Borrowers and their Affiliates shall rely
entirely upon their own judgment with respect to such matters; and any
review, inspection, supervision, exercise of judgment or supply of
information undertaken or assumed by Agent or Banks in connection with
such matters is solely for the protection of Agent and Banks and no
Borrower or any other Person is entitled to rely thereon; and
(d) Agent and Banks shall not be responsible or liable to any
Person for any loss, damage, liability or claim of any kind relating to
injury or death to Persons or damage to Property caused by the actions,
inaction or negligence of Borrowers and/or their Affiliates and
Borrowers hereby indemnify and hold Bank harmless from any such loss,
damage, liability or claim.
11.15 No Third Parties Benefited. This Agreement is made for the purpose
of defining and setting forth certain obligations, rights and duties of
Borrowers and Agent and Banks in connection with the Loans, and is made for the
sole protection of Borrowers and Agent and Banks, and their successors and
assigns. Except as provided in Section 11.13, no other Person shall have any
rights of any nature hereunder or by reason hereof.
11.16 Further Assurances. Borrowers and their Subsidiaries shall, at
their expense and without expense to Agent or any Bank, do, execute and deliver
such further acts and documents as Agent or any Bank from time to time
reasonably require for the assuring and confirming unto Agent and Banks of the
rights hereby created or intended now or hereafter so to be, or for carrying out
the intention or facilitating the performance of the terms of any Loan Document,
or
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for assuring the validity, perfection, priority or enforceability of any Lien
under any Loan Document.
11.17 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. In the event of any conflict between the provisions
of this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control and govern; provided that the inclusion of supplemental
rights or remedies in favor of Agent or Banks in any other Loan Document shall
not be deemed a conflict with this Agreement. Each Loan Document was drafted
with the joint participation of the respective parties thereto and shall be
construed neither against nor in favor of any party, but rather in accordance
with the fair meaning thereof.
11.18 Governing Law. Except to the extent otherwise provided therein,
each Loan Document shall be governed by, and construed and enforced in
accordance with, the local Laws of California; provided that the local Laws of
California shall not apply with respect to any foreclosure of real Property
Collateral located outside California, and in no event shall California Code of
Civil Procedure Sections 726 and/or 580a and/or 580b and/or 580d apply to any
such foreclosure outside of California or to the right of Agent and Banks to
obtain a deficiency judgment for all Obligations remaining due following such
foreclosure.
11.19 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable or invalid as to any party or in
any jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
11.20 Headings. Article and Section headings in this Agreement and the
other Loan Documents are included for convenience of reference only and are not
part of this Agreement or the other Loan Documents for any other purpose.
11.21 Time of the Essence. Time is of the essence of the Loan Documents.
11.22 Securities Representation. Each Bank hereby represents that any
disposition by it of all or any part of its rights under the Loan Documents
shall not violate Section 5 of the Securities Act of 1933 to the extent, if any,
applicable.
11.23 Joint Borrower Provisions. Borrowers acknowledge and agree that
Borrowers shall be jointly and severally liable for all obligations arising
under this Agreement, any/or Loan Documents. In furtherance thereof, Borrowers
acknowledge and agree as follows:
(a) Any advance made by Bank hereunder shall be made jointly and
severally to all of the Persons comprising Borrower (for purposes of
this Section, each such Person being referred to as a "Borrowing
Entity"). Any payments received by any Bank likewise shall be credited
to all Borrowing Entities. While it is anticipated that SCC, Inc. will
make Requests for Loans or for Standby Letters of Credit, Requests for
Loans or for Standby Letters of Credit may be made by any Borrowing
Entity and Agent and any
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Bank, in its discretion, is authorized to honor and rely upon any such
Request or any instructions received from any Responsible Official of
any Borrowing Entity. It is expressly agreed and understood by each
Borrowing Entity that Agent and each Bank shall have no responsibility
to inquire into the appointment, allocation or disposition of any Loans
made to Borrowers. All Loans are to be made for the collective account
of Borrowers. For the purpose of implementing the joint borrower
provisions of the Loan Documents, including without limitation the
giving and receiving of notices and other communications, the making of
Requests for Loans or Requests for Standby Letters of Credit, the
execution and delivery of certificates and the receiving and allocating
of disbursements from Bank, Borrowers hereby irrevocably appoint each
other as the agent and attorney-in-fact for all purposes of the Loan
Documents.
(b) It is understood and agreed that the handling of this credit
facility on a joint borrowing basis as set forth in this Agreement is
solely as an accommodation to Borrowers and at the request of Borrowers,
and that Agent and Banks shall incur no liability to Borrowers or any
Borrowing Entity as a result thereof. To induce Agent and Banks to do
so, and in consideration thereof, each Borrowing Entity hereby agrees to
indemnify Agent and Banks and hold Agent and Banks harmless from and
against any and all liabilities, expenses, losses, damages and/or claims
of damage or injury asserted against Agent and Banks by Borrowers or by
any other Person arising from or incurred by reason of Agent's or any
Bank's handling of the financing arrangement of Borrowers as herein
provided, reliance by Agent and Banks on any requests or instructions
from any Borrowing Entity, or any other action taken by Agent and Banks.
(c) Each of Borrowers represents and warrants to Agent and Banks
that the request for joint handling of the Loans was made jointly by the
Borrowing Entities and that the Borrowing Entities are engaged in an
integrated operation that requires financing on a basis permitting the
availability of credit from time to time to each of the Borrowing
Entities as required for the continued successful operation of each of
them and their integrated operations. Each Borrowing Entity expects to
derive benefit, directly or indirectly, from such availability because
the successful operation of each Borrower is dependent on the continued
successful performance of the functions of the integrated group.
(d) Each Borrower acknowledges that the Liens and security
interests created or granted herein and by the other Loan Documents will
or may secure obligations of persons or entities other than itself and,
in full recognition of that fact, each Borrower consents and agrees that
any action by Agent or any Bank with respect to the following shall not
affect the enforceability or security hereof or of any other Loan
Document:
(1) supplement, modify, amend, extend, renew,
accelerate, or otherwise change the time for payment or the
terms of the obligations of the other Borrowers or any part
thereof, including any increase or decrease of the rate(s) of
interest thereon;
(2) supplement, modify, amend or waive, or enter into or
give any agreement, approval or consent with respect to, the
obligations of the other
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Borrowers or any part thereof or any of the Loan Documents or
any additional security or guaranties, or any condition,
covenant, default, remedy, right, representation or term thereof
or thereunder;
(3) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan
Documents or the obligations of Borrowers or any part thereof;
(4) accept partial payments on the obligations of
Borrowers;
(5) receive and hold additional security or guaranties
for the obligations of Borrowers or any part thereof;
(6) release, reconvey, terminate, waive, abandon,
subordinate, exchange, substitute, transfer and enforce any
security or guaranties, and apply any security and direct the
order or manner of sale thereof as Agent or Banks in their sole
and absolute discretion may determine;
(7) release any person or entity or any guarantor from
any personal liability with respect to the obligations of
Borrowers or any part thereof;
(8) settle, release on terms satisfactory to Agent or
Banks or by operation of applicable laws or otherwise liquidate
or enforce any obligations of Borrowers and any security or
guaranty therefor in any manner, consent to the transfer of any
security and bid and purchase at any sale; and
(9) consent to the merger, change or any other
restructuring or termination of the corporate existence of
Borrowers or any other person, and correspondingly restructure
the obligations of Borrowers, and any such merger, change,
restructuring or termination shall not affect the liability of
Borrowers or the continuing existence of any lien or security
interest hereunder, under any other Loan Document to which any
Borrower is a party or the enforceability hereof or thereof with
respect to all or any part of the obligations of Borrowers.
Upon the occurrence of and during the continuance of any Event
of Default, Agent and Banks may enforce this Agreement and the other
Loan Documents independently as to each Borrower and independently of
any other remedy or security Agent or Banks at any time may have or hold
in connection with the obligations of Borrowers, and it shall not be
necessary for Agent or Banks to marshal assets in favor of any of
Borrowers or any other person or entity or to proceed upon or against
and/or exhaust any other security or remedy before proceeding to enforce
this Agreement and the other Loan Documents. Each of Borrowers expressly
waives any right to require Agent or Banks to marshal assets in favor of
any Borrower or any other person or entity or to proceed against any
other person or entity or any Collateral provided by any other person,
and agrees that Agent or Banks may proceed against any persons or
entities and/or Collateral in such order as it shall determine in its
sole and absolute discretion. Agent or Banks may file a separate action
or actions against any Borrower, whether action is brought or prosecuted
with respect to any other security or against any other
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person, or whether any other person or entity is joined in any such
action or actions. Each of Borrowers agrees that Agent or Banks and each
of Borrowers and any other person or entity may deal with each other in
connection with the obligations of Borrowers or otherwise, or alter any
contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting
the security of this Agreement or the other Loan Documents. The rights
of Agent and Banks hereunder and under the other Loan Documents shall be
reinstated and revived, and the enforceability of this Agreement and the
other Loan Documents shall continue, with respect to any amount at any
time paid on account of the obligations of Borrowers which thereafter
shall be required to be restored or returned by Agent and Banks upon
bankruptcy, insolvency or reorganization of any Borrower or any other
person, or otherwise, all as though such amount had not been paid. The
enforceability of this Agreement and the other Loan Documents at all
times shall remain effective even though the obligations of Borrowers,
including any part thereof or any other security or guaranty therefor,
may be or hereafter may become invalid or otherwise unenforceable as
against any of Borrowers or any other person or entity and whether or
not any of Borrowers or any other person or entity shall have any
personal liability with respect thereto. Each of Borrowers expressly
waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of any of the other
Borrowers or any other person or entity with respect to the obligations
of Borrowers, (b) the unenforceability or invalidity of any security or
guaranty for the obligations of Borrowers or the lack of perfection or
continuing perfection or failure of priority of any security for the
obligations of Borrowers, (c) the cessation for any cause whatsoever of
the liability of any other Borrower or any other person or entity (other
than by reason of the full payment and performance of all obligations of
Borrowers), (d) any failure of Agent or any Bank to marshal assets in
favor of any of Borrowers or any other person, (e) any failure of Agent
or any Bank to give notice of sale or other disposition to any of the
other Borrowers or any other person or entity or any defect in any
notice that may be given in connection with any sale or disposition, (f)
any failure of Agent or any Bank to comply in any non-material respect
with applicable laws in connection with the sale or other disposition of
any Collateral or other security for any obligation of Borrowers, (g)
any act or omission of Agent or any Bank or others that directly or
indirectly results in or aids the discharge or release of any Borrower
or any other person or entity or the obligations of Borrowers or any
other security or guaranty therefor by operation of law or otherwise,
(h) any law which provides that the obligation of a surety or guarantor
must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation, (i) any failure of
Agent or any Bank to file or enforce a claim in any bankruptcy or other
proceeding with respect to any person, (j) the election by Agent or any
Bank, in any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy
Code, (k) any extension of credit or the grant of any lien under Section
364 of the United States Bankruptcy Code, (l) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any
agreement or stipulation with respect to the provision of adequate
protection in any bankruptcy proceeding of any person, (n) the avoidance
of any lien or security interest in favor of Agent or any Bank for any
reason, or (o) any bankruptcy, insolvency, reorganization,
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arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any person, including any discharge of, or bar
or stay against collecting, all or any of the obligations of Borrowers
(or any interest thereon) in or as a result of any such proceeding.
(e) Each of Borrowers represents and warrants to Agent and Banks
that such Borrower has established adequate means of obtaining from the
other Borrowers, on a continuing basis, financial and other information
pertaining to the businesses, operations and condition (financial and
otherwise) of the other Borrowers and their respective properties, and
each of Borrowers now is and hereafter will be completely familiar with
the businesses, operations and condition (financial and otherwise) of
the other Borrowers and their respective properties. Each of Borrowers
hereby expressly waives and relinquishes any duty on the part of Agent
or any Bank to disclose to such Borrower any matter, fact or thing
related to the businesses, operations or condition (financial or
otherwise) of any other Borrower or such other Borrower's properties,
whether now known or hereafter known by Agent or any Bank during the
life of this Agreement. With respect to any of the obligations of
Borrowers, Agent and Banks need not inquire into the powers of any of
the Borrowers or the officers or employees acting or purporting to act
on its behalf.
(f) Notwithstanding anything to the contrary elsewhere contained
herein or in any other Loan Document to which any Borrower is a party,
each of the Borrowers hereby waives with respect to each other Borrower
and its respective successors and assigns (including any surety) and any
other party any and all rights at law or in equity, to subrogation, to
reimbursement, to exoneration, to contribution, to setoff or to any
other rights that could accrue to a surety against a principal, to a
guarantor against a maker or obligor, to an accommodation party against
the party accommodated, or to a holder or transferee against a maker and
which each of Borrowers may have or hereafter acquire against any other
Borrower or any other party in connection with or as a result of any
Borrower's execution, delivery and/or performance of this Agreement or
any other Loan Document to which any such Borrower is a party until the
obligations hereunder are paid in full. Each of the Borrowers agrees
that it shall not have or assert any such rights against any other
Borrower or any such Borrower's successors and assigns or any other
person or entity (including any surety), either directly or as an
attempted setoff to any action commenced against such Borrower by the
other such Borrower (as borrower or in any other capacity) or any other
person until the obligations hereunder are paid in full. Each of
Borrowers hereby acknowledges and agrees that this waiver is intended to
benefit Agent and Banks and shall not limit or otherwise affect any of
Borrowers' liability hereunder, under any other Loan Document to which
any Borrower is a party, or the enforceability hereof or thereof.
(g) Each of Borrowers warrants and agrees that each of the
waivers and consents set forth herein is made with full knowledge of its
significance and consequences, with the understanding that events giving
rise to any defense waived may diminish, destroy or otherwise adversely
affect rights which each of Borrowers otherwise may have against the
other Borrowers, Agent or any Bank, or others, or against any
Collateral. If any of the waivers or consents herein are determined to
be contrary to any
68
<PAGE> 74
applicable law or public policy, such waivers and consents shall be
effective to the maximum extent permitted by law.
(h) Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Borrower hereunder shall be
limited to a maximum aggregate amount equal to the greatest amount that
would not render that Borrower's obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any provisions of applicable state
law (collectively, the "Fraudulent Transfer Laws"), in each case after
giving effect to all other liabilities of that Borrower, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of that Borrower under
any unsecured indebtedness or indebtedness which is otherwise
subordinated in right of payment to the obligations arising hereunder,
if such indebtedness arises under an agreement which contains a
limitation as to maximum amount similar to that set forth in this
paragraph and such agreement also provides that the liability of that
Borrower under this Agreement is included in the liabilities taken into
account in determining the maximum amount of the obligations of such
Borrower under such other agreement) and after giving effect as assets
to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of that Borrower pursuant to
(i) applicable law or (ii) any agreement providing for an equitable
allocation by that Borrower of obligations arising under guaranties by
that Borrower.
