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EXHIBIT 10.83
THE SPORTS CLUB COMPANY
00000 XXXXX XXXXXX XXXXXXXXX, XXXXX 000
XXX XXXXXXX, XXXXXXXXXX 00000
March 26, 1998
VIA TELECOPIER: ORIGINAL BY FEDERAL EXPRESS
Xx. Xxxxx X. Xxxxxxx
MDP Ventures II LLC
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: THE SPORTS CLUB COMPANY, INC./PURCHASE OF LAND
Dear Xxxxx:
This letter agreement ("AGREEMENT") sets forth the basic terms
and conditions under which The Sports Club Company, Inc. ("SCC") is granting to
MDP Ventures II LLC ("MILLENNIUM") an irrevocable right and option (the
"OPTION") to purchase certain undeveloped land located in La Jolla, California,
more particularly described in Exhibit "A" attached hereto (the "LAND"), for a
purchase price of Six Million Four Hundred Thousand Dollars (the "GROSS PURCHASE
PRICE"). SCC is currently a party to a purchase agreement dated September 4,
1997, as amended (the "PURCHASE AGREEMENT"), under which SCC has the right to
purchase the Land for the Gross Purchase Price, less a $425,000 cash deposit
previously given to seller by SCC (the "DEPOSIT")(the "NET PURCHASE PRICE"), on
or prior to April 12, 1998; if SCC fails to purchase the Land on or prior to
April 12, 1998, or such other later date as shall be negotiated with the seller
(such date being the "PURCHASE DEADLINE"), then SCC will forfeit $325,000 of the
Deposit. A copy of the Purchase Agreement is attached hereto as Exhibit "B".
1. GRANT AND EXERCISE OF OPTION; PAYMENT OF PURCHASE PRICE.
(a) Subject to the terms and conditions of this Agreement, SCC
hereby grants to Millennium, and Millennium hereby accepts, the Option to
purchase and acquire the Land.
(b) In consideration of its purchase of the Option, Millennium
will pay to SCC the sum of Four Hundred Twenty Five Thousand Dollars ($425,000),
which shall be paid on or before the "Option Exercise Date" (as hereinafter
defined) by wire transfer to SCC's account or by certified or bank cashier's
check payable to the order of SCC.
(c) On or prior to the Option Exercise Date, SCC shall notify
Millennium of the closing costs for which SCC is, or will be, obligated under
the Purchase Agreement (the "CLOSING COSTS"). If Millennium elects, in its sole
discretion, to exercise the Option, it shall
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notify SCC of such fact not less than five (5) days prior to the Purchase
Deadline (the "OPTION EXERCISE DATE") and shall transmit to SCC, or to the
escrow agent or title company identified in the Purchase Agreement, in same-day
funds, the full amount of the Net Purchase Price (plus all Closing Costs). SCC
shall then be obligated to consummate the purchase of the Land, as nominee for
Millennium, for the Purchase Price in accordance with the terms of the Purchase
Agreement. If SCC is unable to direct that the grant deed transferring fee title
to the Land be delivered directly to Millennium, then, simultaneously upon the
consummation of its acquisition of the Land, SCC will transfer, for no
consideration, fee title to the Land to Millennium on the same terms and
conditions as are set forth in the Purchase Agreement. If, on the other hand,
Millennium elects not to exercise the Option, then it shall so notify SCC of
such decision on or before the Option Exercise Date. SCC represents and warrants
to Millennium that if Millennium chooses not to exercise the Option, the
Purchase Agreement provides that $100,000 of the $425,000 deposit is refundable
to the purchaser thereunder.
(d) If Millennium elects to exercise the Option and directs SCC
to purchase and acquire the Land, Millennium may not sell all or any portion of
the Land (including any improvements thereon, if the Land shall have been
developed by Millennium or any other person or entity) for the six (6)-month
period following the date (the "CLOSING DATE") the transactions contemplated by
the Purchase Agreement shall have been consummated (the "STANDSTILL PERIOD");
except that, if SCC determines not to develop a health/fitness facility on the
Land at any time prior to the expiration of the six-month period referred to in
Paragraph 2(a) hereof, then the Standstill Period shall terminate and expire on
the date of such written determination is delivered to Millennium.
