CUSIP NO. 84917P10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 5
THE SPORTS CLUB COMPANY, INC.
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
84917P10
(CUSIP NUMBER)
AARON A. GRUNFELD
RESCH POLSTER ALPERT & BERGER, LLP
10390 SANTA MONICA BOULEVARD
FOURTH FLOOR
LOS ANGELES, CALIFORNIA 90025-6917
(310) 277-8300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS)
NOVEMBER 9, 2004
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a Reporting Person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP NO. 84917P10
(1) NAME OF REPORTING PERSONS
D. Michael Talla
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(A) |_|
(B) |_|
(3) SEC USE ONLY
(4) SOURCE OF FUNDS (SEE INSTRUCTIONS)
PF
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) |_|
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.
NUMBER OF SHARES (7) SOLE VOTING POWER 4,266,350 (1)
BENEFICIALLY OWNED BY (8) SHARED VOTING POWER 0
EACH REPORTING PERSON (9) SOLE DISPOSITIVE POWER 4,266,350 (1)
WITH (10) SHARED DISPOSITIVE POWER 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,266,350 (2)
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) |_|
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 26.75% (2)
(14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
--------
(1) After giving effect to an irrevocable proxy to vote 1,000,000 shares of
Common Stock granted by Mr. Talla to MDP Ventures II LLC as part of a
loan agreement between them that included delivery of those shares as
collateral.
(2) After giving effect to shares of Common Stock issued November 15, 2004,
options exercisable by Mr. Talla and Series C Preferred Stock owned by
Mr. Talla but excluding 30,953 shares of Common Stock owned by Mona
Talla, wife of D. Michael Talla, and as to which he disclaims beneficial
interest.
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CUSIP NO. 84917P10
The Schedule 13D filed with the Securities and Exchange Commission (the
"Commission") on December 1, 1994, as amended to date, is hereby further amended
as follows.
ITEM 1. SECURITY AND ISSUER
This statement relates to the common stock, par value $0.01 per share (the
"Common Stock"), of The Sports Club Company, Inc., a Delaware corporation (the
"Issuer"). The principal executive offices of the Issuer are located at 11100
Santa Monica Blvd., Suite 300, Los Angeles, California 90025.
ITEM 2. IDENTITY AND BACKGROUND
(a) This Statement is being filed solely by D. Michael Talla
("Talla"). Effective September 14, 1994, as previously reported, Talla entered
into that certain Stockholders Voting Agreement and Conditional Irrevocable
Proxy (the "Voting Agreement") with certain other persons (the "Voting Group
Persons") pursuant to which the Voting Group Persons agreed to vote their shares
of the Common Stock of the Issuer in the manner directed by holders of a
majority of the shares of Common Stock held by the Voting Group Persons; as a
result of the Voting Agreement, the Voting Group Persons reported that they were
considered a group pursuant to Rule 13d-5. The Voting Agreement terminated on
October 20, 2004.
(b), (c) and (f) The name, address, principal occupation, and
citizenship of the Reporting Person are set forth below:
CITIZENSHIP/
PRINCIPAL JURISDICTION
NAME AND ADDRESS OCCUPATION OF ORGANIZATION
D. Michael Talla Chairman of the Board United States
11100 Santa Monica Blvd. of Issuer
Los Angeles, California 90025
(d) The Reporting Person has not, during the past five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) The Reporting Person has not, during the past five years, been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding as or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The following information amends and supplements Item 3.
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As further described in Item 6 below, between May of 2004 and November 15,
2004, Mr. Talla received the following shares from the Issuer as compensation
for his guarantee of certain loans to the Issuer:
November 15, 2004 46,466
November 15, 2004 50,481
The Reporting Person listed below currently has options exercisable within
60 days of the date hereof to purchase 365,000 shares of the Issuer's Common
Stock pursuant to employee stock options.
ITEM 4. PURPOSE OF TRANSACTION
The following information amends and supplements Item 4.
The Issuer has previously disclosed that it has engaged an independent
investment banker to assist the Issuer in selling certain assets and fitness
facilities in order to generate cash for working capital purposes and to retire
a portion of its existing indebtedness. By letter dated November 8, 2004 and
delivered to the investment banker on November 9, 2004, Moraga Newport, LLC, a
limited liability company beneficially owned by the Reporting Person ("Buyer"),
submitted a letter of intent to purchase from the Issuer (also referred to
herein as the "Seller") certain of the assets and business comprising the
"Southern California Business" for an undisclosed amount.