11.24 Waiver of Jury Trial. The parties to this Agreement acknowledge
that jury trials often entail additional expenses and delays not occasioned by
nonjury trials. The parties to this Agreement further agree and stipulate that a
fair trial may be had before a state or federal judge by means of a bench trial
without a jury. In view of the foregoing, and as a specifically negotiated
provision of this Agreement, each party to this Agreement hereby expressly
waives any right to trial by jury of any claim, demand, action or cause of
action (1) arising under this Agreement or any other instrument, document or
agreement executed or delivered in connection herewith, or (2) in any way
connected with or related or incidental to the dealings of the parties hereto or
any of them with respect to this Agreement or any other instrument, document or
agreement executed or delivered in connection herewith, or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether sounding in contract or tort or otherwise; and each party
hereby agrees and consents that any such claim, demand, action or cause of
action shall be decided by court trial without a jury, and that any party to
this Agreement may file an original counterpart or a copy of this section with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
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<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BORROWERS:
THE SPORTS CLUB COMPANY, INC. THE SPECTRUM CLUB COMPANY,
a Delaware corporation INC., a California corporation
By: /s/ Timothy O'Brien By: /s/ Timothy O'Brien
------------------------------- --------------------------------
Timothy O'Brien Timothy O'Brien
Its: Chief Financial Officer Its: Chief Financial Officer
PONTIUS REALTY, INC. LA/IRVINE SPORTS CLUBS, LTD.,
a California corporation a California corporation
By: Sports Club, Inc. of California,
general partner
By: /s/ Timothy O'Brien
------------------------------
Timothy O'Brien
Its: Chief Financial Officer
BY: /s/ Timothy O'Brien
--------------------------------
Timothy O'Brien
Its: Chief Financial Officer
SPORTS CLUB, INC. OF CALIFORNIA, TALLA NEW YORK, INC.,
a California corporation a New York corporation
By: /s/ Timothy O'Brien By: /s/ Timothy O'Brien
------------------------------- --------------------------------
Timothy O'Brien Timothy O'Brien
Its: Chief Financial Officer Its: Chief Financial Officer
TVE, INC., SPECTRUM CLUB ANAHEIM,
a California corporation a California corporation
By: /s/ Timothy O'Brien By : /s/ Timothy O'Brien
------------------------------- --------------------------------
Timothy O'Brien Timothy O'Brien
Its: Chief Financial Officer Its: Chief Financial Officer
70
<PAGE> 76
IRVINE SPORTS CLUB, INC., GREEN VALLEY SPECTRUM CLUB, INC.
a California corporation a Nevada corporation
By: /s/ Timothy O'Brien By: /s/ Timothy O'Brien
------------------------------- --------------------------------
Timothy O'Brien Timothy O'Brien
Chief Financial Officer Chief Financial Officer
THE SPORTSMED COMPANY, INC.,
a California corporation
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
CANOGA AGOURA SPECTRUM CLUB,
INC., a California corporation
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
SCC SPORTS CLUB, INC.,
a Texas corporation
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
SPECTRUM LIQUIDATING CORPORATION,
a California corporation,
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
71
<PAGE> 77
HFA SERVICES, INC.
a California corporation,
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
NY Sports Club, Inc.
a Delaware corporation,
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
SF SPORTS CLUB, INC.,
a Delaware corporation,
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
WASHINGTON D.C. SPORTS CLUB, INC.,
a Delaware corporation,
By: /s/ Timothy O'Brien
-------------------------------
Timothy O'Brien
Chief Financial Officer
Borrowers' Address
c/o The Sports Club Company, Inc.
11100 Santa Monica Boulevard
Suite 300
Los Angeles, California 90025
Telephone: (310) 479-5200
Facsimile: (310) 479-5740
72
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AGENT:
COMERICA BANK-CALIFORNIA,
a California banking corporation
By: /s/ Joseph Yurosek
--------------------------------
Joseph Yurosek
Vice President
Address:
Comerica Bank-California
301 E. Ocean Boulevard, Suite 1800
Long Beach, California 90802
Attn: Joseph Yurosek, Vice President
Telecopier: (562) 595-8251
Telephone: (562) 590-2530
BANKS:
73
<PAGE> 79
COMERICA BANK-CALIFORNIA,
a California banking corporation
By: /s/ Joseph Yurosek
--------------------------------
Joseph Yurosek
Vice President
Address:
Comerica Bank-California
301 E. Ocean Boulevard, Suite 1800
Long Beach, California 90802
Attn: Joseph Yurosek, Vice President
Telecopier: (562) 595-8251
Telephone: (562) 590-2530
74
<PAGE> 1
EXHIBIT 10.3
INTERCREDITOR AND SUBORDINATION AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS; INTERPRETATION......................................... 1
1.1 Terms Defined in Credit Agreement.......................................... 1
1.2 Certain Other Defined Terms................................................ 2
1.3 Interpretation............................................................. 4
ARTICLE II AGREEMENT OF SUBORDINATION.......................................... 4
2.1 Benefit of Subordination Provisions........................................ 4
2.2 Subordination to Payment of Senior Credit Agreement Obligations............ 5
2.3 Subordination of Liens..................................................... 5
2.4 Applicability of Subordination Provisions to Proceeds...................... 5
2.5 No Challenge............................................................... 5
2.6 No Effect of Disallowance.................................................. 5
2.7 Turnover of Share Certificates............................................. 5
ARTICLE III SUBORDINATION UPON ANY DISTRIBUTION OF ASSETS OF DESIGNATED
GUARANTORS.......................................................... 6
ARTICLE IV NO PAYMENTS BY DESIGNATED GUARANTORS ON SENIOR NOTE
OBLIGATIONS......................................................... 6
ARTICLE V SUBORDINATION OF REMEDIES........................................... 6
5.1 Agent's Exercise of Rights as Secured Party................................ 6
5.2 Remedies of the Trustee and Senior Secured Note Holders.................... 8
5.3 Discontinuance of Remedies................................................. 8
ARTICLE VI DIVISION OF SHARED ASSETS PROCEEDS.................................. 8
ARTICLE VII PAYMENT OVER TO AGENT............................................... 9
ARTICLE VIII REORGANIZATION OF DESIGNATED GUARANTOR.............................. 9
ARTICLE IX REORGANIZATION CLAIMS OF THE TRUSTEE AND THE SENIOR SECURED
NOTE HOLDERS AGAINST DESIGNATED GUARANTORS.......................... 10
9.1 Reorganization Claims...................................................... 10
9.2 Opposition to Substantive Consolidation.................................... 11
ARTICLE X AMENDMENTS TO SENIOR CREDIT AGREEMENT OBLIGATIONS;
AMENDMENTS TO SENIOR NOTE OBLIGATIONS............................... 11
10.1 Amendments to Senior Credit Agreement Obligations.......................... 11
10.2 Amendments to Senior Note Obligations...................................... 11
ARTICLE XI CERTAIN AGREEMENTS OF THE TRUSTEE AND THE SENIOR SECURED
NOTE HOLDERS........................................................ 12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE(S)
------
<S> <C>
11.1 No Interference............................................................ 12
11.2 Acquisition of Additional Liens or Guaranties; Limitations on and
Termination of Guaranties of Designated Guarantors......................... 12
11.3 Rights of Agent Not to Be Impaired; Waivers of Trustee and Senior
Secured Note Holders....................................................... 13
11.4 Financial Condition of Borrower............................................ 13
11.5 Litigation................................................................. 14
11.6 Absence of Reliance........................................................ 14
11.7 Non-Disturbance............................................................ 14
ARTICLE XII SUBROGATION......................................................... 14
12.1 Subrogation................................................................ 14
12.2 Payments Over.............................................................. 15
ARTICLE XIII CONTINUING AGREEMENT; REINSTATEMENT................................. 15
13.1 Continuing Agreement....................................................... 15
13.2 Reinstatement.............................................................. 15
ARTICLE XIV NO FIDUCIARY DUTY................................................... 15
ARTICLE XV [Intentionally Omitted.]............................................ 16
ARTICLE XVI OBLIGATIONS OF THE ISSUER NOT AFFECTED.............................. 16
ARTICLE XVII REPRESENTATIONS AND WARRANTIES...................................... 16
17.1 Representations and Warranties of the Trustee.............................. 16
17.2 Representations and Warranties of the Agent................................ 16
ARTICLE XVIII PAYMENTS............................................................ 17
ARTICLE XIX INCORPORATION BY REFERENCE; ENDORSEMENT OF SENIOR SECURED
NOTES; FURTHER ASSURANCES AND ADDITIONAL ACTS...................... 17
19.1 Incorporation by Reference................................................. 17
19.2 Endorsement of Senior Secured Notes........................................ 17
19.3 Further Assurances and Additional Acts..................................... 17
ARTICLE XX NOTICES............................................................. 18
ARTICLE XXI NO WAIVER; CUMULATIVE REMEDIES...................................... 18
ARTICLE XXII COSTS AND EXPENSES.................................................. 18
22.1 Payments by the Issuer..................................................... 18
22.2 Payments by the Issuer and the Designated Guarantors....................... 18
ARTICLE XXIII SURVIVAL............................................................ 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C>
ARTICLE XXIV MISCELLANEOUS....................................................... 19
24.1 Benefits of Agreement...................................................... 19
24.2 Binding Effect............................................................. 19
24.3 Governing Law.............................................................. 19
24.4 Submission to Jurisdiction................................................. 19
24.5 Appointment of Process Agent............................................... 19
24.6 Entire Agreement........................................................... 20
24.7 Amendments and Waivers..................................................... 20
24.8 Conflicts.................................................................. 20
24.9 Severability............................................................... 20
24.10 Counterparts............................................................... 20
24.11 Termination of Agreement................................................... 21
</TABLE>
iii
<PAGE> 5
INTERCREDITOR AND SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this "Agreement"), dated
as of April 1, 1999, is made among The Sports Club Company, Inc. (the "Issuer"),
the Designated Guarantors (as defined below), the Agent (as defined below) and
U.S. Bank Trust, National Association, a national banking association, as
trustee (the "Trustee") pursuant to that certain Indenture (the "Indenture")
dated as of April 1, 1999 among, inter alia, the Issuer, the Guarantors and the
Trustee with respect to the 11.375% Senior Secured Notes of Issuer due March 15,
2006 (collectively, the "Senior Secured Notes"), and is made with reference to
the following:
A. The Spectrum Club Company, Inc.; Pontius Realty, Inc.; Sports Club,
Inc. of California; Irvine Sports Club, Inc.; The SportsMed Company; Inc.
L.A./Irvine Sports Club, Ltd.; Talla New York, Inc.; SCC Sports Club, Inc.;
Green Valley Spectrum Club, Inc., Canoga Agoura Spectrum Club, Inc.; Spectrum
Liquidating Corp.; TVE, Inc.; Spectrum Club Anaheim, a California Corporation;
SF Sports Club, Inc.; Washington D.C. Sports Club, Inc.; HFA Services, Inc.; and
NY Sports Club, Inc. (collectively, the "Guarantors"), the Issuer (collectively
with the Guarantors, "Borrower"), Comerica Bank-California, a California banking
corporation ("Comerica" and, collectively with such other Persons as may from
time to time become lenders pursuant to the terms of the Credit Agreement, the
"Banks"), and Comerica, as agent for the Banks (the "Agent"), are parties to
that certain Fourth Amended and Restated Loan Agreement, dated as of April 1,
1999 (as amended, modified, renewed, extended or replaced from time to time, the
"Credit Agreement"), pursuant to which the Banks have agreed to make loans to
Borrower and to issue certain standby letters of credit (the "Standby Letters of
Credit") for the account of Borrower. Additionally, the Issuer is indebted to
the holders of the Senior Secured Notes in the aggregate principal amount of
$100,000,000, and the Guarantors have guaranteed such indebtedness.
B. It is a condition precedent to the borrowings by Borrower under the
Credit Agreement and the issuance of the Standby Letters of Credit to Borrower
that the Issuer, the Designated Guarantors, and the Trustee deliver this
Agreement to the Agent to provide for the subordination of certain of the
obligations of the Designated Guarantors (as defined below) under the Senior
Note Agreements (as defined below) and the liens of the Trustee and the Senior
Secured Note holders in the Shared Assets (as defined below) to the liens of the
Agent on behalf of the Banks in the same. The Trustee, on behalf of the holders
of the Senior Secured Notes, has been directed pursuant to the Indenture to
agree to and enter into the subordination provisions set forth in this Agreement
(collectively, the "Subordination Provisions").
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.1 Terms Defined in Credit Agreement. The following terms used in this
Agreement shall, except as otherwise specified herein, have the meanings
assigned to them in the Credit
<PAGE> 6
Agreement as in effect on the date of this Agreement: Collateral, Commitment,
Default, Loan and Loan Documents.
1.2 Certain Other Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Bank Notes" means, collectively, the promissory notes executed
and delivered by Borrower to the Banks under the Credit Agreement.
"Cash Equivalent" shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
and, at the time of acquisition, having the highest rating obtainable from
either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (c)
commercial paper issued by any Bank or any bank holding company owing any Bank
maturing no more than one year from the date of its creation and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; and (d) certificates of deposit
or bankers' acceptances maturing within one year from the date of acquisition
issued by any Bank or by any commercial bank organized under the laws of the
United States of America or any state thereof having combined capital and
surplus of not less than $250,000,000.
"Collection or Enforcement Action" means any litigation,
self-help, judicial foreclosure, non-judicial foreclosure, consensual transfer
in lieu of foreclosure, pre- or post-judgment remedy or other activity, whether
judicial or non-judicial, for the enforcement of rights, including the assertion
of rights of setoff, banker's lien, subrogation or contribution, the
notification of any Designated Guarantor's account debtors, the taking of any
additional Shared Assets or any attempt to do any of the foregoing.
"Designated Guarantors" shall mean Irvine Sports Club, Inc.;
Green Valley Spectrum Club, Inc.; and Canoga Agoura Spectrum Club, Inc.;
provided, however, that any of the foregoing Persons shall cease to be a
Designated Guarantor at such time as the Agent, on behalf of the Banks, shall
voluntarily and on its own initiative release its Lien on all of the assets
(whether real or personal) of such Person and in all of the issued and
outstanding stock of, and all other equity interests in, such Person.
"Governmental Person" shall mean any national (Federal or
foreign), state or local government, any political subdivision or any
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, agency, body or entity, including any self-regulatory organization,
commission, tribunal or organization.