(e) During the Standstill Period, Millennium and SCC shall
jointly investigate the feasibility of developing a health/fitness facility on
the Land, including, without limitation, reviewing proposed architectural plans,
construction budgets and schedules, zoning issues, environmental impact report
issues and the like. In this regard, Millennium and SCC will analyze and discuss
development strategies and alternatives, including the sale of the Land to a
third party developer; development of the Land by Millennium (with or without a
development partner) and leasing the Land and all improvements thereon
(collectively, "PROPERTY"), to SCC on a "triple-net" lease basis; or financing
the development of the Land by another person or entity (whether or not in
conjunction with SCC and/or Millennium). To the extent financing or lease
arrangements between Millennium and SCC are investigated, the parties shall
negotiate the terms and conditions of such arrangements in good faith. However,
both SCC and Millennium acknowledge and agree that no representations,
warranties, promises or commitments have been made or relied upon by either
party with respect to the feasibility of developing a health/fitness
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facility on the Land, or the availability of financing sources to fund any such
development (if Millennium elects not to proceed with the development of a
health/fitness facility on the Land).
(f) In the event that SCC does not exercise the repurchase option
pursuant to Paragraph 2(a) below (or, following exercise, defaults on its
obligation to so repurchase) or enter into a transaction with Millennium to
develop the Land during the Standstill Period, then Millennium shall be free to
own, hold, sell or develop the Land in its sole and absolute discretion without
any duty or obligation owing to SCC.
(g) Anything herein to the contrary notwithstanding, from and
after the date hereof up to the Closing Date, SCC shall furnish Millennium with
copies of all correspondence, agreements and other documentation which shall be
transmitted or received by SCC in connection with the Purchase Agreement, and
SCC may not enter into any commitments or otherwise take any action relative to
the transactions contemplated by the Purchase Agreement without the prior
consent or approval of Millennium, which consent or approval may not be
unreasonably withheld, delayed or conditioned.
2. REPURCHASE OPTION.
(a) Anything herein to the contrary notwithstanding, for the
period commencing on the date hereof and continuing through the expiration of
the Standstill Period, SCC shall retain the right, exercisable in its sole
discretion, to purchase and acquire from Millennium the Land or the Property (if
development of the Land shall have been commenced by Millennium or any third
party during such period), for a purchase price equal to the sum of (i)
$200,000; (ii) all costs and expenses paid or incurred by Millennium to
purchase, acquire and carry the Land and, if applicable, to develop and
construct thereon all improvements (collectively, "MILLENNIUM COSTS"), plus
(iii) a twelve percent (12%) return computed on all Millennium Costs, compounded
annually (collectively, the "PROPERTY PURCHASE PRICE"). If SCC elects to
exercise its repurchase right, in its sole discretion, then SCC shall notify
Millennium of such fact prior to the expiration of the six-month period referred
to in the first sentence hereof, which notice shall be binding and irrevocable.
(b) Any notice by which SCC elects to purchase the Property shall
specify a closing date, which shall be a business day not less than sixty (60)
nor more than ninety (90) days after the date of such notice, and as to which
time shall be of the essence as to SCC's obligation to close the transaction
contemplated thereunder. Such transfer and conveyance shall be by grant deed,
without covenant, and shall be subject to all exceptions to title then affecting
the Property except for monetary financing liens placed upon Millennium's
interest in the
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Property. The conveyance shall be completely "AS IS, WITH ALL FAULTS", and
Millennium shall make no representation or warranty in connection with such
conveyance (including, for purposes of this Paragraph 2(b), that it is the
understanding of the parties that SCC, and not Millennium, shall deliver any
Title Affidavit required by SCC's title insurance company).
(c) SCC shall be responsible for paying any transfer taxes (as
well as any title charges or other miscellaneous closing expenses) payable in
connection with any conveyance by Millennium to SCC pursuant to this Paragraph
2. Upon the conveyance of the Property to SCC pursuant to this Paragraph 2, SCC
shall accept the Property in its then "as is" condition, and Millennium shall
not be deemed to have made any representation or warranty, or to have assumed
any ongoing responsibility of any kind whatsoever, in connection with any such
conveyance.