The Southern California Business consists of those three health and
fitness clubs owned and operated by the Issuer and/or its affiliate presently
known as Sports Club/LA , Sports Club/Irvine and the Sports Club LA/Beverly
Hills. Buyer has offered to purchase all the assets owned by Seller and/or its
affiliate that relate to the use or operation of the Southern California
Business, except the management assets in the Issuer's corporate offices, in
each instance free and clear of all encumbrances and obligations at closing
(except for all existing equipment leases, individual sale contracts (or
reasonable replacement thereof) and/or concession agreements, which are to be
assumed by Buyer as part of the Purchase).
Buyer offered to assume all liabilities of the Issuer and its affiliates
relating to the Southern California Business (except repayment of the bond
financing), including, without limitation, the obligation to provide service on
all memberships and for all prepaid goods and services, and the obligations
under all equipment leases (if any), leases, concession agreements and service
agreements of Seller and/or its affiliates related thereto.
The letter of intent is subject to a number of conditions including
without limitation the receipt all necessary government and third party consents
and approvals, there being no pending or threatened litigation against the
Seller or any of its affiliates, not covered by insurance, that could materially
and adversely affect the Southern California Business, and there being no
material adverse change in the Southern California Business. The offer contained
in the letter of intent automatically expires if the Issuer has not accepted it
on or before 5:00 p.m. Pacific Standard Time on November 30, 2004.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As of the date of this Amendment 5 to Schedule 13D, the
Reporting Person directly or indirectly beneficially owns in the aggregate
5,266,350 shares of the Common Stock of The Sports Club Company, Inc., or
approximately 26.75% of the Common Stock outstanding based on 19,689,000 shares
of the Common Stock deemed to be outstanding, giving effect to the number of
shares outstanding as set forth in the Proxy Statement dated September 24, 2004
plus shares issued in November 2004 in respect of loan guaranty fees, and after
giving effect to 365,000 shares issuable under currently exercisable options and
346,365 shares issuable upon conversion of Series C Preferred Stock but
excluding 30,953 shares of Common Stock owned by Mona Talla, wife of D. Michael
Talla, and as to which shares the Reporting Person disclaims beneficial
interest.
(b) None of the Reporting Person's shares is subject to the Voting
Agreement. As of November 15, 2004, the Reporting Person has direct beneficial
ownership of (and, except as indicated below, power of disposition with respect
to) shares of Common Stock as follows:
NUMBER OF APPROXIMATE PERCENTAGE
REPORTING PERSON SHARES OF SHARES OUTSTANDING
D. Michael Talla 5,266,350 26.75%
As part of a loan agreement between the Reporting Person and MDP Ventures II LLC
the Reporting Person granted to MDP Ventures II LLC an irrevocable proxy to vote
1,000,000 shares of Common Stock and delivered certificates evidencing those
shares as collateral.
(c) Please see Item 3 above and Item 6 below.
(d) As part of a loan agreement between the Reporting Person and
MDP Ventures II LLC the Reporting Person granted to MDP Ventures II LLC the
right to receive or the right to direct the receipt of dividends with respect to
1,000,000 shares of Common Stock owned by the Reporting Person. See Item 5 (b)
above.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The following information amends and restates Item 6.
In connection with the Issuer's renewal and extension of its $15,000,000
credit facility with Comerica Bank - California ("Comerica") in July 2001, Mr.
Talla and certain other parties guaranteed up to $5,000,000 of any amounts drawn
under the facility. Pursuant to an Indemnification and Contribution Agreement
dated as of July 3, 2001, by and among the Issuer, Mr. Talla and the other
guarantors with respect to the facility, the Issuer agreed to pay to the
guarantors in consideration of their provision of such guaranty: (i) a
commitment fee equal to 1% of their pro rata portion (33.33%) of its maximum
permitted borrowing under the facility, and (ii) a usage fee equal to 2% of
their pro rata portion of the average annual outstanding advances under the
facility, which fees may be paid by the Issuer in cash or Common Stock. On April
25, 2003, the Issuer issued 54,653 shares of Common Stock to Mr. Talla in
payment of the commitment fee due at that time; and on November 3, 2003, 16,355
additional shares were issued to Mr. Talla in payment of the commitment fees.