"Lien" means any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien
(statutory or other) or other preferential arrangement (including any
conditional sale or other title retention agreement, any financing
2
<PAGE> 7
lease having substantially the same economic effect as any of the foregoing or
any agreement to give any security interest).
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or Governmental Person.
"Pledged Share Certificates" means certificates representing
issued and outstanding stock of each of the Designated Guarantors.
"Reorganization" of a Person means (i) any distribution of assets
of that Person upon any voluntary or involuntary dissolution, winding up, total
or partial liquidation or reorganization, readjustment, composition, service of
statutory demand or any other similar proceeding relating to that Person, its
property or its creditors, (ii) any bankruptcy or other action pursuant to the
United States Bankruptcy Code or any insolvency, receivership, administrative
receivership or other statutory or common law proceeding or arrangement
involving a readjustment of the obligations of that Person, (iii) any assignment
for the benefit of creditors of that Person, or (iv) any marshalling of the
assets or obligations of that Person.
"Restricted Senior Note Payment" means any payment or
distribution of any kind or character by or on behalf of a Designated Guarantor
of Shared Assets or proceeds thereof, whether in cash, property or securities,
of or in respect of any Senior Note Obligation (whether of an absolute or
contingent or direct or indirect obligation, including on account of the
purchase, redemption or other acquisition of any Senior Note Obligation, as a
result of any collection, sale or other disposition of collateral, or by setoff,
exchange or in any other manner, or the establishment by a Designated Guarantor
of a sinking fund) for or on account of any Senior Note Obligation which is
made: (a) on or after the earlier to occur of the date: (i) on which the Agent
or any Bank provides notice to the Trustee in the manner provided in ARTICLE XX
hereof that a Default has occurred under any Senior Credit Agreement; or (ii) on
which the Trustee has knowledge of the occurrence of an Event of Default (as
defined in the Indenture) under any Senior Note Agreement; and (b) prior to the
time each such Default or Event of Default has been cured or permanently waived
in writing.
"Senior Credit Agreements" means, collectively, the Credit
Agreement, the Bank Notes, the Standby Letters of Credit and all of the other
Loan Documents.
"Senior Credit Agreement Obligations" means all present and
future indebtedness, liabilities and other obligations of Borrower to the Agent
or any Bank under or in connection with the Senior Credit Agreements, whether
created under, arising out of or in connection with the Senior Credit
Agreements, including all unpaid principal of any Loan or Loans, all unpaid
drawings under the Standby Letters of Credit (the amount of all unpaid principal
of any Loans, including the principal amount of any Standby Letters of Credit,
not to exceed Twenty Million Dollars ($20,000,000)), all interest accrued
thereon, all fees, costs, expenses, premiums and reimbursements due under the
Senior Credit Agreements, all indemnification obligations and all other amounts
payable by Borrower to the Agent or any Bank thereunder or in connection
therewith, whether now existing or hereafter arising, and whether due or to
become due, absolute or contingent, liquidated or unliquidated, determined or
undetermined.
3
<PAGE> 8
"Senior Note Agreements" means, collectively, the Indenture, the
Senior Secured Notes and all other agreements and instruments executed and
delivered by the Issuer, any Guarantor, or any other Person in connection
therewith.
"Senior Note Obligations" means all present and future
indebtedness, liabilities and other obligations of the Issuer and the Guarantors
under the Senior Secured Notes or the Indenture, whether now existing or
hereafter arising and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, including all principal
on the Senior Secured Notes, all interest accrued thereon, and all fees and
other amounts payable by the Issuer, and guaranteed by the Guarantors, to the
Trustee under or in connection with the Senior Note Agreements.
"Shared Assets" means (a) all property, whether real or personal,
now existing and owned by a Designated Guarantor or hereafter acquired by a
Designated Guarantor (except property hereafter acquired by a Designated
Guarantor in violation of the terms and conditions of the Indenture); (b) all of
the issued and outstanding stock of, and any other equity interest in any of,
the Designated Guarantors; and (c) all proceeds of the foregoing, in each case
which is subject to a Lien in favor of the Trustee on behalf of the holders of
the Senior Secured Notes pursuant to the Senior Note Agreements, securing
payment and performance of the Senior Note Obligations; provided, however, that
any Shared Asset shall cease to be a Shared Asset at such time as the Agent, on
behalf of the Banks, shall voluntarily and on its own initiative release its
Lien on all rights in such Shared Asset.
1.3 Interpretation. In this Agreement, except to the extent the
context otherwise requires (i) any reference in this Agreement to an Article,
Section, Schedule or Exhibit is a reference to an article, section schedule or
exhibit of or to this Agreement, respectively, and to a subsection or clause is,
unless otherwise stated, a reference to a subsection or a clause of the Section
or subsection in which the reference appears; (ii) the words "hereof," "herein,"
"hereto," "hereunder" and the like refer to this Agreement as a whole and not
merely to the specific Article, Section, subsection, paragraph or clause in
which the reference appears; (iii) the meaning of defined terms shall be equally
applicable to both the singular and plural forms of the terms defined; (iv) the
words "including," "includes" and "include" shall be deemed to be followed by
the words "without limitation"; (v) references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modifications thereto; (vi) references to statutes or regulations are to
be construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; and (vii) the
captions and headings are for convenience of reference only and shall not affect
the construction of this Agreement.
ARTICLE II
AGREEMENT OF SUBORDINATION
2.1 Benefit of Subordination Provisions. The Subordination Provisions
are made for the benefit of the Agent and the Banks, and each Bank is made an
obligee hereunder with the same effect as if it were a party hereto and may
proceed to enforce the Subordination Provisions.
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2.2 Subordination to Payment of Senior Credit Agreement Obligations.
Subject only to the provisions of Section 5.2, all Restricted Senior Note
Payments shall be subject, subordinate and junior in right of payment and
exercise of remedies to the prior payment in full in cash or Cash Equivalents of
the Senior Credit Agreement Obligations.
2.3 Subordination of Liens. All Liens of the Trustee on behalf of the
holders of the Senior Secured Notes now or hereafter existing in any Shared
Assets shall be subject, subordinate and junior in all respects and at all times
to the Liens of the Agent on behalf of the Banks now or hereafter existing
therein, regardless of the time or order of attachment or perfection of such
Liens, the time or order of filing of financing statements, the acquisition of
purchase money or other Liens, the time of giving or failure to give notice of
the acquisition or expected acquisition of any purchase money or other Liens, or
any other circumstances whatsoever.
2.4 Applicability of Subordination Provisions to Proceeds. The
Subordination Provisions shall be effective as set forth in this Agreement with
respect to any proceeds of Shared Assets to which any Designated Guarantor holds
legal title and which are received or realized by the Trustee or any Senior
Secured Note holder pursuant to a Restricted Senior Note Payment.
2.5 No Challenge. None of the Trustee or the holder of any Senior
Secured Note shall, whether in a Reorganization proceeding or otherwise,
challenge the validity, perfection or relative priority of the Agent's Liens in
the Shared Assets nor the Agent's or the Banks' right to prior payment
established by this ARTICLE II. None of the Agent or any of the Banks shall,
whether in a Reorganization proceeding or otherwise, challenge the validity or
perfection or the relative priority of the Liens of the Trustee on behalf of the
holders of the Senior Secured Notes in any collateral, other than the relative
priority of the Liens on the Shared Assets, securing obligations under the
Senior Note Agreements.
2.6 No Effect of Disallowance. The Senior Credit Agreement Obligations
shall continue to constitute Senior Credit Agreement Obligations for all
purposes under this Agreement, the Subordination Provisions shall continue to
apply to such Senior Credit Agreement Obligations, and the Liens of the Agent on
behalf of the Banks shall continue to enjoy priority over the Liens of the
Trustee on behalf of the holders of Senior Secured Notes in the Shared Assets
for all purposes under this Agreement notwithstanding the fact that such Senior
Credit Agreement Obligations or any claim in respect thereof or any Lien of the
Agent or any Bank shall be disallowed, avoided or subordinated pursuant to the
provisions of the United States Bankruptcy Code or other applicable law or
pursuant to any Reorganization.
2.7 Turnover of Share Certificates. At such time as no Senior Credit
Agreement Obligations remain outstanding and the Commitment has expired, Agent
shall deliver the Pledged Share Certificates previously delivered to it to the
Trustee.
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ARTICLE III
SUBORDINATION UPON ANY DISTRIBUTION OF ASSETS OF
DESIGNATED GUARANTORS
In the event of any payment or distribution of assets of any Designated
Guarantor, whether in cash, property or securities, in connection with any
Reorganization of any Designated Guarantor all amounts owing on account of the
Senior Credit Agreement Obligations shall first be paid in full in cash or Cash
Equivalents before any Restricted Senior Note Payment is made.
ARTICLE IV
NO PAYMENTS BY DESIGNATED GUARANTORS ON SENIOR NOTE OBLIGATIONS
As long as any Senior Credit Agreement Obligations remain outstanding
and unpaid or any Standby Letter of Credit remains outstanding, no Designated
Guarantor shall make, directly or indirectly, and neither the Trustee nor any
Senior Second Note holder shall accept or receive, any Restricted Senior Note
Payment.
ARTICLE V
SUBORDINATION OF REMEDIES
So long as any Senior Credit Agreement Obligations remain outstanding
and unpaid or any Standby Letter of Credit remains outstanding, the following
shall apply:
5.1 Agent's Exercise of Rights as Secured Party. The Agent shall be
permitted and is hereby authorized to take any and all actions and to exercise
any and all rights, remedies and options which it may have under the Senior
Credit Agreements and sell or otherwise realize upon the Shared Assets, in each
case upon the terms and subject to the conditions set forth in the Senior Credit
Agreements. All demand of performance, advertisements, notices of sale or
retention, as well as the presence the of Shared Assets at any sale and the
constructive possession of Shared Assets by the Agent conducting any sale,
except only as provided by Section 9504(3) of the California Uniform Commercial
Code, are hereby specifically waived by the Trustee and each Senior Secured Note
holder. Without limiting the generality of the foregoing, upon the occurrence
and during the continuance of any event of default under the Senior Credit
Agreements, the Agent shall not be required to proceed against Borrower, the
Shared Assets or any other property pledged and assigned to the Agent under the
Senior Credit Agreements or to pursue any other remedy in its power before
proceeding against Shared Assets, nor shall the Agent be required to pursue its
remedies against any portion of the Shared Assets in any particular order. The
Trustee and each Senior Secured Note holder hereby waives any right to require
the Agent to marshal any liens or assets, including, without limitation,
pursuant to Sections 2899 and 3433 of the California Civil Code and Sections
100.040 and 100.050 of the Nevada Revised Statutes.
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Furthermore, the Trustee and each Senior Secured Note holder agrees that
the following shall be deemed commercially reasonable in compliance with Section
9504(3) of the California Uniform Commercial Code:
(i) after the occurrence and during the continuance of an event of
default under the Senior Credit Agreements, the Agent may apply, set
off, collect or sell in one or more sales the whole or any part of the
Shared Assets in such order as the Agent elects;
(ii) any such sale may be public or private and conducted at the Agent's
place of business or at any other place deemed in good faith by the
Agent to be commercially reasonable;
(iii) any such sale may be either for cash, notes or property upon
credit for future delivery, and at such price or prices as the Agent in
good faith considers fair;
(iv) any such sale may be conducted by an officer or agent of the Agent
who may deliver possession of the Shared Assets so sold to the purchaser
or purchasers thereof;
(v) the Agent or any Bank in its own right and free from any claim of
Borrower, the Trustee or any Senior Secured Note holder (other than as
to the application of proceeds as set forth in ARTICLE VI) and from any
right of redemption may purchase and hold any of the Shared Assets at
any such public sale; and
(vi) the Agent shall be authorized at any such sale, should the Agent
deem it advisable to do so, to restrict the prospective bidders or
purchasers to persons or entities who shall have obtained all necessary
authorizations and approvals of any applicable federal, state or local
regulatory agency, authority or instrumentality necessary to purchase
the Shared Assets or any part thereof or to conduct the business
activities for which the Shared Assets is intended, as the successor in
interest of Borrower, or, alternatively, to condition the closing of the
sale to the successful bidder or prospective purchaser upon the
subsequent obtaining of all such authorizations and approvals.
The Agent shall not be obligated to make any sale of the Shared Assets
if it shall determine not to do so, regardless of the fact that a notice of sale
of the Shared Assets may have been given. The Agent may adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice
be made at the time and place to which the same was so adjourned. If a sale of
any of the Shared Assets is made on credit or for future delivery, the Shared
Assets sold may be retained by the Agent until the selling price is paid in full
by the purchaser thereof, but the Agent shall have no liability in the event the
purchaser thereof fails to take up and pay for the Shared Assets so sold. In
case of any such failure, such Shared Assets may be resold in such manner as the
Agent deems appropriate. The Trustee and the Senior Secured Note holders hereby
waive to the extent permitted by applicable law any claims against Agent and the
Banks arising by reason of the fact that the price at which the Shared Assets
may be sold at such a private sale is less than the price which might be
obtained at a public sale or less than the aggregate amount of the Senior Credit
Agreement Obligations even if the Agent accepts the first offer received and
does not offer such Shared Assets to more than one offeree.
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5.2 Remedies of the Trustee and Senior Secured Note Holders. Without in
any way limiting their ability to take any other action or exercise any other
remedy against any Person other than a Designated Guarantor or any collateral
for the obligations under the Senior Note Agreements other than the Shared
Assets, none of the Trustee or any Senior Secured Note holder shall, without the
prior written consent of the Agent, accelerate the maturity of the Senior Note
Obligations without providing the Agent five (5) business days prior written
notice, nor shall the Trustee or any Senior Secured Note holder, without the
prior written consent of the Agent, make demand for payment under any Senior
Note Agreement upon any Designated Guarantor or commence or maintain any
Collection or Enforcement Action against the Shared Assets or any Designated
Guarantor unless and until the earliest of the following: (A) a case under the
United States Bankruptcy Code is commenced by or against such Designated
Guarantor or the Person holding ownership rights in such Shared Assets and is
not dismissed within 60 days thereafter; (B) an Event of Default (as defined in
the Credit Agreement) has occurred and the Agent has accelerated the Senior
Credit Agreement Obligations and has commenced foreclosure proceedings with
respect to Shared Assets or any part thereof held by such Designated Guarantor;
or (C) an event of default has occurred under the Senior Note Agreements, the
Trustee has given written notice of that event of default to the Agent, and one
hundred eighty (180) days have elapsed since the Trustee has provided written
notice to the Agent of that event of default.