3. BROKERS AND FINDERS. Neither Millennium nor SCC, nor any
person acting on behalf of either of them, has employed any broker, agent or
finder, or incurred any liability for any brokerage fees, agents' commissions,
finders' fees or advisory fees in connection with the transactions contemplated
hereby; and each party shall indemnify and hold the other harmless in respect of
any "Damages" (as defined in Paragraph 4(a) hereof) arising out of any
agreements, arrangements or understandings claimed to have been made by such
party, or any person acting on its behalf, with any third party.
4. INDEMNIFICATION.
(a) SCC shall indemnify and hold Millennium and/or its
"Affiliates" (as hereinafter defined) (the "Millennium Indemnified Parties" and
each individually a "Millennium Indemnified Party") harmless from and against
any and all claims, losses, causes of action, expenses, losses, damages and/or
liabilities, including reasonable attorney's fees and out-of-pocket
disbursements (collectively, "DAMAGES") incurred or suffered by any Millennium
Indemnified Party, relating to or arising out of (i) the breach by SCC of any
term or provision of this Agreement; (ii) the breach by SCC of any term or
provision of the Purchase Agreement prior to the date hereof; and/or (iii) if
Millennium elects to exercise the Option and purchase the Land, any matters
relating to title (including liens or encumbrances affecting the Land and any
easements or recorded documents affecting the Land) and/or all liability and
actions resulting therefrom due to environmental contamination on or about the
Land. Promptly after receipt by a Millennium Indemnified Party of notice of the
commencement of any action, such party will, if a claim in respect thereof is to
be made against SCC under this Paragraph 4(a), notify SCC in writing of the
commencement thereof. In case any such action is brought against any
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Millennium Indemnified Party and such Millennium Indemnified Party notifies SCC
of the commencement thereof, SCC will be entitled to participate therein.
(b) Millennium shall indemnify and hold SCC and/or their
Affiliates (the "SCC Indemnified Parties" and each individually a "SCC
Indemnified Party") harmless from and against any and all Damages incurred or
suffered by any SCC Indemnified Party arising out of (i) the breach by
Millennium of any term or provision of this Agreement, and/or (ii) the
acquisition, ownership, development and operation of the Land and Property (if
any improvements shall be developed and constructed thereon by Millennium), it
being understood that this clause (ii) shall only apply to events not resulting
from any act or omission on the part of SCC or any affiliate thereof. Promptly
after receipt by an SCC Indemnified Party of notice of the commencement of any
action, such party will, if a claim in respect thereof is to be made against
Millennium under this Paragraph 4(b), notify Millennium in writing of the
commencement thereof. In case any such action is brought against an SCC
Indemnified Party and such SCC Indemnified Party notifies Millennium of the
commencement thereof, Millennium will be entitled to participate therein.
(c) In order for a party (the "INDEMNIFIED PARTY") to be entitled
to any indemnification provided for under this Agreement arising out of or
involving a claim or demand made by any person or entity (a "THIRD PARTY CLAIM")
against the Indemnified Party, such Indemnified Party must notify the
indemnifying party (the "Indemnifying Party") in writing, and in reasonable
detail, of the Third Party Claim as promptly as reasonably possible after
receipt by such Indemnified Party of written notice of the Third Party Claim,
and shall deliver to the Indemnifying Party, within five (5) business days after
the Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the Third
Party Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(d) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party will be entitled to participate in the defense thereof
(provided no actual or potential conflict of interest exists with respect to
such assumption) and, if it so chooses and acknowledges its obligation to
indemnify the Indemnified Party therefor, to assume the defense thereof with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party. If such counsel shall determine that a conflict exists
between the Indemnifying and Indemnified Parties, or that one or more defenses
are available to one and not to the other, then the Indemnified Party shall have
the right to engage counsel of its choice, at the Indemnifying Party's expense,
subject to the Indemnifying Party's prior approval of such
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counsel. Should the Indemnifying Party so elect to assume the defense of a Third
Party Claim, the Indemnifying Party will not be liable to the Indemnified Party
for legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof. If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party has not assumed the defense
thereof. If the Indemnifying Party chooses to defend any Third Party Claim, all
the parties hereto shall cooperate in the defense or prosecution thereof.