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On June 12, 2003, the Issuer replaced its credit facility with Comerica
with a new $20.0 million promissory note payable to Orange County's Credit
Union. The note is guaranteed by Mr. Talla and Rex A. Licklider. Pursuant to an
Indemnity and Guaranty Agreement dated as of December 1, 2003, by and among the
Issuer, Irvine Sports Club, Inc. (a wholly owned subsidiary of Issuer), and
Messrs. Talla and Licklider with respect to the note, the Issuer agreed to pay
the guarantors in consideration of their provision of such guaranty a fee equal
to three percent (3%) of their pro rata portion of the average outstanding
principal balance of the loan for each defined three-month period. Such fees may
be paid by the Issuer in cash or Common Stock. On January 29, 2004, the Issuer
issued 28,509 shares of Common Stock to Mr. Talla in payment of the guaranty fee
due September 30, 2003. On May 20, 2004, the Issuer issued 40,731 shares of
Common Stock to Mr. Talla in payment of the guaranty fee due December 31, 2003.
On May 20, 2004, the Issuer issued 39,538 shares of Common Stock to Mr. Talla
in payment of the guaranty fee due March 31, 2004. On November 15, 2004, the
Issuer issued 46,466 shares of Common Stock to Mr. Talla in payment of the
guaranty fee due June 30, 2004. On November 15, 2004, the Issuer issued 50,481
shares of Common Stock to Mr. Talla in payment of the guaranty fee due September
30, 2004.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT A Stockholders Voting Agreement and Conditional Irrevocable Proxy
dated September 14, 1994.*
EXHIBIT B Amendment to Stockholders Agreement and Irrevocable Proxy dated
September 14, 1994.*
EXHIBIT C Agreement Regarding the Joint Filing of Schedule 13D.*
EXHIBIT D Indemnification and Contribution Agreement entered into as of
July 3, 2001 by and among The Sports Club Company, Inc., Rex A.
Licklider, D. Michael Talla and MDP Ventures II LLC, incorporated
herein by reference to Exhibit 2 to the Issuer's Current Report
on Form 8-K filed with the Commission on July 17, 2001.*
EXHIBIT E Certificate of Designation of Series C Convertible Preferred
Stock of The Sports Club Company, Inc., incorporated by reference
to Exhibit 99.1 to the Issuer's Current Report on Form 8-K filed
with the Commission on September 9, 2002.*
EXHIBIT F Preferred Stock Purchase Agreement entered into as of September
6, 2002 by and among The Sports Club Company, Inc., MDP Ventures
II LLC, Rex A. Licklider as Trustee of the Licklider Living Trust
and D. Michael Talla, Trustee of the Talla Family Irrevocable
Trust, incorporated herein by reference to Exhibit 99.3 to the
Issuer's Current Report on Form 8-K filed with the Commission on
September 9, 2002.*
EXHIBIT G Investors' Rights Agreement entered into as of September 6, 2002
by and among The Sports Club Company, Inc., MDP Ventures II LLC,
Rex A. Licklider as Trustee of the Licklider Living Trust, D.
Michael Talla as Trustee of the Talla Family Irrevocable Trust,
incorporated herein by reference to Exhibit 99.2 to the Issuer's
Current Report on Form 8-K filed with the Commission on September
9, 2002.*
EXHIBIT H Letter Agreement between Millennium Entertainment Partners, L.P.,
and The Sports Club Company, Inc. joined in by D. Michael Talla
and Rex A. Licklider, dated as of March 13, 1997, incorporated
herein by reference to Exhibit 10.92 to the Issuer's Annual
Report on Form 10-K filed with the Commission on March 31, 1997.*
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EXHIBIT I Indemnity and Guaranty Agreement entered into as of December 1,
2003 by and my among The Sports Club Company, Inc. and Irvine
Sports Club, Inc. for the benefit of Rex A. Licklider and D.
Michael Talla.*
*Previously filed
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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CUSIP NO. 84917P10
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be filed jointly with
the other undersigned party.
Dated: November 16, 2004
/s/ D. Michael Talla
D. Michael Talla
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