5.3 Discontinuance of Remedies. Upon receipt of written notice to do so
from the Agent prior to any foreclosure sale or other transfer of the Shared
Assets contemplated by the Trustee or any Senior Secured Note holder, such
Person shall discontinue any foreclosure proceeding as to the Shared Assets
commenced by it if the Agent elects to conduct its own foreclosure sale of the
Shared Assets pursuant to the Senior Credit Agreements, and in that event the
sole remedy of the Trustee or the Senior Secured Note holders as to the Shared
Assets shall be to receive any excess proceeds from the Agent's foreclosure
sale, as more particularly set forth in ARTICLE VI.
ARTICLE VI
DIVISION OF SHARED ASSETS PROCEEDS
So long as any Senior Credit Agreement Obligations remain outstanding
and unpaid or any Standby Letter of Credit remains outstanding, the proceeds of
any sale, disposition or other realization by any of the Agent, any Bank, the
Trustee or any Senior Secured Note holder upon the Shared Assets (or any portion
thereof), whether in connection with any Reorganization of the Issuer or any
Guarantor or after the occurrence of an event described in clause (a) of the
definition of Restricted Senior Note Payment set forth in Section 1.2
(collectively, "Shared Assets Proceeds"), shall be distributed in the following
order of priority:
(a) first, to the Agent in accordance with the terms of the
Senior Credit Agreements until all of the Senior Credit Agreement Obligations
are indefeasibly paid in full in cash or Cash Equivalents;
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(b) second, to the Trustee on behalf of the Senior Secured Note
holders in accordance with the terms of the Senior Note Agreements until all of
the Senior Note Obligations are indefeasibly paid in full in cash or Cash
Equivalents; and
(c) third, to Borrower or as a court of competent jurisdiction
may otherwise direct, any surplus then remaining from such proceeds.
ARTICLE VII
PAYMENT OVER TO AGENT
In the event that the Trustee or any Senior Secured Note holder receives
any Restricted Senior Note Payments or Shared Assets Proceeds in contravention
of ARTICLE II, ARTICLE III, ARTICLE IV, ARTICLE V or ARTICLE VI before all
Senior Credit Agreement Obligations are paid in full in cash or Cash Equivalents
and all Standby Letters of Credit have expired, such Restricted Senior Note
Payments or Shared Assets Proceeds shall be held in trust for the benefit of the
Agent, shall not be commingled with any other property, and shall be paid over
or delivered to the Agent for application to the payment in full in cash or Cash
Equivalents of all Senior Credit Agreement Obligations remaining unpaid to the
extent necessary to give effect to ARTICLE II, ARTICLE III, ARTICLE IV, ARTICLE
V, and ARTICLE VI after giving effect to any concurrent payments or
distributions to the Agent in respect of the Senior Credit Agreement
Obligations.
ARTICLE VIII
REORGANIZATION OF DESIGNATED GUARANTOR
Without in any way limiting their ability to take any other action or
exercise any other remedy against any Person other than a Designated Guarantor
or any collateral for the obligations under the Senior Note Agreements other
than the Shared Assets, so long as any Senior Credit Agreement Obligations
remain outstanding and unpaid or any Standby Letter of Credit remains
outstanding, none of the Trustee or any Senior Secured Note holder shall,
without the prior written consent of the Agent, commence or join with any other
Person in commencing any Reorganization proceeding of or against any Designated
Guarantor unless and until: (A) the Trustee shall have provided ninety (90) days
prior written notice of its intention to commence a Reorganization proceeding
against such Designated Guarantor, which written notice shall: (1) state that
the Trustee or the Senior Secured Note holder, as applicable, intends to
commence such proceeding unless the Agent provides a written notice of the
existence of a Default under any Senior Credit Agreement prior to the expiration
of such ninety day notice period; and (2) set forth the date of expiration of
such ninety day notice period; and (B) the Agent shall not have provided such a
notice of Default to the Trustee during such ninety day notice period. The
Trustee and each of the Senior Secured Note holders acknowledges and agrees that
any interest on the Senior Credit Agreement Obligations which accrues after the
commencement of any such proceeding (or, if interest on any portion of the
Senior Credit Agreement Obligations cease to accrue by operation of law by
reason of the commencement of said proceeding, such interest as would have
accrued on any such portion of the Senior Credit Agreement Obligations if said
proceedings had not been commenced) shall be included in the
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Senior Credit Agreement Obligations because it is the intention of the parties
that the Senior Credit Agreement Obligations should be determined without regard
to any rule of law or other principle which may relieve Borrower of any portion
of such obligations. The Trustee and each Senior Secured Note holder shall
permit any trustee in bankruptcy, receiver, debtor in possession, assignee for
the benefit of creditors or similar person to pay the Agent, or allow the claim
of the Agent in respect of, any such interest accruing after the date on which
such proceeding is commenced.
ARTICLE IX
REORGANIZATION CLAIMS OF THE TRUSTEE AND
THE SENIOR SECURED NOTE HOLDERS AGAINST DESIGNATED GUARANTORS
9.1 Reorganization Claims.
(a)Subject to the provisions of ARTICLE VI and for so long as any
Senior Credit Agreement Obligations or any Standby Letters of Credit remain in
outstanding, the Trustee and each Senior Secured Note holder shall, upon the
request of the Agent, assign to the Agent all of their respective rights in any
claim with respect to any Senior Note Obligation that is either: (a) filed or
(b) scheduled as undisputed and not disavowed relating to any indebtedness of
such Designated Guarantor to the Trustee or such Senior Secured Note holder
which it may have in any Reorganization or other similar proceeding with regard
to a Designated Guarantor (a "Senior Note Obligation Claim") unless or until
such Designated Guarantor shall have been substantively consolidated with the
Issuer or with any Guarantor that is not a Designated Guarantor in such
Reorganization or other similar proceeding. Neither the Agent nor any Bank shall
be entitled to require the Trustee or any Senior Secured Note holder to file (or
to refrain from disavowing) any claim in any such Reorganization or other
similar proceeding. At any time following the date of the Agent's request that
such claim be assigned to it, the Agent shall be entitled to vote each claim
(other than claims in Reorganization or other similar proceedings in which a
Designated Guarantor has been substantively consolidated with the Issuer or with
any Guarantor which is not a Designated Guarantor) in connection with such
Reorganization or other proceeding; provided that, in the event that the Agent
is not permitted, or does not elect, to vote all or any portion of such claims,
(i) the Trustee and each Senior Secured Note holder shall refrain from
exercising any voting rights arising out of such claim it may have relating to
such Reorganization or other proceeding if such action would have a material
adverse effect on the rights of the Agent or any Bank and (ii) the Trustee and
each Senior Secured Note holder shall give the Agent at least seven (7) business
days written notice of the manner in which it intends to exercise, or that it
will refrain from exercising, any such rights. The Agent, as attorney-in-fact
for the Trustee or such Senior Secured Note holder, is hereby authorized, in the
Agent's discretion, to assign the claim to a nominee. In all such cases, whether
in administration, bankruptcy or otherwise, the person or persons authorized to
pay such claim shall pay to the Agent the full amount thereof and, to the full
extent necessary for that purpose, the Trustee and each Senior Secured Note
holder assigns to the Agent all of the Trustee's or such Senior Secured Note
holder's rights to any such payments or distributions to which the Trustee or
such Senior Secured Note holder would otherwise be entitled.
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(b) If, at any time prior to the date on which a disclosure
statement with respect to a proposed plan of reorganization for a Designated
Guarantor of which the Agent is a proponent is filed with the bankruptcy court,
the Agent shall receive a written request from the Trustee to do so, the Agent
shall withdraw (or disavow, as applicable) any Senior Note Obligation Claim with
respect to such Designated Guarantor.
9.2 Opposition to Substantive Consolidation. Each of the Trustee and the
Agent agrees that it will oppose the substantive consolidation of any Designated
Guarantor with the Issuer or with any Guarantor which is not a Designated
Guarantor in any Reorganization or similar proceeding with respect to the Issuer
or any Guarantor.
ARTICLE X
AMENDMENTS TO SENIOR CREDIT AGREEMENT OBLIGATIONS; AMENDMENTS TO
SENIOR NOTE OBLIGATIONS
10.1 Amendments to Senior Credit Agreement Obligations. At any time and
from time to time, without notice to or the consent of the Trustee or any Senior
Secured Note holder, without incurring responsibility to the Trustee or any
Senior Secured Note holder and without impairing or releasing the subordination
provided for herein or otherwise impairing the rights of the Agent hereunder:
(i) the time for Borrower's performance of or compliance with any of its
agreements contained in the Senior Credit Agreements may be extended or such
performance or compliance may be waived by the Agent; (ii) the agreements of
Borrower with respect to the Senior Credit Agreements may from time to time be
modified by Borrower and the Agent for the purpose of adding any requirements
thereto or changing in any manner the rights and obligations of Borrower and the
Agent or the Bank thereunder (provided, however, that the amount of the
Commitment or principal amount which may be outstanding thereunder may not be
increased); (iii) the manner, place or terms for payment of Senior Credit
Agreement Obligations or any portion thereof may be altered or the terms for
payment extended, or the Senior Credit Agreement Obligations may be renewed in
whole or in part; (iv) the maturity of the Senior Credit Agreement Obligations
may be accelerated in accordance with the terms of any present or future
agreement between Borrower and the Agent or the Banks; (v) any Collateral may be
sold, exchanged, released or substituted and any Lien in favor of the Agent may
be terminated, or fail to be perfected or become unperfected; (vi) any Person
liable in any manner for Senior Credit Agreement Obligations may be discharged,
released or substituted; and (vii) all other rights against Borrower, any other
Person or with respect to any Collateral may be exercised (or the Agent may
waive, release or refrain from exercising such rights).
10.2 Amendments to Senior Note Obligations. So long as any Senior Credit
Agreement Obligations remain outstanding and unpaid or the Commitment remains in
effect, none of the Issuer, the Guarantors, or the Trustee shall, unless it has
received a notice in substantially the form of Exhibit A hereto, agree to or
permit any amendment, modification or waiver of any material provision of the
Senior Note Agreements (including any amendment, modification or waiver pursuant
to an exchange of other securities or instruments for outstanding Senior Note
Obligations) if the effect of such amendment, modification or waiver is to: (i)
increase the aggregate principal amount of, or interest rate on (unless the
guarantees of the Designated Guarantors shall be amended to exclude any such
increased interest amount from the
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obligations guaranteed), the Senior Note Obligations or change (to earlier
dates) the dates upon which principal is due thereon; (ii) alter the redemption
or prepayment provisions thereof (other than to delay any payment or otherwise
to reduce the obligations of any issuer) if such alteration affects the
guarantee obligations of the Designated Guarantors under their respective
guarantees of the Senior Note Obligations in any manner other than to reduce the
same; (iii) alter the Subordination Provisions; (iv) alter the covenants and
events of default in a manner which would make such provisions more onerous or
restrictive to any Designated Guarantor; (v) alter the guarantee of any
Designated Guarantor in any manner which could make the obligations under the
same more onerous or could otherwise affect adversely the interests of such
Designated Guarantor, the Agent or any Bank; or (vi) otherwise increase the
obligations of the Issuer in respect of the Senior Note Obligations if such
increase affects the guarantee obligations of the Designated Guarantors under
their respective guarantees of the Senior Note Obligations in any manner.
ARTICLE XI
CERTAIN AGREEMENTS OF THE TRUSTEE AND
THE SENIOR SECURED NOTE HOLDERS
11.1 No Interference. The Trustee and each Senior Secured Note holder
acknowledges that Borrower has granted the Agent a security interest in certain
of Borrower's assets, including the Shared Assets, and shall not interfere with
or in any manner oppose a disposition of any Collateral by the Agent in
accordance with applicable law. The Agent and each Bank acknowledges that the
Issuer and the Guarantors have granted the Trustee a security interest in
certain of their assets, including the Shared Assets, and shall not interfere
with or in any manner oppose a disposition of any collateral securing the Senior
Note Obligations (other than to enforce their rights hereunder in the Shared
Assets) by the Trustee in accordance with applicable law.
11.2 Acquisition of Additional Liens or Guaranties; Limitations on and
Termination of Guaranties of Designated Guarantors. None of the Trustee or any
Senior Secured Note holder shall, without the prior written consent of the
Agent, accept any additional guaranties of the Senior Note Obligations from any
Designated Guarantor. The Issuer agrees to cause all documentation reflecting
the guarantee obligations of each Designated Guarantor, including but not
limited to the Senior Note Agreements, at all times to provide that such
guarantee obligations shall terminate and cease to be of any further force and
effect upon the foreclosure upon, consensual transfer in lieu of foreclosure of,
or exercise of any similar remedy with respect to, the equity securities of such
Designated Guarantor by the Agent or any Bank. The Issuer also agrees to limit
the guarantee obligations of the Designated Guarantors under all documentation
reflecting such obligations, including but not limited to the Senior Note
Agreements, to the maximum amount that will, after giving effect to all other
contingent and fixed liabilities of such Designated Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Person in respect of the Senior Credit Agreement Obligations or the Senior Note
Obligations of such other Person under the Senior Credit Agreements and its
guarantee of the Senior Note Obligations, result in the obligations of such
Designated Guarantor under the Senior Credit Agreement or its guarantee of the
Senior Note Obligations not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law or render a Designated Guarantor insolvent.
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11.3 Rights of Agent Not to Be Impaired; Waivers of Trustee and Senior
Secured Note Holders. No right of the Agent or any Bank to enforce the
subordination provided for herein or to exercise its other rights hereunder
shall at any time in any way be prejudiced or impaired by any act or failure to
act by the Issuer, any Guarantor, the Agent or any Bank hereunder or under or in
connection with the Senior Credit Agreements or by any noncompliance by Borrower
with the terms of this Agreement or the Senior Credit Agreements, regardless of
any knowledge thereof the Agent or any Bank may have or otherwise be charged
with; by any other act or failure to act by Borrower; by any lack of validity or
enforceability of all or any part of any Senior Credit Agreement; or by any
other circumstances except as otherwise expressly agreed by the Agent in
writing. The Trustee and each Senior Secured Note holder unconditionally waives
(a) all notices which may be required, whether by statute, rule of law or
otherwise, to preserve intact any rights of the Agent or any Bank against
Borrower, including, without limitation, any demand, presentment and protest,
proof of notice of non-payment under any Senior Credit Agreement Obligation, and
notice of any failure on the part of Borrower to perform and comply with any
covenant, agreement, term or condition of the Senior Credit Agreement
Obligations or contained in any Senior Credit Agreement, (b) any right to the
enforcement, assertion or exercise by the Agent or any Bank of any right, power,
privilege or remedy conferred in any Senior Credit Agreement or otherwise, (c)
any requirement of diligence on the part of the Agent or any Bank, (d) any
requirement on the part of the Agent or any Bank to mitigate damages resulting
from any default under the Senior Credit Agreement Obligations or any Senior
Credit Agreement, and (e) any notice of any sale, transfer or other disposition
of any Senior Credit Agreement Obligation by any Bank or of the replacement of
the Agent by a successor agent for the Banks under the term of the Credit
Agreement.