Whether or not the Indemnifying Party shall have assumed the defense of a Third
Party Claim, the Indemnified Party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld).
(e) As used herein the term "Affiliate" means, with respect to
any person: (i) any person who is an "affiliate" of such person as defined in
Rule 12b-2 of the SEC under the Securities and Exchange Act of 1934, as amended,
(ii) any family member of such person, and (iii) any person who is a director,
officer or partner or holds a similar position with such entity or any entity in
which such person has a 10% or greater equity or profit interest.
5. MISCELLANEOUS PROVISIONS.
(a) SCC and Millennium hereby covenant and agree to use their
respective best efforts to perform each of their obligations hereunder, to
execute and deliver any and all agreements, instruments, certificates and other
documents and to satisfy all other conditions set forth in this Agreement in
order to effectuate the purpose and intent of this Agreement.
(b) This Agreement is binding on, and shall inure to the benefit
of and be enforceable by, the parties hereto and their respective successors,
permitted assigns and legal representatives; provided that, neither this
Agreement, nor any right, duty or interest therein, may be assigned by either
party hereto without the prior written consent of the other party, except that,
Millennium shall have the right to assign its right and duties hereunder to an
Affiliate of Millennium that is controlled by Xxxxxxxxxxx X. Xxxxxxxx or jointly
controlled by Xxxxxxxxxxx X. Xxxxxxxx and Xxxxxxx Xxxxx & Co. (or any of its
Affiliates). Except as set forth herein, this Agreement is for the benefit of
the parties hereto, and no other person or entity shall have any rights or
interest in this Agreement.
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(c) All notices, requests, demands and other communications which
are required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person or upon receipt when
transmitted by telecopy, messenger or air courier, or seventy two (72) hours
after deposit in the U.S. Mails, mailed by certified or registered first class
mail, postage prepaid, return receipt requested, and duly addressed to the party
to whom the same is to be given or made:
If to Millennium, to:
MDP Ventures II LLC
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx
With a copy to:
Xxxx Xxxxxx, Esq.
Battle Xxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
If to SCC, to:
The Sports Club Company, Inc.
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, President
Telecopier No.: (000)000-0000
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With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Kinsella, Boesch, Fujikawa & Xxxxx LLP
1901 Avenue of the Stars, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000)000-0000
Any party may change its address or facsimile number for purposes of this
Section 5(c) by giving notice to the others in accordance with the terms hereof.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(e) This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York applicable to
contracts entered into and to be wholly performed therein.
(f) If either party should institute any action to enforce or
interpret any term or provision of this Agreement, the party prevailing in such
action shall be entitled to its attorneys' fees, out-of-pocket disbursements and
all other expenses from the non-prevailing party in such action.
(g) This Agreement (together with all Exhibits attached hereto,
which are incorporated herein by this reference) constitutes the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous written and
oral negotiations, discussions, agreements and understandings with respect to
such subject matter.
(h) Except as otherwise specifically provided herein, each party
shall bear its own costs in connection with the transactions contemplated
hereby.
(i) Each of Millennium and SCC have participated in the
negotiation and drafting of this Agreement. Accordingly, each of the parties
hereby waives any statutory provision, judicial precedent or other rule of law
to the effect that contractual ambiguities are to be construed against the party
who shall have drafted the same.
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If the foregoing is acceptable to you, please date and sign the
enclosed copy of this letter and return it to me.
Very truly yours,
THE SPORTS CLUB COMPANY, INC.
By: /s/ Xxxx Xxxxxx
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Xxxx Xxxxxxx, President
Agreed and accepted on the date of this letter at New York, New
York.
MDP VENTURES II LLC
By: MILLENNIUM DEVELOPMENT PARTNERS L.P.
By: MILLENMIUM DEVELOPMENT ASSOCIATES L.P.
By: MILLENNIUM DEVELOPMENT CORP.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx X. Xxxxxxx,
Authorized Officer
