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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
▇▇▇▇▇▇▇ REALTY, INC.,
COLLECTIVELY WITH THE ISSUER, AS THE COMPANY PARTIES
DATED AS OF
APRIL 1, 1999
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TABLE OF CONTENTS
Page
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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 ▇▇▇)....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
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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
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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
▇▇▇▇▇▇▇ 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").
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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 ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 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 ▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. (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 ▇▇▇ (the "SANTA ▇▇▇ CLUB").
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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.
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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
▇▇▇, 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
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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 ▇▇▇).
(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 ▇▇▇ 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 ▇▇▇ 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 ▇▇▇ 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 ▇▇▇ 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 ▇▇▇ 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
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Trust ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: _____________
and to:
U.S. BANK TRUST NATIONAL ASSOCIATION
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▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Assistant Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Trustee:
U.S. BANK TRUST NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Trust ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: _____________
and to:
U.S. BANK TRUST NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Assistant Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company Parties:
The Sports Club Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
The Spectrum Club Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
NY Sports Club, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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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/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title: Assistant Vice President
------------------------------
TRUSTEE: U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title: Assistant Vice President
------------------------------
COMPANY PARTIES: THE SPORTS CLUB COMPANY, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
-------------------------------
Title: Chief Financial Officer
------------------------------
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THE SPECTRUM CLUB COMPANY, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
-------------------------------
Title: Chief Financial Officer
------------------------------
▇▇▇▇▇▇▇ REALTY, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
-------------------------------
Title: Chief Financial Officer
------------------------------