11.4 Financial Condition of Borrower. None of the Trustee or any Senior
Secured Note holder shall have any right to require the Agent or any Bank to
obtain or disclose any information with respect to: (i) the financial condition
or character of Borrower or any other Person or the ability of Borrower to pay
and perform the Senior Credit Agreement Obligations; (ii) the Senior Credit
Agreement Obligations; (iii) the Collateral or any other security for any or all
of the Senior Credit Agreement Obligations; (iv) the existence or nonexistence
of any guarantees of, or any other subordination agreements with respect to, all
or any part of the Senior Credit Agreement Obligations; (v) any action or
inaction on the part of the Agent or any Bank or any other Person; or (vi) any
other matter, fact or occurrence whatsoever. The Trustee hereby assumes
responsibility for keeping itself and the Senior Secured Note holders informed
of the financial condition of the Issuer and the Guarantors and of all other
circumstances bearing upon the risk of nonpayment of the Senior Note Obligations
that diligent inquiry would reveal. Except as otherwise specifically provided by
this Agreement, none of the Agent or any Bank shall have any right to require
the Trustee or any Senior Secured Note holder to obtain or disclose any
information with respect to: (i) the financial condition or character of
Borrower or any other Person or the ability of Borrower to pay and perform the
Senior Note Obligations; (ii) the Senior Note Obligations; (iii) the collateral
or any other security for any or all of the Senior Note Obligations; (iv) the
existence or nonexistence of any other subordination agreements with respect to
all or any part of the Senior Note Obligations; (v) any action or inaction on
the part of the Trustee or any Senior Secured Note holder or any other Person;
or (vi) any other matter, fact or occurrence whatsoever. The Agent hereby
assumes responsibility for keeping itself and the Banks informed of the
financial condition of the Issuer and the Guarantors and of all other
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circumstances bearing upon the risk of nonpayment of the Senior Credit Agreement
Obligations that diligent inquiry would reveal.
11.5 Litigation. None of the Trustee or any Senior Secured Note holder
shall, except as permitted by this Agreement, without the prior written consent
of the Agent, commence, prosecute or participate in an administrative, legal or
equitable action against any Designated Guarantor relating to the Senior Note
Obligations. If any such Person shall, in violation of the provisions herein set
forth, commence, prosecute or participate in any suit, action, case or
proceeding against such Designated Guarantor, such Designated Guarantor may
interpose as a defense or plea the Subordination Provisions, and the Agent may
intervene and interpose such defense or plea in its own name or in the name of
such Designated Guarantor, and shall, in any event, be entitled to restrain the
enforcement against such Designated Guarantor of the payment provisions of the
Senior Note Obligations in its own name or in the name of such Designated
Guarantor, as the case may be, in the same suit, action, case or proceeding or
in any independent suit, action, case or proceeding.
11.6 Absence of Reliance. Neither the Trustee nor any Senior Secured
Note holder is relying upon or expecting the Agent or any Bank to furnish to it
any information now or hereafter in the Agent's or the Bank's possession
concerning the financial condition of the Issuer, the Guarantors or any other
Person or any other matter.
11.7 Non-Disturbance. Neither the Trustee nor any Senior Secured Note
holder shall take any action to impair, disturb, infringe, or abridge the rights
of, or disturb the quiet enjoyment of, any Designated Guarantor (or any
successor or assignor of the same) in the Non-Exclusive License dated as of
March 31, 1999 from the Issuer to such Designated Guarantor.
ARTICLE XII
SUBROGATION
12.1 Subrogation. Except at such times as all Senior Credit Agreement
Obligations have been paid in full in cash or Cash Equivalents and no Standby
Letters of Credit are outstanding, none of the Trustee or any Senior Secured
Note holder shall have, and none of the Trustee or any Senior Secured Note
holder shall directly or indirectly exercise, any rights that it may acquire by
way of subrogation under this Agreement by any payment or distribution to the
Agent hereunder or otherwise. Except at such times as all Senior Credit
Agreement Obligations have been paid in full in cash or Cash Equivalents and no
Standby Letters of Credit are outstanding, the Trustee shall be subrogated to
the rights of the Agent to receive payments or distributions applicable to the
Senior Credit Agreement Obligations until the Senior Note Obligations are paid
in full. For purposes of the foregoing subrogation, no payments or distributions
to the Agent of any cash, property or securities to which the Trustee or any
Senior Secured Note holder would be entitled but for the provisions of ARTICLE
II, ARTICLE III, ARTICLE IV, ARTICLE V or ARTICLE VI shall, as among Borrower,
its creditors (other than the Agent and the Banks) and the Trustee and the
Senior Secured Note holders, be deemed to be a payment by Borrower to or on
account of the Senior Credit Agreement Obligations.
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<PAGE> 19
12.2 Payments Over. If any payment or distribution to which the Trustee
or any Senior Secured Note holder would otherwise have been entitled but for the
provisions of ARTICLE II, ARTICLE III, ARTICLE IV, ARTICLE V or ARTICLE VI shall
have been applied pursuant to such Sections to the payment of amounts payable
under the Senior Credit Agreement Obligations, the Trustee shall be entitled to
receive from the Agent any payments or distributions received by the Agent in
excess of the amount sufficient to pay in full in cash or Cash Equivalents all
amounts payable under or in respect of the Senior Credit Agreement Obligations.
If any such excess payment is made to the Agent, the Agent shall promptly remit
such excess to the Trustee and until so remitted the Agent shall hold such
excess payment for the benefit of the Trustee.
ARTICLE XIII
CONTINUING AGREEMENT; REINSTATEMENT
13.1 Continuing Agreement. This Agreement is a continuing agreement of
subordination and shall continue in effect and be binding upon the Trustee and
each Senior Secured Note holder until payment and performance in full in cash or
Cash Equivalents of the Senior Credit Agreement Obligations and termination of
the Commitment. The subordinations, agreements and priorities set forth herein
shall remain in full force and effect regardless of whether any party hereto in
the future seeks to rescind, amend, terminate or reform, by litigation or
otherwise, its respective agreements with the Issuer or any other Borrower.
13.2 Reinstatement. This Agreement shall continue to be effective or
shall be reinstated, as the case may be, if, for any reason, any payment of the
Senior Credit Agreement Obligations by or on behalf of Borrower shall be
rescinded or must otherwise be restored by the Agent or any Bank, whether as a
result of an insolvency event or otherwise.
ARTICLE XIV
NO FIDUCIARY DUTY
The Agent and the Banks, on the one hand, and the Trustee and the Senior
Secured Note holders, on the other, acknowledge and agree that neither has any
fiduciary duty to the other hereunder and that in approving or disapproving any
matter or proposed action hereunder, each may act in its sole and absolute
discretion and in the manner which it considers to be in its own best interests,
except as specifically provided otherwise herein. Further, the Agent and the
Banks, on the one hand, and the Trustee and the Senior Secured Note holders, on
the other, acknowledge that neither has made any warranties, express or implied,
to the other nor does any of them assume any liabilities to the other with
respect to the value or collectability of the Shared Assets, the enforceability
or validity of its Lien therein, Borrower's financial condition or Borrower's
right, title or interest in the Shared Assets (or any portion thereof). Neither
of the Agent, on the one hand, or the Trustee or any Senior Secured Note holder,
on the other, shall be liable to the other for any action or failure to act, for
any error of judgment, negligence or mistake or for any oversight whatsoever on
its own part or on the part of any of its agents, officers, employees or
attorneys with respect to any transaction relating to Shared Assets, except to
the extent such liability arises from that party's gross negligence or willful
misconduct.
15
<PAGE> 20
ARTICLE XV
[Intentionally Omitted.]
ARTICLE XVI
OBLIGATIONS OF THE ISSUER NOT AFFECTED
The provisions of this Agreement are intended solely for the purpose of
defining the relative rights against Borrower of the Trustee and the Senior
Secured Note holders, on the one hand, and the Agent and the Banks, on the other
hand. Nothing contained in this Agreement shall (i) impair, as between the
Issuer and the Trustee and the Senior Secured Note holders, the obligation of
the Issuer to pay (and the guarantees by the Guarantors of) the principal of or
interest on the Senior Secured Notes and its other obligations with respect to
the Senior Note Obligations as and when the same shall become due and payable in
accordance with the terms thereof, or (ii) otherwise affect the relative rights
against the Issuer and the Guarantors of the Trustee and the Senior Secured Note
holders, on the one hand, and the creditors of the Issuer (other than the Agent
or the Bank), on the other hand.
ARTICLE XVII
REPRESENTATIONS AND WARRANTIES
17.1 Representations and Warranties of the Trustee. The Trustee
represents and warrants to the Agent that:
(a) Organization and Powers. The Trustee is a corporation duly
organized, validly existing and in good standing under the law of the
jurisdiction of its incorporation and has all requisite power and authority to
own its assets and carry on its business and to execute, deliver and perform its
obligations under this Agreement.
(b) Authorization; No Conflict. The execution, delivery and
performance by the Trustee of this Agreement have been duly authorized by all
necessary corporate action and do not and will not result in a breach of or
constitute a default under the Indenture or violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree or the like binding
on or affecting the Trustee.
(c) Binding Obligation. This Agreement constitutes the legal,
valid and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except to the extend that such enforceability may be
limited by applicable bankruptcy or other insolvency or reorganization laws
affecting creditors' rights generally and by principles of equity.
(d) Governmental Consents. No authorization, consent, approval,
license, exemption of, or filing or registration with, any Governmental Agency
is required for the due execution, delivery or performance by the Trustee of
this Agreement.
17.2 Representations and Warranties of the Agent. The Agent represents
and warrants to the Trustee that, to the Agent's actual knowledge: (i) Borrower
is not currently in default of
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<PAGE> 21
any principal or interest obligation in respect of the Senior Credit Agreement
Obligations; (ii) as of the date hereof, the approximate principal amount of the
outstanding Senior Credit Agreement Obligations is $0.00, and interest has been
paid through April 1, 1999; and (iii) no nonmonetary default currently exists
under the Senior Credit Agreements. The Trustee and each of the Senior Secured
Note holders agrees that the Agent and the Banks have made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Credit Agreement or any other Senior
Credit Agreement or the collectibility of the Senior Credit Agreement
Obligations and that the Agent and the Banks shall be entitled to manage and
supervise their loans to Borrower in accordance with their usual practices,
modified from time to time as they deem appropriate under the circumstances,
without regard to the existence of any rights that the Trustee or the Senior
Secured Note holders may now or in the future have with respect to the Senior
Note Obligations or in or to any of the assets of Borrower.
ARTICLE XVIII
PAYMENTS
The Trustee (with respect to payments under ARTICLE VII hereof), each
Senior Secured Note holder, the Issuer and each Guarantor shall make each such
payment as such Person is required to make hereunder, unconditionally in full
without set-off or counterclaim, on or before the day when due in United States
dollars and in immediately available funds, to the Agent at its office located
at 301 East Ocean Boulevard, Long Beach, California 90802, to account number
74-2503561-4, or to such other office and account of the Agent as the Agent from
time to time shall designate in a written notice to the Trustee.
ARTICLE XIX
INCORPORATION BY REFERENCE; ENDORSEMENT OF SENIOR SECURED NOTES;
FURTHER ASSURANCES AND ADDITIONAL ACTS
19.1 Incorporation by Reference. The Issuer agrees that it shall cause
the terms and conditions of this Agreement to be incorporated at all times by
reference into the Indenture.
19.2 Endorsement of Senior Secured Notes. The Issuer agrees that it
shall cause the Senior Secured Notes and all other documents and instruments
evidencing any of the Senior Note Obligations shall be endorsed with a legend
noting that the Senior Secured Notes and such other documents and instruments
are subject to this Agreement.
19.3 Further Assurances and Additional Acts. Each of the Trustee, the
Issuer and each Designated Guarantor shall execute, acknowledge, deliver, file,
notarize and register at its own expense all such further agreements,
instruments, certificates, financing statements, documents and assurances, and
perform such acts as the Agent shall deem necessary or appropriate to effectuate
the purposes of this Agreement, and promptly provide the Agent with evidence of
the foregoing satisfactory in form and substance to the Agent.
17
<PAGE> 22
ARTICLE XX
NOTICES
All notices and other communications provided for herein shall, unless
otherwise stated herein, be in writing (including by telex or facsimile
transmission) and shall be mailed, sent or delivered at or to the address or
telex or facsimile number of the respective party or parties set forth on the
signature pages hereof, or at or to such other address or telex or facsimile
number as such party or parties shall have designated in a written notice to the
other party or parties. All such notices and communications shall be effective
(i) if delivered by hand, when delivered; (ii) if sent by mail, upon the earlier
of the date of receipt or five business days after deposit in the mail, first
class, postage prepaid; (iii) if sent by telex, upon receipt by the sender of an
appropriate answerback; and (iv) if sent by facsimile transmission, when sent.
ARTICLE XXI
NO WAIVER; CUMULATIVE REMEDIES
No failure on the part of the Agent to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
remedy, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights and remedies
under this Agreement are cumulative and not exclusive of any rights, remedies,
powers and privileges that may otherwise be available to the Agent.
ARTICLE XXII
COSTS AND EXPENSES
22.1 Payments by the Issuer. The Issuer shall pay to the Agent on demand
the reasonable out-of-pocket costs and expenses of the Agent, and the reasonable
fees and disbursements of counsel to the Agent (including allocated costs of
internal counsel), in connection with the negotiation, preparation, execution,
delivery and administration of this Agreement and any amendments, modifications
or waivers of the terms thereof.
22.2 Payments by the Issuer and the Designated Guarantors. Each of the
Issuer and each Designated Guarantors, jointly and severally, shall pay to the
Agent on demand all actual costs and expenses of the Agent, and all actual fees
and disbursements of counsel (including allocated costs of internal counsel),
incurred in connection with the enforcement or attempted enforcement of, and
preservation of rights or interests under, this Agreement, including any losses,
costs and expenses sustained by the Agent as a result of any failure by the
Trustee or any Senior Secured Note holder to perform or observe its obligations
contained in this Agreement.
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<PAGE> 23
ARTICLE XXIII
SURVIVAL
All covenants, agreements, representations and warranties made in this
Agreement shall, except to the extent otherwise provided herein, survive the
execution and delivery of this Agreement and shall continue in full force and
effect for so long as any Senior Credit Agreement Obligations remain unpaid or
the Commitment remains in effect. Without limiting the generality of the
foregoing, the obligations of the Issuer and the Guarantors under ARTICLE XXII
shall survive the satisfaction of the Senior Credit Agreement Obligations and
the termination of the Commitment.
ARTICLE XXIV
MISCELLANEOUS
24.1 Benefits of Agreement. This Agreement is entered into for the sole
protection and benefit of the parties hereto, the Banks and the Senior Secured
Note holders and their successors and assigns, and no other Person shall be a
direct or indirect beneficiary of, or shall have any direct or indirect cause of
action or claim in connection with, this Agreement.
24.2 Binding Effect. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by Borrower, the Trustee and the Agent and their
respective successors and assigns.
24.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
24.4 Submission to Jurisdiction. The Trustee hereby (i) submits to the
non-exclusive jurisdiction of the courts of the State of California and the
Federal courts of the United States sitting in the State of California for the
purpose of any action or proceeding arising out of or relating to this
Agreement, (ii) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such courts, (iii) irrevocably waives
(to the extent permitted by applicable law) any objection which it now or
hereafter may have to the laying of venue of any such action or proceeding
brought in any of the foregoing courts, and any objection on the ground that any
such action or proceeding in any such court has been brought in an inconvenient
forum and (iv) agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner permitted by law.
24.5 Appointment of Process Agent. The Trustee hereby irrevocably
appoints U.S. Bank Trust, National Association (the "Process Agent"), with an
office on the date hereof at 550 South Hope Street, Los Angeles, California
90071, as its authorized agent with all powers necessary to receive on its
behalf service of copies of the summons and complaint and any other process
which may be served in any action or proceeding arising out of or relating to
this Agreement in any of the courts in and of the State of California. Such
service may be made by mailing or delivering a copy of such process to the
Trustee in care of the Process Agent at the
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<PAGE> 24
Process Agent's above address, and the Trustee hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf and agrees that
the failure of the Process Agent to give any notice of any such service to the
Trustee shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. As an alternative
method of service, the Trustee also irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of copies of
such process to it at its address specified in ARTICLE XX. If for any reason the
Los Angeles office of U.S. Bank Trust, National Association shall cease to act
as Process Agent, the Trustee shall appoint forthwith, in the manner provided
for herein, a successor Process Agent qualified to act as an agent for service
of process with respect to all courts in and of the State of California and
acceptable to the Agent. Nothing in this Section 24.5 shall affect the right of
the Agent to serve legal process in any other manner permitted by law or limit
the right of the Agent to bring any action or proceeding against the Trustee or
its property in the courts of other jurisdictions.
24.6 Entire Agreement. This Agreement constitutes the entire agreement
of the Issuer, the Guarantors, the Agent and the Trustee and the Senior Secured
Note holders with respect to the matters set forth herein and supersedes any
prior agreements, commitments, discussions and understandings, oral or written,
with respect thereto. There are no conditions to the full effectiveness of this
Agreement.
24.7 Amendments and Waivers. This Agreement may not be amended except by
a writing signed by the Issuer, the Designated Guarantors, the Trustee and the
Agent. No waiver of any rights under any provision of this Agreement or consent
to any departure therefrom shall be effective unless in writing and signed by
the Agent, the Issuer and the Trustee. Any such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
24.8 Conflicts. In case of any conflict between any terms of this
Agreement, on the one hand, and the Senior Note Agreements or any other document
or instrument relating to the Senior Note Obligations or the Senior Credit
Agreements or any other document or instrument relating to the Senior Credit
Agreement Obligations, on the other hand, then the terms of this Agreement shall
control.
24.9 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
applicable laws and regulations. If, however, any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid only to the
extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement or the validity or effectiveness of such provision
in any other jurisdiction.
24.10 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
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<PAGE> 25
24.11 Termination of Agreement. Upon payment and performance in full in
cash or Cash Equivalents of the Senior Credit Agreement Obligations and the
termination of the Commitment, this Agreement shall terminate and the Agent
shall promptly execute and deliver to the Issuer, the Trustee and the Senior
Secured Note holders such documents and instruments as shall be necessary to
evidence such termination; provided, however, that the obligations of the
Issuer, the Guarantors, and the Trustee under ARTICLE XXII shall survive such
termination.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
THE ISSUER
THE SPORTS CLUB COMPANY, INC.,
a California corporation
By /s/ Timothy O'Brien
--------------------------------------------
Timothy O'Brien
Title: Chief Financial Officer
Address:
The Sports Club Company, Inc.
11100 Santa Monica Boulevard., Suite 300
Los Angeles, California 90025
Tel. No.: (310) 479-5200
Fax No.: (310) 479-5740
THE DESIGNATED GUARANTORS
IRVINE SPORTS CLUB, INC.,
a California corporation
By /s/ Timothy O'Brien
--------------------------------------------
Timothy O'Brien
Title: Chief Financial Officer
Address:
c/o The Sports Club Company, Inc.
11100 Santa Monica Boulevard., Suite 300
Los Angeles, California 90025
Tel. No.: (310) 479-5200
Fax No.: (310) 479-5740
21
<PAGE> 26
CANOGA AGOURA SPECTRUM CLUB, INC.,
a California corporation
By: /s/ Timothy O'Brien
---------------------------------------------
Timothy O'Brien
Title: Chief Financial Officer
Address:
c/o The Sports Club Company, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Tel. No.: (310) 479-5200
Fax No.: (310) 479-5740
GREEN VALLEY SPECTRUM CLUB, INC.,
a Nevada corporation
By /s/ Timothy O'Brien
---------------------------------------------
Timothy O'Brien
Title: Chief Financial Officer
Address:
c/o The Sports Club Company, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Tel. No.: (310) 479-5200
Fax No.: (310) 479-5740
22
<PAGE> 27
THE AGENT
COMERICA BANK-CALIFORNIA
a California corporation
By /s/ Joseph Yurosek
---------------------------------------------
Joseph Yurosek
Title: Vice President
Address:
Comerica Bank-California
301 E. Ocean Boulevard., Suite 1800
Long Beach, California 90802
Tel. No.: (562) 590-2530
Fax No.: (562) 901-2703
THE TRUSTEE
U.S. BANK TRUST, NATIONAL
ASSOCIATION, A NATIONAL BANKING ASSOCIATION
By /s/ Richard Prokosch
-------------------------------------------
Title: Assistant Vice President
Address:
U.S. Bank Trust, National Association
-------------------------------------------------------
100 Wall Street
-------------------------------------------------------
New York, New York 10005
-------------------------------------------------------
Attn: Corporate Trust Administration SPFT 0210
Tel. No.: (212) 361-2501
Fax No.: (212) 809-5459
23
<PAGE> 1
EXHIBIT 10.4
DISBURSEMENT AGREEMENT
AMONG
U.S. BANK TRUST NATIONAL ASSOCIATION,
AS THE TRUSTEE,
U.S. BANK TRUST NATIONAL ASSOCIATION,
AS THE DISBURSEMENT AGENT
AND
THE SPORTS CLUB COMPANY, INC.,
AS ISSUER
THE SPECTRUM CLUB COMPANY, INC.,
AND
PONTIUS REALTY, INC.,
COLLECTIVELY WITH THE ISSUER, AS THE COMPANY PARTIES
DATED AS OF
APRIL 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions........................................................3
1.1 Defined Terms...............................................3
1.2 Additional Defined Terms....................................7
2. Establishment of Disbursement Account..............................7
2.1 Appointment of Disbursement Agent...........................7
2.2 Establishment of Disbursement Account.......................8
2.3 Security Agreement..........................................8
3. Disbursements from the Disbursement Account........................8
3.1 Conditions to Disbursement..................................8
3.2 Method of Disbursement......................................8
3.3 Disbursement Agent's Compensation...........................8
3.4 Transfer of Funds to the Trustee............................9
4. Disbursement Requests..............................................9
4.1 Acquisition Disbursements Requests (Fullerton/Santa Ana)....9
4.2 Capital Improvement Disbursement Requests..................11
4.3 Construction Disbursement Requests.........................12
4.4 Disbursements After Event of Default.......................13
4.5 Final Disbursement of Funds Following Operating Date.......14
5. Sale of Clubs; Other Replacement Clubs............................14
5.1 Sale of Existing Clubs.....................................14
5.2 Designation of Other Replacement Clubs.....................15
6. Replacement Clubs.................................................15
6.1 Limitations on Replacement Clubs...........................15
6.2 Development and Construction of Replacement Clubs..........16
7. Budget Amendments.................................................16
8. Events of Default.................................................17
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
9. Disbursement Agent's Limitation of Liability......................17
10. Termination.......................................................18
11. Substitution or Resignation of Disbursement Agent.................18
12. Notice............................................................18
13. Miscellaneous.....................................................19
13.1 Waiver and Amendment.......................................19
13.2 Invalidity.................................................19
13.3 No Authority...............................................19
13.4 Assignment.................................................19
13.5 Benefit....................................................19
13.6 Time.......................................................19
13.7 Choice of Law..............................................20
13.8 Entire Agreement...........................................21
13.9 Notices....................................................21
13.10 Counterparts...............................................22
13.11 Captions...................................................22
</TABLE>
iii
<PAGE> 4
DISBURSEMENT AGREEMENT
THIS DISBURSEMENT AGREEMENT (as amended, supplemented or otherwise
modified from time to time, the "AGREEMENT") is dated as of April 1, 1999, by
and among, U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association,
as disbursement agent (in such capacity, the "DISBURSEMENT AGENT"), U.S. BANK
TRUST NATIONAL ASSOCIATION, a national banking association, as trustee (in such
capacity, "Trustee"), and THE SPORTS CLUB COMPANY, INC., a Delaware corporation
(the "ISSUER"), THE SPECTRUM CLUB COMPANY, INC., a California corporation, and
PONTIUS REALTY, INC., a Delaware corporation ("PRI" and, together with the
Issuer, the "COMPANY PARTIES").
RECITALS
A. The Issuer has issued $100,000,000 aggregate principal amount of
Notes (as defined below) on the date hereof pursuant to the provisions of the
Indenture (as defined below). Sixty-Four Million Six Hundred Eighty Thousand
Dollars ($64,680,000) of the proceeds from the issuance of such Notes, (the
"PROCEEDS") will be deposited into an account (the "DISBURSEMENT ACCOUNT") to be
maintained by the Disbursement Agent pursuant to the terms hereof and of the
Security Agreement (as defined below).
B. As security for the Secured Obligations (as defined below), the
Issuer and the Subsidiary Guarantors have, among other things, granted, a
security interest to the Trustee, on behalf of itself and the holders of the
Notes, in all of the their right, title and interest in the Disbursement Account
and any amounts held in such Disbursement Account.
C. The parties intend that Seventeen Million Two Hundred Seventy
Thousand Dollars ($17,270,000) of such Proceeds (the "ROCKEFELLER ALLOCATION")
will be used solely to develop and construct a new athletic club and related
facilities at the space leased by PRI at Rockefeller Center, New York, New York
in accordance with the Budget (as defined below) attached hereto as Schedule I
(the "ROCKEFELLER CLUB").
1
<PAGE> 5
D. The parties intend that Twenty-Eight Million One Hundred Sixty
Thousand Dollars ($28,160,000) of such Proceeds (the "VERTICAL ALLOCATION,"
together with the Rockefeller Allocation, the "NEW YORK ALLOCATION") will be
used solely to develop and construct a new athletic club and related facilities
at the space leased by NYSC at 330 East 61st Street, New York, New York in
accordance with the Budget attached hereto as Schedule II (the "VERTICAL CLUB,"
together with the Rockefeller Club, the "NEW YORK CLUBS").
E. The parties intend that Six Million Five Hundred Thousand Dollars
($6,500,000) of such Proceeds (the "BOSTON ALLOCATION") will be used solely to
develop and construct a new athletic club and related facilities at the space
leased or to be leased by the Company and described as the portions of two city
blocks bounded by Washington, Tremont and Boylston, and fronting on the Boston
Commons, Boston, Massachusetts (the "BOSTON CLUB") or the Boston Replacement
Club (as defined below), in each case in accordance with a Budget delivered to
the Disbursement Agent and the Trustee.
F. The parties intend that Two Million Five Hundred Thousand Dollars
($2,500,000) of such Proceeds (the "WASHINGTON ALLOCATION") will be used solely
to develop and construct a new athletic club and related facilities at the space
leased by the Company at 220 M Street, Washington, D.C. (the "WASHINGTON CLUB")
or the Washington Replacement Club (as defined below), in each case in
accordance with a Budget delivered to the Disbursement Agent and the Trustee.
G. The parties intend that Ten Million Two Hundred Fifty Thousand
Dollars ($10,250,000) of such Proceeds (the "PURCHASE ALLOCATION") will be used
to acquire: (i) the ground lease interest of SCC I LLC under that certain ground
lease agreement with the City of Fullerton in the land underlying that certain
athletic club and related facilities more commonly known as the Spectrum Club
Fullerton (the "FULLERTON CLUB"); and (ii) SCC I LLC's fee interest in the
ground underlying that certain athletic club and related facilities more
commonly known as the Spectrum Club Santa Ana (the "SANTA ANA CLUB").
2
<PAGE> 6
H. The parties have entered into this Agreement in order to set forth
the conditions upon which, and the manner in which, funds will be disbursed from
the Disbursement Account.
3
<PAGE> 7
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions
1.1 Defined Terms. In this Agreement, defined terms shall have
the meanings herein specified, such definitions to be equally applicable to both
the singular and plural forms of any of the terms defined:
"ACQUISITION DISBURSEMENT REQUEST" means a request by a Company Party
for the disbursement of a portion of the Purchase Allocation to be used for the
acquisition of either the Spectrum Club Fullerton or the Spectrum Club Santa
Ana, which request shall be in the form of EXHIBIT "A" attached hereto.
"ADDITIONAL REVENUE" means investment income (loss), less any losses or
costs associated therewith, earned on amounts deposited in the Disbursement
Account. Subject to SECTION 3.3, Additional Revenue shall be distributed to the
Company on March 1 and September 1 of each year during the term of this
Agreement.
"ADVANCE DISBURSEMENT" means a disbursement from the Disbursement
Account to a Company Party in accordance with the applicable Budget,
notwithstanding the fact that not all certifications and lien releases have been
obtained or that other disbursement conditions have not been satisfied; provided
that the aggregate amount of Advance Disbursements outstanding at any time shall
not exceed (i) One Million Dollars ($1,000,000) per New Club, or (ii) Two
Million Dollars ($2,000,000) in the aggregate for all New Clubs.
"BUDGET" means, with respect to any New Club, the itemized budget in the
form of EXHIBIT "E" hereto setting forth on a line item basis all of the costs
the applicable Company Party anticipates expending from and after March 1, 1999
in connection with the design, development, construction and equipping of such
New Club (provided, that in connection with any New Club with aggregate
Construction
4
<PAGE> 8
Costs of $10 million or less, the Budget may have as many line items as the
Company Parties may determine), which Budget may be amended from time to time in
accordance with the provisions of SECTION 7(A) hereof.
"CAPITAL IMPROVEMENT ALLOCATION" means (a) that portion of the Purchase
Allocation not allocated to a Purchase Replacement Club pursuant to SECTION
4.1(D) and (b) that portion of the Sale Proceeds not allocated to a Sale
Replacement Club pursuant to SECTION 5.1(B).
"CAPITAL IMPROVEMENT DISBURSEMENT REQUEST" means a request by a Company
Party for the disbursement of a portion of the Capital Improvement Allocation,
which request shall be in the form of Exhibit "B" attached hereto.
"CONSTRUCTION ALLOCATION" means, with respect to any New Club, the
amount deposited in the Disbursement Account and allocated to pay the
Construction Costs of such New Club.
"CONSTRUCTION COSTS" means with respect to any New Club, all of the
costs set forth on all line items in the Budget for such New Club.
"CONSTRUCTION DISBURSEMENT REQUEST" means any In-Progress Disbursement
Request or any Advance Disbursement Request (each as defined below).
"CONTRACT" means a contract pertaining to the design or construction of
any of the New Clubs, and any other contract, license and performance and
payment bond or guarantee, if any, relating to any of the New Clubs.
"CONTRACTOR" means a contractor which is a party to a Contract.
"DISBURSEMENT REQUEST" means an Acquisition Disbursement Request, a
Capital Improvement Disbursement Request or a Construction Disbursement Request.
"INDENTURE" means the indenture dated, April 1, 1999, among the Issuer,
the Subsidiary Guarantors named therein and Trustee, on behalf of itself and the
holders of the Notes, as amended, supplemented or modified from time to time.
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"NEW CLUBS" means The New York Clubs, the Boston Club, the Washington
Club, and any Replacement Club
"NOTES" means the 11-3/8% Senior Secured Notes due 2006 issued from time
to time under the Indenture, each with the Subsidiary Guaranty endorsed thereon.
"OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers of
the Company Party on whose behalf or for whose benefit the certificate is being
executed or delivered, in either case including one of the following Officers of
such Company Party: the Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer, Executive Vice President, Vice President,
Treasurer or Assistant Treasurer.
"OPERATING" means, with respect to the any New Club, the first time that
(1) all Liens (other than Liens permitted
pursuant to clause (h) of the definition of Permitted Liens in the
Indenture) related to the development, construction and equipping of,
and beginning operations at, such New Club have been discharged or, if
payment is not yet due or if such payment is contested in good faith by
the Company Party that owns or operates such New Club, sufficient funds
remain in the Disbursement Account to discharge such Liens and such
Company Party has taken any action (including the institution of legal
proceedings) necessary to prevent the sale of any or all of such New
Club,
(2) the applicable Company Party has granted a
first priority security interest to the Trustee, on behalf of itself and
the holders of the Notes, in its right title and interest in such
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New Club (subject only to liens permitted pursuant to clause (h) of the
definition of Permitted Liens in the Indenture),
(3) the Issuer has delivered an Officers'
Certificate to Trustee certifying that such New Club is substantially
complete in all material respects in accordance with the Budget and all
applicable building and other laws, ordinances and regulations for such
New Club,
(4) such New Club is in a condition (including
installation of furnishings, fixtures and equipment) to receive
customers in the ordinary course of business,
(5) such New Club is open to the general public
and operating in accordance with all applicable laws, and
(6) a certificate of occupancy has been issued
for such New Club by the appropriate governmental authorities; provided,
that if such certificate of occupancy is temporary, the conditions
specified therein can be satisfied without material expense.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"REALIZED SAVINGS" means the excess of the amount budgeted in a Budget
for a New Club for a line item over the amount of funds expended or owed or
expected to be expended by a Company Party to complete the tasks set forth in
such line item and for the materials and services used to complete such tasks,
so long as the terms for such tasks are final and unconditional (other than the
satisfactory completion of such tasks); provided, that Realized Savings for any
line item shall be deemed to be (i) zero if such savings are or will be obtained
in a manner that materially detracts
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from the overall value, quality and amenities of such New Club and (ii) reduced
to the extent previously reallocated to another line item in the Budget.
"REPLACEMENT CLUBS" means the Boston Replacement Club, the Washington
Replacement Club, the Sale Replacement Clubs and the Purchase Replacement Clubs
(each as defined below).
"RETAINAGE AMOUNTS" means amounts that have accrued and are owing under
the terms of any Contract for work or services already provided but are being
withheld from payment to any Contractor until certain subsequent events (e.g.,
completion benchmarks) have been achieved.
"SECURED OBLIGATIONS" shall mean all Obligations of the Company Parties
from time to time owing to the Trustee now existing or hereafter incurred,
arising under or in connection with the Indenture, the Notes, the Security
Agreement, or this Disbursement Agreement.
1.2 Additional Defined Terms. All other capitalized terms not
defined herein, but defined in the Indenture, shall have the meaning ascribed to
them in the Indenture.
2. Establishment of Disbursement Account.
2.1 Appointment of Disbursement Agent. The Trustee and the
Company Parties hereby appoint the Disbursement Agent, and the Disbursement
Agent hereby accepts appointment, as disbursement agent under the terms and
conditions of this Agreement and as securities intermediary under the terms and
conditions of the Security Agreement. The Disbursement Agent agrees to act in
good faith at all times.
2.2 Establishment of Disbursement Account. Concurrently with the
execution and delivery of this Agreement, the Disbursement Account shall be
established in accordance with the terms of the Security Agreement.
2.3 Security Agreement. Pursuant to the Security Agreement, the
Company Parties have granted to the Trustee, for the benefit of the holders of
the
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Notes, a security interest in the Disbursement Account and all funds and assets
from time to time deposited therein, and all products and proceeds thereof.
3. Disbursements from the Disbursement Account.
3.1 Conditions to Disbursement. The Disbursement Agent shall
disburse funds from the Disbursement Account only upon satisfaction of the
applicable conditions to disbursement set forth herein.
3.2 Method of Disbursement. Upon satisfaction of the applicable
conditions to disbursement set forth herein, the Disbursement Agent shall
disburse funds from the Disbursement Account as specified in the applicable
Disbursement Request.
3.3 Disbursement Agent's Compensation. As long as the Securities
Intermediary under the Security Agreement also serves as Disbursement Agent
hereunder, the Disbursement Agent shall not be entitled to an additional fee for
its services hereunder, but shall be entitled to reimbursement for its
reasonable expenses, including, without limitation, the reasonable fees and
expenses of the Disbursement Agent's counsel. The Disbursement Agent shall
receive such payments without the requirement of obtaining any further consent
or action on the part of the Company Parties with respect to the payment;
provided that without limiting the foregoing, the Disbursement Agent shall
provide written itemization of requested reimbursement of such fees and expenses
to the Company Parties at least ten (10) Business Days before the Disbursement
Agent withdraws such payment from the Disbursement Account. All amounts payable
to the Disbursement Agent shall be deducted from the Additional Revenue.
3.4 Transfer of Funds to the Trustee. Upon the receipt of
written notice executed by the Trustee, which certifies (i) that an Event of
Default hereunder has occurred and is continuing, and (ii) that the Trustee is
entitled to the funds in the Disbursement Account, the Disbursement Agent shall
deliver to the Trustee all funds in the Disbursement Account, other than amounts
then permitted to be disbursed under SECTION 5.2 hereof.
4. Disbursement Requests.
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4.1 Acquisition Disbursements Requests (Fullerton/Santa Ana).
(1) On or prior to the eightieth (80th) day after the
Issue Date, the Company Parties will acquire SCC I LLC's interest in the
Fullerton Club and Santa Ana Club (the "SCC Interest"). The Company Parties may
within eighty (80) days after the Issue Date submit to the Disbursement Agent,
with a copy to the Trustee, an Acquisition Disbursement Request to fund the
portion of such acquisitions not funded by the use of Sale Proceeds from the
sale of the Santa Ana Club in accordance with SECTION 5.1.
(2) The Disbursement Agent shall review each Acquisition
Disbursement Request submitted to determine that such request conforms to
EXHIBIT "A", and that to the best of the Disbursement Agent's actual knowledge,
all other conditions set forth in SECTION 4.1(C) hereof have been satisfied. The
Disbursement Agent shall notify the Company Party that submitted such request as
soon as reasonably possible (and in any event within two (2) Business Days after
the Disbursement Agent receives the required documents) if any Acquisition
Disbursement Request is disapproved and the reason(s) therefor.
(3) Promptly following the satisfaction of the
conditions described below, the Disbursement Agent shall make the disbursement
described in the corresponding Acquisition Disbursement Request.
(1) The Company Party making such request shall
have agreed to grant to the Trustee, for its benefit and the ratable
benefit of the Holders, a first priority security interest (subject to
Permitted Liens) in the real property interest being acquired pursuant
to such Acquisition Disbursement (provided, that if the acquiring
Company Party sells, in accordance with SECTION 5.1 hereof, its interest
in the Santa Ana Club within three (3) Business Days following its
acquisition thereof, such selling Company Party need not grant such
security interest), pursuant to a deed of trust or leasehold mortgage,
as applicable, substantially identical to those deeds of trust executed
by the Company Parties and the Subsidiary
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Guarantors, dated as of April 1, 1999, in favor of the Trustee, for its
benefit and the ratable benefit of the Holders.
(2) The Acquisition Disbursement Request on its
face shall have been completed as to the information required therein.
(3) No Event of Default exists and is
continuing.
(4) In the event that the Company Parties do not
submit an Acquisition Disbursement Request for the full amount of the
Purchase Allocation within eighty (80) days after the Issue Date, then
the Company Parties may designate, by written notice to the Disbursement
Agent and the Trustee (accompanied by a Budget relating thereto) one or
more replacement athletic clubs and related facilities the Construction
Costs of which shall be funded from the unused portion of the Purchase
Allocation (the "PURCHASE REPLACEMENT CLUB"). The Company Parties shall
use the Purchase Allocation solely for the acquisition, construction and
development of such Purchase Replacement Club pursuant to the terms
hereof or to make capital improvements in other clubs that are
Collateral.
4.2 Capital Improvement Disbursement Requests.
(1) The Company Parties may from time to time submit to
the Disbursement Agent, with a copy to the Trustee, a Capital Improvement
Disbursement Request to fund capital improvements at any existing athletic clubs
that are Collateral.
(2) The Disbursement Agent shall review each Capital
Improvement Disbursement Request to determine that such request conforms to
EXHIBIT "B" hereto, and that to the best of the Disbursement Agent's actual
knowledge, all other conditions set forth in SECTION 4.2(C) hereof have been
satisfied. The Disbursement Agent shall notify the Company Party that submitted
such request as soon as reasonably possible (and in any event within two (2)
Business Days after the Disbursement Agent receives the required documents) if
any Capital Improvement Disbursement Request is disapproved and the reason(s)
therefor.
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(3) Promptly following the satisfaction of the
conditions described below in this subsection, the Disbursement Agent shall make
the disbursement described in the corresponding Capital Improvement Disbursement
Request.
(1) The Company Party making such request
shall have identified the athletic club at which the capital
improvements are to be made and the nature of such improvements.
(2) Any and all funds disbursed pursuant to
such request shall be used solely for capital improvements, in
accordance with attached invoices.
(3) The Capital Improvement Disbursement
Request on its face shall have been completed as to the information
required therein.
(4) No Event of Default exists and is
continuing.
4.3 Construction Disbursement Requests.
(1) The Company Parties may from time to time submit to
the Disbursement Agent, with a copy to the Trustee, a request for the
disbursement of funds from the Construction Allocation for the purpose of paying
Construction Costs. Such request shall be (i) consistent with the Budget for
such New Club, and (ii) in the form of either EXHIBIT "C" attached hereto (a
"IN-PROGRESS DISBURSEMENT REQUEST") or EXHIBIT "D" attached hereto (an "ADVANCE
DISBURSEMENT REQUEST"); provided, that Advance Disbursement Requests may be
delivered no more frequently than twice per calendar month.
(2) The Disbursement Agent shall review each
Construction Disbursement Request to determine that such request conforms to
EXHIBIT "C" or EXHIBIT "D", as the case may be, and that, to the best of the
Disbursement Agent's actual knowledge, all other conditions set forth in SECTION
4.3(c) hereof have been satisfied. The Disbursement Agent shall notify the
Company Party that submitted
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such request as soon as reasonably possible (and in any event within two (2)
Business Days after the Disbursement Agent receives the required documents) if
any Construction Disbursement Request, or any portion thereof, is disapproved
and the reason(s) therefor.
(3) Promptly following the satisfaction of the
conditions described below in this Section, the Disbursement Agent shall make
the disbursements described in the corresponding Construction Disbursement
Request:
(1) The Construction Disbursement Request on its
face shall have been completed as to the information required therein,
and the required exhibits and attachments, if any, shall be attached.
(2) No Event of Default exists and is
continuing.
(3) The Company Party making such request
certifies that any amounts disbursed pursuant to any previous
Construction Disbursement Requests (other than Advance Disbursements
permitted to be outstanding under this Agreement) shall have been paid
to the respective parties identified in such previous Construction
Disbursement Request.
(4) With respect to any Disbursement Request
related to any Replacement Club, such disbursement will only be used to
construct or develop a New Club on which the Trustee, for its benefit
and the ratable benefit of the Holders, holds a first priority security
interest (subject to Permitted Liens). In no event may any disbursement
pursuant to a Construction Disbursement Request be used in connection
with any Shared Collateral.
4.4 Disbursements After Event of Default. If an Event of Default
exists and is continuing, the Disbursement Agent shall not approve any
disbursement of funds from the Disbursement Account; provided, that with the
consent of the Trustee, the following payments can be made:
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(i) if all other conditions in SECTION 4.3 are met, funds
from the Disbursement Account for work completed or
materials purchased on or prior to the date that such
Event of Default first occurred;
(ii) payments to prevent the condition of any New Club from
deteriorating or to preserve any work completed on any
New Club certified to the Disbursement Agent and the
Trustee in writing by the Company Parties to be
reasonably necessary or advisable; and
(iii) if such condition continues for a period of three (3)
consecutive months or more, at the written request of
the Company Parties, Retainage Amounts for work
completed; provided that the Company Parties certify to
the Disbursement Agent and the Trustee in writing the
amount required to be paid for such Retainage Amounts
and the conditions for paying such amounts.
4.5 Final Disbursement of Funds Following Operating Date.
Provided that no Event of Default has occurred and is continuing, any funds
allocated to a New Club that remain in the Disbursement Account after such New
Club has been Operating (other than funds retained to pay Construction Costs or
discharge Liens with respect to such New Club) may be disbursed to the Company
Party that owns or operates such New Club in accordance with the provisions of
this Section (the "Final Disbursement"). Upon receipt by the Disbursement Agent
of a written certification from such Company Party that (i) such New Club is
Operating, and (ii) no Event of Default exists, then the Disbursement Agent
shall disburse the Final Disbursement as directed by such Company Party.
5. Sale of Clubs; Other Replacement Clubs.
5.1 Sale of Existing Clubs.
(1) Concurrently with the closing of the sale of either
(i) the Santa Ana Club, or (ii) that certain real property and improvements
thereon
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located in the City of Thousand Oaks, State of California, more commonly known
as "Spectrum Club Thousand Oaks" (the "SPECTRUM CLUB THOUSAND OAKS"), the
selling Company Party shall (A) receive the Net Proceeds of such sale (the "SALE
PROCEEDS"), if any, as trustee and (B) either (x) deposit the Sale Proceeds into
the Disbursement Account or (y) use the Sale Proceeds of the Santa Ana Club to
acquire the SCC Interest.
(2) The Company Parties may (i) designate by written
notice to the Disbursement Agent and the Trustee (accompanied by a Budget
relating thereto) one or more replacement athletic clubs and related facilities
the Construction Costs of which shall be funded from all or a portion of the
Sale Proceeds deposited in the Disbursement Account (the "SALE REPLACEMENT
CLUB"), and (ii) use all or any portion of the Sale Proceeds deposited in the
Disbursement Account, if any, are to be used to make capital improvements to
clubs that are Collateral. The Company Parties shall use the Sale Proceeds
solely for the acquisition of the SCC Interest, the acquisition, development and
construction of the Sale Replacement Club, or to make capital improvements in
clubs that are Collateral.
5.2 Designation of Other Replacement Clubs.
(1) If the Company Parties elect not to develop and
construct the Boston Club, then the Company Parties may designate by written
notice to the Disbursement Agent and the Trustee (accompanied by a Budget
relating thereto) one or more replacement athletic clubs and related facilities
(the "BOSTON REPLACEMENT CLUB"). The Company Parties shall use the Boston
Allocation for the acquisition, construction and development of the Boston
Replacement Club.
(2) If the Company Parties elect not to develop and
construct the Washington Club, then the Company Parties may designate by written
notice to the Disbursement Agent and the Trustee (accompanied by a Budget
relating thereto) one or more replacement athletic clubs and related facilities
(the "WASHINGTON REPLACEMENT CLUB"). The Company Parties shall use the
Washington Allocation for the acquisition, construction and development of the
Washington Replacement Club.
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6. Replacement Clubs.
6.1 Limitations on Replacement Clubs. The Company Parties'
ability to designate a Replacement Club shall be subject to the following
restrictions:
(1) At the time that the Company Parties designate any
Replacement Club, the Company Parties must also submit to the Disbursement Agent
and the Trustee a Budget for the construction and development of such
Replacement Club reasonably prepared in good faith. The amount of any
Replacement Club Budget shall not exceed the amount of the Construction
Allocation for such Replacement Club.
(2) The Company Parties may only designate as a
Replacement Club an athletic club, site or piece of real property on which the
Trustee, for its benefit and the ratable benefit of the Holders, holds a first
priority security interest, subject to Permitted Liens. The Company Parties may
not designate any Shared Collateral as a Replacement Club.
(3) If the Company Parties acquire any real property
interest in connection with any Replacement Club, the Company Party acquiring
such real property interest must grant to Trustee, for its benefit and the
ratable benefit of the Holders, a first priority security interest in such real
property interest, subject to Permitted Liens. Such first priority security
interest shall be created by a deed of trust or leasehold mortgage, as
applicable, substantially identical to the deeds of trust, dated April 1, 1999,
executed by the Company Parties in favor of the Trustee, for its benefit and the
ratable benefit of the Holders.
6.2 Development and Construction of Replacement Clubs.
Disbursements for the construction or development of a Replacement Club shall be
governed by SECTIONS 3 AND 4 hereof.
7. Budget Amendments.
(1) The amount of any line item in the Budget for any New Club
may from time to time be (i) decreased by any Realized Savings with respect to
such line item, or (ii) increased by (x) any Realized Savings with respect to
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any other line item in such Budget, (y) additional amounts deposited in the
Disbursement Account and allocated to such line item or (z) additional amounts
paid by the Company Parties with respect to any cost overrun relating to such
line item from other funds available to the Company Parties. In connection with
any such amendment of the Budget, the Company Parties shall deliver an Officers'
Certificate to the Disbursement Agent and the Trustee specifying the changes to
the line items in such Budget, the basis therefor (including, if applicable, a
description of the basis for the amount of any Realized Savings and the source
of any other funds), and that such amended Budged complies with the terms
hereof.
(2) Promptly upon becoming aware of any cost overrun for
any line item in the Budget relating to any New Club, the Company Parties shall
amend such Budget pursuant to the provisions of clause (a) of this Section to
eliminate such cost overrun (and, if necessary, pay such cost overrun from other
funds available to the Company Parties or deposit in the Disbursement Account
amounts sufficient to effectuate such amendment).
8. Events of Default. The occurrence of any of the following specified
events shall be an "EVENT OF DEFAULT" hereunder:
8.1 An Event of Default under the Indenture.
8.2 A payment to be made by a Company Party from the proceeds of
a prior Disbursement Request in excess of Fifty Thousand Dollars ($50,000) has
not been paid within five (5) Business Days after notice of such non-payment.
8.3 Any representation, warranty, certification or statement by
any of the Company Parties in this Agreement, or any certificate, request,
budget or statement delivered pursuant to this Agreement, shall be untrue in any
material respect on the date given or made and such untruthfulness continues for
a period of thirty (30) days after written notice thereof.
8.4 The Company Parties shall have failed to comply with any
other term set forth herein, and such breach shall not have been remedied within
thirty (30) days after written notice thereof.
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8.5 The failure of any of the Company Parties to deliver any
documents required by the Security Agreement and such failure continues for a
period of thirty (30) days.
9. Disbursement Agent's Limitation of Liability. The Disbursement Agent
shall have no duties or obligations hereunder, except as expressly set forth
herein, shall be responsible only for the performance of such duties and
obligations, shall not be required to take any action otherwise than in
accordance with the terms hereof and shall not be in any manner liable or
responsible for any loss or damage arising by reason of any act or omission to
act by it hereunder or in connection with any of the transactions contemplated
hereby, including, but not limited to, any loss that may occur by reason of
forgery, false representations, or any other reason, except for its negligence
or willful misconduct. 1.
10. Termination. This Agreement shall terminate (a) automatically thirty
(30) days following such time as all amounts in the Disbursement Account have
been distributed pursuant to and in accordance with the terms hereof and all New
Clubs are Operating, or (b) upon the earliest of (i) the date upon which the
Secured Obligations have been indefeasibly paid and performed in full and the
Indenture has been terminated or (ii) the date upon which there has been a Legal
Defeasance or a Covenant Defeasance.
11. Substitution or Resignation of Disbursement Agent. The Issuer shall
have the right, upon thirty (30) days written notice to the Disbursement Agent
and the Trustee to cause the Disbursement Agent to be relieved of its duties
hereunder and select a substitute disbursement agent to serve hereunder. The
Disbursement Agent may resign at any time upon thirty (30) days' written notice
to all parties hereto. Such resignation shall take effect upon receipt by the
Disbursement Agent of an instrument of acceptance executed by a successor
disbursement agent and consented to by the Company Parties. Upon selection of
such substitute disbursement agent, the Trustee, the Company Parties (so long as
there exists no Default or Event of Default) and the substitute disbursement
agent shall enter into an agreement substantially identical to this Agreement
and, thereafter, the Disbursement Agent shall be relieved of its duties and
obligations to perform hereunder, except that the Disbursement Agent shall
transfer to the substitute disbursement agent upon request therefor originals of
all books, records, and other documents in the Disbursement
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Agent's possession relating to this Agreement. Notwithstanding anything to the
contrary in the foregoing, the Company Parties will only appoint as a
disbursement agent a Person who (i) is not an affiliate of any of the Company
Parties, and (ii) is either a domestic commercial bank of recognized standing or
a nationally recognized investment bank, in either case that holds capital and
surplus reserves in excess of One Hundred Million Dollars ($100,000,000).
12. Notice. The parties hereto irrevocably instruct the Disbursement
Agent that on the first date upon which the balance in the Disbursement Account
is reduced to zero, the Disbursement Agent shall deliver to the Trustee and the
Company Parties a notice that the balance in such account has been reduced to
zero (0).
13. Miscellaneous.
13.1 Waiver and Amendment. Any party hereto may specifically
waive any breach of this Agreement by any other party only in accordance with
Section 9.2 of the Indenture, but no such waiver shall be deemed to have been
given unless such waiver is in writing, signed by the waiving party and
specifically designates the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches. This Agreement may be amended
only by a writing signed by duly authorized representatives of all parties and
in accordance with Section 9.2 of the Indenture.
13.2 Invalidity. If, for any reason whatsoever, any one or more
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
13.3 No Authority. The Disbursement Agent shall have no
authority to, and shall not make any warranty or representation or incur any
obligation on behalf of, or in the name of, the Trustee.
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13.4 Assignment. This Agreement is personal to the parties
hereto, and, except as set forth in SECTION 11 hereof, the rights and duties of
any party hereunder shall not be assignable except with the prior written
consent of the other parties. In any event, this Agreement shall inure to and be
binding upon the parties and their successors and permitted assigns.
13.5 Benefit. The parties hereto, the holders from time to time
of the Notes, and their respective successors and assigns, but no others, shall
be bound hereby and entitled to the benefits hereof.
13.6 Time. Time is of the essence of each provision of this
Agreement.
13.7 Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED, AND THE RIGHTS OF THE PARTIES DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402
OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND
RULES 327(b). THE COMPANY PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY PARTIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY
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MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. THE COMPANY IRREVOCABLY CONSENT, TO THE FULLEST EXTENT THEY
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY
PARTIES AT THEIR ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY PARTIES IN ANY OTHER
JURISDICTION.
13.8 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments, whether
oral or written.
13.9 Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either; (a) on the day of hand delivery; (b) on the date of
confirmation of receipt of electronic facsimile transmission; (c) on the date of
confirmation of delivery if sent by Federal Express (or other reputable
overnight courier service), or (d) on the third day after sent, when sent by
United States certified mail, postage and certification fee prepaid, return
receipt requested, addressed as follows:
To the Disbursement Agent:
U.S. BANK TRUST NATIONAL ASSOCIATION
100 Wall Street
New York, New York 10005
Attn: Corporate Trust Administration SPFT0210
Telecopier No.: _____________
and to:
U.S. BANK TRUST NATIONAL ASSOCIATION
21
<PAGE> 25
180 East 5th Street
St. Paul, Minnesota 55101
Attn: Richard Prokosch, Assistant Vice President
Telecopier No.: (651) 244-0711
To the Trustee:
U.S. BANK TRUST NATIONAL ASSOCIATION
100 Wall Street
New York, New York 10005
Attn: Corporate Trust Administration SPFT0210
Telecopier No.: _____________
and to:
U.S. BANK TRUST NATIONAL ASSOCIATION
180 East 5th Street
St. Paul, Minnesota 55101
Attn: Richard Prokosch, Assistant Vice President
Telecopier No.: (651) 244-0711
To the Company Parties:
The Sports Club Company, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Telecopier No.: (310) 479-8879
The Spectrum Club Company, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Telecopier No.: (310) 479-8879
NY Sports Club, Inc.
11100 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
22
<PAGE> 26
Telecopier No.: (310) 479-8879
or at such other address as the specified entity most recently may have
designated in writing in accordance with this paragraph to the others.
13.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13.11 Captions. Captions in this Agreement are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
23
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed and delivered this
Disbursement Agreement as of the day and year first above written.
DISBURSEMENT AGENT: U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association
By: /s/ Richard Prokosch
------------------------------------
Name: Richard Prokosch
-------------------------------
Title: Assistant Vice President
------------------------------
TRUSTEE: U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association
By: /s/ Richard Prokosch
------------------------------------
Name: Richard Prokosch
-------------------------------
Title: Assistant Vice President
------------------------------
COMPANY PARTIES: THE SPORTS CLUB COMPANY, INC.,
a Delaware corporation
By: /s/ Timothy O'Brien
------------------------------------
Name: Timothy O'Brien
-------------------------------
Title: Chief Financial Officer
------------------------------
[Signatures continue on next page]
<PAGE> 28
THE SPECTRUM CLUB COMPANY, INC.,
a California corporation
By: /s/ Timothy O'Brien
------------------------------------
Name: Timothy O'Brien
-------------------------------
Title: Chief Financial Officer
------------------------------
PONTIUS REALTY, INC.
a Delaware corporation
By: /s/ Timothy O'Brien
------------------------------------
Name: Timothy O'Brien
-------------------------------
Title: Chief Financial Officer
------------------------------
<PAGE> 1
EXHIBIT 99.1
[THE SPORTS CLUB COMPANY]
NEWS RELEASE
FOR IMMEDIATE RELEASE CONT ACT: JOHN M. GIBBONS
PRESIDENT AND
CHIEF OPERATING OFFICER
THE SPORTS CLUB COMPANY, INC.
(310) 479-5200
THE SPORTS CLUB COMPANY COMPLETES
OFFERING OF $100,000,000 OF SENIOR SECURED NOTES
LOS ANGELES, CA (April 5, 1999) -- The Sports Club Company, Inc. (AMEX: SCY)
today announced the completion of its private offering of $100,000,000 principal
amount of its 11-3/8% Senior Notes due 2006.
The initial purchasers offered the Notes only to Qualified Institutional Buyers
and Accredited Investors as permitted under Rule 144A of the Securities Act. The
Notes initially have not been registered under the Securities Act and may not be
sold in the United States absent registration or an exemption from the
registration requirements of the Securities Act. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy the Notes.
"Completion of this Offering provides the incremental funding necessary for our
five new Sports Clubs in Boston, San Francisco, Washington D.C. and two in New
York City. Our focus is squarely on the development of these Clubs to the
standards and success of our other Sports Clubs in Los Angeles and New York,"
commented John M. Gibbons, President and Chief Operating Officer.
The Sports Club Company operates thirteen upscale health and fitness clubs
throughout the country under the Sports Club and Spectrum Club names.
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